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Monday, February 18 , 2019, 9:34 pm | Fair 50º


Tam Hunt: Feed-in Tariff Discussion Gets Energized

New studies point states toward path of aggressive pursuit of fossil-fuel reduction, increased energy independence

The Gulf of Mexico oil spill catastrophe is an ongoing tragedy. And while the well seems to be capped now, we will surely see the harm from the spilled oil unfold for many months and years to come. From all tragedy springs opportunity, however, and one positive impact flowing from BP’s unfortunate accident is a renewed focus on energy and climate change, at least in some more sane parts of our country.

Tam Hunt
Tam Hunt

The federal climate change bill appears to be dead this session, the victim of partisan politics in defiance of good sense. Other efforts are more promising, including a growing national focus on feed-in tariffs as a key policy tool for promoting renewable energy. A feed-in tariff is a guaranteed price paid for renewable energy projects that meet certain criteria. Contrary to what many believe, a feed-in tariff doesn’t have to be an “above-market” price. The key features of feed-in tariffs are what I just mentioned: a guaranteed price for those projects that meet defined criteria.

California, often the leader on energy policy, is not in fact in the lead on feed-in tariff policy. Rather, municipalities like Sacramento and Gainesville, Fla., and states such as Oregon, Washington and Vermont, are leading the charge on feed-in tariffs. In Canada, the province of Ontario has the most robust feed-in tariff program in North America, similar to the European model that has proved so successful in the Czech Republic, Germany, Italy, Spain and many other countries.

California is, however, leading in one key area related to feed-in tariffs. The California Public Utilities Commission recently filed a declaratory order request with the Federal Energy Regulatory Commission (FERC). This kind of action asks FERC to decide on a legal dispute before it makes it to the courts, hopefully heading off legal action. The CPUC asked FERC to decide if a limited new feed-in tariff, applicable only to cogeneration facilities under 20 megawatts, was preempted by federal law.

FERC ruled favorably in finding that state feed-in tariffs are not preempted if they set prices at “avoided cost.” The relevant federal law here is the Public Utilities Regulatory Policy Act, passed in 1978 and, ironically, responsible for the first-in-the-world and highly successful feed-in tariff policy back in the 1980s and ‘90s. PURPA’s feed-in tariff required that each state determine the “avoided cost” of power as the price paid to renewable energy developers. The avoided cost determination requires that each state figure out what utilities would otherwise pay for comparable power. This is not an easy exercise and it doesn’t, contrary to common belief, simply mean the cost of power from a natural gas plant or a coal plant.

Rather, federal law requires that states consider the benefits of avoiding fossil fuel consumption and the benefits of reducing line losses through distributed generation.
FERC also made it clear in their recent decision that it would be deferential toward states setting avoided costs.

Renewable energy costs have dropped dramatically in recent years, with wind and solar leading the way. Accordingly, the door is now wide open for states to set effective feed-in tariff prices within the avoided cost framework of PURPA, with a high degree of deference to be provided by FERC.

Now, creating effective feed-in tariffs won’t be painless in practice because utilities and other entities will very likely challenge state avoided cost rulings. FERC will probably reject these claims if the avoided cost figures are reasonable and fair, so this shouldn’t be considered a major impediment to states becoming proactive on feed-in tariffs.
I submitted detailed legal comments to FERC for my client, the FIT Coalition, a California advocacy group focused on feed-in tariffs and “wholesale distributed generation.” We are now also working to pass a robust feed-in tariff for California, the Renewable Energy & Economic Stimulus Act, which I co-authored, while at the same time pushing the CPUC to enact under its own authority a similarly robust feed-in tariff.

A major boost for our efforts recently came from UC Berkeley’s analysis of our REESA bill. Professors Dan Kammen and Max Wei found that REESA could achieve California’s 2020 renewable energy goals more cost-effectively than under the traditional model, creating more jobs in the process.

The bottom line is that states have significant leeway to be aggressive in seeking fossil-fuel reduction and increased energy independence by developing renewable energy and cogeneration facilities with robust and economically advantageous feed-in tariffs. Many studies have shown that these policies can save ratepayers and taxpayers a lot of money.

The path seems clear: Let’s get going on a serious feed-in tariff for California and other states!

— Tam Hunt is president of Community Renewable Solutions LLC, which develops medium-scale wind, solar and biomass projects. He also is a lecturer on climate change law and policy at UCSB’s Bren School of Environmental Science & Management.

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