U.S. Photovoltaic FiTs and Starts

ferc_seal SEIA pulls their Federal Energy Regulatory Commission (FERC) Feed-in Tariff (FiT) ruling press release.
Vote Solar believes the FERC decision reaffirms already identified options to move forward under existing law.

After reading Solar Biz: Lack of Permits for Solar on Federal Land “Is Disturbing” by Josie Garthwaite at Earth2Tech, I was drawn to the Solar Energy Industries Association (SEIA) website to root into their latest utility scale mischief. In the Press Release section, I stumbled upon “FERC Ruling Invalidates California Feed-in Tariffs” (cached, Greenjobs.com) which I tweeted:

SEIA: FERC Ruling Invalidates California Feed-in Tariffs http://bit.ly/cM4LBO @RhoneResch -> @votesolar believes the RAM will work #Solar 9:31 PM Jul 21st

I had read The Vote Solar Initiative Blog post, “FERC decision on CPUC CHP feed-in tariff” earlier in the week.

The FERC decision relates to the California Public Utilities Commission (CPUC) implementation of AB 1613 establishing a Feed-in Tariff program for Combined Heat and Power (CHP) Distributed Generation systems sized up to 20 MW (MegaWatts). AB 1613 required Investor-Owned Electric Utilities to purchase electricity from the CHP generators delivered to the grid at a price set by the CPUC.

Per the FERC “California feed-in tariff petitions” (E-1-FACT07-15-10.DOC) summary:

The first petition addressed in FERC’s order, filed by the CPUC, asked that FERC find that sections of the Federal Power Act (FPA) and the Public Utility Regulatory Policies Act (PURPA) do not preempt a CPUC decision on feed-in tariffs issued pursuant to AB 1613. The second petition, filed by three investor-owned California utilities (Pacific Gas and Electric Company, San Diego Gas & Electric Company, and Southern California Edison Company), asked FERC to find the CPUC decision is preempted by the FPA.

FERC affirmed in its order that its authority under the FPA includes the exclusive jurisdiction to regulate the rates, terms and conditions of sales for resale of electric energy in interstate commerce by public utilities. FERC also explained that the role of States in setting wholesale rates is limited to determining “avoided cost” rates for qualifying facilities pursuant to PURPA. FERC thus found that the CPUC’s decision under AB 1613, including the CPUC-set price, would be consistent with these federal laws as long as it satisfies certain requirements:

  • The CHP generators must be QFs pursuant to PURPA.
  • The CPUC-set price must not exceed the avoided cost of the purchasing utility.

According to Vote Solar, the FERC decision reaffirms Feed-in Tariff approaches outlined in “On the legality of feed-in tariffs in the US” by Adam Browning at Grist in July 2009. Per the Vote Solar Blog:

The options are:

  • Set a price at utilities’ avoided cost
  • Establish a more targeted requirement (say, PV systems from 1-10 MW) and let the market set the price
  • Set a price at avoided cost, and cover the marginal gap to a workable price with tax or REC from a public benefit fund.

State-Level Feed-In Tariffs for Renewable Energy: Comments on FERC’s California Decision” by National Regulatory Research Institute (NRRI) Executive Director Scott Hempling, Esq. also describes the legal background and decision in a succinct four (4) pages. Mr. Hempling co-authored the “Renewable Energy Prices in State-Level Feed-in Tariffs: Federal Law Constraints and Possible Solutions” report published in January 2010 for the National Renewable Energy Laboratory (NREL).

In “California proposes new program for 1 GW of renewables”, Vote Solar advocates the Renewable Auction Mechanism (RAM) proposed by the CPUC and the subject of my California Reversal of Feed-in Tariff Auction Proposal post. The RAM is not expected to run afoul of FERC’s electricity regulatory responsibilities since it doesn’t set a Feed-in Tariff price but a requirement for utilities to purchase Distributed Generation renewable electricity from developers who bid via a reverse auction process.

Enacted in 2009, SB 32 expands on the first option above by directing the CPUC to consider the “valuable attributes like reducing emissions, reducing the need for adding new transmission lines, and generating electricity during hours of peak demand” when determining the avoided cost for renewable electricity standard contracts or Feed-in Tariffs. Per the California Solar Energy Industries Association (CALSEIA) study, “IMPLEMENTING THE FEED IN TARIFF FOR SMALL-SCALE SOLAR PHOTOVOLTAICS IN CALIFORNIA AS AUTHORIZED BY SB 32 (2009, NEGRETE-MCLEOD, D-CHINO)”:

the value of electricity from renewable generation is higher than the value of generation from a natural gas power plant. Depending on the location of the renewable generation, the value of electricity is between 5 and 12 cents higher than electricity from natural gas generation. This study shows that the value, per kilowatt-hour (kWh) for renewable generation is between 17 and 24 cents per kWh.

I was planning to Blog about the SEIA Utility Scale Solar (Concentrating Solar Power) Financing Teleconference until I noticed another press release, “State and Regional Solar Industry Associations Call for Broad Adoption of Feed-in Tariffs in U.S.”. As a Feed-in Tariff theme emerged, I checked back to the SEIA website, and the “FERC Ruling Invalidates California Feed-in Tariffs” release was gone! I don’t think the action was the result of my tweet but complaints from SEIA members and partner organizations. I think that was the first time “Feed-in Tariffs” were mentioned on the SEIA website? Thus far, the SEIA has not responded to my questions about the removal. I imagine the SEIA is busy trying to salvage the solar policy agenda outlined in “Solar Industry Calls on Senate to Include Bipartisan Solar Provisions in Energy Bill” (sans FiTs?) after the death of the climate bill.

The fourth and most flexible Feed-in Tariff option is for the U.S. Congress to amend PURPA and the FPA to grant states authority to craft their own Renewable Energy policies including Feed-in Tariffs without FERC intervention.

The SEIA was working on this and in the pulled press release said:

Many States, including California, are taking the steps necessary to decrease our use of polluting energy sources and these efforts should not be frustrated by federal regulation. We will continue to work with Congress to clarify that states have the authority to establish a feed-in tariff to help deploy more clean, safe solar energy.

We are pleased that the comprehensive climate and energy bill passed by the House last year, H.R.2454, includes a provision authored by Representatives Kathy Castor (D-11th FL) and Jay Inslee (D-1st WA) that We are working with the Senate to include such a provision in S.1462, the Senate energy bill. We also encourage FERC to reconsider its ruling should an appropriate and timely request for rehearing be filed with the Commission.

Who opposes European style Feed-in Tariffs (FiT) more, Investor Owned Utilities, climate deniers, or fossil fuel lobbyists?

In California, the shocking answer is incumbent photovoltaic system installers and independent power producers such as Recurrent Energy, SunEdison, and, as I heard at Intersolar North America, Tioga Energy. Other photovoltaic manufacturers and system installers are known to oppose Feed-in Tariffs but only in private, off the record conversations. In my opinion, their opposition is based on the desire to maintain the status quo and leverage their existing development expertise to win distributed utility photovoltaic projects. Classic Feed-in Tariffs lower barriers to market entry and act to increase project competition.

Background on FPA, PURPA, FERC, and Feed-in Tariffs
Back in March 2010, Vote Solar hosted a webinar on Feed-in Tariff Pricing in the US: Practical Approaches to Establishing Wholesale Programs at the State Level and posted all the resources including the recording, presentation, references, and Frequently Asked Questions at “Follow-up on IREC/VSI webinar on jurisdictional issues and feed-in tariffs”. All these resources should help motivated parties understand the Federal Power Act (FPA), Public Utility Regulatory Policies Act (PURPA), and the role of FERC in regulating state Feed-in Tariff program design.

What Is an Effective Feed-In Tariff for Your State? A Design Guide” from NRRI also looks useful for policy makers.


  1. ECD Fan says:

    Leaving aside the legal issues, I fail to understand why the ratepayers should be on the hook for the unjustified profits of the PV developers and installers. System costs per Watt have now fallen to $3.00-$3.50 per Watt for decent size large-enough systems, which seems to imply grid-parity in (at least) Southern CA (actual system prices are much higher, partly because of the ITC and the CSI). So why should the ratepayer subsidize PV further? What am I missing? Does the deficit-crippled CA really want to be in the situation that Spain is now?

  2. JoeJoe says:

    Just set the FiT at the value of the delivered electricity. If it’s 15 ct/kWh set it there. If 20 ct/kWh set it there. If there are locational benefits and/or costs add those in. Adjust this rate every so often to maintain a good price signal. Make this feed in rate available to everyone – residential, commercial, industrial, etc.

    If the FiT is set to the value of the delivered electricity no one is subsidizing anything. Take all the other subsidies off the table. Done.

  3. Slurry says:

    Joe Joe: in essence you want net metering, and that implies a big subsidy. The value of electricity fed into the grid is the wholesale price of 6-10 cents and not the retail tariff at the feed-in point.

    There are several PV application segments that are very close to taking off without subsidies in CA (utility, industrial rooftop), so I don’t think it is worth implementing a FIT at this point. Rather, the focus should lie on streamlining permitting and installation processes to knock down BOS costs and accelerate adoption. Greed will take care of the rest.

  4. JoeJoe says:

    I don’t think the value of electricity fed into the grid from an end-user system is equal to the wholesale price. The value will be locational and the specifics can get terribly complicated. Have you read Severin Borenstein’s stuff? He comes up with photoelectricity values of 10 to 15 cents/kWh in California. I’m sure we’ll see a lot more study of this topic over the coming years.

    Anyways, there’s generally a positive spread between the Value of end-user/producer photoelectricity and the price of electricity that the photoelectricity is ultimately traded for. This means net-metering is more like a trade because the utility will pocket a few cents/kWh on each unit of electricity exchanged depending on when the end-user takes the credits. Wait for the studies… they are coming.

    Utility PV is not anywhere close to taking off without subsidies… Nor is industrial rooftop. In the case of Utility scale PV you have to compete against wholesale electricity which unsubsidized PV can’t do. In the industrial rooftop case, PV needs to compete against industrial electricity rates which are much lower than residential and commercial rates. The economy of scale advantages of these deployment arrangements are not as great as the spread between industrial/wholesale rates and commercial/residential rates. Try using the calculator I posted. You can run the numbers yourself.

    I agree it’s all about streamlining permitting and installation. I think we should start preapproving sections of the distribution grid for X amount of PV and pre-assigning PPA values for the excess photoelectricity from each sections of the grid based on locational factors. This would provide end-users with the price signals they need to properly size their systems. It would also provide installers with the price signals they need to stop screwing around and start competing. A whole lotta lobbyist would be outta jobs… Awww… so sowwy.

  5. Slurry says:

    JoeJoe: The value of PV is nothing but the price that you can sell the electricity for. Chances are your local utility will buy your PV electricity for the spot wholesale rate plus a small optional premium for T&D savings (if it is willing to pay a price at all!). There’s no reason for your utility to pay more in a free market.

    Net Metering applied on a massive scale will bankrupt your utility. Let’s say all consumers start producing 50% of their average annual consumption with PV and get on a net metering scheme. The utility’s revenue will drop 50%, but the costs won’t because the T&D infrastructure will have to be maintained or augmented. The spread that you mention between the traded price of PV and the retail tariff sounds strange, do you have a link to a study?

    Counterintuitively PV provides a higher value in the commercial and industrial segments and not in residential. I’ll explain comparing estimates of PV value and LCOE in the various segments in California using german installed system prices:

    Utility RPS (Capex: $2.9 per watt, LCOE: $0.15/kWh): Here the value of the electricity is the MPR plus solar adder, thus $0.12-$0.14.

    Utility free competition (Capex: $2.9 per watt, LCOE: $0.15/kWh): Value is the TOD-adjusted wholesale rate, maybe $0.08/kWh.

    Industry rooftop (Capex: $3.0 per watt, LCOE: $0.15/kWh): The value of the PV electricity equals the industrial retail rate assuming you are able to consume every kWh of PV electricity you produce, thus $0.10/kWh

    Commercial rooftop (Capex: $3.1 per watt, LCOE: $0.16/kWh): Value of the PV electricity here equals the commercial retail rate assuming you are able to consume every kWh of PV electricity you produce, thus $0.12/kWh

    Residential rooftop (Capex: $3.4 per watt, LCOE: $0.17/kWh): Value of the PV electricity DOES NOT equal the retail rate simply because you normally don’t consume every kWh produced. A typical household with a grid-connected system normally consumes only 20-30% of the PV electricity produced. 70% is fed into the grid (when appliances are off or people are away from home altogether). The value is calculated as mix of self-consumed PV power, for which the value is the retail rate, and the fed-in PV power, for which the value is the wholesale rate at best. Assuming $0.14/kWh retail rate and $0.08 TOD-adjusted wholesale the average value of PV electricity is 30% x $0.14 + 70% x $0.08 = $0.10

    In Summary, you see the smallest gap between value and cost at utility RPS, then commercial, then industrial. Residential has the largest gap. In order to bridge the commercial and industrial gap you require a 30-40% cost reduction in system prices (relative to german benchmark). This equates to 3-4 years of PV cost degression and parallel streamlining of permitting and installation.

    Cheers, Slurry

  6. JoeJoe says:

    Take another look at PG&E’s retail rates. I think you’re also using self-consumption percentages from HDD climates vs. CDD climates.

  7. Slurry says:

    Never seen anything as complex as PG&E’s rate structure. The rates I used were the average from the eia, looks like the averages went up slightly for may:


    Anyhow, you’re right in pointing out that there may already be consumer segments (e.g. high self-consumption through e.g. AC and above-average kWh costs) that allow for a profitable BC for PV without subsidies. Looking at how close PV LCOE is to the average commercial rate I think this applies to both residential and commercial. Seems like there are some thrilling years ahead for end-user PV in CA !!!

  8. Slurry says:

    I found current and historical rate averages for PG&E:


    Forget my previous posts, you already have grid parity in many segments. No need for FITs or RPSs in California, just get rid of all subsidies and regulatory hurdles.

    Thanks for pointing that out, it made my day.

  9. No matter who benefits in the short term, solar energy systems will benefit everyone in the long term in an economic, social, political, and environmental. There is so much politics surrounding energy but all I can say is that I love my solar energy system and I hope the affordability of these systems will motivate more to take the next step to a sustainable form a of living.

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