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February 17, 2010

SMUD Receives Huge Response to its Renewable Energy Feed-in-Tariff

A California utility's feed-in tariff (FIT) program for renewable or combined heat and power generating facilities met with an overwhelming response last month. The Sacramento Municipal Utility District (SMUD) reported on January 19 that applications for the new FIT, which were all for solar photovoltaic power, exceeded its 100-megawatt allotment. SMUD lists only five applicants for the new program, and they are all commercial entities: Belectric, Inc.; Globall Connect; McClellan Park; Recurrent Energy; and SunPower Corporation. The program, approved in September 2009, is designed to remove barriers to interconnection with the utility by providing standard rates and contract conditions that make it easier for SMUD and its power-generating customers to do business. For example, for contracts signed in 2010, SMUD customers with photovoltaic systems will be paid on average $0.0968 per kilowatt-hour (kWh) for a 10-year contract, $0.1040 per kWh for a 15-year contract, and $0.1107 per kWh for a 20-year contract. Applications must include $1,400 for the Interconnection Review Fee and a deposit of $20 per kilowatt, and each system is limited to 5 megawatts in capacity. See the SMUD press release (PDF 85 KB) and Feed-In Tariff Web page. Download Adobe Reader.

FITs, which are widely used in Europe, face regulatory constraints in the United States. However, according to a January 2010 report from DOE's National Renewable Energy Lab (NREL), the path for states seeking to provide legal FITs is tricky, but possible. The report, "Renewable Energy Prices in State-Level Feed-in Tariffs: Federal Law Constraints and Possible Solutions," concludes that states can offer feed-in tariffs, but need to create them in such a way as to meet federal requirements under the Public Utility Regulatory Policies Act of 1978 and the Federal Power Act of 1935. The report describes several possible ways for states to proceed to create incentives for renewable energy. One suggestion is for payments based on cost of generation, in keeping with federal limits, but then adding incentives on top of that cost through subsidies, Renewable Energy Credits, or state tax credits. The report notes that given the legal uncertainties, state regulatory groups should consider getting advice from the appropriate federal agencies. See the NREL report (PDF 1.37 MB).

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