New bill in California has great promise....

Today's post: Wednesday, 7-8-2009

We need an 80% reduction in fossil fuel use by 2050 to avoid the worst global warming effects. And, practically speaking, we need to also double our electricity generation and double the useful work done per unit of electricity & other energy sources as well during that same time to have a decent economy.

As I’ve posted many times and many other people have said, correctly I think, we need a massive increase in renewable energy, particularly electricity generated by renewable energy to come anywhere near to the increases we need so badly.

So reasonable incentives for every kind of solar or wind generated electricity are, I think, absolutely imperative.

The mechanism that has been proven to work in Germany to do this superbly well is called the Feed In Tariff which is often abbreviated, FIT. (Because of the massive amounts of renewable energy their FIT program unleashed, Germany now generates the least cCO2 release per capita in Europe among the larger countries of Europe.)

The basic Feed In Tariff concept is relatively simple. The government of the city or state or country where a utility is located requires the utilities in its area to offer long term contracts, for 20 years as an example, to buy power from renewable energy producers at a rate that will cover the cost of creating the renewable energy project and its equipment and make it at least modestly profitable to the renewable provider to do.

The utility then passes the added cost on to the rate payers.

In the early stages and the later stages this actually costs the rate payers so little it’s hardly noticeable it may surprise you to know.

In the early stages, if the renewable energy rate is 20% higher than what the utility pays for other electricity, adding a new 10% of their total energy generation from renewable energy raises rates by only 2% at the point all 10% of the renewable energy is online.

Then in the later stages as the nonrenewable energy sources begin to cost more due to supply demand imbalances and gradually having fossil fuel sources have to pay their true costs plus an increasing CO2 disincentive of some kind AND the new technology and economy of scale REDUCES the rate for renewable energy, Feed In Tariffs will actually lead to a LOWER utility bill than rate payers would have had otherwise.

In between, there might be a 5 or 10 % increase in utility bills per unit of delivered electricity from having an extensive FIT program like Germany’s. But because of increases in energy efficiency allowing most people to use less electricity and natural gas that are likely, most rate payers will actually not pay a larger monthly bill even then!

So, for very modest possible increases in utility bills and NO taxes or other funds needed, Feed In Tariffs make possible immediate increases in installed renewable energy.

But it gets even better than that. Because the 20 year (or similar duration) contracts for providing renewable energy generated electricity with a major utility are so financially strong, for a bank, financing a renewable energy project with a FIT contract is as safe as investing in T-bills and pays better.

And, that results in easily available financing instead of hardly available financing AND at lower rates due to this decrease in risk. That both lowers the cost to provide the renewable energy and sharply increases the number of new projects to provide it!

Meanwhile, Germany continues to lead the world in percentage of its energy from renewable energy due to the Feed In Tariff there while it has been almost totally unused in the United States.

But, since many innovations adopted in California are emulated by other states, it would very likely lead to near country wide use of Feed In Tariffs if California adopted one.

And, due to California’s large amount of sunny desert area and its very sunny summers, the economic gain from a Feed In Tariff would be huge.

The wonderful news is that if the new bill, AB 1106 (Fuentes) which would require the California Public Utilities Commission to develop standardized rates to cover costs and provide a reasonable profit for clean-energy generators such as wind turbines, solar-thermal plants, and rooftop solar panels – manages to pass with the amendments to upgrade it that the Sierra Club supports, California will have a state wide Feed In Tariff.

Then when the otherwise favorable factors in California plus this Feed In Tariff create massive increase in renewable energy, many of the other states will also adopt Feed In Tariffs and much the same will happen in other states – beginning with the other states that have abundant sun or wind or geothermal potential.

That will begin to make the changes we need in the United States and then from the sales of the improving technology and products used and more countries begin adopting FITs, we will begin to generate the renewable power we need to avert economic and environmental disaster.