Act Now on the Right FIT for California

California is on the precipice of passing into law a game-changing Feed-In Tariff (FIT) policy that will unleash the tremendous potential of renewable energy and provide a massive economic boost in California. A lot rides on getting the support of California State Senator Christine Kehoe (San Diego), so get ready to encourage her to do the right thing.

Before getting into the details, however, let’s review the current state of affairs: Renewable energy and energy efficiency are on a roll. Wind power installations in the first half of 2009 totaled 4,000 megawatts, exceeding installations in the first half of 2008. This happened in the worst recession since the Great Depression, so this is quite an achievement.

Solar power installations in the US and globally have remained level with 2008, due primarily to the ailing economy. But staying level is better than declining.

Energy efficiency and conservation have also improved. For example, petroleum consumption in the U.S. is down about 7% compared to 2007, a remarkable reduction considering that the trend in recent years has been to increase 2-3% each year. This change is, however, due primarily to high prices and declining economic activity.

As many commentators have noted, and as I’ve mentioned in my columns, President Obama understands the need for a dramatic improvement in renewable energy production, energy efficiency and conservation. He has already committed many billions of dollars for tax credits and other incentives on these items and they are starting to have an impact. Although, as I wrote in my last column, I am not happy about the proposed climate change bill because I don’t think it will have much impact as written.

Adding to the urgency for aggressive action is a recent change of position at the International Energy Agency regarding the timing of peak oil. The IEA, in its 2008 World Energy Outlook, projected a peak in global conventional oil production sometime before 2030. This projection has now been moved up.

In a recent interview with the UK-based Guardian newspaper, Fatih Birol, the IEA’s chief economist, warned of a potentially “catastrophic” supply shortfall due to lack of sufficient investment in new supplies and rapidly declining conventional oil supplies at about twice the rate of previous projections. He also advanced the IEA’s projection of the conventional oil peak to 2020. This date is practically around the corner and is yet another wakeup call to a world slumbering in the dream of infinite fossil fuel resources.

We need urgent action to create a renewably-powered sustainable world, with widespread use of electric cars and plug-in hybrid electric cars to replace our petroleum consumption.  

This is where an aggressive Feed-In Tariff (FIT) comes in. AB 1106 (Fuentes) is pending in Sacramento and will, if passed, be a game changer for renewables in California. The state’s Renewable Portfolio Standard (RPS), effective since 2003, has achieved very little in terms of bringing new renewables online. Last year saw an increase, but it was almost entirely from out-of-state facilities.

We need to develop in-state supplies to localize our grid and keep the economic benefits local. The RPS has in fact been so ineffective that the total percentage of renewable energy online in California, even with the out-of-state boost to our renewable energy portfolio last year, has declined in every year since the RPS has been in effect. The most recent report was just released by the California Energy Commission, finding that the total amount of renewable energy was 10.6% in 2008, a decline from 11.8% in 2007. This is unfortunate and unacceptable.

AB 1106 promises to change this equation substantially because it would require utilities to accept up to 2% of their total demand each year from new renewable energy facilities 10 megawatts and below. It will also ensure that ratepayers would never experience an increase in rates above 1%.

A key additional feature is the certainty of the FIT price: this is not negotiated and would be set by the California Public Utilities Commission. For projects 5 megawatts and below, AB 1106 would create a “cost-based” FIT,  a policy which has brought huge volumes of cost-effective renewable energy online around the world. The pricing mechanism for projects between 5 and 10 megawatts is still being debated. But in any case, it will be superior to the “market price” mechanism that is used in the RPS program today.  

With this transparency and consequent certainty for the marketplace (which includes my new company, for the sake of full disclosure), we can expect many thousands of megawatts of renewable energy to come online quickly in the form of “community-scale” projects that don’t require new transmission lines and don’t require massive amounts of land. (I am fully supportive of wisely placed large renewable energy projects but believe, for a variety of reasons, that the community-scale market segment can do as much or more than the large-scale market segment).

AB 1106 is better than a competing FIT bill, SB 32 (Negrete-McLeod), because SB 32 would only allow projects up to 3 megawatts (doubling the current limit of 1.5 megawatts), and would only require the CPUC to consider “locational benefits” of community-scale projects when setting a FIT price. This is an improvement, but we can do better.

Worst of all, SB 32 contains a “poison pill” clause that was included to appease the utilities that would prevent the CPUC from implementing any additional FIT provisions in the future. The limited improvement offered by SB 32 does not warrant this poison pill. AB 1106, on the other hand, will introduce a tremendous FIT program that has been proven around the world. Accordingly, it is opposed by the utilities, who prefer the large-scale, utility-controlled generation model.

I am urging any California stakeholder to contact Senator Kehoe, the chair of the Senate Appropriations Committee and urge her to strongly support AB 1106 for passage this year. Senator Kehoe’s support is required in order to get AB 1106 through her Appropriations Committee and this needs to happen within the week of August 24th in order to have AB 1106 signed into law this year by Governor Schwarzenegger.  

Again, if passed, AB 1106 will be a game changer for bringing renewable energy online and boosting the economy in California. And as California goes, so goes the nation. We need aggressive action. Now. Help make it happen!

Tam Hunt is president of Community Renewable Solutions, LLC, and a Lecturer in climate change law and policy at the UC Santa Barbara Bren School of Environmental Science & Management.


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