Feed-in tariffs

FEED-IN TARIFFS…. If there is one industry on which America has hung its hopes, it is renewable energy. President Barack Obama has touted a robust green energy sector as our best chance of salvaging the economy, putting Americans back to work, and securing our nation’s standing in a post-carbon world.

The renewable energy industry, however, has been very hard hit by the severe economic downturn. Solar panels, originally intended for homes and businesses, are stacking up in warehouses.

There’s one area, however, offering real hope. In the new issue of the Washington Monthly, editor Mariah Blake takes a close look at the solar-power boom underway in Gainesville, Florida, where an innovative “feed-in tariff” program offers a promising answer for the whole country.

Why is the renewable energy market in Gainesville booming while it’s collapsing elsewhere in the country? The answer boils down to policy. In early February, the city became the first in the nation to adopt a “feed-in tariff” — a clunky and un-descriptive name for a bold incentive to foster renewable energy. Under this system, the local power company is required to buy renewable energy from independent producers, no matter how small, at rates slightly higher than the average cost of production. This means anyone with a cluster of solar cells on their roof can sell the power they produce at a profit. The costs of the program are passed on to ratepayers, who see a small rise in their electric bills (in Gainesville the annual increase is capped at 1 percent). While rate hikes are seldom popular, the community has rallied behind this policy, because unlike big power plant construction — the costs of which are also passed on to the public — everyone has the opportunity to profit, either by investing themselves or by tapping into the groundswell of economic activity the incentive creates.

Though Gainesville is the first to take the leap, other U.S. cities are also moving toward adopting feed-in tariffs. Hawaii plans to enact one this summer, and at least ten other states are considering following suit. Among them is hard-hit Michigan, where Governor Jennifer Granholm has promised that the policy will help salvage the state’s economy and create thousands of jobs by allowing “every homeowner, every business” to become “a renewable energy entrepreneur.” There is also a bill for a federal feed-in tariff before Congress.

Could this approach help revive our renewable energy market, and give a needed jolt to the U.S. economy? There is reason to believe it could.

Germany has already had striking success with feed-in tariffs, helping create the country’s vibrant green energy sector, and more than 40 countries have followed suit. The United States has fallen behind in recent years, but feed-in tariff programs offer us a chance to over overcome stumbling blocks that have stifled our green manufacturing sector.

It’s a great piece; be sure to take a look.