Feed-in Tariff
Encyclopedia
A feed-in tariff is a policy mechanism designed to accelerate investment in renewable energy
technologies. It achieves this by offering long-term contracts to renewable energy producers, typically based on the cost of generation of each technology. Technologies such as wind power, for instance, are awarded a lower per-kWh price, while technologies such as solar PV and tidal power
are offered a higher price, reflecting higher costs.
In addition, feed-in tariffs often include "tariff degression", a mechanism according to which the price (or tariff) ratchets down over time. This is done in order to track and encourage technological cost reductions. The goal of feed-in tariffs is to offer cost-based compensation to renewable energy producers, providing the price certainty and long-term contracts that help finance renewable energy investments.
Under a feed-in tariff, eligible renewable electricity generators (which can include homeowners, business owners, farmers, as well as private investors) are paid a cost-based price for the renewable electricity they produce. This enables a diversity of technologies (wind, solar, biogas, etc.) to be developed, providing investors a reasonable return on their investments. This principle was first explained in Germany's 2000 RES Act:
“The compensation rates…have been determined by means of scientific studies, subject to the provision that the rates identified should make it possible for an installation – when managed efficiently – to be operated cost-effectively, based on the use of state-of-the-art technology and depending on the renewable energy sources naturally available in a given geographical environment.”
As a result, the tariff (or rate) may differ to enable various technologies to be profitably developed. This can include different tariffs for projects in different locations (e.g. rooftop or ground-mounted for solar PV projects), of different sizes (residential or commercial scale), and sometimes, for different geographic regions. The tariffs are typically designed to ratchet downward over time to both track, and encourage, technological change.
FITs typically offer a guaranteed purchase agreement for electricity generated from renewable energy sources. These agreements are generally framed within long-term (15–25 year) contracts.
The fact that the payment levels are performance-based puts the incentive on producers to maximize the overall output and efficiency of their project.
As of 2011, feed-in tariff policies have been enacted in over 50 countries, including in Algeria, Australia, Austria, Belgium, Brazil, Canada, China, Cyprus, the Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Iran, Republic of Ireland, Israel, Italy, Kenya, the Republic of Korea, Lithuania, Luxembourg, the Netherlands, Portugal, South Africa, Spain, Switzerland, Tanzania, Thailand, Turkey
In 2008, a detailed analysis by the European Commission concluded that "well-adapted feed-in tariff regimes are generally the most efficient and effective support schemes for promoting renewable electricity". This conclusion has been supported by a number of recent analyses, including by the International Energy Agency, the European Federation for Renewable Energy, as well as by Deutsche Bank
.
, who signed the National Energy Act
(NEA). This Act included five separate Acts, one of which was the Public Utility Regulatory Policies Act
(PURPA). The purpose of the National Energy Act was to encourage energy conservation
and the development of new energy resources, including renewables such as wind, solar and geothermal power.
Within PURPA was a provision that required utilities to purchase electricity generated from qualifying independent power producers at rates not to exceed their avoided cost. Avoided costs were designed to reflect the cost that a utility would incur to provide that same electrical generation. Different interpretations of PURPA prevailed in the 1980s: some utilities and state utility commissions interpreted avoided costs narrowly to mean avoided fuel costs, while others chose to define "avoided costs" as the "avoided long-run marginal cost" of generation. The long-run costs referred to the anticipated cost of electricity in the years ahead. This last approach was adopted by California in its Standard Offer Contract No. 4. Another provision included in the PURPA law was that utilities were prevented from owning more than 50% of projects, a clause that was introduced to encourage new participants to enter the electricity generation industry.
In order to comply with PURPA, certain states began offering Standard Offer Contracts to renewable power producers. California's Public Utility Commission established a number of Standard Offer Contracts, including Standard Offer No.4 (SO4), which made use of fixed prices, based on the expected long-run cost of generation. The long-run estimates of electricity costs were based on the belief (widely held at the time) that oil and gas prices would continue to increase. This led to an escalating schedule of fixed purchase prices, designed to reflect the long-run avoided costs of new electrical generation. By 1992, private power producers had installed approximately 1,700 MW of wind capacity in California, some of which is still in service today. The adoption of PURPA also led to significant amounts of renewable energy generation in states such as Florida, and Maine.
This notwithstanding, PURPA continues to have negative connotations in the U.S. electricity industry. When oil and gas prices plummeted in the late 1980s, the Standard Offer Contracts that were signed to encourage new renewable energy development seemed high by comparison. As a result, PURPA contracts came to be seen as an expensive burden on electricity ratepayers, a connotation that remains to this day.
Another source of opposition to PURPA stems from the fact that it was designed to encourage non-utility generation. This was interpreted as a threat by many large utilities at the time, particularly those operating in monopoly environments. As a result of its encouragement of non-utility generation, PURPA has been interpreted as an important step toward increasing competition in the U.S. electricity industry by some.
While Germany's StrEG (Feed-in Law) was insufficient to encourage costlier sources of generation such as solar photovoltaics, it proved relatively effective at encouraging lower-cost technologies such as wind power, leading to the deployment of 4 400 MW of new wind capacity between 1991 and 1999, representing approximately one third of the global capacity at the time.
An additional challenge that was addressed by Germany’s Feed-in Law was the right to interconnect to the utility’s grid. The StrEG stipulated that renewable electricity producers would be guaranteed grid access. Similar percentage-based feed-in laws were adopted in Spain, as well as in Denmark in the 1990s.
). In its new form, it has proved to be the world's most effective policy framework at accelerating the deployment of renewable energy technologies.
Germany's new feed-in tariff made a number of important changes to its previous policy: 1) first, the purchase prices were methodologically based on the cost of generation from renewable energy sources. This led to different prices for wind power, solar power, biomass and biogas sources, and geothermal energy, as well as different prices for projects of different sizes, to account for economies of scale; 2) purchase guarantees were extended for a period of 20 years; 3) utilities were now allowed to participate; and finally 4) the rates offered were designed to decline annually based on expected cost reductions, in a mechanism known as "tariff degression".
Since it has been the most successful, the German policy (amended in 2004 and 2008) often provides the benchmark against which other feed-in tariff policies are considered.
Following the German approach, a number of countries have begun adopting feed-in tariff policies. These long-term contracts for electricity are typically offered in a non-discriminatory manner to all producers of electricity generated from renewable energy sources. Because the purchase prices are based on the cost of generation, investors are assured that efficiently operated projects will yield a reasonable rate of return.
This principle was explained in Germany's 2000 RES Act:
“The compensation rates…have been determined by means of scientific studies, subject to the proviso that the rates identified should make it possible for an installation – when managed efficiently – to be operated cost-effectively, based on the use of state-of-the-art technology and depending on the renewable energy sources naturally available in a given geographical environment.”
Feed-in tariff policies typically target a rate of return ranging from 5–10%.
Feed-In Tariffs (REFIT) have been associated with a large growth in solar power in Spain, Germany and wind power in Denmark.
s and nuclear power
). Cost increases of approximately four Euros per month per household are recorded in Germany. A number of analyses have shown that these price increases, however, can be offset by the price-dampening effect that large amounts of lower cost renewable energy sources (such as wind power) can have on spot market prices. This is attributed in large part to what is called the merit order effect
. This has led to electricity price reductions in Spain, Denmark, and Germany.
Cost impacts will depend to a significant extent on the overall mix of renewable energy sources encouraged by the policy. Due to the currently higher cost of certain technologies such as solar PV, the deployment of large amounts of these technologies would lead to proportionally larger rate payer impacts.
Grid parity
Some have argued that feed-in tariffs can be used to accelerate the pace at which renewable energy technologies become cost-competitive with electricity provided from the grid. The rapid deployment of renewable energy under feed-in tariffs seen in countries like Germany, Denmark and Spain has undoubtedly contributed to reducing technology costs, and hence, in accelerating this trend. For instance, wind and solar technology costs have decreased dramatically since the 1960s and 1970s , as the technologies have become more widespread, manufacturing processes have improved, innovations have been incorporated, and gains have been harnessed from economies of scale.
While it is true that large scale deployment of renewable energy technologies contributes to advancing toward grid parity, grid parity itself is a moving target, both in time (i.e. during the course of the day and over the course of years) and in space (i.e. geographically). The price of electricity from the grid varies widely from high-cost jurisdictions such as Hawaii and California, to lower-cost jurisdictions such as Wyoming, and Idaho. Similarly, due to their dependence on diesel generators, islands typically have higher electricity costs than on the mainland. In jurisdictions with time-of-use pricing the electricity price changes over the course of the day, rising during high-demand hours (e.g. 11AM – 8 PM) and declining during low-demand hours.
In certain jurisdictions, wind power
, landfill gas
, and certain forms of biomass generation are already lower-cost (on a per-kWh basis) than electricity provided from the grid. In fact, "grid parity" has already been obtained in certain jurisdictions that continue to use feed-in tariffs (e.g. the generation cost from landfill gas systems in Germany are currently lower than the average electricity spot market price) And in remote areas, electricity from solar photovoltaics can be cheaper than building new distribution lines to connect up to the main transmission grid.
There are other reasons to retain FIT laws even as grid parity approaches, because there are other important aspects of FIT laws which should be retained even if remuneration drops to 1:1 equivalence with the retail electricity price. These include the obligation to purchase, the obligation to connect and the long term payment guarantee associated with FIT laws.
s) and subsidies create limited protected markets for renewable energy. The supply of renewable energy is achieved by obliging suppliers to deliver to consumers a portion of their electricity from renewable energy sources. To do this, they collect green electricity certificates. Hence, a market is created in green electricity certificates which, according to the theory, generates downward pressure on the prices paid to renewable energy developers. This is based on the theory of perfect competition
where there is a multiplicity of buyers and sellers in a market where no single buyer or seller has a big enough market share to have a significant influence on prices. Although, in practice, markets are very rarely perfectly competitive, the assumption is still that a relatively competitive market will produce a more efficient use of resources compared to a system where prices are set by analysts.
The fundamental problem with the quota scheme is that there is no long-term certainty. When a quota is set either for a period of time or for a quantity of power, once that goal is reached then there is nothing to keep the green power
producers from becoming uneconomic in the face of power produced from coal fired power stations
and hence collapsing as businesses. This inevitability with the quota method means that there is reluctance on behalf of investors to get involved in the first place. Those that do get involved are short-term speculators
rather than long-term entrepreneurs and so instability is inherent in this system.
Quota systems favor large, vertically integrated generators and multinational electric utilities, and are more difficult to design and implement than a price system.
Research for information on feed in tariffs is difficult to find and typically extensive research is required to find it. Information about solar feed in tariffs may be found in a consolidated form, however not all of the countries are listed in this source.
For electricity generated from solar or radiant heat only, the bonus is 300% of the price per kWh of electricity produced by the market operator defined by Law 02-01 of 22 Dhu El Kaada 1422 corresponding to 5 February 2002 above, and this when the minimum contribution of solar energy represents 25% of all primary energy.
For electricity generated from facilities using solar thermal systems solar-gas hybrid, the bonus is 200% of the price per kWh.
For contributions of solar energy below 25%, said the bonus is paid in the following conditions:
The price of electricity is fixed by the CREG (Gas and Electricity Regulatory Commission). According to the last decision which fixed it, the consumer pays his electricity as below:
The other consumers (Industry, agriculture…etc.), they pay their electricity 4.17 DZD/kWh.
Furthermore the feed-in tariff provides with bonuses for electricity generated by cogeneration. The bonus will be 160% taking into account a thermal energy use by 20% of all primary energy used. The bonuses for solar generated electricity and cogeneration are cumulative. Remuneration of the generated electricity will be guaranteed over the whole plant lifetime.
and Queensland
, 2009 in the Australian Capital Territory
and Victoria
and 2010 in New South Wales
, Tasmania
and Western Australia
. In the Northern Territory
there are only local feed-in tariff schemes. A uniform federal scheme to supersede all State schemes has been proposed by Tasmanian Greens Senator Christine Milne
, but not enacted.
introduced a feed-in tariff in 2006, and revised it in 2009, which in a draft proposal increases from 42¢/kWh to 80.2¢/kWh for micro-scale (≤10 kW) grid-tied photovoltaic projects. Ontario's FIT program also includes a tariff schedule for larger projects up to and including 10MW solar farms at a reduced rate. As of April 2010, several hundred projects have been approved, including 184 large scale projects, worth $8 billion all together. (See Ontario Power Authority Feed-in Tariff program for renewable energy)
and is about us$0.15 per kWh.
"China has set a fixed feed-in tariff for new onshore wind power plants in a move that will help struggling project operators to realise profits. The National Development and Reform Commission (NDRC), the country's economic planning agency, announced at the weekend four categories of onshore wind projects, which according to region will be able to apply for the tariffs. Areas with better wind resources will have lower feed-in tariffs, while those with lower outputs will be able to access more generous tariffs.
The tariffs per kilowatt hour are set at 0.51 yuan (US 0.075, GBP 0.05), 0.54 yuan, 0.58 yuan and 0.61 yuan. These represent a significant premium on the average rate of 0.34 yuan per kilowatt hour paid to coal-fired electricity generators.".
introduced a feed-in tariff by act of law no. 180/2005 for wide range of renewable sources in 2005. Tariff is guaranted for 15–30 years (depends on source). Supported sources are small hydropower (up to 10 MW), biomass, biogas, wind and photovoltaics. As of 2010 highest tariff is 12.25 CZK/kWh for small photovoltaic.
Feed-in tariff rates for PV electricity vary depending on the size and locations of the systems and are shown below. Since 2009, there are additional tariffs for electricity immediately consumed rather than supplied to the grid with increasing returns if more than 30% of overall production is consumed on-site. This is to incentivise a demand side management and help develop solutions to the intermittency of solar power.
(JNNSM) was officially announced by Prime Minister of India on 12 January 2010. This program aims to install 20,000 MW of solar power by 2022. The first phase of this program aims to install 1000 MW by paying a tariff fixed by the Central Electricity Regulatory Commission (CERC)
of India. While in spirit this is a feed in tariff, there are several conditions on project size and commissioning date. Tariff for solar PV projects is fixed at Rs. 17.90 (USD 0.397/kWh). Tariff for solar thermal projects is fixed Rs. 15.40 (USD 0.342/kWh). Tariff will be reviewed periodically by the CERC.
s/kWh was set for renewable electricity. For 4 hours in the mid-night, the price is 900 Rials.
Currently (Q2:2011) REFIT is being negotiated between DCENR and the EU, the industry is hopeful that REFIT will be available, however much investment funds have been lost to oversees projects at this stage.
Industry associations (such as the Irish BioEnergy Association) are strongly lobbying government and government departments to have feed in tariffs available to the renewable energy sector.
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is limited to a total installation of 50MW during 7 years, whichever is reached first, with a maximum of 15 kWp installation for residential and a maximum of 50kWp for commercial
. Bank Hapoalim
offered 10 year loans for the installation of solar panels. The National Infrastructures Ministry announced that it would expand the feed-in tariff scheme to include medium-sized solar-power stations ranging from 50 kilowatts to 5 megawatts. The new tariff
scheme caused solar company Sunday Solar Energy to announce that it would invest $133 million to install photovoltaic solar arrays on kibbutzim, which are social communities that divide revenues amongst their members.
As of the summer of 2009, The Netherlands has a subsidy system. The subsidy budget has a quota for diverse types of energy, at several tens of million euro. The budget for wind is hardly used, because the tariffs are too low. The 2009 budget for Wind on Land was 900 MW (incl unused 400 MW from 2008); only 2.5 MW was used. Dutch utilities have no obligation to buy energy from windparks. The tariffs change yearly, to compensate the change in market prices. This creates uncertain investment conditions. The current subsidy system was introduced in 2008. The previous subsidy scheme stopped in 2005 because it became "too expensive". In 2009, Dutch windparks are still being built with grants from the old scheme. The old and new subsidy scheme is fed from the general budget.
The most probable change towards the FIT is that the subsidy budget will be fed with a small increase of the kWh price. The quota remain. End of November 2009 the Dutch Government spoke out that they now finally will also follow the Germans with their FiT to make investments in Sustainable Energy for investors much more interesting. Details will follow shortly after November 2009.
NERSA said in its release that the tariffs were based, as in most European countries, on the cost of generation plus a reasonable profit. The tariffs for wind energy and concentrating solar power are among the most attractive worldwide.
The tariff for wind energy, 1.25 ZAR/kWh (€0.104/kWh, $0.14 USD/kWh, $0.17 CAD/kWh) is greater than that offered in Germany (€0.092/kWh) and more than that proposed in Ontario, Canada ($0.135 CAD/kWh).
The tariff for concentrating solar, 2.10 ZAR/kWh (€0.175/kWh), is less than that in Spain (€0.278/kWh), but offers great promise in the bright sunlight of South Africa. NERSA's revised program followed extensive public consultation.
Stefan Gsänger, Secretary General of the World Wind Energy Association said in a release that "South Africa is the first African country to introduce a feed-in tariff for wind energy. Many small and big investors will now be able to contribute to the take-off of the wind industry in the country. Such decentralised investment will enable South Africa to overcome its current energy crisis. It will also help many South African communities to invest in wind farms and generate electricity, new jobs and new income. We are especially pleased as this decision comes shortly after the first North American feed-in law has been proposed by the Government of the Canadian Province of Ontario".
However, the feed-in tariff was abandoned before being promulgated in favor of a competitive bidding process launched on August 3, 2011. Under this bidding process, the South African government plans to procure 3,750MW of renewable energy: 1,850MW of onshore wind, 1,450MW of solar PV, 200MW of CSP, 75MW of small hydro, 25MW of landfill gas, 12.5MW of biogas, 12.5MW of biomass, and 100MW of small projects. The bidding process comprises two steps:
The first round of bids is due on November 4, 2011. The SA government is expected to announce preferred bidders before COP17 in December. PPA's are expected to be in place by June 2012. Projects should commission by June 2014, except CSP projects which are expected by June 2015.
Originally under the 661/2007, photovoltaic feed-in tariffs have been recently (Sept 2008) developed under a separate specific law frame due to the rapid growth experienced by this technology since release of the original scheme.
The current Photovoltaic decree 1578/2008 categorizes installations in two main groups with differentiated tariffs:
I) Building Integrated installations; with 34c€/kWh in systems up to 20 kW of nominal power, and for systems above 20 kW with a limit of nominal power of 2MW tariff of 31c€/kWh .
II) Non integrated installations; 32c€/kWh for systems up to 10MW of nominal power.
For other technologies decree 661/2007 sets up:
were first announced in October 2008 by the UK Secretary of State for Energy and Climate Change
, Ed Miliband
, who announced that Britain would implement a scheme by 2010, in addition to its current renewable energy quota scheme (ROCS). In July 2009, he presented details of the scheme, which began in early April 2010.
Less than a year into the scheme, in March 2011 the new coalition government
announced that support for large-scale photovoltaic installations (greater than 50 kW) would be cut. This was in response to European speculators lining up to establish huge solar farms in the West Country, which would have absorbed disproportionate amounts of the fund.
On 9th June, 2011, DECC confirmed that Feed-in Tariffs cut for solar PV systems above 50 KW after 1st Aug, 2011. Many are disappointed with the decision of DECC, especially after long time discussion with public. Still some think positive about the new Feed-in Tariffs, from the report published by PVinsights. It is believed that the total subsidies for solar PV industry is not changed, UK government tries to trim the tariffs for large systems in order to benefit smaller systems. The fast track review is based on the long term plan to reach an annual installation of 1.9GW in 2020.
"While feed-in tariffs are most closely associated with solar photovoltaic panels, utilities managing the programs in Vermont and California will also pay a set price for electricity generated from other renewable sources, like wind.
California's Sacramento Municipal Utility District
(SMUD) program is open to homeowners who are not participating in another program, called net metering, which allows anyone whose system is producing more electricity than they need to sell the excess back to the utility, thus reducing their electric bill. But once their bill falls to zero, the homeowner gets no more money from the system.
Jon Bertolino, a spokesman for SMUD, said that customers with land to spare had been asking whether, if they put up small solar farms, the utility would buy the excess electricity.
As long as they are not part of the net-metering program and not seeking the $1.90- to $2.20-per-watt ratepayer subsidy for their new panels under the state’s “Million Solar Roofs” program, Mr. Bertolino said, small generators can sell their power to SMUD. The rates would depend on the time of day the power is generated, ranging from a low of 5 or 6 cents a kilowatt-hour to 30 cents on a hot summer afternoon; the size of eligible systems is capped at 5 megawatts (and the program overall has a 100-megawatt cap).
The Vermont law caps the size of individual systems at 2.2 megawatts. Solar energy fetches a fixed price of 30 cents a kilowatt-hour, and other forms of renewables fetch lower rates".
(CPUC) approved a feed-in tariff on 31 January 2008 that is effective immediately.
As of 1 January 2010 state laws have passed allowing homeowners who produce more than they use over the course of the year to opt in to be able to sell the excess power to the utility at a currently undisclosed rate (the rate decision has a 1 January 2011 deadline). Previously the homeowner would get no credit for over-production over the course of the year. In order to get the California Solar Initiative
(CSI) rebate the customer is not allowed to install a system that inherently over-produces thereby encouraging efficiency measures to be installed after solar installation. This over-production credit is not available to certain municipal utility customers namely Los Angeles Water and Power.
, Florida, approved the nation's first solar feed-in tariff. The program is open to small, medium and large projects, but is capped at 4 MW per year. As of 2011, Gainesville has increased solar generated electricity from 328 kW to 7,391 kW. Solar energy now makes up approximately 1.2% of peak load energy (610 mW) in Gainesville.
required Hawaiian Electric Company (HECO & MECO & HELCO) to pay above-market prices for renewable energy fed into the electric grid. The policy offers project a set price and standard 20-year contract. The PUC plans to review the initial feed-in tariff two years after the program starts and every three years thereafter.
Renewable energy
Renewable energy is energy which comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are renewable . About 16% of global final energy consumption comes from renewables, with 10% coming from traditional biomass, which is mainly used for heating, and 3.4% from...
technologies. It achieves this by offering long-term contracts to renewable energy producers, typically based on the cost of generation of each technology. Technologies such as wind power, for instance, are awarded a lower per-kWh price, while technologies such as solar PV and tidal power
Tidal power
Tidal power, also called tidal energy, is a form of hydropower that converts the energy of tides into useful forms of power - mainly electricity....
are offered a higher price, reflecting higher costs.
In addition, feed-in tariffs often include "tariff degression", a mechanism according to which the price (or tariff) ratchets down over time. This is done in order to track and encourage technological cost reductions. The goal of feed-in tariffs is to offer cost-based compensation to renewable energy producers, providing the price certainty and long-term contracts that help finance renewable energy investments.
Description
FITs typically include three key provisions:- guaranteed grid access
- long-term contracts for the electricity produced
- purchase prices based on the cost of generation
Under a feed-in tariff, eligible renewable electricity generators (which can include homeowners, business owners, farmers, as well as private investors) are paid a cost-based price for the renewable electricity they produce. This enables a diversity of technologies (wind, solar, biogas, etc.) to be developed, providing investors a reasonable return on their investments. This principle was first explained in Germany's 2000 RES Act:
“The compensation rates…have been determined by means of scientific studies, subject to the provision that the rates identified should make it possible for an installation – when managed efficiently – to be operated cost-effectively, based on the use of state-of-the-art technology and depending on the renewable energy sources naturally available in a given geographical environment.”
As a result, the tariff (or rate) may differ to enable various technologies to be profitably developed. This can include different tariffs for projects in different locations (e.g. rooftop or ground-mounted for solar PV projects), of different sizes (residential or commercial scale), and sometimes, for different geographic regions. The tariffs are typically designed to ratchet downward over time to both track, and encourage, technological change.
FITs typically offer a guaranteed purchase agreement for electricity generated from renewable energy sources. These agreements are generally framed within long-term (15–25 year) contracts.
The fact that the payment levels are performance-based puts the incentive on producers to maximize the overall output and efficiency of their project.
As of 2011, feed-in tariff policies have been enacted in over 50 countries, including in Algeria, Australia, Austria, Belgium, Brazil, Canada, China, Cyprus, the Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Iran, Republic of Ireland, Israel, Italy, Kenya, the Republic of Korea, Lithuania, Luxembourg, the Netherlands, Portugal, South Africa, Spain, Switzerland, Tanzania, Thailand, Turkey
In 2008, a detailed analysis by the European Commission concluded that "well-adapted feed-in tariff regimes are generally the most efficient and effective support schemes for promoting renewable electricity". This conclusion has been supported by a number of recent analyses, including by the International Energy Agency, the European Federation for Renewable Energy, as well as by Deutsche Bank
Deutsche Bank
Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...
.
The United States
The first form of feed-in tariff was implemented in the US in 1978 under President Jimmy CarterJimmy Carter
James Earl "Jimmy" Carter, Jr. is an American politician who served as the 39th President of the United States and was the recipient of the 2002 Nobel Peace Prize, the only U.S. President to have received the Prize after leaving office...
, who signed the National Energy Act
National Energy Act
The National Energy Act of 1978 was a legislative response by the U.S. Congress to the 1973 energy crisis. It includes the following statutes:* Public Utility Regulatory Policies Act * Energy Tax Act * National Energy Conservation Policy Act...
(NEA). This Act included five separate Acts, one of which was the Public Utility Regulatory Policies Act
Public Utility Regulatory Policies Act
The Public Utility Regulatory Policies Act is a law, passed in 1978 by the United States Congress as part of the National Energy Act. It is meant to promote greater use of domestic renewable energy...
(PURPA). The purpose of the National Energy Act was to encourage energy conservation
Energy conservation
Energy conservation refers to efforts made to reduce energy consumption. Energy conservation can be achieved through increased efficient energy use, in conjunction with decreased energy consumption and/or reduced consumption from conventional energy sources...
and the development of new energy resources, including renewables such as wind, solar and geothermal power.
Within PURPA was a provision that required utilities to purchase electricity generated from qualifying independent power producers at rates not to exceed their avoided cost. Avoided costs were designed to reflect the cost that a utility would incur to provide that same electrical generation. Different interpretations of PURPA prevailed in the 1980s: some utilities and state utility commissions interpreted avoided costs narrowly to mean avoided fuel costs, while others chose to define "avoided costs" as the "avoided long-run marginal cost" of generation. The long-run costs referred to the anticipated cost of electricity in the years ahead. This last approach was adopted by California in its Standard Offer Contract No. 4. Another provision included in the PURPA law was that utilities were prevented from owning more than 50% of projects, a clause that was introduced to encourage new participants to enter the electricity generation industry.
In order to comply with PURPA, certain states began offering Standard Offer Contracts to renewable power producers. California's Public Utility Commission established a number of Standard Offer Contracts, including Standard Offer No.4 (SO4), which made use of fixed prices, based on the expected long-run cost of generation. The long-run estimates of electricity costs were based on the belief (widely held at the time) that oil and gas prices would continue to increase. This led to an escalating schedule of fixed purchase prices, designed to reflect the long-run avoided costs of new electrical generation. By 1992, private power producers had installed approximately 1,700 MW of wind capacity in California, some of which is still in service today. The adoption of PURPA also led to significant amounts of renewable energy generation in states such as Florida, and Maine.
This notwithstanding, PURPA continues to have negative connotations in the U.S. electricity industry. When oil and gas prices plummeted in the late 1980s, the Standard Offer Contracts that were signed to encourage new renewable energy development seemed high by comparison. As a result, PURPA contracts came to be seen as an expensive burden on electricity ratepayers, a connotation that remains to this day.
Another source of opposition to PURPA stems from the fact that it was designed to encourage non-utility generation. This was interpreted as a threat by many large utilities at the time, particularly those operating in monopoly environments. As a result of its encouragement of non-utility generation, PURPA has been interpreted as an important step toward increasing competition in the U.S. electricity industry by some.
Developments in Europe
In 1990, Germany adopted its "Stromeinspeisungsgesetz" (StrEG), or its "Law on Feeding Electricity into the Grid" The StrEG required utilities to purchase electricity generated from renewable energy sources at prices that were determined as a percentage of the prevailing retail price of electricity. The percentage offered to solar and wind power was set at 90% of the residential electricity price, while other technologies such as hydro power and biomass sources were offered percentages ranging from 65–80%. A project cap of 5 MW was includedWhile Germany's StrEG (Feed-in Law) was insufficient to encourage costlier sources of generation such as solar photovoltaics, it proved relatively effective at encouraging lower-cost technologies such as wind power, leading to the deployment of 4 400 MW of new wind capacity between 1991 and 1999, representing approximately one third of the global capacity at the time.
An additional challenge that was addressed by Germany’s Feed-in Law was the right to interconnect to the utility’s grid. The StrEG stipulated that renewable electricity producers would be guaranteed grid access. Similar percentage-based feed-in laws were adopted in Spain, as well as in Denmark in the 1990s.
Germany's Renewable Energy Sources Act
Germany's Feed-in Law underwent a major restructuring in the year 2000, being re-framed as the Act on Granting Priority to Renewable Energy Sources ("Erneuerbare Energien Gesetz", German Renewable Energy ActGerman Renewable Energy Act
The German Renewable Energy Act was designed to encourage cost reductions based on improved energy efficiency from economies of scale over time...
). In its new form, it has proved to be the world's most effective policy framework at accelerating the deployment of renewable energy technologies.
Germany's new feed-in tariff made a number of important changes to its previous policy: 1) first, the purchase prices were methodologically based on the cost of generation from renewable energy sources. This led to different prices for wind power, solar power, biomass and biogas sources, and geothermal energy, as well as different prices for projects of different sizes, to account for economies of scale; 2) purchase guarantees were extended for a period of 20 years; 3) utilities were now allowed to participate; and finally 4) the rates offered were designed to decline annually based on expected cost reductions, in a mechanism known as "tariff degression".
Since it has been the most successful, the German policy (amended in 2004 and 2008) often provides the benchmark against which other feed-in tariff policies are considered.
Following the German approach, a number of countries have begun adopting feed-in tariff policies. These long-term contracts for electricity are typically offered in a non-discriminatory manner to all producers of electricity generated from renewable energy sources. Because the purchase prices are based on the cost of generation, investors are assured that efficiently operated projects will yield a reasonable rate of return.
This principle was explained in Germany's 2000 RES Act:
“The compensation rates…have been determined by means of scientific studies, subject to the proviso that the rates identified should make it possible for an installation – when managed efficiently – to be operated cost-effectively, based on the use of state-of-the-art technology and depending on the renewable energy sources naturally available in a given geographical environment.”
Feed-in tariff policies typically target a rate of return ranging from 5–10%.
Feed-In Tariffs (REFIT) have been associated with a large growth in solar power in Spain, Germany and wind power in Denmark.
Effects on electricity rates
FITs have been shown to lead to a small annual increase in the price of electricity per customer, as a result of the fact that electricity generated from renewable energy sources is typically more expensive than electricity generated from conventional sources (fossil fuelFossil fuel
Fossil fuels are fuels formed by natural processes such as anaerobic decomposition of buried dead organisms. The age of the organisms and their resulting fossil fuels is typically millions of years, and sometimes exceeds 650 million years...
s and nuclear power
Nuclear power
Nuclear power is the use of sustained nuclear fission to generate heat and electricity. Nuclear power plants provide about 6% of the world's energy and 13–14% of the world's electricity, with the U.S., France, and Japan together accounting for about 50% of nuclear generated electricity...
). Cost increases of approximately four Euros per month per household are recorded in Germany. A number of analyses have shown that these price increases, however, can be offset by the price-dampening effect that large amounts of lower cost renewable energy sources (such as wind power) can have on spot market prices. This is attributed in large part to what is called the merit order effect
Merit Order
For other uses see Order of Merit The merit order is a way of ranking available sources of energy, especially electrical generation, in ascending order of their short-run marginal costs of production, so that those with the lowest marginal costs are the first ones to be brought online to meet...
. This has led to electricity price reductions in Spain, Denmark, and Germany.
Cost impacts will depend to a significant extent on the overall mix of renewable energy sources encouraged by the policy. Due to the currently higher cost of certain technologies such as solar PV, the deployment of large amounts of these technologies would lead to proportionally larger rate payer impacts.
Grid parityGrid parityGrid parity is the point at which alternative means of generating electricity is at least as cheap as grid power.For solar energy, it is achieved first in areas with abundant sun and high costs for electricity such as in California, Hawaii, Spain and Japan. Many solar power advocates predict that...
Some have argued that feed-in tariffs can be used to accelerate the pace at which renewable energy technologies become cost-competitive with electricity provided from the grid. The rapid deployment of renewable energy under feed-in tariffs seen in countries like Germany, Denmark and Spain has undoubtedly contributed to reducing technology costs, and hence, in accelerating this trend. For instance, wind and solar technology costs have decreased dramatically since the 1960s and 1970s , as the technologies have become more widespread, manufacturing processes have improved, innovations have been incorporated, and gains have been harnessed from economies of scale.While it is true that large scale deployment of renewable energy technologies contributes to advancing toward grid parity, grid parity itself is a moving target, both in time (i.e. during the course of the day and over the course of years) and in space (i.e. geographically). The price of electricity from the grid varies widely from high-cost jurisdictions such as Hawaii and California, to lower-cost jurisdictions such as Wyoming, and Idaho. Similarly, due to their dependence on diesel generators, islands typically have higher electricity costs than on the mainland. In jurisdictions with time-of-use pricing the electricity price changes over the course of the day, rising during high-demand hours (e.g. 11AM – 8 PM) and declining during low-demand hours.
In certain jurisdictions, wind power
Wind power
Wind power is the conversion of wind energy into a useful form of energy, such as using wind turbines to make electricity, windmills for mechanical power, windpumps for water pumping or drainage, or sails to propel ships....
, landfill gas
Landfill gas
Landfill gas is a complex mix of different gases created by the action of microorganisms within a landfill.-Production:Landfill gas production results from chemical reactions and microbes acting upon the waste as the putrescible materials begins to break down in the landfill...
, and certain forms of biomass generation are already lower-cost (on a per-kWh basis) than electricity provided from the grid. In fact, "grid parity" has already been obtained in certain jurisdictions that continue to use feed-in tariffs (e.g. the generation cost from landfill gas systems in Germany are currently lower than the average electricity spot market price) And in remote areas, electricity from solar photovoltaics can be cheaper than building new distribution lines to connect up to the main transmission grid.
There are other reasons to retain FIT laws even as grid parity approaches, because there are other important aspects of FIT laws which should be retained even if remuneration drops to 1:1 equivalence with the retail electricity price. These include the obligation to purchase, the obligation to connect and the long term payment guarantee associated with FIT laws.
Policy alternatives and complements
Schemes such as quota-based mechanisms (Renewable Portfolio StandardRenewable Portfolio Standard
A Renewable Portfolio Standard is a regulation that requires the increased production of energy from renewable energy sources, such as wind, solar, biomass, and geothermal...
s) and subsidies create limited protected markets for renewable energy. The supply of renewable energy is achieved by obliging suppliers to deliver to consumers a portion of their electricity from renewable energy sources. To do this, they collect green electricity certificates. Hence, a market is created in green electricity certificates which, according to the theory, generates downward pressure on the prices paid to renewable energy developers. This is based on the theory of perfect competition
Perfect competition
In economic theory, perfect competition describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product. Because the conditions for perfect competition are strict, there are few if any perfectly competitive markets...
where there is a multiplicity of buyers and sellers in a market where no single buyer or seller has a big enough market share to have a significant influence on prices. Although, in practice, markets are very rarely perfectly competitive, the assumption is still that a relatively competitive market will produce a more efficient use of resources compared to a system where prices are set by analysts.
The fundamental problem with the quota scheme is that there is no long-term certainty. When a quota is set either for a period of time or for a quantity of power, once that goal is reached then there is nothing to keep the green power
Green Power
Green Power is a Hong Kong-based non-governmental organization concerned with the city's environmental issues. The NGO was founded in 1988 by a group of volunteers who made environmental education the foremost priority of the organization....
producers from becoming uneconomic in the face of power produced from coal fired power stations
Fossil fuel power plant
A fossil-fuel power station is a power station that burns fossil fuels such as coal, natural gas or petroleum to produce electricity. Central station fossil-fuel power plants are designed on a large scale for continuous operation...
and hence collapsing as businesses. This inevitability with the quota method means that there is reluctance on behalf of investors to get involved in the first place. Those that do get involved are short-term speculators
Speculation
In finance, speculation is a financial action that does not promise safety of the initial investment along with the return on the principal sum...
rather than long-term entrepreneurs and so instability is inherent in this system.
Quota systems favor large, vertically integrated generators and multinational electric utilities, and are more difficult to design and implement than a price system.
Territories
Feed-in tariff laws were in place in 46 jurisdictions across the world by 2007.Research for information on feed in tariffs is difficult to find and typically extensive research is required to find it. Information about solar feed in tariffs may be found in a consolidated form, however not all of the countries are listed in this source.
Algeria
To cover the additional costs of producing electricity from renewables and for the costs of diversification, producers of electricity from renewables will get a bonus for each kWh produced, marketed or consumed.For electricity generated from solar or radiant heat only, the bonus is 300% of the price per kWh of electricity produced by the market operator defined by Law 02-01 of 22 Dhu El Kaada 1422 corresponding to 5 February 2002 above, and this when the minimum contribution of solar energy represents 25% of all primary energy.
For electricity generated from facilities using solar thermal systems solar-gas hybrid, the bonus is 200% of the price per kWh.
For contributions of solar energy below 25%, said the bonus is paid in the following conditions:
| Solar Share | Bonus |
|---|---|
| >25% | 200% |
| 20% to 25% | 180% |
| 15% to 20% | 160% |
| 10% to 15% | 140% |
| 5% to 10% | 100% |
| 0 to 5% | 0 |
The price of electricity is fixed by the CREG (Gas and Electricity Regulatory Commission). According to the last decision which fixed it, the consumer pays his electricity as below:
- 1.77 DZD/kWh for a consumption which is lower than 41.6 kWh/month.
- 4.17 DZD/kWh for a consumption which is higher than 41.6 kWh/month.
The other consumers (Industry, agriculture…etc.), they pay their electricity 4.17 DZD/kWh.
Furthermore the feed-in tariff provides with bonuses for electricity generated by cogeneration. The bonus will be 160% taking into account a thermal energy use by 20% of all primary energy used. The bonuses for solar generated electricity and cogeneration are cumulative. Remuneration of the generated electricity will be guaranteed over the whole plant lifetime.
Australia
Feed-in tariffs had been introduced by the States in 2008 in South AustraliaSouth Australia
South Australia is a state of Australia in the southern central part of the country. It covers some of the most arid parts of the continent; with a total land area of , it is the fourth largest of Australia's six states and two territories.South Australia shares borders with all of the mainland...
and Queensland
Queensland
Queensland is a state of Australia, occupying the north-eastern section of the mainland continent. It is bordered by the Northern Territory, South Australia and New South Wales to the west, south-west and south respectively. To the east, Queensland is bordered by the Coral Sea and Pacific Ocean...
, 2009 in the Australian Capital Territory
Australian Capital Territory
The Australian Capital Territory, often abbreviated ACT, is the capital territory of the Commonwealth of Australia and is the smallest self-governing internal territory...
and Victoria
Victoria (Australia)
Victoria is the second most populous state in Australia. Geographically the smallest mainland state, Victoria is bordered by New South Wales, South Australia, and Tasmania on Boundary Islet to the north, west and south respectively....
and 2010 in New South Wales
New South Wales
New South Wales is a state of :Australia, located in the east of the country. It is bordered by Queensland, Victoria and South Australia to the north, south and west respectively. To the east, the state is bordered by the Tasman Sea, which forms part of the Pacific Ocean. New South Wales...
, Tasmania
Tasmania
Tasmania is an Australian island and state. It is south of the continent, separated by Bass Strait. The state includes the island of Tasmania—the 26th largest island in the world—and the surrounding islands. The state has a population of 507,626 , of whom almost half reside in the greater Hobart...
and Western Australia
Western Australia
Western Australia is a state of Australia, occupying the entire western third of the Australian continent. It is bounded by the Indian Ocean to the north and west, the Great Australian Bight and Indian Ocean to the south, the Northern Territory to the north-east and South Australia to the south-east...
. In the Northern Territory
Northern Territory
The Northern Territory is a federal territory of Australia, occupying much of the centre of the mainland continent, as well as the central northern regions...
there are only local feed-in tariff schemes. A uniform federal scheme to supersede all State schemes has been proposed by Tasmanian Greens Senator Christine Milne
Christine Milne
Christine Anne Milne is an Australian Senator and deputy leader of the Australian Greens.Christine Milne first came to public attention for her role in opposing the building of the Wesley Vale pulp mill near Bass Strait in North Western Tasmania on the basis of its allegedly harmful environmental...
, but not enacted.
Canada
OntarioOntario
Ontario is a province of Canada, located in east-central Canada. It is Canada's most populous province and second largest in total area. It is home to the nation's most populous city, Toronto, and the nation's capital, Ottawa....
introduced a feed-in tariff in 2006, and revised it in 2009, which in a draft proposal increases from 42¢/kWh to 80.2¢/kWh for micro-scale (≤10 kW) grid-tied photovoltaic projects. Ontario's FIT program also includes a tariff schedule for larger projects up to and including 10MW solar farms at a reduced rate. As of April 2010, several hundred projects have been approved, including 184 large scale projects, worth $8 billion all together. (See Ontario Power Authority Feed-in Tariff program for renewable energy)
China
As of August 2011 a national feed-in tariff for solar projects was issued,and is about us$0.15 per kWh.
"China has set a fixed feed-in tariff for new onshore wind power plants in a move that will help struggling project operators to realise profits. The National Development and Reform Commission (NDRC), the country's economic planning agency, announced at the weekend four categories of onshore wind projects, which according to region will be able to apply for the tariffs. Areas with better wind resources will have lower feed-in tariffs, while those with lower outputs will be able to access more generous tariffs.
The tariffs per kilowatt hour are set at 0.51 yuan (US 0.075, GBP 0.05), 0.54 yuan, 0.58 yuan and 0.61 yuan. These represent a significant premium on the average rate of 0.34 yuan per kilowatt hour paid to coal-fired electricity generators.".
Czech Republic
Czech RepublicCzech Republic
The Czech Republic is a landlocked country in Central Europe. The country is bordered by Poland to the northeast, Slovakia to the east, Austria to the south, and Germany to the west and northwest....
introduced a feed-in tariff by act of law no. 180/2005 for wide range of renewable sources in 2005. Tariff is guaranted for 15–30 years (depends on source). Supported sources are small hydropower (up to 10 MW), biomass, biogas, wind and photovoltaics. As of 2010 highest tariff is 12.25 CZK/kWh for small photovoltaic.
Germany
First introduced in 2000, the Erneuerbare-Energien-Gesetz (EEG) law is reviewed on a regular basis and the 2010 version is currently in force. Its predecessor was the 1991 "Stromeinspeisegesetz". As of May 2008, the cost of the program adds about €1.01 (USD1.69) to each monthly residential electric bill. In 2011 the additional costs have risen to €0.035/kWh.Feed-in tariff rates for PV electricity vary depending on the size and locations of the systems and are shown below. Since 2009, there are additional tariffs for electricity immediately consumed rather than supplied to the grid with increasing returns if more than 30% of overall production is consumed on-site. This is to incentivise a demand side management and help develop solutions to the intermittency of solar power.
| type | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | Jul 2010 | Oct 2010 | 2011 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Rooftop mounted | up to 30 kW | 57,4 | 54,53 | 51,80 | 49,21 | 46,75 | 43,01 | 39,14 | 34,05 | 33,03 | 28,74 |
| between 30 kW and 100 kW | 54,6 | 51,87 | 49,28 | 46,82 | 44,48 | 40,91 | 37,23 | 32,39 | 31,42 | 27,34 | |
| above 100 kW | 54,0 | 51,30 | 48,74 | 46,30 | 43,99 | 39,58 | 35,23 | 30,65 | 29,73 | 25,87 | |
| above 1000 kW | 54,0 | 51,30 | 48,74 | 46,30 | 43,99 | 33,00 | 29,37 | 25,55 | 24,79 | 21,57 | |
| Ground mounted | contaminated grounds | 45,7 | 43,4 | 40,6 | 37,96 | 35,49 | 31,94 | 28,43 | 26,16 | 25,37 | 22,07 |
| agricultural fields | 45,7 | 43,4 | 40,6 | 37,96 | 35,49 | 31,94 | 28,43 | - | - | – | |
| other | 45,7 | 43,4 | 40,6 | 37,96 | 35,49 | 31,94 | 28,43 | 25,02 | 24,26 | 21,11 | |
India
India's inaugurated its most ambitious solar power program to date on 9 January 2010. The Jawaharlal Nehru National Solar MissionJawaharlal Nehru National Solar Mission
The Jawaharlal Nehru National Solar Mission is a major initiative of the Government of India and State Governments to promote ecologically sustainable growth while addressing India’s energy security challenges. It will also constitute a major contribution by India to the global effort to meet the...
(JNNSM) was officially announced by Prime Minister of India on 12 January 2010. This program aims to install 20,000 MW of solar power by 2022. The first phase of this program aims to install 1000 MW by paying a tariff fixed by the Central Electricity Regulatory Commission (CERC)
Central Electricity Regulatory Commission
Central Electricity Regulatory Commission , a key regulator of power sector in India, is a statutory body functioning with quasi-judicial status under sec - 76 of the Electricity Act 2003...
of India. While in spirit this is a feed in tariff, there are several conditions on project size and commissioning date. Tariff for solar PV projects is fixed at Rs. 17.90 (USD 0.397/kWh). Tariff for solar thermal projects is fixed Rs. 15.40 (USD 0.342/kWh). Tariff will be reviewed periodically by the CERC.
Iran
سانا (SANA) , first introduced FiT in 2008 for purchasing renewable energy from investors. A price of 1300 RialIranian rial
The rial is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting....
s/kWh was set for renewable electricity. For 4 hours in the mid-night, the price is 900 Rials.
Republic of Ireland
From 2006 to 2011 the sitting Ministers for Communications Energy and Natural Resources (Noel Dempsey, Eamon Ryan) have at various times announced Feed in Tariffs for renewable electricity in Ireland. However they have never actually put feed in tariffs in place. This has seriously hindered the growth of renewable electricity in Ireland.Currently (Q2:2011) REFIT is being negotiated between DCENR and the EU, the industry is hopeful that REFIT will be available, however much investment funds have been lost to oversees projects at this stage.
Industry associations (such as the Irish BioEnergy Association) are strongly lobbying government and government departments to have feed in tariffs available to the renewable energy sector.
name="dcenr.gov.ie"/>
Israel
On 2 June 2008, the Israeli Public Utility Authority approved a feed-in tariff for solar plants. The tariffTariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
is limited to a total installation of 50MW during 7 years, whichever is reached first, with a maximum of 15 kWp installation for residential and a maximum of 50kWp for commercial
Commerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...
. Bank Hapoalim
Bank Hapoalim
Bank Hapoalim is Israel’s largest bank. As of 31 December 2008 it had total consolidated assets of NIS 306.85 billion. The Bank has a significant presence in global financial markets. In Israel, the Group has over 260 full-service branches, eight regional business centers, and industry desks...
offered 10 year loans for the installation of solar panels. The National Infrastructures Ministry announced that it would expand the feed-in tariff scheme to include medium-sized solar-power stations ranging from 50 kilowatts to 5 megawatts. The new tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
scheme caused solar company Sunday Solar Energy to announce that it would invest $133 million to install photovoltaic solar arrays on kibbutzim, which are social communities that divide revenues amongst their members.
The Netherlands
The Netherlands has no FIT yet. However, the Dutch Cabinet agreed on 27 March 2009 to implement some parts of a feed-in tariff during a renegotiation of the government agenda in response to the global financial crisis. The proposed regulation may adjust the quota incentive system.As of the summer of 2009, The Netherlands has a subsidy system. The subsidy budget has a quota for diverse types of energy, at several tens of million euro. The budget for wind is hardly used, because the tariffs are too low. The 2009 budget for Wind on Land was 900 MW (incl unused 400 MW from 2008); only 2.5 MW was used. Dutch utilities have no obligation to buy energy from windparks. The tariffs change yearly, to compensate the change in market prices. This creates uncertain investment conditions. The current subsidy system was introduced in 2008. The previous subsidy scheme stopped in 2005 because it became "too expensive". In 2009, Dutch windparks are still being built with grants from the old scheme. The old and new subsidy scheme is fed from the general budget.
The most probable change towards the FIT is that the subsidy budget will be fed with a small increase of the kWh price. The quota remain. End of November 2009 the Dutch Government spoke out that they now finally will also follow the Germans with their FiT to make investments in Sustainable Energy for investors much more interesting. Details will follow shortly after November 2009.
South Africa
"South Africa's National Energy Regulator (NERSA) announced 31 March 2009 the introduction of a system of feed-in tariffs designed to produce 10 TWh of electricity per year by 2013. The feed-in tariffs announced were substantially higher than those in NERSA's original proposal. The tariffs, differentiated by technology, will be paid for a period of 20 years.NERSA said in its release that the tariffs were based, as in most European countries, on the cost of generation plus a reasonable profit. The tariffs for wind energy and concentrating solar power are among the most attractive worldwide.
The tariff for wind energy, 1.25 ZAR/kWh (€0.104/kWh, $0.14 USD/kWh, $0.17 CAD/kWh) is greater than that offered in Germany (€0.092/kWh) and more than that proposed in Ontario, Canada ($0.135 CAD/kWh).
The tariff for concentrating solar, 2.10 ZAR/kWh (€0.175/kWh), is less than that in Spain (€0.278/kWh), but offers great promise in the bright sunlight of South Africa. NERSA's revised program followed extensive public consultation.
Stefan Gsänger, Secretary General of the World Wind Energy Association said in a release that "South Africa is the first African country to introduce a feed-in tariff for wind energy. Many small and big investors will now be able to contribute to the take-off of the wind industry in the country. Such decentralised investment will enable South Africa to overcome its current energy crisis. It will also help many South African communities to invest in wind farms and generate electricity, new jobs and new income. We are especially pleased as this decision comes shortly after the first North American feed-in law has been proposed by the Government of the Canadian Province of Ontario".
However, the feed-in tariff was abandoned before being promulgated in favor of a competitive bidding process launched on August 3, 2011. Under this bidding process, the South African government plans to procure 3,750MW of renewable energy: 1,850MW of onshore wind, 1,450MW of solar PV, 200MW of CSP, 75MW of small hydro, 25MW of landfill gas, 12.5MW of biogas, 12.5MW of biomass, and 100MW of small projects. The bidding process comprises two steps:
- Qualification phase. Projects are assessed based on structure of the project, legal, land acquisition and use, financial, environmental consent, technical, economic development and bid guarantee
- Evaluation phase. Compliant bids are then evaluated based on: (1) price relative to a ceiling provided in bid documentation, accounting for 70% of the decision, and (2) economic development, accounting for 30% of the decision.
The first round of bids is due on November 4, 2011. The SA government is expected to announce preferred bidders before COP17 in December. PPA's are expected to be in place by June 2012. Projects should commission by June 2014, except CSP projects which are expected by June 2015.
Spain
Current Spanish feed-in legislation is Royal decree 1578/2008 (Real Decreto 1578/2008), for photovoltaic installations, and Royal decree 661/2007 for other renewable technologies injecting electricity to the public grid.Originally under the 661/2007, photovoltaic feed-in tariffs have been recently (Sept 2008) developed under a separate specific law frame due to the rapid growth experienced by this technology since release of the original scheme.
The current Photovoltaic decree 1578/2008 categorizes installations in two main groups with differentiated tariffs:
I) Building Integrated installations; with 34c€/kWh in systems up to 20 kW of nominal power, and for systems above 20 kW with a limit of nominal power of 2MW tariff of 31c€/kWh .
II) Non integrated installations; 32c€/kWh for systems up to 10MW of nominal power.
For other technologies decree 661/2007 sets up:
| Energy Source | Feed-in Tariff |
|---|---|
| Cogeneration systems | maximum FiT of 13.29c€/kWh during lifetime of system. |
| Solar thermoelectric | 26.94 c€/kWh for the first 25 years |
| Wind systems | up to 7.32 c€/kWh for the first 20 years |
| Geothermal, wave, tidal and sea-thermal | 6.89 c€/kWh for the first 20 years |
| Hydroelectric | 7.8 c€/kWh for the first 25 years |
| Biomass and biogas | up to 13.06 c€/kWh for the first 15 years |
| Waste combustion | up to 12.57 c€/kWh for the first 15 years |
Switzerland
Switzerland introduced the so called "Cost-covering remuneration for feed-in to the electricity grid (CRF)" on 1 May 2008. The CRF applies to hydropower (up to 10 megawatts), photovoltaics, wind energy, geothermal energy, biomass and waste material from biomass and will be applicable for a period of between 20 and 25 years, depending on the technology. The implementation is done through the national grid operator SWISSGRID.Thailand
In 2006, the Thai government enacted a feed-in tariff that provides an adder paid on top of utility avoided costs, differentiated by technology type and generator size, and guaranteed for 7–10 years. Solar receives the highest, 8 baht/kWh (about US cents 27/kWh). Large biomass projects receive the lowest at 0.3 baht/kWh (at about 1 US cent per kWh). Additional per-kWh subsidies are provided for projects that offset diesel use in remote areas. Under the FIT program, as of March 2010, 1364 MW of private sector RE was online with an additional 4104 MW in the pipeline with signed PPAs. Biomass makes up the bulk of this capacity: 1292 MW (online) and 2119 MW (PPA only). Solar electricity is second but rapidly catching up, with 78 MW online and signed PPAs for an additional 1759 MW.Ukraine
Ukraine has introduced the law 'On feed-in tariff' as of 25 September 2008. The law guarantees grid access for renewable energy producers (small hydro up to 10 MW, wind, biomass, photovoltaic and geothermal). The feed-in tariffs for renewable power producers are set by the national regulator. As of July 2011 the following tariffs per kWh were applied: biomass – UAH 1.3446 (EUR 0.13), wind – UAH 1.23 (EUR 0.12), small hydro – UAH 0.8418 (EUR 0.08), solar - UAH 5.0509 (EUR 0.46). In case of significant fluctuations of the national currency against Euro the feed-in tariff is adjusted to reflect the changes.United Kingdom
Feed-in tariffs in the United KingdomFeed-in tariffs in the United Kingdom
Feed-in tariffs in the United Kingdom were announced in October 2008 and took effect from April 2010. They were entered into law by the Energy Act of 2008.-Scope:...
were first announced in October 2008 by the UK Secretary of State for Energy and Climate Change
Secretary of State for Energy and Climate Change
The Secretary of State for Energy and Climate Change is a British government cabinet position currently held by Chris Huhne. The government department was created on 3 October 2008 when former Prime Minister Gordon Brown reshuffled his cabinet....
, Ed Miliband
Ed Miliband
Edward Samuel Miliband is a British Labour Party politician, currently the Leader of the Labour Party and Leader of the Opposition...
, who announced that Britain would implement a scheme by 2010, in addition to its current renewable energy quota scheme (ROCS). In July 2009, he presented details of the scheme, which began in early April 2010.
Less than a year into the scheme, in March 2011 the new coalition government
Cameron Ministry
David Cameron is Prime Minister of the United Kingdom, after being invited by Queen Elizabeth II to form a new government after the resignation as Prime Minister of Gordon Brown on 11 May 2010. Leading a coalition government formed by the Conservative Party and the Liberal Democrats, the coalition...
announced that support for large-scale photovoltaic installations (greater than 50 kW) would be cut. This was in response to European speculators lining up to establish huge solar farms in the West Country, which would have absorbed disproportionate amounts of the fund.
On 9th June, 2011, DECC confirmed that Feed-in Tariffs cut for solar PV systems above 50 KW after 1st Aug, 2011. Many are disappointed with the decision of DECC, especially after long time discussion with public. Still some think positive about the new Feed-in Tariffs, from the report published by PVinsights. It is believed that the total subsidies for solar PV industry is not changed, UK government tries to trim the tariffs for large systems in order to benefit smaller systems. The fast track review is based on the long term plan to reach an annual installation of 1.9GW in 2020.
United States
In April 2009, 11 United States state legislatures were considering adopting a FiT as a complement to their renewable electricity mandates."While feed-in tariffs are most closely associated with solar photovoltaic panels, utilities managing the programs in Vermont and California will also pay a set price for electricity generated from other renewable sources, like wind.
California's Sacramento Municipal Utility District
SMUD
The Sacramento Municipal Utility District provides electricity to Sacramento County, California, and a small portion of adjacent Placer County, established under the Municipal Utility District Act...
(SMUD) program is open to homeowners who are not participating in another program, called net metering, which allows anyone whose system is producing more electricity than they need to sell the excess back to the utility, thus reducing their electric bill. But once their bill falls to zero, the homeowner gets no more money from the system.
Jon Bertolino, a spokesman for SMUD, said that customers with land to spare had been asking whether, if they put up small solar farms, the utility would buy the excess electricity.
As long as they are not part of the net-metering program and not seeking the $1.90- to $2.20-per-watt ratepayer subsidy for their new panels under the state’s “Million Solar Roofs” program, Mr. Bertolino said, small generators can sell their power to SMUD. The rates would depend on the time of day the power is generated, ranging from a low of 5 or 6 cents a kilowatt-hour to 30 cents on a hot summer afternoon; the size of eligible systems is capped at 5 megawatts (and the program overall has a 100-megawatt cap).
The Vermont law caps the size of individual systems at 2.2 megawatts. Solar energy fetches a fixed price of 30 cents a kilowatt-hour, and other forms of renewables fetch lower rates".
California
The California Public Utilities CommissionCalifornia Public Utilities Commission
The California Public Utilities Commission is a regulatory agency which regulates privately owned public utilities in the state of California, including electric power, telecommunications, natural gas and water companies...
(CPUC) approved a feed-in tariff on 31 January 2008 that is effective immediately.
As of 1 January 2010 state laws have passed allowing homeowners who produce more than they use over the course of the year to opt in to be able to sell the excess power to the utility at a currently undisclosed rate (the rate decision has a 1 January 2011 deadline). Previously the homeowner would get no credit for over-production over the course of the year. In order to get the California Solar Initiative
California Solar Initiative
California Solar Initiative is a renewable energy program in the United States.As part of Governor Arnold Schwarzenegger's Million Solar Roofs Program, California has set a goal to create 3,000 megawatts of new, solar-produced electricity by 2016 — moving the state toward a cleaner energy future...
(CSI) rebate the customer is not allowed to install a system that inherently over-produces thereby encouraging efficiency measures to be installed after solar installation. This over-production credit is not available to certain municipal utility customers namely Los Angeles Water and Power.
Florida
In February of 2009, city commissioners inGainesvilleGainesville, Florida
Gainesville is the largest city in, and the county seat of, Alachua County, Florida, United States as well as the principal city of the Gainesville, Florida Metropolitan Statistical Area . The preliminary 2010 Census population count for Gainesville is 124,354. Gainesville is home to the sixth...
, Florida, approved the nation's first solar feed-in tariff. The program is open to small, medium and large projects, but is capped at 4 MW per year. As of 2011, Gainesville has increased solar generated electricity from 328 kW to 7,391 kW. Solar energy now makes up approximately 1.2% of peak load energy (610 mW) in Gainesville.
Hawaii
In September 2009 the Hawaii Public Utilities CommissionHawaii Public Utilities Commission
The Hawaii Public Utilities Commission is a public utilities commission, a quasi-judicial tribunal, which regulates public service companies operating in the U.S. state of Hawaii....
required Hawaiian Electric Company (HECO & MECO & HELCO) to pay above-market prices for renewable energy fed into the electric grid. The policy offers project a set price and standard 20-year contract. The PUC plans to review the initial feed-in tariff two years after the program starts and every three years thereafter.
| Renewable Generator Type and Size | FIT Rate (cents/kWh) |
|---|---|
| Baseline FIT rate for any RPS-eligible technology under the max. size limit | 13.8 |
| Tier 1 On-Shore Wind < 20 kW | 16.1 |
| Tier 1 In-line Hydropower < 20 kW | 21.3 |
| Tier 2 On-Shore Wind 20-100/500 kW | 13.8 |
| Tier 2 In-line Hydropower 20-100/500 kW | 18.9 |
| Renewable Generator Type and Size | Oahu Oahu Oahu or Oahu , known as "The Gathering Place", is the third largest of the Hawaiian Islands and most populous of the islands in the U.S. state of Hawaii. The state capital Honolulu is located on the southeast coast... and 2.72 MW for Maui Maui The island of Maui is the second-largest of the Hawaiian Islands at and is the 17th largest island in the United States. Maui is part of the state of Hawaii and is the largest of Maui County's four islands, bigger than Lānai, Kahoolawe, and Molokai. In 2010, Maui had a population of 144,444,... and Hawaii Hawaii (island) The Island of Hawaii, also called the Big Island or Hawaii Island , is a volcanic island in the North Pacific Ocean... island. The Commission's decision caps the total amount of feed-in tariff projects brought onto the electricity grid at 5% of the system peak on Oahu, Maui, and the Big Island for the first two years of the program. Tier 3 is still pending a Decision and Order based on the findings of the Reliability Standards Working Group (a "docket within the docket"). Tier 2 and 3 project size caps vary by island and by technology. Tier 2 includes larger systems that are less than or equal to: 100 kW-AC for on-shore wind and in-line hydropower on all islands; 100 kW-AC for PV and CSP on Lanai and Molokai; 250 kW-AC for PV on Maui and Hawaii; 500 kW-AC for CSP on Maui and Hawaii; and 500 kW-AC for PV and CSP on Oahu. Tier 3 covers systems larger than the Tier 2 caps. MaineIn the 2009 Maine Legislature's session, a "Feed-In" Tariff bill, (LD 1450), introduced by Rep. Herbert Adams (D-Portland), was considered. It made it from the House to the Senate, where is was killed 21 May.Known as "An Act to Establish the Renewable Energy Resources Program" it was closely modeled on the German law. OregonIn June 2009, Oregon established a pilot solar volumetric incentive rate and payment program* with legislation. Under this incentive program, systems are paid for the kilowatt-hours (kWh) generated over a 15-year period, at a rate set at the time a system is initially enrolled in the program. The Oregon Public Utility Commission (PUC) was left with the discretion to establish rates and rules by 1 July 2010. The PUC established rates and rules in May 2010. This program must be offered by the three investor-owned utilities in Oregon and will be administered by the utilities, though the PUC will periodically re-evaluate rates. The program costs are recoverable in utility rates and utility-owned systems are not allowed to receive the incentive.The pilot program installation cap is limited to an aggregate cap of 25 megawatts (MW) of solar photovoltaics (PV), with a maximum system size cap of 500 kilowatts (kW). The aggregate program cap will be spread equally over four years, with 6.25 MW of capacity being eligible to receive the incentive each year. The aggregate cap is divided up by utility based on 2008 retail sales revenue. PGE has a cap of 14.9 MW, Pacific Power has a cap of 9.8 MW, and Idaho Power has a cap of 0.4 MW. Idaho Power's program is limited to residential installations. Rates differ by system size and geographic zone. Small- and medium-scale systems participate in a program that is modeled after net metering and larger-scale systems participate in a competitive bidding program. Participating PV systems must be grid-connected, metered and meet all applicable codes and regulations. Systems must be "permanently installed" and must remain in service for the entire useful life. Systems sized 100 kW or less can participate in the portion of the program based on net metering. Generating capacity of 20 MW of the aggregate cap is reserved for the net metering portion, with 12 MW available for residential and 8 MW available for small commercial systems. These residential and small commercial systems are paid for the amount of electricity generated, up to the amount of electricity consumed. In essence, customers are paid for the amount of utility electric load consumption that is offset by on-site solar photovoltaic generation. Unlike typical feed-in tariffs, customers can consume the electricity generated on-site and receive a production incentive – or a volumetric incentive payment – for the amount of electricity generated and consumed. To remove a perverse incentive Perverse incentive A perverse incentive is an incentive that has an unintended and undesirable result which is contrary to the interests of the incentive makers. Perverse incentives are a type of unintended consequences.- Examples :... to increase electricity consumption to receive a greater payment, the system must be appropriately sized to meet average electricity consumption. The rates are determined by the PUC and are based on annual system cost and annual energy output, differentiated by geographic zones. The cost estimates are based on installation data from Energy Trust of Oregon. The volumetric incentive rates are not the actual rates paid to the customer-generator; the actual rate paid is the volumetric incentive rate minus the retail rate. The volumetric incentive rates will be re-evaluated every six months and may be adjusted if necessary. The rates for the net metering program are as follows: http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=OR134F&re=1&ee=1 VermontVermont adopted feed-in tariffs on 27 May 2009. Generators must possess a capacity of no more than 2.2 MW.Puerto RicoThe net metering program pays the energy fed back to the grid at the same rate it is charged. The rate varies monthly around 23 cents per kilowatt. It is not actually paid but credited to the next month if the production exceeds consumption. At the end of the fiscal year (June) the excess if any is paid at a fixed 10 cents per KW of which 25% is retained for public schools. Then the cycle starts again. To participate in the program a yearly insurance, means for disconnecting the system accessible outside of the building and specific brands of equipment dictated by the government are required. The Puerto Rico Electric Power Authority (PREPA), a government agency, is the sole provider of energy in the island.See also
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