Good news for renewable energy! Yesterday, the Federal Energy Regulatory Commission (FERC) issued an order that will help states implement strong renewable energy policies known as feed-in tariffs (FITs). ELAW Staff Attorney Jen Gleason has been working to promote FITs in the U.S. and around the world for years, so she was thrilled to get the order and dive into the details.

 

If you know the complex world of energy policy, you might enjoy Jen’s report below on the FERC order.

Bern Johnson
Executive Director

Jen reports:   FERC’s order issued yesterday creates another way for states to design strong feed-in tariff programs for electricity generated from renewable sources. States have been constrained in adopting an avoided cost that would adequately cover the costs of generating electricity from renewables. In California Public Utilities Commission, 133 FERC 61,059 (2010) (October 21 Order), FERC issues an order clarifying its July 15, 2010 order addressing the California Public Utilities Commission’s (CPUC) program adopted under California’s Waste Heath and Carbon Emissions Reduction Act.

In yesterday’s order, FERC clarified and overruled parts of an earlier FERC decision to make it clear that if states require utilities to purchase power from specific sources of electricity, the state may set avoided cost for that specific resource. FERC states: “[W]here a state requires a utility to procure a certain percentage of energy from generators with certain characteristics, generators with those characteristics constitute the sources that are relevant to the determination of the utility’s avoided cost for that procurement requirement.” 133 FERC 61,059, para. 27. In a footnote FERC explains, “a state may appropriately recognize procurement segmentation by making separate avoided cost calculations.” Id. at fn. 53. For the first time, FERC said, “the concept of a multi-tiered avoided cost rate structure can be consistent with the avoided cost rate requirements set forth in PURPA and our regulations.” Id. at para. 26.

Thus, if a state requires utilities to purchase 30 MW of electricity generated on PV systems with a total capacity of 10 kW or less; 100 MW of electricity from PV systems between 10 kW and 50 kW; 100 MW from PV systems between 50 and 100 kW (etc. — with potential of designing a system requiring purchases from systems up to the maximum size allowed for QFs) the state should be able to set separate avoided costs for each of these categories and require utilities to purchase the electricity at that rate.

If these avoided cost rates will not themselves be enough to create a strong FIT program, FERC made it perfectly clear that “a state may separately provide additional compensation for environmental externalities . . . in addition to the PURPA avoided cost rate, through the creation of renewable energy credits (RECs). Id. at para. 31.