Advocates for feed-in tariffs (FITs) have long claimed that the policy is the fastest, most efficient method for deploying renewable energy. One need only look at the rapid adoption rates in European countries to see their effectiveness.
FITs require utilities to purchase renewable electricity from system owners over a certain period of time, typically 15-20 years. The rates are calculated to ensure a specific rate of return for different technologies. By providing a guaranteed contract for the electricity over the life of the system, project financing is often simpler and less expensive than a tax-credit or renewable energy credit system.
Here’s one more experience that advocates say favors FITs: In just three years since Gainesville, Florida adopted the policy for solar PV, the city has deployed almost 7.3 megawatts of systems. That means that this city of 100,000 people has more solar deployed per capita than California — a state with solar incentives in place for more than a decade.
FIT expert Paul Gipe put together this chart showing where Gainesville stacks up with other areas of the world:
Officials at the municipal utility running the program, Gainesville Regional Utilities (GRU), say that by the end of the year, cumulative installed solar capacity will be generating about 1.5 million kilowatt-hours per month. That’s enough electricity to service roughly 1,600 average American homes.
Some continue to criticize FITs, saying they’re too inflexible to match market conditions quickly. Indeed, in some countries and provinces, rates have been set too high, leading to unsustainable development and grossly high profits for project developers. But in most cases, like in Germany, rates have been adjusted downward to reflect the changing economics of the technology.
Oddly, even though this is exactly how a FIT program is designed to work, people within the industry react negatively to these changes.
To some critics, Gainesville’s program has been just that — a program, not a market. The popularity of the FIT causes a burst of activity when GRU starts taking applications. The program quickly becomes over-subscribed and is halted for months while the projects are completed.
However, one need only look at the ups and downs in states like New Jersey and Pennsylvania — states with tradeable credit mechanisms that were supposed to create a sustained market — to see that similar problems can occur with a floating market-based approach to incentives.
Over the years, states have opted to develop credit-based programs over FITs. But if the city of Gainesville continues to put up impressive numbers and show that it can support a sustainable industry, perhaps the mechanism will get more attention from U.S. regulators.