This is Part 2 of the Clean Coalition’s report on how electric utilities across the country are utilizing feed-in tariffs to expand cost-effective clean local energy. Part 1 of this story is available here.
In 2000, Germany’s nationwide feed-in tariff (FIT) set the country on a path to become the world’s clean energy leader. The FIT was a major success and the nation experienced tremendous growth of local renewable energy because it unleashed the wholesale distributed generation (wholesale DG) market segment. By replicating Germany’s FIT policy successes, policymakers and utilities in the U.S. have the opportunity to unleash the market for local renewables and make them the most cost-effective form of electricity in the country.
Expanding the wholesale DG market in the United States
In the U.S., there is a lack of policy support for the wholesale DG market segment, which refers to distributed generation systems that connect to the distribution grid and sell the electricity they produce to the local utility to serve local energy demand. Existing policies have focused primarily on driving deployment of large-scale renewables through Renewable Portfolio Standards, as well as small, customer-sited renewables — like residential rooftop solar — through net energy metering (NEM). The critically underserved wholesale DG market segment must be addressed as it offers a tremendous opportunity for cost-effective clean local energy.
NEM is indisputably effective for deploying retail DG projects across the country. Net metering policy works best for residential installations as it typically credits customers at their retail rate for any energy exported back to the grid. In fact, most solar systems in the U.S. are net metered, and NEM projects added over 2,100 megawatts (MW) of generation capacity in 2015.
Unfortunately, NEM does not effectively address the commercial-scale solar segment for a number of reasons. As Los Angeles Mayor Eric Garcetti explained, “Until L.A.’s FIT was launched, 75 percent of our city’s rooftop market was ineligible for solar because of insufficient load or because so many buildings are non-owner occupied or multi-tenant.” For properties in any of these situations, net metering is not an effective policy. A policy that supports the development of wholesale DG projects is necessary to bring the vast majority of these commercial properties into play. Fortunately, there are a growing number of success stories for addressing the wholesale DG market in the U.S.
Georgia Power shines with wholesale DG solar program
Georgia Power, a utility serving nearly 2.5 million customers deep in coal country, has emerged as a leading solar utility with roughly 900 MW of solar-generated electricity on its grid. The vast majority of this capacity came online through Georgia Power’s highly successful Advanced Solar Initiative, which was launched in 2012 and had a specific focus on expanding the wholesale DG market.
“Georgia Power has aggressive goals for utilizing solar power, including lots of local solar, without raising customer rates,” said John Kraft, a Georgia Power Spokesperson.
The utility has certainly been successful in achieving these goals. Georgia Power began the Advanced Solar Initiative by bringing 210 MW of solar online across the residential, commercial and industrial, and utility-scale segments. In 2013, Georgia Power, to the delight of state regulators, increased the Advanced Solar Initiative to 735 MW. Of this total capacity, 190 MW were carved out for wholesale DG projects, and all of this capacity has been built.
“The Clean Coalition's CLEAN Program Guide and other resources definitely facilitated the design and implementation of our programs, including the standard offer program we developed for commercial-scale solar projects," said Kraft.
Previous FIT programs in the U.S.
Georgia Power’s program was highly successful and received well-deserved attention. However, it was not the first utility program designed to enable growth of wholesale DG programs.
In 2009, the Sacramento Municipal Utility District introduced a FIT that brought 100 MW of local solar online at no additional cost to its customers. Gainesville Regional Utilities implemented a FIT in 2009 that drove more than a 3,500% percent growth in local solar capacity over the program’s first 3.5 years and created hundreds of local jobs. And other successful wholesale DG programs have been in place from Hawaii to Colorado to Vermont.
More FITs on the way
The use of FITs to drive growth of the wholesale DG market continues to gain steam across the country. The Hawaii Electric Company (HECO) recently announced plans to meet Hawaii’s 100% renewable target 5 years ahead of schedule. Part of HECO’s plan is to grow the wholesale DG market by purchasing power from 31 MW of renewables through an FIT. In California, Community Choice Aggregation (CCA) programs have fully embraced wholesale DG. Marin Clean Energy and Sonoma Clean Power both have successful FITs, and the newly formed San Francisco CCA — known as CleanPowerSF — is in the process of rolling out its own.
Expansion of existing programs is underway too. Fort Collins Utilities in Colorado just announced plans to for the next phase of its FIT, known as the Solar Power Purchase Program. And finally, Los Angeles Department of Water and Power, the nation’s largest public utility, is working on increasing its CLEAN L.A. Solar Program from 150 MW to 450 MW.
Although the U.S. will likely never have a federal level program like Germany did, state policies and utility programs supporting wholesale DG have proven highly successful. Building upon this success is critical to accelerating the deployment of cost-effective clean local energy across the country.