IMPORTANT! PLEASE READ: Ecopolitology has moved to a new host and a new domain. Please adjust your bookmarks and be sure to check out the beautiful new ecopolitology 2.0 theme by pointing your browser to, or by following this link.

February 8, 2008

Feed-in Tariffs: The Quick and Dirty

Quite a lot of people come to ecopolitology looking for information on renewable energy laws called feed-in tariffs (FIT's). Miguel Mendonca, of the World Future Council wrote an excellent post at Celsius, which gave an excellent introduction to FITs and an elaboration of how and why the policy mechanism works. I have excerpted a portion of that post below. For information and guidance on actually drafting a feed-in law, go the Policy Action on Climate Toolkit (PACT) website.

"FIT laws place a legal obligation on utilities to purchase electricity from renewable energy installations. The tariff rate is guaranteed, and in the best examples, for a long period — say 20 years. The tariff rate is scientifically determined for each technology, to ensure profitable operation of the installation.

There are different design options for the law, including tariff degression; this reduces the rates each year — meaning for example that PV gets a lower rate if you install next year than if you install this year. One, it encourages swift take-up; two, it encourages manufacturers indirectly to increase design efficiency. If you are going to receive a lower rate, you want to generate more electricity. This drives innovation, making renewable energy a more rapidly evolving field — which is precisely what we all need.

The costs of the scheme should be shared among all end-users, so that no-one is overly burdened. In Germany (perhaps the most effective system, developed and supported politically since 1990), their law has made them a world leader in renewable energy, generated billions of dollars a year in exports, created in the region of a quarter of a million jobs, saved towards 100m tons of CO2 annually in recent years, and set records for installed capacity across many technologies — all at the cost of around $1.80 per household, per month."

Photo Credit: ChiKurt via flickr

No comments: