Study Shows States Can Legally Implement Feed-In Tariffs

by | Feb 10, 2010

PURPArulesStates can offer feed-in tariffs (FIT) but the programs must be tailored to meet federal requirements, according a legal analysis report from the National Renewable Energy Laboratory (NREL), reports Renewable Energy World. FIT programs are designed to promote renewable energy production.

The January 2010 report, “Renewable Energy Prices in State-Level Feed-in Tariffs: Federal Law Constraints and Possible Solutions” (PDF), shows how states can implement feed-in tariffs and still comply with federal law, reports Renewable Energy News.

The report cites two legal ways to implement feed-in tariffs — under the Public Utility Regulatory Policies Act (PURPA) of 1978 and the Federal Energy Regulatory Commission (FERC), reports Renewable Energy World.

Under PURPA, feed-in tariffs are legal if they are “voluntarily” offered by the utility, or if the tariffs are based on “avoided cost” and any additional payments necessary to make workable tariffs, which are derived from renewable energy credits, subsidies and utility tax credits, reports Renewable Energy World.

Under FERC, feed-in tariffs are legal if they are cost- or market-based, reports Renewable Energy World. However, if the tariffs are cost-based, each contract must be reviewed by FERC, and if they are market-based, the seller must provide a “market-power” report to FERC every three years, according to the article.

These conditions could be averted in some cases if FERC grants exemptions from PURPA for generators of less than 20 MW, allowing them to sell at any price without FERC approval, reports Renewable Energy World. The report also indicates that Hawaii, Alaska and most of Texas are exempt from the Federal Power Act, according to the article.

Some clean-energy proponents claim that the high, fixed-rate payments associated with feed-in tariffs, which help cover the higher cost of renewables production, are more likely to drive the alternative energy industry, reports the New York Times.

A recent report indicates that FIT policies may be a less expensive way to jumpstart renewable energy development compared to other policies including renewable energy certificates.

The Washington state legislature recently introduced a bill that would clear the way for feed-in tariffs modeled on Germany’s, and California’s public utility commission is looking to expand its limited feed-in tariff approved last year, reports the New York Times.

In addition to Washington and California, several other states including Minnesota, Michigan, Indiana, Hawaii, Florida and Vermont have approved some form of a FIT program or have proposals under consideration.

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