Bioenergy, Geothermal, Hydropower, Solar, Wind Power

All for renewables…and renewables for all: tariffs for North America

Issue 5 and Volume 10.

Americans lag other countries when it comes to using policy to encourage the growth of renewables, says Paul Gipe. In his opinion, they should follow the example of the Germans, French and Spanish, who have developed the idea of feed-in tariffs from one that simply treats all renewables equally to one that has various ways of differentiating between them

While Americans are all atwitter as the US Congress makes another run at a nationwide Renewable Portfolio Standard (RPS), they are losing sight of the bigger picture. By definition, an RPS gets us only part of the way to the promised land (some small percentage of supply) and often with only one technology (wind). Worse, it may leave us wandering in the desert for years to come, as it has California and several other states.

It is true that no single policy mechanism will part the Red Sea and lead us to safety from climate change and dwindling fossil fuels. But one policy mechanism has outshone all others in quickly delivering the massive amounts of renewable energy needed: feed-in renewable tariffs.

Renewable tariffs have resulted not only in more installed generating capacity and more actual generation than any other policy mechanism, but also in more robust competition among manufacturers and more renewable technology development as well. Countries with renewable tariffs, such as Germany and Spain, dominate the world market for wind, solar PV and biogas.

Consider the outsize influence of Germany and Spain compared with the potentially massive US market. Despite its size, Germany installed nearly as much wind capacity in 2006 as did the US. Total installed wind capacity in Spain, once the poor man of Europe, rivals that of the US, the world’s largest economy. Germany installed 1100 MW of solar PV last year – nearly 10 times that installed in all of North America – and in doing so became the undisputed world leader in this technology.

Significantly, some 300 MW of the solar PV installed in Germany last year was installed by farmers – not a group anyone would call ‘early adopters’. And therein lies the difference between Germany and most Anglophone countries. German policy not only encompasses all renewables, from geothermal to solar PV, but also creates the opportunity for all of its citizens to participate. Renewables are not reserved for just an elite few.

Not to be fooled, a growing number of North Americans are asking, ‘Hey, wait a minute, how have the Europeans been so successful? How do they do it? Do they have an RPS?’ The answer, of course, is no. Most European countries don’t use an RPS, which the Europeans call a quota model. Only the UK and a few other countries do. The European countries most rapidly developing renewable energy, the ones featured in the pages of Renewable Energy World, all use renewable tariffs, which are variously known as electricity feed laws or feed-in tariffs. This often comes as a surprise to many North Americans, even to some renewable energy advocates who should know better.

Although renewable tariffs remain barely a blip on the radar screen of public policy in North America, interest is growing. Solar and wind conferences are now setting aside time to discuss the topic, and the California Energy Commission has launched a formal investigation into feed-in tariffs. On the other side of the continent, Ontario is well into the first year of its groundbreaking Standard Offer Program. Meanwhile, budding citizen movements are gaining steam in several states and provinces, from Massachusetts to Michigan, from British Columbia to Québec.

Some environmentalists and renewables advocates in North America shake their heads sadly and say, ‘We’re Americans [or Canadians]. We’re different. It can’t be done here.’ That’s hogwash. Of course it can be done here. North Americans were the first to do so, before we gave up leadership in renewable energy development during the Reagan-Thatcher era.

We have a successful track record to prove it. Californians were the first to demonstrate conclusively that we can bring massive amounts of renewables online quickly when renewable tariffs are correctly tuned. Wind farm developers alone installed 1200 MW of new generation in a few short years in the mid-1980s with what is now considered obsolete technology. Yet those old turbines have been supplying 1%-1.5% of California’s electricity for more than two decades!

Political winds are turning

The political winds are slowly changing direction. Several political parties (mostly Canadian) and more than 100 individuals and organizations have endorsed the concept of using renewable tariffs in North America. Although they may use varying terms to describe the policy they wish to see, all support the general principle of allowing interconnection with the grid for all those who wish to do so – and paying a fair price for the electricity delivered.

The technology has always existed, whether solar or wind. It has always been a question of whether we want renewables or not, whether we want to pay for them or not. The issue has always been one of policy.

Paying what it costs should be our new mantra. Many, if not most, EnNGOs in North America – especially those in the US – are still in denial about the monetary costs of renewable energy (Canadians don’t have the luxury of the hefty tax subsidies that so distort the US market). You still find environmentalists and renewables advocates arguing how cheap wind is or how cheap solar will be sometime in the future. It’s always in the future.

Renewable energy is not cheap, nor does it need to be. Renewable energy is absolutely essential for our economic and environmental survival. Most of us know this, but very few of us in North America are willing to stand up and say, as the Stern report does, ‘Pay now or pay more – a lot more – later.’

Despite the dire predictions of neoliberal economists, countries using renewable tariffs continue to use them. Germany’s grand coalition has reaffirmed its support for its pioneering feed-in law, going so far as to increase substantially their tariffs for geothermal and offshore wind.

Other countries are raising their tariff rates or expanding their programmes. France’s new solar tariffs and subsidies now put it on a par with Germany. Italy, not to be outdone by the success of its northern neighbours, abandoned its RPS for solar PV and this summer introduced new solar tariffs that are even higher than Germany’s and rival South Korea’s, in fact they are the highest in the world.

How have the Germans, French, and Spanish done it? The answer is simple. They pay for it. They’ve made a political decision that all renewables are desirable, in fact needed, that they’re needed now, and that they will pay for them.

Market economies produce the products people want when people are willing to pay for them. If you pay for it, ‘they will come’. The key is the price or tariff. The role of public policy is to set a price that will result in the type and pace of development desired.

To create the rapid development of the massive amounts of renewable energy that we need, we must pay more than we might otherwise pay. If growth isn’t robust enough, we pay more. If growth is too rapid – can there be such a problem? – we reduce the price and development slackens.

In using renewable tariffs, society sets what is believed to be a fair price for each technology, a price that will result in profitable development at the rate needed. The market then functions to determine how much renewable energy will be developed where, and by whom.

The German, French and Spanish programmes have gone beyond the simple feed-in tariffs of the 1990s by moving toward more sophisticated policies. These Advanced Renewable Tariffs, dubbed ARTs, differentiate tariffs by technology. Solar gets one price, wind another and so on. In well developed systems like those of Germany and France, there is further differentiation by project size or application. In Germany, there is one price for solar mounted on the ground and a different price for solar on rooftops. Similarly, in France, there’s one general price for solar and an additional bonus for solar integrated into buildings.

The beauty of ARTs is that they are transparent, comprehensible and equitable. The door is open to everyone, from farmers to homeowners, from utility company subsidiaries to independent power producers to co-operatives. Everyone can participate – renewable energy for all.

Ontario is the first place in North America to test the concept since California in the mid-1980s. Significantly, Ontario’s Standard Offer Program is one of the few programmes anywhere in North America without a cap or, more correctly, a quota. The programme has no upper limit. The province is signing 100 MW in contracts every month. By the end of the year, Ontario will have contracted for more than 1000 MW of new renewables. Most – but importantly not all – of this is for wind. That’s as much as Ontario’s last call for tender. Admittedly, these are, in the end, just contracts, not hardware. And as we’ve seen from the dismal performance of California’s RPS, contracts are just that – contracts.

Nevertheless, Ontario is the first major jurisdiction in North America to implement a comprehensive policy for the development of all renewables. And because the programme is open to all participants, Ontario also offers the equitable distribution of opportunity to all.

Yes, the programme is flawed. Of the 90 MW of solar PV under contract, homeowners and small businesses will install less than 1%. More than two thirds of the wind contracts were awarded to large commercial developers, just as they would be under an RPS, although about one third of the wind contracts were awarded to small developers, some even to farmers.

Most importantly, the political intent is there to make the programme successful. This spring, Canada’s Minister of Energy Dwight Duncan described his plans to modify Ontario’s programme to ‘find the right mechanism to spread the use of wind across the province’ so that wind projects are not concentrated solely along the shores of the Great Lakes. Duncan has also said he will ‘bring the barriers down’ to encourage more community participation.

Premier Dalton McGuinty, in describing his intent for the programme, said, ‘…we are encouraging homeowners, farmers, schools and community co-ops to set up renewable energy systems by letting them sell clean power to the grid’. He added, ‘Over the long term, it could add thousands of megawatts of renewable power to our system.’

McGuinty was the first senior political figure in North America to articulate this transformative objective. He sought to enlist the public’s imagination through Ontario’s programme, to inspire a vision of a ‘culture of conservation’. Al Gore has since picked up on the theme in his testimony before Congress on climate change. Other political leaders, such as Michigan’s Kathleen Law, are beginning to follow suit. They are leading a new approach to renewable energy policy.

We, as renewable energy advocates, will never inspire either the public or the politicians, who eventually listen to us by merely – and often meekly – calling for a tempered status quo. We will never reach the promised land of sustainability by striving only to meet demand growth. Our vision must be broader. It must reach all the way to the other shore.

Moses hasn’t handed down tablets to North Americans inscribed with the letters ‘RPS’. There is another path, and we do have a choice. If we want a comprehensive renewable energy policy, one that includes all renewables and is equitable to all, then we must begin demanding the kind of programme we truly want: Advanced Renewable Tariffs. We shouldn’t settle for less.

 
 

Paul Gipe is a US-based author and analyst, and advocate for renewable energy. His most recent book is Le Grand Livre de l’Éolien (2007)
e-mail: [email protected]