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As we have discussed in earlier posts,  the Federal Energy Regulatory Commission (FERC) recently gave states a green light to develop strong renewable energy programs known as feed-in tariffs (FITs).  A lot of people have been asking us how a state can design a strong FIT program without worrying about federal preemption. With generous support from the Alliance for Renewable Energy (ARE) (using funds provided by the Eleventh Hour Project), ELAW has published two documents to help renewable energy advocates understand and navigate federal and state jurisdiction as it relates to FITs.  I hope you find these documents useful and that you will share your thoughts with us.  I intend to continually replace these documents with fresh versions as we hear from more people interested in these issues.

Please read Adopting State Feed-in Tariff Laws without Federal Preemption  and Available Paths for Designing Strong State Feed-in Tariffs and send us your comments!

Jen Gleason
Staff Attorney

The Federal Energy Regulatory Commission (FERC) has issued another order making it clear that states can move forward with strong renewable energy policies. California Public Utilities Commission, order denying rehearing, 134 FERC 61,044 (January 20, 2011)

By Dirk Ingo Franke (via Wikimedia Commons)

On October 21, 2010, FERC issued an order making it clear that states have the authority to implement a strong feed-in tariff (FIT) by setting rates for renewable energy purchases under the Public Utility Regulatory Policies Act (PURPA).  (Read our previous blog post). California’s investor-owned utilities challenged that order, asking FERC to clarify or reconsider its decision.  FERC denied the request and issued an Order that should remove any doubt.  In its Order, FERC recognizes the changing landscape of electricity regulation and notes that “[p]reviously, states did not mandate particular purchases, e.g., from renewables, and so there was no need to differentiate among generation sources and no need for tiering [rates]; all generation sources were essentially fungible . . . . That is increasingly not the case; states are now looking to draw distinctions in what they will allow.  The orders issued to date in this proceeding, and this order, reflect this change in circumstances.” Id. at fn. 66.

“[W]here a state requires a utility to procure energy from generators with certain characteristics,” the state may set the wholesale rate (known as ‘avoided cost’) for that specific type of energy.  Id. at para. 30. Therefore, a state can require utilities to purchase electricity generated from differentiated technologies (wind, solar, wave, etc.) and set the rate for purchases from each of these generators.

This should be FERC’s final word on this issue for now.  The order could be challenged in federal court, but let’s hope we’re done with this discussion and states can move forward boldly!

Jen Gleason
Staff Attorney

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.

Contrary to what some commentators are saying, Oregon did not just adopt a feed-in tariff (FIT).  ELAW has been working diligently to ensure that Oregon adopts a FIT because FITs have been proven to be the most effective and efficient means of moving renewables onto the grid. Sadly, Oregon’s program falls far short of the mark.

Although I’m happy to see more incentives for solar PV generation here in Oregon, people should understand that Oregon is not testing a feed-in tariff.  Don’t get me wrong — I’m pleased that homeowners have a new net metering program that should pay for installation of a PV system, but Oregon’s pilot program is not a FIT.

Does it matter?  Yes.  Feed-in tariffs have proven to be a highly effective and efficient means of getting renewables onto the grid, which is why ELAW has been working hard to ensure Oregon adopts a FIT.

Oregon’s program is lacking key elements of a true FIT.  A FIT encourages people to install systems that generate as much electricity as possible, because they are paid for all electricity produced.  FITs pay a fixed price for all the electricity generated, which enables solar manufacturers and installers to anticipate future demand and build their business.  Setting the price and designing a simple program encourages the growth of the local industry, with small local businesses competing on equal footing with out-of-state installers.

Under Oregon’s new program, small and medium sized systems (systems up to 100kW) will not be paid for any electricity they generate that exceeds what they consume.  A true FIT encourages installation of more solar capacity, but the Commission is requiring new installations to be limited in size so they do not exceed the average consumption on the site.  The electricity generated under a FIT is sent to the grid, ‘greening’ the electricity we all use, while electricity generated under Oregon’s program is used on-site, never making it to the grid.  This means it is really an incentivized net metering program, not really a FIT at all.

Under Oregon’s program, large systems (up to 500kW) will participate in an annual bidding process.  Bids will be selected from lowest price to highest until the capacity target is achieved.  This kind of bidding process fails to provide the pricing certainty that is a key ingredient of a FIT (which enables businesses to project future demand for solar installations) and makes it harder for small, local businesses to participate.

Also, note that we’re only talking about 25 MW of generation over five years for the entire state.  The city of Gainesville Florida (pop. 125,000) is implementing a FIT that already has 25 MW of capacity enrolled (at least on the books) through 2016.

The good news?  The new pilot program in Oregon may well boost solar production.  But, it is not a FIT and we should not think that Oregon is testing how a FIT will work.  As we search for energy solutions, we should be clear about what we are testing and what we are learning.

Jen Gleason, Staff Attorney

de.Franziska.Sperfeld.Cannon.Beach.OR

Robert and Franziska take Henrietta on her first trip to the coast in Cannon Beach, Oregon

Franziska Sperfeld is an environmental scientist who graduated with a specialization on environmental politics, law, and education.  Now a part of the Department of Participation and Environmental Law with ELAW’s partner organization, Independent Institute for Environmental Concerns (UfU) in Berlin, Franziska is working to establish and enforce participation rights concerning environmental matters.  She is also focusing on energy and climate law in Germany – work that has brought her to the US to team up with ELAW staff, who are working toward a German-style Feed-in-Tariff (FITs) renewable energy law in Oregon.

With her husband, Robert, and one-year old daughter, Henrietta, Franziska is traveling the west coast for six weeks, studying how US citizens can combat climate change beyond energy saving measures at home.  She is especially interested in the participation in rule-making and planning processes with an impact on climate change.  She is spending three weeks of her time in Eugene working directly with ELAW staff and meeting with area activists who organize citizens and public outreach campaigns to approach climate protection initiatives.  “I am impressed how citizen participation in rule-making seems so natural here.  Although it is an informal process, information and involvement of civil society and civic organizations is so comprehensive,” says Franziska.

Not surprisingly, the family is making some time to check out a few of the west coast’s beautiful natural areas.  Although Franziska and Robert lived in Russia for a year, their first sighting of a bear was in the Olympic National Forest only a few days after arriving in the states.  Franziska hopes to visit the Oregon coast, Crater Lake, and the Redwoods before heading down to the Bay area in a couple of weeks to continue her work.

Franziska has obvious energy and enthusiasm for her work.  Her commitment to giving the public a voice – like that of so many ELAW advocates – is inspiring and refreshing.  We are thrilled to have her in the office and are already looking forward to a return visit.

Lauren Ice
Office Manager

 Renewable Energy Sculpure in front of Houston Public Library. From Flickr - by ANVAR - RUSSIANTEXAN © GONE WITH THE WIND

Renewable Energy Sculpture in front of Houston Public Library. From Flickr - by ANVAR - RUSSIANTEXAN © GONE WITH THE WIND

For years, ELAW has been evaluating renewable energy policies from around the world and helping partners around the world develop strong laws. Policies known as feed-in tariffs (FITs) have proven very successful in Europe.  ELAW Staff Attorney Jen Gleason worked with colleagues in the United Kingdom and Germany to determine what made some FITs more effective than others.  Studies show that FITs are the most effective and efficient way to promote the rapid generation of electricity from renewable sources.  A good FIT will guarantee that a generator of qualified electricity will be able to connect to the grid and sell all the electricity generated to the local utility at a price that ensures a reasonable profit.  Germany has far surpassed its goals for generating power from renewable sources.  ELAW has been working to bring lessons from these successful models back to Oregon.

A year ago, the World Future Council brought together people from the United States and Canada who have been studying FITs for an all-day workshop.  At the end of the workshop a new organization was created to promote FITs in North America – the Alliance for Renewable Energy (ARE).  Jen is an ARE steering committee member.  ARE members keep each other informed about efforts to adopt FITs.

A focus on promoting renewable energy is one of the best ways known to combat climate change, and ELAW is working around the world to ensure that the best renewable energy policies are adopted and replicated.

Read other takes on climate change:  www.blogactionday.org

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