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California Is Set To Crank Up Solar Feed-In Tariffs

in Solar

California will unvail its first solar feed-in tariff sometime in the first quarter of 2011. The current solar incentive program is being phased out. As usual, the United States is behind the rest of the world who have had feed-in tariffs for years. In Germany, homeowners are paid about 56 cents per kWh for power fed back to the grid from small scale installations.

Rooftop solar installation in California is brisk, but in Europe, it’s been downright explosive according to San Luis Obispo Tribune. What’s the difference? Solar feed-in tariffs.

Solar feed-in tariffs are rates that a utility such as PG&E would have to pay a customer for the excess solar power the customer produces with a rooftop solar installation. Such tariffs can be a powerful incentive to go solar because they turn solar panels into moneymakers, rather than just something that reduces a power bill.

California is set to unveil its first photovoltaic feed-in tariffs after the first of the year to replace its solar incentive program that is being phased out. Currently, PG&E takes excess power a customer produces and credits it to the customer’s account in a program called net metering.

Countries such as Germany, Spain and Portugal have had solar feed-in tariffs for years. Germany pays about 56 cents per kilowatt hour for power from a small-scale rooftop installation. According to the National Renewable Energy Laboratory, feed-in tariffs are responsible for 75 percent of global photovoltaic development. For example, using feed-in tariffs, Portugal gets nearly 45 percent of its electricity from solar, up from 17 percent five years ago.

Compare this to the United States, which gets 10 percent of its energy from renewable sources, with California getting 14 percent.

“I think solar feed-in tariffs would be the biggest step forward for renewable products we could take,” said Mike Emrich, president of Solarponics, a solar system company in Atascadero. “Right now, we are crawling forward, and the rest of the world is running.”

Critics of plans to construct two large, utility-scale solar farms on the Carrizo Plain often cite Europe as an example of a better way to rapidly develop renewable energy. However, Europe is also a cautionary tale. Feed-in tariffs that are too generous can be disruptive to energy markets by creating a solar “gold rush” and forcing utilities to pay more for feed-in power than they would on the open market. That drives up the price of solar panels. This has caused utilities such as PG&E to resist feed-in tariffs.

“PG&E’s primary concern with solar feed-in tariff programs in general is that the price tends to be set too high and, as a result, customers overpay for renewable energy generation,” said Kory Raftery, PG&E spokesman. For example, Spain was paying feed-in tariffs in 2008 that were 10 times higher than the wholesale market. The result was $126 billion in overproduction, Raftery said.

PG&E and most renewable energy advocates are encouraging state utility regulators to take a Goldilocks approach to solar feed-in tariffs. They should be high enough to create a real incentive but not so high as to be destabilizing. The state Public Utilities Commission is expected to announce solar feed-in tariff rates for residential customers sometime in January. According to John Ewan, owner of Pacific Energy Co. in San Luis Obispo, the tariff rate would have to be in the 14 to 15 cent per kilowatt hour to be a true incentive. Anything below that would be a reimbursement rather than an incentive, he said. Either way, solar reed-in tariffs is good news for California solar companies.