California Passes Improved Feed-in Tariffs, while Germany and Spain Debate Changes

October 13, 2009

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California’s Governor Schwarzenegger has signed into law SB 32, one of several feed-in tariff (FIT) bills, which amends the existing FIT introduced by the California Public Utility Commission (PUC) last year, reports Wind-Works.org. Meanwhile, Germany and Spain are debating changes to their FIT schemes.

The SB 32 bill was introduced by Senator Gloria Negrete McLeod (D-District 32) on behalf of the California Solar Energy Industries Association (CalSIA) in December 2008. SB 32 raises the project size cap to 3 MW from 1.5 MW but does not change the way tariffs are determined except that it directs the PUC to include environmental and distributed generation attributes in the tariffs, reports Wind-Works.org. The bill is another effort in the state legislature to gradually improve existing feed-in tariff policy, according to the wind energy Web site.

SB 32 also allows greenfield projects, determines tariffs by avoided cost (MPR or value-based), raises the program cap from 500 MW to 750 MW, and allows contracts for 10, 15, and 20 years, according to Wind-Works.org.

SB 32 will primarily benefit commercial solar PV projects, and it’s unlikely to provide any benefit to wind or other forms of renewable energy, according to the Web site.

While the U.S. is just starting to address feed-in tariff issues, the new German government is expected to reform its Renewable Energy Act (EEG), although cuts for solar power rates will be modest to prevent harming the fast-growing industry, according to Reuters.

The FDP and the CDU want reforms to the EEG and have talked of cutting state-mandated feed-in tariffs — which utilities pay for CO2-free energy — by about 30 percent, though it’s more likely to be around 15 percent according to a coalition source, reports Reuters.

The FDP and their allies have demanded steeper cuts to the scheme that require power consumers to subsidize green energy through higher electricity bills, adding about 3 percent to monthly power bills, but CDU leaders in states with photovoltaic industries have blocked steeper cuts in past reforms, reports Reuters.

Utilities are now obligated to pay 43 cents per kilowatt for 20 years for photovoltaic systems installed in 2009, and that rate has been falling by roughly 8 percent per year and is scheduled to drop by 9 percent in 2010 to 39 cents per kilowatt.

The situation is different in Spain. With feed-in rates, the extra money required to make renewables profitable generally come from consumers in the form of higher retail electricity rates, but the particularities of the Spanish electricity market prevented these extra costs from being passed on, reports the Grist blog.

At the beginning of each year, the Spanish government sets retail power rates and if the price of natural gas skyrockets that year, for example, the Spanish government later reimburses power providers and grid operators to cover the difference, according to the Grist blog. In this way, electricity rates are kept artificially low, with part of the cost being covered by taxpayers, resulting in future generations subsidizing current electricity consumption, reports the blog.

The problem with the Spain FIT scheme is it attempted to combine feed-in rates with inflexible, government pricing of retail rates, reports the blog. Spain is now starting to phase out the entire system, and by 2013, it will be eliminated, according to the article.

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