Download the pdf of this report, which deals with U.S. state and federal policies pertaining to feed-in tariffs, here.

From the Introduction:

During the past decade, there has been remarkable progress in renewable energy policy development in the US, particularly at the state level. As can be seen in figure 1 below, there are currently 26 states with mandatory renewable portfolio standards (RPS) in the United States, and another six states have established non-binding renewable energy goals. Although it is projected that RPS policies will require the development of over 60 gigawatts of renewable sources by 2025, this will only account for 15% of projected electricity demand growth in that year (Wiser and Barbose, 2008).

These gains, although impressive by today’s standards, are modest in comparison to the scenarios for renewable energy market growth (American Council on Renewable Energy, 2007), renewable energy job creation (Bezdek, 2007; Inslee and Hendricks, 2008), and climate protection (IPCC, 2007; Kutscher, 2006; Socolow, 2006, Stern, 2006) that have been recommended by experts and industry organizations during the past few years. In order to meet increasingly aggressive environmental and economic development goals, US policy makers are looking at new ways to accelerate renewable energy market growth. Among the emerging policy mechanisms that are being considered are feed-in tariffs.

Feed-in tariffs have become a term of art to refer to the style of incentives adopted (most notably) by Germany to increase the adoption of renewable energy resources. Under the German feed-in tariff legislation, renewable energy technologies are guaranteed interconnection with the electricity grid, and are paid a premium rate that is designed to generate a reasonable profit for investors over a 20-year term. The rates are differentiated by technology such that each renewable resource type (e.g. solar, wind, biomass, etc.) can profitably be developed. This approach stands in contrast to the Public Utilities Regulatory Act (PURPA) in the US, under which long-term contracts are based on the avoided cost of conventional fuels. German feed-in tariff rates decrease each year, such that a generator locking into a feed-in rate in 2008 would get a slightly lower rate than a generator locking into a rate in 2007. The German feed-in tariff has caused explosive renewable energy market growth during the past decade, and Germany is now the world’s largest market for photovoltaic systems and wind energy. Germany more than doubled its national supply of renewable electricity between 2000 and 2007, and met its 2010 target of 12.5% renewable electricity three years ahead of schedule (Böhme et al., 2008). The majority of European Union countries have adopted a feed-in tariff, and the policy is diffusing to other countries around the world (Martinot, 2008). In 2006, Ontario became the first government in North America to establish a set of European-style feed-in tariffs, called the Standard Offer Contract (Ontario Power Authority, 2007).

There has been vigorous debate in Europe as to whether feed-in tariffs or policies based on tradable renewable energy credits (RECs) are more efficient for promoting renewable energy (Rickerson and Grace, 2007a). The European Commission (2005) determined that feed-in tariffs were both more effective and efficient than tradable renewable energy credit systems, largely because feed-in tariffs provide greater investor security. European REC systems are viewed as direct descendents of US renewable portfolio standard (RPS) policies (Lauber, 2004). As a result, it has been assumed that US states would not adopt feed-in tariffs, given the conflict between feed-in tariffs and tradable credit policies in Europe. The past two years have seen a remarkable shift in the US policy landscape, however, as numerous states have introduced feed-in tariff legislation to supplement RPS policies, and proposals for a federal feed-in tariff have been developed. This paper provides an overview of state and federal feed-in tariff proposals, and discusses potential future directions for US energy policy.