There are many different ways to promote the adoption of renewable power. There are rebates and grants, federal tax credits, state tax credits, refundable state tax credits, renewable energy certificates (RECs), zero- or low-interest loans, energy-efficient mortgages, power purchase agreements, solar lease programs… you get the picture. Among the options, one of the most effective — in terms of encouraging the most renewable energy installations — is the feed-in tariff (FIT). As you’ll read below, the Sacramento Municipal Utility District (SMUD) recently approved a feed-in tariff for residential customers.
In a nutshell, a feed-in tariff guarantees above-market payments for all the electricity generated by qualifying systems. System owners can sell power at, say, 30 cents/kWh when the going retail rate charged by their utility is 12 cents/kWh. Feed-in tariffs generally reduce the number of years needed to recoup initial system costs and, accordingly, boost the overall return on investment (ROI).
An often-cited example for showcasing the merits of the feed-in tariff is Germany, which, since enacting an FIT ten years ago, has witnessed an explosion in the number of installed rooftop solar panel systems. As suggested by Felicity Barringer at Green Inc., the approach appears to be gaining favor here in the U.S. In February, the city of Gainesville, Florida adopted a feed-in tariff so popular that, soon after its launch, it became oversubscribed through 2014. Then, last month Vermont passed a statewide feed-in tariff, paying 30 cents/kWh for solar panel installations. Barringer notes, “Washington state also has such a policy, and Hawaii is currently considering one.”
As for the Sacramento feed-in tariff, here are a couple of highlights for you solarheads out there:
- Tariff payment terms are available for 10, 15 or 20 years
- Participants in the FIT are not eligible for solar rebate funds from California’s Million Solar Roofs initiative. They are, however, still entitled to the 30-percent federal renewable energy tax credit.
- The program is not available to homeowners who are participating in net-metering
- The rate at which homeowners may sell electricity will vary throughout the day, peaking at times of high demand
The SMUD program is set to launch in January. See their website for more details.
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