By Mark Halper
Posting in Energy
You want feed-in-tariffs in the U.S.? So did American abroad Mark Halper. Then he saw what they did to his utility bill. His Thanksgiving Day advice- don't be a turkey, know what you're getting into.
This being an energy story, I am of course talking about the feed-in-tariff (FiT). An FiT is a financial mechanism that subsidizes residential and, sometimes, commercial, producers of solar and other forms of renewable energy. It is intended to stimulate green energy. The U.S. doesn’t have an FiT, but many countries do, including the UK, where I live.
I’m in favor of FiTs. But a warning to those of you clamoring for them: be careful what you ask for, you might get it. Someone has to pay, and that someone could be you.
FiTs come in a few varieties. A common thread is that a homeowner who installs solar panels gets paid a rate (a “tariff”) above the market rate for every watt of electricity he/she produces. The electricity can power his home, or it can “feed in” to the grid.
The FiT is indeed a solid inducement to someone considering solar. In the UK, the rate is currently (but not for long) about four times above the market rate. People who tap it make money by generating electricity – although they typically pay about $20,000 in upfront panel and installation costs.
I support FiTs as a way to spark growth in the solar and renewable market. They've succeeded on that basis in the UK. I don't have the hard numbers, but anecdotally, I now see them on one out of every 10 or 20 houses is the village where I live, a year-and-a-half after Britain implemented the subsidy. They've worked wonders in Germany – not exactly the Riviera, yet it generates more solar electricity than any country in the world, thanks to FiTs that began decade or so ago.
My view, however, is more sober than it was in April 2010, when I cheered enthusiastically as the UK launched its scheme. To understand why I've calmed down, circle back to my intentionally vague, boldfaced remark above in which I note that the homeowner “gets paid”.
Who pays the lucky ones who have $20K to buy and install solar panels? In the UK, the utilities do, which means the money comes other utility customers who don’t have the capital to equip their own rooftops.
That has led to another sort of feed-in, if you will: It has helped feed in to the relentless march upwards in utility bills as the utilities take funds from the rest of its customer base. In Britain, many people don't realize that the government does not fund FiTs. Rather “have not” utility ratepayers do. The government’s role is not that of subsidizer. The government has simply approved a scheme that allows utilities to rob Peter to pay Paul.
Exactly how much the FiT factors into the relentless and recently brutal rise in utility rates is debatable, and for those of us not inside the energy companies, it’s very difficult to tell. The UK’s Renewable Energy Association says not much. It’s a vocal champion of FiTs.
Certainly, other factors are driving up utility charges: the rising price of fossil fuel, genuine costly utility efforts to go green, and, dare I say, perhaps a dose of profiteering.
But when Energy Secretary Chris Huhne told Parliament yesterday that government policies would increase the cost of electricity by 27 percent in 2020, surely FiTs were part of his equation. (He also said that energy efficiency and conservation measures would offset those increases). As noted here last month, the British government has had a tough time balancing its admirable renewable energy efforts.
My SmartPlanet colleague Chris Nelder recently pointed out in a well-reasoned call for FiTs in the U.S. that some people regard them as a regressive tax. Count me among those: I’m a journalist in a “democratic” world that no longer financially values free speech, so lump me in with the “have nots” who are subsidizing the “haves.” My utility provider, British Gas, jacked up my monthly electricity rate by 52.5 percent to £61 ($100) in October - and that was after I talked them down from their attempt to raise me by 90 percent.
As a believer in a greener, more sustainable and self-sufficient future, I still support FiTs. In the long run they will help make solar panels more affordable for all of us, as production ramps up, costs come down via economies of scale, and the FiT in theory fades away as it's no longer need.
Still, I crack a bittersweet, $100 smile when I look at the shiny solar panels on the garage next door. It’s the old hard lesson about “no free lunch,” or in the spirit of November’s fourth Thursday, no free feast. Someone paid for the bird on the table, the potatoes, the sprouts, the parsnips, the cranberry sauce, the pie (I’ll have the apple AND the pumpkin the please).
If we want a "renewables" future, we all have to put skin in the game, be it via higher energy bills (although I call for the utilities to include a transparent line indicating how much of bill goes towards the FiT), taxes, $40 energy efficient light bulbs or whatever. If not, stick with fossil fuels.
Solar panels don’t drop miraculously from the sky and land bolted and wired onto your pitched roof. Someone pays for them. If you’re not flush enough to fork out $20,000 for your own photovoltaics, then with an FiT, you might end up subsidizing the gleaming array atop your neighbor’s house.
Any FiT supporter who doesn’t understand that before getting into the game is a turkey.
- Why America needs a feed-in-tariff
- UK: Hard lessons on subsidizing renewable energy
- Germany's solar feedin' frenzy
- Buongiorno, solar parity!
Nov 23, 2011
It sounds like the UK FIT allows the owner of the solar panels to be paid for every watt they produce, verses every watt they feed back to the grid. A more reasonable FIT would be a net usage FIT. In a net usage FIT the monthly utility bill is straightforward. X watts of grid power used - Y watts locally produced and fed to the grid = net usage. The person owning the solar panels is then billed for their net usage. The incentive to install solar is the bottom line savings on your bill. If you install enough panels you can become a net producer and be paid by the utility at the going per watt rate they are billing. Even though this model has the least impact on the majority who choose not to install solar it is the least used of the many FIT models. The UK FIT model is an excessive burden on the poor and middle class who cannot afford to install solar. It simply increases the wealth of those who can afford to install solar.
....a side by side comparison of utility rates in a energy efficiency + renewables scenario for the next 50 years, compared to a new-coal/retrofit existing coal/carbon sequesteredCO2 coal/new nuclear scenario? I found such a study here: http://newenergynews.blogspot.com/2011/11/todays-study-new-energy-saves-billions.html As you can tell even from the article address, while there are upcharges for going energy efficiency + renewables, there are even steeper prices for sticking to the Business As Usual route of continued dependence on fossil fuels and nuclear. Add the CO2 emission issue and you can begin to understand the reasons most of Europe is investing in renewables the way they are. Doesn't mean that corruption and draconian profits won't be an issue and needs to be watched; but these issues certainly can arise in either path, no?
Have you thought about your tax dollars that go to pay for the health and environmental damages caused by burning coal? Burning coal drives up British health care costs. If you're living in the US are you thinking about the hundreds of millions of tax dollars we spend each day due to the harmful aspects of coal? About how you or your employer are paying more for health insurance because of coal? How about the tax dollars that you're contributing to American's oil wars? Close to a billion dollars a day. What we spend right now to help mature renewable technology is an investment. We've subsidized wind for the last 30 years and now it's become one of our two cheapest new generation technologies. We just started subsidizing solar and the price is plummeting. These are investments in our future. A future of truly inexpensive electricity. Right now large array solar in a sunny location produces electricity for $0.154 over the 20 years the loan is being paid. But those panels will continue pumping out power for many more decades. Once the panels are paid off your electricity will cost you about $0.01/kWh. And in a few years the 'first 20 years' of solar should drop below $0.10/kWh and work its way toward $0.05/kWh. The same holds for wind turbines. While they are being paid off they are generating power at about $0.05/kWh. After payoff they should crank out power for another 20 years or so at something more like $0.02/kWh. And the money you are now paying to subsidize coal will disappear. Successful business people understand the wisdom of smart investments. Subsidies to create inexpensive solar is an outstanding investment.
Looks like some places in Australia are doing it that way--here's a link to one of their example of how it works: http://www.solarshane.com.au/pfit.html