BY Gaelan Brown

Vermont, the First State with Mandaroty FiT

A properly designed FiT is the only policy that removes the monopolistic corporate controls over the utility grid and allows anyone to effectively become a power company with cost-effective renewable energy. Other nations have proven how to make this work, but sadly the concept is not even in discussion in Washington D.C.

Vermont, on the other hand, where the solar power company I work for is headquartered currently leads the U.S. in this category, as the first state whose legislature mandated a FiT program as a test. But the Vermont utility and regulatory landscape has a long way to go toward understanding the value of this concept.

Becoming Independent Energy  Producer

A FiT is not a government subsidy that comes and goes depending on the government’s budget pressures. A FiT would eliminate the complex ever-changing labyrinth of state and federal tax credits, rebates and renewable energy ‘credits’ which require renewable energy developers to pay for full time accountants and lawyers to make sense of it all, along with full-time teams of administrators to process all the current incentive paperwork (all this bureaucracy increases costs, a FiT removes those costs).

A FiT is simply a rule that power companies MUST allow consumers to become independent renewable energy producers, feeding their energy into the grid, in exchange for a guaranteed price that helps renewable energy catch up to the decades of subsidies that fossil fuels and nuclear power has had.

FiT in the U.S. and Other Countries

An un-capped, differentiated FiT in the U.S. or in any U.S. state would create a clear and predictable return on investment for renewable energy, causing capital to pour into the category, creating hundreds of thousands of long-term U.S. jobs. And by the time the U.S. had 30% of more of its electricity from FiT projects, the cost of our nuclear and fossil-fuel based energy will be much higher than renewable energy, so a FiT will provide long-term savings and energy-stability for America.

Germany’s FiT created 300,000 green-collar jobs and within a few years got to 16% of the energy in their power grid being clean, local renewable energy, while the average increase in cost of power per year to homeowners was less than US$50. In Denmark, 23% of the power in the grid is domestic renewable energy from FiT projects, and the conservative political party in power has an official policy of massive deployment of renewable energy specifically to save money and protect the economy from ever-increasing energy costs from fossil fuel and nuclear sources.

Different Views on FiT

Let me say that again, the conservative right-wing political party that now controls Denmark is focusing on renewable energy to protect their economy from energy price increases. Many Americans, particularly those on the right-side of the political spectrum believe falsely that since a FiT forces power companies to pay a premium to renewable energy producers, that consumers and businesses will be victimized with unreasonable price increases, which will hurt the economy.

But this is simply not true, because by the time we get to a majority of our power being renewable energy, the technology costs will have come down, the FiT rates can be adjusted down appropriately, and the fossil-fuel or nuclear power sources will have become much more expensive because these are limited and dramatically declining resources. In Germany, the average home has seen less than a US$50 per year increase in their power coats because of the premiums paid for the renewable energy, and now the cost of residential solar installations, without any subsidy, is only a year or two away from being at ‘grid parity’? Wind power can already be more cost-effective than just about any other type of generation.

Cost & Investment

The truth is that utility power costs are heavily influenced by the global oil markets which influence the price of natural gas and coal. As we are running out of cheap oil, we’re making gasoline from coal and using more natural gas for transportation fuel, which will dramatically drive up the cost of electricity in the U.S. beyond our current 6% average annual increase. And since wind and solar power are both already cost-effective, they’ll save us a lot of money relative to how much we increase the scale of their deployment.

The most fiscally conservative and environmentally responsible policy regarding energy would be to invest as much as possible into renewable energy generation through a market-based FiT that encourages anyone (resident, institution or business) to install solar, wind or biomass power generation and earn a fair return on their investment. Yes, fiscal responsibility and environmental responsibility actually go hand in hand, but few if any of our politicians understand this, therefore these values remained permanently divided by our political system. This has to change.

Green Policies

Ironically, with all the hype over the government rebates and tax credits and the ‘green economy’ the one policy that is not even being discussed in D.C. is a national FiT. It’s not even on the table. In D.C., it’s all about ever more complex tax regulations that limit the market to people and companies that have tax liability, with grant programs thrown in to keep everyone guessing. The state-level rebate and tax-credit programs are constantly changing, creating unpredictable variables for investors, including how these programs interrelate with the federal tax credits and grants. 

So this means it’s likely that each U.S. state will have to craft its own energy policy, while somehow still navigating whatever carbon-tax or energy policy comes from D.C. There are many political challenges because of this: how does a state predict what D.C. will do and how that will impact the economies at the state-level? 

Vermont’s FiT

Barely Passing Grade

Thanks to a lot of work by Vermont’s renewable energy industry leaders, who spent years educating and lobbying the legislature, Vermont was the first state in the U.S. to create a FiT law in May of 2009. This was ground-breaking progress, except the program had many flaws that have limited its effectiveness, because many of Vermont’s regulators and policy-makers still see renewable energy as a ‘way to be green’ instead of a way to save green $ and create jobs.

Paul Gipe, a world-renowned expert on effective renewable energy policy, gave a presentation as the keynote speaker at a recent Renewable Energy Vermont (REV) conference devoted to reviewing Vermont’s FiT. He gave Vermont a grade of D on the global scale compared to successful FiT programs in other countries, although Vermont was the only U.S. state he gave a passing grade to. The bottom line which he clearly laid out is that the only effective policy for getting renewable energy deployed is an un-capped FiT and in which ANYONE can become a power company without heavy inter-connection fees having to be paid to utilities (even homeowners).

Vermont’s test-FiT gets a barely-passing grade because :

1. It was capped at 50 MW, so there is no real investment or permanent job-creation. The program was really just a ‘toe in the water’ test to take a baby-step in the right direction.

2. It is only available to large-scale systems because anyone doing this must spend US$200,000 in inter-connection fees to the utility, along with large annual inter-connection fees after that. The power companies pretend these fees are to cover their cost of accepting ‘intermittent power’ from renewable energy including electrical engineering systems. The truth is Germany and Denmark, etc, just made it the law that power companies have to allow anyone to feed clean-energy into the grid, and those countries DON’T have these fees.

Talk with Vermont Public Service Board

Dave Lamont of the Vermont Public Service Board (VPSB) was on the ‘lessons learned’ panel at the REV event. He concluded that the FiT was a bad idea for Vermont because it would increase Vermonters’s rates without any real benefit.  Peal oil and peak natural gas didn’t enter his calculus. (Nor does he factor the hidden cost of the U.S. wars for oil security.) Status quo, full steam ahead! The VPSB and many Vermont and U.S. politicians do not grasp the opportunity presented by investing in decentralized renewable energy. The eventual impact of making every home a mini-power-generating station, feeding into the grid, is almost beyond calculation in terms of jobs and energy security.

The VPSB is tasked with protecting rate-payers from price increases, a worthy role. But the challenge is that the VPSB has a misconception that renewable energy is ‘too expensivet and that increasing our renewable energy would hurt the economy, costing Vermont jobs. There is a lot of this mentality in the American political landscape, and if we are going to survive and have a real economic recovery during the next 20 years, this has got to change. We need domestic renewable energy as a foundation for a sustainable economy because renewable energy provides stable, cost-effective, domestic energy.

The REV event was interesting but I found it discouraging because we’re moving at a snail’s pace when we need to be sprinting. The FiT in Vermont barely made large scale solar economically feasible and many people seem to think it’s not necessary since Vermont can get power from Hydro Quebec instead. The politicos and utility people seem convinced that we need billions of dollars (from where?) invested in a smart grid in before we can deploy significant renewable energy, (Vermont is about to spend US$148 MM on smart-grid, tax-dollars that Vermonters sent to D.C. or $ that was borrowed on our behalf: free money!) even though the lack of a ‘smart grid’ has not been an issue for Denmark or Germany. I spoke about this at length with Paul Gipe and he confirmed that the ‘smart grid’ concept is not a valid prerequisite for renewable energy. This is mostly just a way for utilities to remain in control.

It seems to me that very few of the people at the REV event, including many within the renewable-energy industry, have peak-oil or financial turmoil on their radar. Many think we can and should march along toward a ‘smart-grid’ Jetson’s fantasy-land where everyone will have a washing machine and fridge that automatically turns on when power from the grid is cheaper, thereby creating ‘grid-efficiency’ before we deploy major renewable energy generation. It’s all for appropriate high-speed internet expansion and the appropriate smart-grid technologies, but distributed renewable energy should have a much higher priority and not take a back-seat to smart-grid investments. If America is going to survive and prosper during the next 20 years, it needs to get serious about domestic renewable energy production as a top priority.

What mystifies me the most is when I hear politicians or regulatory officials say that we need to protect rate-payers from increasing costs driven by too much renewable energy in the grid. We need a major political and cultural shift to open our eyes to the fact that domestic renewable energy is an investment in America’s economic foundation, and an investment in our sovereignty. Remaining dependent on foreign energy sources and unhealthy, dangerous domestic energy sources like offshore-drilling, coal and nuclear-power will only weaken America’s long-term standing in the global economy.

When will the business and political mindsets in America wake up and realize that the answers to our energy future are right in front of us, if we will only recognize the opportunities? 

Gaelan Brown is Vice President of Marketing for groSolar  (http://www.grosolar.com/).  Brown is also running for Vermont State Senate in Washington County in the 2010 November elections. Brown graduated with honors with a BA in Mass Communication and Economics from Washington and Lee University.

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