Yes, obesity is a big -- literally -- problem in America. One in four four-year-olds is considered obese. But the FIT I am referring to is Feed In Tariffs, the European kind, the kind that ignited the renewable energy industry on the other side of the Atlantic. It is my assertion that the time is long past for America to follow our European cousins' examples.
Let me explain how a FIT works. The government or the utility, depending on who's making the offer, agrees to pay people who install solar electric panels a fixed per kilowatt rate for the power their system produces for a set period of time. In Europe, that's typically at least 20 years and frequently longer. With that promise in hand, homeowners and businesses can go to the bank and take out a loan to install the biggest PV system they can afford. It's not unusual for systems that are installed on roofs to be paid a bit more than those mounted on the ground. The rate paid is always more than the normal residential rate, so the homeowner not only offsets their own power bill, but also makes enough to pay off the system and earn a profit. That's why FITs have been so successful in Europe.
What triggered this blog are comments made during a recent energy briefing by a representative of our local public utility and -- surprisingly -- a senior energy consultant at the Rocky Mountain Institute. During the follow-on Q&A session, which I video recorded, I asked the utility representative if it made sense for OPPD to look at what its public utility counterpart, Gainesville Regional Utility (GRU) in Gainesville, Florida is doing by introducing a modest -- by European standards -- Feed in Tariff or FIT.
His response was that doing so would run counter to the utility's decade's old mandate to provide "least cost" electric power, which in this region is largely coal, with some nuclear power, hydroelectric, a tiny bit of landfill gas generation and a smidgen of wind. Certainly, we all enjoy having some of the lowest electric utility rates in the country at 6.5¢ or so a kilowatt hour, but it comes at a huge environmental cost in terms of greenhouse gases, sulfur and mercury emissions.
His point was that if we started to pay rates like they do in Europe, this will have a very negative impact on the poor in our community, who won't be able to afford electric power. That sounds reasonable, but it doesn't make any sense.
First of all, the average electric rates in Europe aren't all that much higher than they are in the United States. The average kilowatt rate in Texas, for example is just over 13¢ and in New York State it is over 17¢/kwh; that is comparable to rates in Sweden and Belgium, respectively. Denmark has the highest rates at 32¢, Switzerland and Netherlands at 25¢ and Germany at 19¢. However, the average per kilowatt rate for Europe is 16.91¢. And what about nuclear-powered France, you ask? Just over 15¢.(1)
The reason I asked about Gainesville is because I actually talked to the lady administering applications for GRU's FIT weeks ago. Here's what I learned.
The program is designed to add just 4 MW annually of solar photovoltaics. Since the program started in March 2009, the 2009 quota has been filled. So has 2010, and 2011 and 2012. She is now taking applications for 2013. Roof-mounted systems will be paid 32¢/kwh while ground mounted systems will received 25¢. These numbers will be reviewed and likely reduced in subsequent years, she explained.
The reason for the 4MW quota is so that the utility and its rate payers in Gainesville can more easily assimilate the higher cost of photovoltaic-generated electricity. Like Omaha, most of GRU's power comes from coal generated at its Deer Creek plant north of the central Florida community. A New York Times story on GRU's FIT indicated the program would add 74¢ to each customer's monthly power bill. My contact said the number was more like 90¢ a month. Either way, that's hardly exorbitant and I would argue it won't be the financial tipping point that forces the utility to cut off power to households that fall behind in their payments. To the contrary, the community is gradually going to get cleaner air (meaning less asthma and other respiratory illnesses) and stabilized energy prices that are not impacted by future carbon penalties and fossil fuel pricing gyrations. Their fuel is forever free as long as the sun shines.
Now here's the kicker. My state with its "socialist" public power system dating back to the 1920s actually gets more sunshine than Florida. It's true. Look it up. Yet, we do next to nothing with it, other than complain. We certainly don't incentivize people to use it.
Contrary to the assertion that FIT will hurt the poor, a thoughtfully administered FIT program will, over the long term, benefit them by giving them stable, predictable power rates and it might even put some of them in the power generation business.
Next came the RMI consultant who said there is no correlation between higher energy prices and increased productivity. You can, he stated, have low energy prices like we have in Nebraska and high productivity.
Fine. That may be true, but that's not the issue here. The issue is how do we stop using something that is bad for the planet and switch to something that is far better and more economically viable in the long term? Unfortunately, I didn't get to ask any follow-ups.
The real jaw-dropper came next when he talked about Feed In Tariffs paying 70¢ a kilowatt in Europe. Now, I follow this pretty closely. It costs me €200 annually to subscribe to Photon International, the leading trade journal on what's happening in the photovolatic industry, especially in Europe. I've never read or heard of a FIT that high. Germany's initially was 45¢ a kilowatt, about twice as high as what consumers in Hawaii pay, the highest priced utility market in the 50 United States.
Further, he said that FIT's send the wrong economic message. There is no incentive, he argued, for PV producers or people who install systems that benefit from the FIT to reduce costs. That also is malarky! Every FIT I am aware of has a rate reduction clause in it. The first people to install PV systems in Germany or Spain, Italy or Greece enjoyed the highest tariff rate. The people who follow them in subsequent years get paid successively less each year. The whole idea is to gradually force down the cost of the technology and it's working. This is exactly what Gainesville is doing. The systems that get installed in 2013 are going to be paid less on a per kilowatt hour basis than the ones that went online in 2009 and 2010. But by then, systems will cost less.
The price of solar PV is now headed towards $1/watt. Today you can order containers of Chinese-made PV panels for $1.45 a watt. [See also Incentives Add Shine to China Solar Drive]. There are, of course, balance of system costs for inverters and mounting racks, but the rate reduction aspect of FITs is doing exactly what it was intended to do. It has stimulated the widespread installation of solar (and wind) power while driven down costs. It's working there. There's no reason why it can't work here once we get out of our Hoover-era mind-set.
Pictured below is a solar-powered housing development near Freiberg, Germany. The image at the top of the page is of a solar PV "farm" also in Germany. A Google or Bing.com image search will turn up scores of similar images from all across Europe. This is not rocket science when dairy farmers in Bavaria supplement their income with solar energy.
(1) As of 2002. Source: http://tinyurl.com/m5jz7j
