LA Business Group Calls for Feed-in Tariff

by | Jul 9, 2010

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The Los Angeles Business Council (LABC) has called the creation of a Feed-in Tariff (FiT) for the city of Los Angeles in a new report. The goal of the tariff would be to create 600 MW of solar power capacity by 2020, or three percent of Los Angeles’ electricity needs.

The study, titled Bringing Solar Energy into Los Angeles: An Assessment of the Feasibility and Impacts of an In-Basin Solar Feed-in Tariff Program, is the work of the LABC’s Solar Working Group, consisting of representatives from the private, environmental and education sectors. The group was commissioned in September to study the effects an FiT would have on Los Angeles businesses.

The working group found that a FiT with a fixed price and guaranteed access to the grid would allow L.A. businesses to not only recoup their costs, but generate a 5 – 7 percent return on investment (ROI) over the life of the agreement. A similar program in Gainesville, Fla., enacted in March 2009 is currently generating 4 – 5 percent (ROI) for participating businesses. Companies would be able to leverage federal tax credits to fund about 40 percent of the initial investment.

According to the report, the creation of a FiT would cost about $25 – $35 million a year. As the costs of solar power decline and fossil fuels rise, utilities would eventually save money on the cheaper form of power generation. The study also stated that the Los Angeles Department of Water and Power (LADWP) could spur significant participation in a FiT program at a low tariff rate, allowing the program to operate at much lower costs than comparable FiT programs throughout the country.

Long-term, the study found an FiT program would create up to 11,000 local jobs, far above the 4,300 local jobs the LADWP’s green programs have managed to create to date. The report cited Germany’s significant FiT program, which has succeeded in creating an estimated 117,000 jobs since its creation in 2004, though the country is considering reforming its system. The program could also attract additional solar and green technology companies to the region, creating additional economic benefits in increased tax revenues and job growth.

Max Wei and Daniel M. Kammen, both with the Renewable and Appropriate Energy Laboratory Energy and Resources Group at the University of California, Berkeley, supported the findings with their own analysis of a statewide FiT. According to their research, a statewide FiT would increase direct state revenues by an estimated $1.7 billion from sales tax, use tax, and income taxes over the next decade and estimated induced revenues of about $600 million from increased employee compensation and the impact of FIT program costs. The analysis did not include any savings to the state in avoided unemployment benefits.

The program would also stimulate up to $50 billion in total new investment in the state which in turn is eligible for up to $15 billion in federal tax benefits for project developers, they found.

With abundant sunshine and acres of rooftop and parking space, the program could eventually spur the creation of several gigawatts of electricity.

The National Renewable Energy Laboratory recently released a legal analysis stating that states may offer FiTs, but their programs must be tailored to meet federal requirements. Another recent study found that FiTs may be a more effective incentive to push renewable energy than Renewable Energy Certificates.

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