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Solar’s Faceoff: Feed In Tariff Versus Net Energy Metering

With the Gainesville FIT suspended, should solar rally around NEM?

The first and most famous U.S. feed-in tariff has been suspended and rooftop solar advocates are calling for the industry to rally instead around net energy metering.

The Gainesville Regional Utilities (GRU) program “came to a screeching halt, it’s over,” said The Alliance for Solar Choice President Bryan Miller. “This shows that FITs don’t build a long term durable market,” added Miller, a VP for the residential solar installer and third party ownership fund manager Sunrun. “Real people are losing real jobs because there is no Gainesville feed-in tariff anymore.”
 

Gainesville’s City Commissioners voted in December to suspend the tarifffor 2014. GRU will not provide the over-retail rate for solar-generated electricity that has driven the installation of fifteen-plus megawatts of capacity since 2009.

 

The FIT currently increases residential rates by around $3 per month per 1,000 kilowatt-hours, according to GRU. Since 2009, the utility has paid some $11.4 million, at an average solar-generated electricity price of $287 per megawatt-hour. Its contracted twenty year obligation is $74 million to $84 million.

 

Western Europe’s landmark FITs were “tremendously important in the development of the solar industry,” Miller acknowledged. “Germany’s FIT jumped started the industry and we give them credit for that. But we’ve outgrown those infant days when you needed to deliberately over-pay to get solar built.”

 

There is a contraction in the German market and market turmoil in Spain, Italy, Portugal, the Czech Republic, Bulgaria, and France, Miller added.

 

“The turmoil in Europe was not a problem with FITs,” renewables analyst and leading FIT advocate Paul Gipe objected. “It was the result of the fossil fuel and nuclear industries’ opposition to renewable energy. If there were renewables mandates or net metering, they would have attacked those.”

 

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FITs can work in places where the cost of retail electricity is low and the cost of electricity from solar systems is high but they don’t suit the U.S., Sunrun Supply Chain Manager and Treasurer of the German Energy Storage Association Dirk Morbizter.
 

With a FIT, Miller said, either the price is set too high, driving irrational demand, or it is set too low, forcing regulators to raise it until it is too high. “Either way, the market doesn’t find equilibrium. Net Energy Meteringallows that to happen.”

 

NEM “is about respecting and protecting the rights of individual homeowners to generate their own power,” Miller said. The FIT “forces the homeowner to sell to the grid but 75 percent of the power generated by net metered systems never touches the grid.”

 

NEM, Miller added, “is in 43 states and, according to D-SIRE data, there have been 150 expansions of it over twenty years and not a single contraction. That is the model of a durable public policy.”

 

The FIT is far more stable than NEM, Gipe responded, because FITs are contracts with a binding term on both parties. “Across the U.S., where utilities can’t push regulators to repeal net metering, they are going to try to limit the number of years it applies.”

 

The FIT is also more fair, Gipe added. NEM is “anti-choice” because the renewable energy builder has to already be a utility customer. With a FIT, a person or a community “can install renewable energy at a greenfield site and be paid for the electricity even if there is not a metered connection.”

 

Solar “leasing companies” oppose the FIT because it is “more bankable,” Gipe explained of third party owner fund managers like Sunrun and SolarCity. “Who needs a leasing company and all their fees and their profit when you can go to the bank and get a loan to do it yourself? In Germany, they don’t have leasing companies. They have community banks and credit unions. Loans are available. There is no need to sell the right to develop solar energy to a leasing company.”

 

But with FITs, Morbizter said, solar customers often build excessively large systems to maximize their return.  “This approach is unsustainable, especially in high-growth solar markets where solar costs continue to drop. Net metering ensures that customers match their system size to their electricity usage,” he explained.

 

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The suspension of the Gainesville FIT “is a blow,” Gipe said. “But the City Council said it is because Gainesville reached its solar targets. Germans would have concluded the targets were too low and increased them. Will Gainesville set new targets? I don’t know. Will they implement net metering instead? I doubt it. They introduced FITs to avoid NEM because it took revenues away from the municipal utility’s base. That hasn’t changed.”

“Net metering has proven an effective policy for deploying retail distributed generation (DG) projects,” Clean Coalition Executive Director Craig Lewis wrote recently at Huffington Post. Net metered systems were 99 percent of those installed in 2012 and are almost half of the installed U.S. solar capacity.”
 

But FITs, along with streamlined interconnection procedures, “are the world’s most effective policy for bringing wholesaleDG online,” Lewis added. And though over 70 percent of the world’s installed solar PV capacity is wholesale DG, it has been “largely overlooked in the U.S.”

 

“Net Energy Metering is most appropriate for residential-scale renewable energy projects while Feed-In Tariffs are unparalleled at unleashing the commercial-scale market segment,” Lewis said. “FITs, along with proactive grid planning, are the most significant drivers for commercial and community-scale renewables going forward.”

pposted by Herman K. Trabish @ 9:04 AM

Content Discussion

Nathan Wilson's picture
Nathan Wilson on January 13, 2014

The FIT and NEM are not the only ways to support clean energy, and neither is well suited to a predominantly clean portfolio.  If we simply institute a portfolio standard for CO2 emissions, then the utilities could decide how best to reduce their own total CO2 emissions.  Both solar and wind are sufficiently mature that utilities can fairly evaluate them alongside other clean alternatives.

FITs are governments’ attempts to dictate the technology rather than the desired outcome.  NEM attempts to hide a cost shift behind a consumer choice issue, and ends up making expensive rooftop generation look more attractive than much cheaper utility scale generation.

Scott Luft's picture
Scott Luft on January 13, 2014

Great article for the most part, but …

Gipe’s claim that “Germans would have concluded the targets were too low and increased them” is obviously nonsense now, as rates were changed to decrease until target capacity ranges were achieved – which happened about the end of this year. (see Germany on Track for Solar Target Corridor in 2013 ).

They started furiously trying to cut back FIT rates as solar approached ~3% of total generation; in 2013 it looks like they may get to 4.5%.

That’s hardly stepping on the accelerator because so many were taking advantage of the program.

Michael Keller's picture
Michael Keller on January 17, 2014

There is no compelling reason for a feed-in tariff as the presumed basis for such a largess is the myth of catastrophic climate change.

There is a market for unreliable and intermittent renewable power – such energy is routinely bought-and-sold in the whole-sale markets. However, the price of such contracts is not very much. Therein lies the actually issue. The lads trying to foist their renewable energy on the population do not like the market price for their product. As such, they resort to all manner of subterfuge and deception to con (or force) everybody else into giving them money.

Donald Osborn's picture
Donald Osborn on January 17, 2014

As a former utility manager, I can tell you that PV generation provides many direct benefits to the utility, the rate payers at large and to the electric grid itself as it has a rather good match to utility peak loads when such power is most needed and the most costly to produce and distribute. As PART of a broad mix of renewables, solar does NOT place undue burden on either the grid nor non-participating rate payers. In crying “NEM is unfair to us”, the utilities are being disingenuous. As a dozen recent studies in as many states show  rooftop PV not only benefits the solar customer, but also results in net benefits to all ratepayers.  It is only when the utilities put their thumbs on the scales by inflating the costs and neglecting many of the benefits of distributed PV generation can utilities argue that solar and net energy metering somehow is a shifting of costs from Solar customers to Non-solar customers. Even the recent utility friendly E3 NEM Report to the CPUC states that “the NEM accounts [PV customers] appear to be paying slightly more than their full cost of service”. In fact, as with energy efficiency, solar generation benefits the entire range of customers, participating and nonparticipating alike, by providing not only clean renewable energy but much of its energy when it is most needed and is most highly valued — during peak periods. And when part of a mix, including wind, it covers a broad portion of the key periods. As a significant part of our energy mix, solar and NEM brings real value to all of us. Considering the challanges facing us, the problem is NOT that solar is over subsidized but that it is UNDER subsidized.

Daniel Ferra's picture
Daniel Ferra on November 27, 2014
We need a National Feed in Tariff, this petition starts in California. California currently has a Feed in Tariff that does not allow home owners to participate in the State mandated goal of 33% renewable energy by 2020.


California also does not allow the homeowner to oversize their R.E systems, as of now, your local utility has allowed only 80% homeowner generation from your R.E system.


California has 2 different Energy policies Net-metering and a Feed in Tariff.


Net metering the energy policy for homeowners, allow you to bank excess electricity from R.E systems for future credits. The credits you accumulate 
are at the retail rate, and are reviewed at the end of the year. It will be written off with a thank you from the utility and no payment to the homeowner for producing more than what you use.


Net metering has allowed third party leasing companies to replace one utility with another.


A California Residential Feed in Tariff would allow homeowners to sell their R.E back to the utility, protecting our communities from grid failures, natural disasters, toxic natural gas and oil Fracking. It would also create a new revenue stream for the Hard Working Taxpaying, Voting, Homeowner.


Examples of Net-metering slow down Renewable Energies:
1. Renewable Portfolio Standards (RPSs) which create de facto caps on the deployment of renewable energies (the Germans do not have any RPSs, their Feed in Tariff has no caps.


2. Net-metering caps, most states only allow a small percentage of one to two percent of peak load to be net metered.


3. Third party leasing companies like Solar City, Sun Run, Verango and others fight tooth and nail to protect scarce capacity carve outs (from the States RPSs) so as to bolster their chosen business model.


No one is fighting for the Hard Working, Taxpaying, Voting, Homeowner, we can change that with a Ca. Residential Feed in Tariff Energy policy that allows everyone to participate. Homeowner’s, Small and Large Businesses, Small and Large farmers, and Industries, have the right to sell Renewable Energy electricity back to the utility.


We need sustainable and successful energy solutions now and a Residential and Commercial Feed in Tariff is sustainable and will help ensure our survival.


Vote Solar Initiative is a Sierra Club and Solar Leasing Companies platform to ensure that One Utility will take the place of Another through the continued use of Net Metering.


We need a Policy that will enable Hard Working, Voting, Tax Paying Citizens, get a chance to participate in the States goal of 33% Renewable Energy by 2020 through a California Residential Feed in Tariff.


California, there is enough Residential Solar to power 2.25 San Onofres, couple that with a Commercial Feed in Tariff and we can solve some of these environmental and electrical generating problems.


This petition will ask the California Regulators and Law makers to allocate Renewable Portfolio Standards to Ca. Home Owners for a Residential Feed in Tariff, the RPS is the allocation method that is used to set aside a certain percentage of electrical generation for Renewable Energy in the the State.


Sign And Share this petition for a California Residential Feed in Tariff.
http://signon.org/sign/let-california-home-owners
 
 
 
 

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