Return Of The Commercial PV Feed-In Tariff
A long time ago… 1978 to be exact, the United States was in energy peril. Under the OPEC embargo, oil prices were at an all-time high and continued to increase with no end in sight. In order to spur an increase in domestic energy supply, President Jimmy Carter signed the Public Utility Regulatory Policies Act (PURPA), which required electric utilities to purchase additional energy from independent power producers. Various methods of purchasing this energy emerged, but one method was particularly innovative. The State of California offered independent energy producers, largely wind farms, contracts to sell the utilities energy at a fixed per-kWh price over a long-term contract period.
In the 1990s and 2000s, the issue of climate change came to the forefront of global energy policy discussion. States began to form renewable portfolio standards (RPS), requiring defined portions of utilities’ energy production to come from renewables. In order to satisfy RPS requirements, utilities began to offer a variety of methods of compensation to renewable energy producers. One such method was the refinement of the California PURPA-type agreement, now called a “Feed-In Tariff” (FIT). Like the California model, FIT agreements are long-term, fixed per-kWh price agreements with distributed energy producers. FIT policies gained prominence in Europe before taking root here in the United States, with notable FIT programs in Los Angeles, Long Island and Gainesville, FL.
As the cost of developing solar energy continues to decline, FIT-like programs have started to make a resurgence. Over the last five years the proliferation of Feed-In Tariff programs has waned. However, the FIT concept, with a few important modifications, has become a prominent solar incentive tool.
States, with the goal of adding stabilization to the electrical grid, are looking to proliferate distributed energy generation and further diversify their energy mix with renewables. Until recently, utilities accepted an economic loss with their FIT agreements and engaged in them merely as a way of adhering to RPS requirements. In current market conditions, utilities and solar energy producers have been negotiating FIT contract prices that fall below the price of residential energy, finally allowing utilities to profit off of FIT programs. In the not-too-distant future, utilities may be using FIT programs to purchase renewable energy at and below the current wholesale cost of energy.
Developments in FIT-like incentives are part of a larger policy movement aimed at valuing the benefits of solar and other forms of distributed energy generation. Rather than simply valuing solar energy at the market price of electricity, these incentives will compensate solar energy generators for the additional benefits that they provide to the grid, such as avoided environmental costs, grid stabilization, and decreased reliance on traditional fuel generation.
Feed-In Tariffs have two main benefits:
- Predictable cash flows eliminate the energy price volatility of a solar energy system, making FIT systems a low-risk investment
- FIT systems can be sized so that their production may exceed the energy consumption of a given facility – ideal for low-consumption facilities
If you have the roof space to take on a solar project, a FIT system may be right for you. Here is a brief rundown of FIT projects in available markets:
On Long Island, the utility PSEG LI is currently soliciting bids for its third round of Feed-In Tariff projects. The Feed-In Tariff III (“FIT III”) program will add 20 Megawatts of solar energy to PSEG LI’s energy portfolio by offering 20-year fixed price contracts to solar producers. In Rhode Island, the utility National Grid is implementing the 2017 iteration of its Renewable Energy Growth (“RE Growth”) program. Like the FIT III program, the RE Growth program will offer 20-year fixed price contracts for solar energy. Lastly, Massachusetts has announced a revamp of its solar policies which will take effect in 2018, converting its current SREC program to the next-generation Solar Massachusetts Renewable Target (“SMART”) program. Contained within the SMART program is a FIT mechanism for net-metered systems, where the difference between the market price of electricity and a predetermined FIT rate will be compensated to solar energy system owners in incentive payments.
If your business has a facility in any of these markets, we can help you take advantage of all available incentive programs and maximize the benefits to your bottom line. EnterSolar has installed over 14 Megawatts of solar in these states. We have the experience to deliver the optimal solar solution for your business. If you are interested, please give us a call at 888-225-0270 or email us at firstname.lastname@example.org.