22.01.2013
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Solar

LA's new feed-in tariffs in context

Los Angeles adopted a relatively large feed-in tariff scheme this month that has drawn a lot of praise. Seen from Europe, the program certainly has an interesting design, but one wonders at a number of restrictions. Conflicting reports also show that Americans still don't quite understand the concept. Local solar installers also have mixed feelings but remain hopeful.

"Don't believe the hype," one is tempted to say in light of the misleading reports about the new feed-in tariffs in Los Angeles. First – and surprisingly – the DSIRE database (usually a reliable source) on policies to promote renewables in the US mistakenly states that a wide range of technologies are eligible for the feed-in tariffs, whereas in fact the policy only applies to solar. Overall, Americans continue to believe that feed-in tariffs are a policy provided for solar, whereas FITs are actually used for all renewables.

The Los Angeles times also mistakenly explains that the program will "allow customers to sell back excess solar energy," whereas "customers" (the word itself reveals a lack of appreciation of the way FITs allow citizens to become producers) will in fact be selling all of their power to the grid, not just "excess." So what exactly is happening?

 - The US remains a market of large systems owned entirely by large corporations. Americans have yet to realize that the switch to renewables offers a one-time opportunity to democratize ownership of power generation.
The US remains a market of large systems owned entirely by large corporations. Americans have yet to realize that the switch to renewables offers a one-time opportunity to democratize ownership of power generation.
Siemens

In February, feed-in tariffs will be offered in the area served by LADWP for solar arrays with a size ranging from 30 kilowatts to three megawatts – provided the policy passes City Council today. Our sources tell us that one council member will be moving today to require additional reviews, thereby slowing down the rollout considerably.

Under the current proposal, 20 megawatts of solar will be on offer every six months for the next 2 1/2 years, providing a total volume of 100 megawatts. The initial rate is 17 cents per kilowatt-hour, dropping with each tranche until we reach 13 cents per kilowatt-hour – a nearly 25 percent reduction in just 30 months. The price is also adjusted by a "time of day adder," which could increase the feed-in tariffs by around 10 percent at certain times of day. Projects will be taken on a first-come, first served basis, and if the six-month allotment is oversubscribed (which all of our sources expect it to be in the first round) projects will be awarded based on a lottery.

Is the price right?

Seen from Germany, the price seems ambitious but not necessarily too low. German feed-in tariffs are currently only slightly higher for some system sizes, but then solar conditions in Los Angeles are much better. On the other hand, Americans usually fail to offer a wide range of feed-in tariffs for various system sizes, and Los Angeles is no exception; a single price offered for systems from 30 kilowatts to three megawatts covers quite a wide range.

Not everyone is convinced that the price is high enough. One solar campaigner pointed out that the pilot program offered a price of 17.5 cents and was only 37 percent subscribed. But Al Rosen, director of Absolutely Solar, says he is not worried. "That was a bidding process, so a lot of firms did not even participate. I personally hate bids myself," he explains the lack of participation. But while Rosen says he can build at 17 cents per kilowatt-hour, he is not sure whether 13 cents is possible by 2015. "I'm not saying it can't be done, but just that the reductions are automatic. I would have preferred a system that reviews how prices actually change." Rosen adds that the government could help make the target of 13 cents possible by providing its own roofs for free.

Why the lower limit?

One bizarre aspect of the policy is the lower limit of 30 kilowatts. An average household has roof space for a system of around 3-5 kilowatts, putting 30 kilowatts completely out of range. As a result, the average ratepayer will not even be able to participate in the policy, which should therefore properly be thought of as commercial, not residential. The limited application of feed-in tariffs is yet another strange understanding of FITs in the United States, where opponents of blanket feed-in tariffs – such as California's Vote Solar (which has praised Los Angeles' proposed policy design) – seem willing to compromise and agree to feed-in tariffs only for a particular part of the spectrum. Here, California is plugging a gap between net-metering for small residential systems and Power Purchase Agreements for utility-scale solar plants. But of course, FITs by system size could be used for all arrays, leaving no gaps.

Overall, the program is quite big for feed-in tariffs in the United States, which are usually limited to quite small pilot projects, but don't be fooled by the absolute figures. Seen in relation, LA's program remains small. Gainesville, Florida, has offered four megawatts of feed-in tariffs a year for solar for a number of years, but the town only has around 125,000 to 250,000 (incorporated and metro area, respectively) inhabitants. Los Angeles has a population of at least 3.7 million (around 12 million in the metro area); LADWP says it serves "about 1.4 million electric customers," but those are probably households, not individuals.

 - The California landscape remains studded with older wind turbines, some of them broken, from the beginning of the renewables age, when California was a global leader. Now, the state struggles to remain at the head of the pack in the US, which lags far, far behind Europe in relative terms.
The California landscape remains studded with older wind turbines, some of them broken, from the beginning of the renewables age, when California was a global leader. Now, the state struggles to remain at the head of the pack in the US, which lags far, far behind Europe in relative terms.
Craig Morris

Even taking the more conservative figures, Los Angeles is at least 15 times bigger than Gainesville and potentially nearly 50 times bigger. Yet, Los Angeles's new feed-in tariff campaign only provides for 40 megawatts per year, just 10 times as much as in Gainesville. So LA’s program is smaller than Gainesville’s in relative terms.

Seen in terms of peak demand in Los Angeles, the policy is also quite modest. A hundred megawatts is only 1.6 percent of the city's peak demand of around 6.1 gigawatts. In contrast, cloudy Germany now has an installed solar capacity exceeding 50 percent of its summer peak demand.

Rosen has another way of looking at it. "Governor Brown has proposed that the state of California get 12,000 megawatts of distributed renewables – not just solar – statewide, and Los Angeles makes up around 10 percent of the state's power consumption. So we should be shooting for 1,200 megawatts of RE in LA alone."

But Rosen is nonetheless optimistic. "LADWP officials really do want to get this right, and I think they will improve the system going forward." His main complaint is with the country's general refusal to copy best practices from abroad. "We think the United States is great, so we don't need to adopt good ideas from elsewhere. We need to get over that." (Craig Morris)

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