Green Energy & Development Law Blog : Green Building & Development Lawyer & Attorney : Brad N. Mondschein : Pullman & Comley Law Firm

I want to thank Kent Jeffreys at the International Council of Shopping Centers for bringing me this post....

From InsideEPA.com’s Carbon Control News:

Coalition Seeks Renewable Energy ‘Feed-In’ Tariffs To Cut GHGs

Posted: July 7, 2010

A coalition of clean energy groups and environmentalists is attempting to spur new interest among lawmakers and regulators in establishing “feed-in” tariffs to bolster renewable energy projects and cut greenhouse gas (GHG) emissions. The tariffs require utilities to purchase renewable power at above-market prices through long-term contracts, providing more certainty for investors to fund new projects.

The coalition is bringing together experts from around the world for a July 12 conference in San Francisco to brainstorm ideas for developing feed-in tariff systems that will at first be designed for state use. Rep. Jay Inslee (D-WA), meanwhile, is preparing a proposal calling for a national feed-in tariff to boost renewable energy, though observers do not expect it to be included in pending energy legislation this year.  (see my post from earlier today regarding Inslee's net metering tariff)

The coalition includes the Center for American Progress (CAP), Sierra Club, Pacific Environment, World Future Council, and Alliance for Renewable Energy. Its initial aim is to convince California officials to pursue feed-in tariffs as a way to at least complement the state’s failing renewable portfolio standard.

“I think California has a real potential to play a leadership role in renewables legislation,” says a source with Pacific Environment. “So we need to reignite and get people on the same page about the potential for what a robust feed-in tariff could mean for California. And one way to do that is to get people from around the world where it has worked together in one room.” The “goal of this conference is to get it right in California first.”

A feed-in tariff essentially requires utilities to buy renewable energy at above-market prices for fixed periods of time under contracts approved by regulators. It represents a subsidy program where owners of renewable energy production systems receive a guaranteed, fixed price from utilities for the purchase of renewable electricity that is fed into the broader electricity grid. The tariff is intended to incentivize renewable energy development by making it more appealing to investors. Several California state lawmakers have introduced a handful of feed-in tariff bills in recent years, but none has advanced.

Sources with the coalition hosting the conference say Vermont and Oregon have already implemented narrow feed-in tariffs that are showing promise. About 10 other states either have proposed feed-in tariffs or are showing interest in pursuing them, the sources say. These include Wisconsin, Minnesota, Washington, Michigan, Indiana, Maine, New York and Nevada, says a Sierra Club source.

A CAP source says 90 percent of the renewable electricity capacity built in the world over the last decade was thanks to feed-in tariffs, because they provide regulatory stability and revenue certainty. Experts are now trying to “figure out a way to make it work in the U.S.”

But one of the chief barriers to domestic feed-in tariffs is that the federal regulatory system is based in part on providing least-cost power, even for renewables, under the Public Utility Regulatory Policies Act (PURPA) of 1978, the CAP source says. For example, utilities must pay the difference between the cost of conventional electricity supplies that are being replaced with more expensive renewable sources. State public utilities commissions are “struggling to justify a rate above” this difference, which is what a feed-in tariff would be, the source says.

European countries have different regulatory goals, focusing on the benefits of renewable energy.

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The Massachusetts Department of Public Utilities (DPU) has adopted new regulations implementing the progressive net metering law passed last year.The order establishes a “model tariff” enabling electric customers who install wind and solar power to be compensated at retail rates for selling excess electricity they generate back to their electric companies. Prior to the Green Communities Act of 2008, customers who opted to net meter could only be compensated at the lower wholesale rate for their excess power.

Through net metering, customers who generate electricity for their own consumption can earn credits from their electric distribution company if they generate more power than they use. Credits may be banked or allocated to other customers, allowing those without facilities to take advantage of net metering benefits as well.

In June, the DPU adopted net metering regulations reflecting Green Communities Act changes that lifted a previous restriction limiting net metering to on-site generation with a capacity of 60 kilowatts or less. Now, customers who own larger wind turbines or solar power installations – up to 2 megawatts – can offset their electric bills with credits for the extra power they don’t use, and at the higher retail price. The regulations also provide for “neighborhood net metering,” allowing credits for renewable power generation to be shared among households in a neighborhood.

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Last October, the Virgin Islands Public Service Commission certified the Tutu Park Mall as a small power provider, or qualifying facility, so that it could operate two 50-kilowatt wind turbines.  At that time, the PSC required the mall to negotiated and enter into an interconnection agreement with the local utility (WAPA) within 60 days.

Since then, the turbines have been installed but an interconnection agreement has not been finalized.  The PSC has now decided to have an evidentiary hearing to settle the agreement.   At the same hearing, the V.I. Energy Office Director Bevan Smith raised the issue of developing a permanent net metering program for the territory.  Two years ago, the PSC gave WAPA and the Energy Office the go-ahead to develop a net-metering standard that would allow ratepayers who create their own renewable energy through wind or solar power generation to donate their excess net energy to WAPA at the end of each month, with a cap on how much power a producer could donate. 

Under the current standard, the amount of power given to WAPA can not exceed five megawatts (or 5,000 kilowatts) on St. Croix and 10 megawatts (or 10,000 kilowatts) on St. Thomas-St. John.   The Energy Office would like to see the limit increased for residential and small commercial customers, along with larger government facilities and schools. 

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As the Stimulus Bill is now behind the Congress, the serious work of a comprehensive Energy Policy and Climate Change Policy is now fully underway.  One major aspect of both bills that is emerging in the halls of Congress is the imposition of a Carbon Tax.  While it is still unclear how a Carbon Tax will be imposed, either through a Cap and Trade system or through a per MW or BTU surcharge, there is no doubt that the cost of electricity and heat for every American will increase.  Realizing that such a surcharge is, by definition, regressive, there is now talk emerging relating to giving a tax credit to less wealthier Americans to offset the Carbon Tax.  At the same time, there is no consideration being given to the businesses that are the real backbone of the American economy who will see their costs increase.

Simply, there is a better way.  Congress should look at a comprehensive reform that encourages the use of on-site generation, renewables and efficiency.  In addition, the cost of such a program should spread over the ratepayers, which is more inclusive than the taxpayer base because of the numerous businesses that do not pay taxes because they manage to shed profit. 

I welcome modifications to this idea as well since I believe that we all need to come together to get it right!!

1.  Institute a national Renewable Portfolio Standard of 25%.  The RPS can be achieved either through centralized power projects to distributed generation projects.  The RPS would be on a statewide basis, not on a larger regional basis.  In addition, the generation to satisfy the RPS must be generated in State.  If we are going to be serious about reducing carbon and dependence on foreign oil, we must do enough to really make a difference.  The large RPS does this.  Further, making the RPS at the state level encourages innovation and does not place the burden of the RPS on one state and on the interstate transmission grid.

2.  Institute real and meaningful nationwide net metering (which will help with RPS).  This means that excess generation is sold back to the grid at 100% retail rate.  Obviously, there is a cost to the utility to transmit and distribute this generation to other users.  The cost of doing so should be paid by the ratepayers as a whole.

3.  For those that install Class 1 Renewable Energy as distributed generation (i.e., solar), all demand charges, backup charges and transmission/distribution charges should be waived.  In effect, the end user would only pay for the generation costs of grid power used and then only if the cost of such power exceeds the amount of excess generation sold back to the grid.   Again, costs to the utility are shared over the ratebase.

4.  For those that other Renewable Energy as distributed generation (each state has different definitions), the same benefits as the Class 1 Renewable would apply except that the end user would be charged distribution and transmission charges for grid power used.

5.  For those that install combined heat and power (i.e., natural gas) generation, for electric the same net metering rules would apply (full net metering).  In addition, only demand charges would be waived.  On the gas side, the end user would only pay for the gas used and all delivery charges would be waived.

6.  For CHP, the end user would be given the ability, without intervention by the utility, to have limited rights to cross a rights of way (limited by distance perhaps) to install electric lines to neighboring end users to share the excess generation and to install pipes to share the excess thermal load.

With these types of incentives, the reduction of carbon would be significant.  While ratepayers would bear the burden, the burden would be fairer than a carbon tax.  In addition, the incentive of installing generation is better than a punishment for using power that is needed for our homes and businesses.

I welcome your thoughts....

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The Utah PSC has issued an order to Rocky Mountain Power which implements true full net metering in Utah.  The first item on the PSC's order is the elimination from the Rocky Mountain Power tariff of any reference to a cap on the amount of energy that an end user can generate to receive the benefit of net metering.  However, the PSC did put a system-wide cap of 20% of Rocky Mountain Power's 2007 peak demand on net metering.  It should be understood that the total net metering electricity produced in 2007 was only only 656 kW which represented about 0.02% of the 2007 peak demand (.1% is 4,615 kw).  Therefore, in realistic terms, the cap will not prevent net metering in the short term.

In addition to establishing a high cap, the UTAH PSC requires that end users receive a credit each month for excess generation.  For residential and small commercial end users, the credit will be at the retail rate.  For large end users, they will have a choice to accept an avoided cost rate or an alternative rate which will be based on Rocky Mountain's revenue per kWh.  Lastly, the PSC clarified that RECs associated with renewable net metering are owned by the end user customer and not the utility company.

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Although not yet available on the Missouri judicial website, the Great Rivers Environmental Law Center has sued the Missouri PSC in state court on behalf of Renew Missouri.  The law suit alleges that the PSC rules relating to Net Metering violate the Missouri Easy Connection Act.  In particular, the lawsuit challenges the PSC's requirement that customers who generate less than 10kW must carry $100,000 of insurance and customers who generate more than 10 kW must carry $1 million of insurance.

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The Pennsylvania Public Utilities Commission adopted its final rulemaking order which amends the Commonwealth's net metering regulations.  The following changes were made:

1.  Commercial generators with systems under 3 MW or systems up to 5 MW that make their systems operate in parallel with the grid during emergencies can participate in the program.

2.  The price paid by the utility for electricity will be the full retail value and no longer the avoided cost of wholesale power.  This rate will include the generation, transmission and distribution charges for each kWh.  Any excess kWh produced will be carried forward and credited against future usage.  At the end of each year, the customer will be paid any excess credits by the utility.

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As we reported earlier on this blog, the Gainesville Regional Utilities has proposed to implement a feed-in tariff regime to spur the development of distributed generation and net metering.  The GRU has now released its proposed rate schedule.  The rates are extremely favorable for the development of distributed generation and net metering.  Depending on the success of the program, this concept could be a model for the rest of the country.  The feed-in tariff concept has already proven successful in Germany where 14% of the country's electricity comes from renewable sources.

GRU is seeking have 3% of its power come from renewable resources in five years.  The feed-in tariff would require a customer to pay $5.50 per month for having access to a power line.  GRU will pay a homeowner 26 cents per kWh, which is more than double what the current net metering price provides.  The price will fall to 25 cents in 2011 and 19 cents in 2016 under the assumption that the cost of solar panels should also decline.

It is expected that the cost of the program will increase rates on homeowners by approximately $2 per month.

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The New Mexico Public Public Regulation Commission (Utility Division) issued new regulations governing the purchase of power from small power producers.  The regulations require that a public utility must purchase power from a qualifying facility at the utility's avoided costs.  Avoided costs are the costs that the utility would have paid for the electricity had the utility generated the electricity itself or purchased the electricity from a third party. 

The power producer is being given 3 choices for receiving payments.  First, if the project owner is primarily serving the load at the premises, the power producer can simply have a single meter with the meter being reversible.  The power producer will pay the utility for any power purchased from the utility.  However, the utility will not be required to make any payments to the power producer for the electricity (this is known as the Load Displacement Option). 

The second option (called the Net Metering Option) allows the utility to install a meter that determines the net energy delivered from the power producer to the utility at time of use rates.  If the net energy flowing to the utility exceeds the energy flowing from the utility, the utility shall pay the power producer for the excess energy at the utility's avoided costs based on time of use.  The utility, however, shall be allowed to bill the facility for demand charges, backup charges etc.

The third option (called the Simultaneous Buy/Sell Option) requires that separate meters measure the electricity flowing to the utility from the power producer and to the power producer from the utility.  In this scenario, the power producer must purchase all of the power for the site from the utility at normal tariffed rates and the utility must purchase all of the power produced by the power producer at avoided costs based on time of use rates.

In addition to the purchase and sale of electricity, power producers will also qualify for capacity payments from the utility.  Capacity payments will be paid to a power producer when the utility avoids procurement of new capacity because of the power producer's electric production.  The capacity payment is currently not tariffed by the utilities and must be developed and approved by the Utilities Division.

The addition of capacity payments to the net metering payments is another significant step forward in net metering regulations.  Although not yet quantified, capacity payments can become significant given the amount of resources needed by utilities to maintain adequate peak load supply.  It is yet to be seen whether New Mexico will make this payment a large financial benefit, but the idea of a capacity payment to small power producers is a good step in the right direction.

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The Interstate Renewable Energy Council (IREC), The Solar Alliance, The Vote Solar Initiative and Network for New Energy Choice (NNEC) have compiled their 2008 list of best and worst states for net metering and Interconnection standards.  In a report entitled "Freeing the Grid", the group analyzes all 50 states' policies and provides a detailed ranking for each state with pros and cons for each as well.

For net metering standards, Colorado tops the list with Maryland, Florida, New Jersey, Oregon, and Pennsylvania all getting grades of "A".    My home state of Connecticut ranked tied for 8th with a "B" Grade.  At the bottom of the list is Texas, Michigan, North Carolina, West Virginia, South Carolina and Idaho with "F" grades and Alabama, Alaska, Kansas, Mississippi, Nebraska, South Dakota and Tennessee with "n/a" ratings because they did not have programs.

For interconnection standards, no state received a higher grade than "B", with Illinois at the top of the list.  Other "B" rated states are New Jersey, New Mexico, Maryland, Massachusetts, Oregon, Pennsylvania, California, Nevada, Arizona and North Carolina.  My home state of Connecticut received a "D".  At the bottom of the list was Wyoming with an "F" rating.  14 other states received "F" ratings and 13 states had "n/a" ratings because they did not have programs.

The top ten Solar Markets by Installed Grid Connected PV Capacity were California (329 MW), New Jersey (44 MW), Nevada (19 MW), Arizona (19 MW), New York (15 MW), Colorado (15 MW), Massachusetts (5 MW), Hawaii (4 MW), Texas (3 MW), and Oregon (3 MW).  All other states had 20 MW.

The top ten Solar Markets by PV Installed Per Person are California (9.1 W), Nevada (7.8 W), New Jersey (5 W), Arizona (3.1 W), Colorado (3.1 W), Hawaii (3 W), Delaware (1.4 W), Vermont (1.2 W) and Connecticut (0.8 W). 

In addition to the lists, the report provides an excellent summary, on a state by state basis, of net metering and interconnection requirements and issues.  In addition, recommendations are made for each state to improve their rankings.

Overall, this document is a must read for anyone in the distributed generation field.  However, it is also a must read for any developer that is contemplating adding any form of on-site generation to their portfolio.

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The Arizona Corporation Commission finalized new net metering rules.  The Arizona rules not only continue the latest national trend modifying net metering rules to encourage more distributed generation, they provide yet another model for encouraging consumers to maximize roof space and other land assets for generation instead of limiting projects to a percentage of base load.

The new net metering rules apply to distributed generation as follows:  biogas, Combined Heat and Power (CHP) (but with an efficiency standard), geothermal, hydroelectric, solar, wind, and fuel cells (when fuel is derived from a renewable source).

The rules require that any excess capacity generated by a customer be available for credit on a rolling basis during each calendar year.  In addition, once each calendar year, the electric utility must send the customer a check for the balanace of any credit due in excess of the amount owed by the customer.  The amount of the check provided to the customer will be for "Avoided Costs" of the utility.  This is defined as the incremental costs avoided by the utility for not having to generate the electricity itself or purchasing the power from another source.

Overall, the Arizona net metering law is a step in the right direction by avoiding the expiration of credits that is prevalent in the older net metering rules.  However, the new rules still lag behind the innovative recent Massachusetts net metering law and the proposed rule in Gainesville Florida (previously reported by the blog) and are similar to the Michigan net metering rules (previously reported by the blog).  With that said, excitement about the Arizona rule is still appropriate.

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