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December 7, 2007

Hopes for Michigan Feed-in Tarriff Fading

Not too much has been heard about Michigan's HB 5218 since it was introduced by Rep. Kathleen Law earlier in this legislative session. HB 5218 was the first proposed legislation containing a 'feed-in tariff' for renewable energy in the U.S. If you don't know, a feed-in tariff or 'fee-schedule' is a policy mechanism which guarantees a premium rate payed to any entity that adds renewable energy to the power grid. Feed-in tariffs have been wildly successful at building the distributed generation of renewable resources very quickly in Germany and Spain -- but not without substantial cost and commitment.

But the latest out of MI is that the proposed tariff because it has not gained the same amount of support as a different bill that would require Michigan get 10 percent of its electricity from renewable sources by 2015. I think nearly any move toward promoting renewable energy is a move in the right direction - and it is also quite possible that Michigan just wasn't ready for the economic commitment to such an aggressive policy as a feed-in tariff. The point will be moot if the U.S. Senate includes a 15 percent RPS possibly in their version of the bill which may be voted on as early as Saturday. Then again, if President Bush follows through on his veto promise, then Michigan might have something after all.

So what's the deal with feed-in tariffs, and why haven't they caught on in the U.S.? I will suggest that there are two very formidable structural impediments standing in their way:

  1. The modern grid was not built with distributed generation in mind. Distributed generation brings fluctuations in generating capacity that would need to be addressed by making substantial investments in infrastructure.
  2. There are corporate and interests heavily invested in keeping things pretty much as they are. Power providers and utilities are trying to solidify the futures of their enormous corporations by institutionalizing the process by which power is generated, bought, and sold.

Basically what it will take in this country to move to a more decentralized grid is a whole new politics. We need to reassess how to think about electricity generation and distribution in this country. Decentralization of the power grid will be the future of electricity in the United States, the only question is how long it'll take to get us there.

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