U.S. state and local efforts to create feed-in tariff (FIT) programs will not work as well as those in Europe unless regulators adopt the key principles that have made FIT programs so successful on the Continent, analysts say.

And, they add, this is unlikely to happen unless U.S. regulators, utilities and key players stop thinking near-term and start fighting against entrenched interests in order to adopt the basic principles key to FIT programs.

“People are thinking very short-term – look at what I’m doing for myself – and that’s what causes all this fighting,” said Ted Ko, associate executive director of the FIT Coalition, a Bay Area-based group promoting the adoption of FITs on a local, state and nationwide level.

Experts agree that a successful FIT program has several key elements:

  • Procure renewable energies at a price it costs to produce them
  • Allow for a diversity of energy sources, not just solar
  • Differentiate prices by technology, not application
  • No caps

And they agree that U.S. programs fail to meet these measures. “It’s a bit of a patchwork across the board,” said Toby Couture, director of energy analysis at E3 Analytics in Canada. Like many FIT observers, Couture cited Vermont and the city of Gainesville as the most forward thinking in the states. But he noted that Gainesville only targets solar PV and both the Florida city and Vermont have caps.

“Caps are crucial. They are one of the major impediments to designing more aggressive feed-in tariffs in the U.S.,” Couture said. He noted that some European countries, like France, have caps, but the French set caps for onshore wind and solar PV at several thousand megawatts, so they act more like targets similar to an RPS (renewable portfolio standard) than a cap.

At the end of June, Oregon announced what it called its “incentive rate pilot programs for Solar PV Systems.” The total program capacity is 25 MW.

“Why bother?” asked FIT expert Paul Gipe. “Oregon has set everything back – possibly by two years because of this pilot program. It’s so small, what’s the point? And it’s only PV.”

[Editor’s Note: For an in-depth discussion of Feed-in tariffs with Paul Gipe where he offers his global outlook and explains his North American report card, register for Alta Terra’s live web conference and teleconference.  The event is co-produced by RenewableEnergyWorld.com and is schedule to take place on August 5, 2009.]

Others agreed that many U.S. programs cater solely to the solar industry and this is a policy mistake. Wilson Rickerson, CEO of Meister Consultants Group, said it’s not just a diversity of technologies, but a diversity of size that’s key. “It’s not just PV and gigantic wind but small biogas,” he noted. He said while there’s been much made of the boom in Germany’s solar market, the real FIT success story there is biomass and biogas. He suspected that solar gets all the press here “because the solar industry is fighting the loudest. It would be great if the U.S. biogas industry or the farm lobby or community wind got up in arms for community feed-in tariffs.”

And there are big gains to be had. Ontario’s FIT, considered the gold standard on this side of the Atlantic, has generated close to $10 billion in investment since it was officially launched last fall, said Canadian-based analyst Toby Couture. He said the program has “been really positively received,” is fully differentiated by technology and has attracted a wide spectrum of players.

Once again, the cap-less program provides benefits. “With caps you limit the ability to develop the manufacturing base that is associated with renewable energy development.” He said a key to Germany’s success and its ability to leverage so much global capital is its uncapped policy environment.

A study published July 7 by the University of California at Berkeley showed that if California enacted a FIT for solar projects up to 20 MW, the program would create 280,000 jobs over the next decade, produce over $2 billion in additional tax revenue for the state and stimulate up to $50 billion in new private investment. It would also fulfill California’s 33% RPS by 2020 on schedule.

Many point to federal energy law as a hindrance and note that the Federal Energy Regulatory Commission (FERC) has the authority to regulate wholesale rates of electricity. “The question has been brought up – Are states allowed to set rates?” noted Ko of the FIT Coalition. He said there are a variety of legal opinions that show that this is not a legal problem, but acknowledged that the threat of legal difficulties is a possible issue.

Asked why the U.S. is so behind other countries, analysts had different views. Ko speculates that utilities are providing the main opposition because “they would prefer to work within the RPS procedures as they are now.” He said large industry is concerned that its rates will go up and it is not supportive of policies “that will level the playing field for everyone.”

Couture, of E3 Analytics in Canada, agreed, noting that the current assets of coal, natural gas and nuclear still have a useful life. “Until that becomes more pressing a lot of utilities are dragging their heals.”  He also said the level of public awareness in Europe is higher than it is in the U.S. “In Germany no politician could get elected if they didn’t openly believe that renewable energy was the way of the future.” That’s not the case in the United States.

Miriam Widman has more than 20 years experience as a journalist and has covered the wave and solar industries for Off the Record Research, an investment research group. She also contributes to NPR and to the Willamette Week, a weekly newspaper in Portland, Oregon.