As many of you solar geeks out there probably know, Gainesville Regional Utilities (GRU) recently launched a feed-in tariff, or FIT -- the first of its kind in the country. Generally speaking, FITs create two main benefits for solar buyers. First, they ensure that residents and businesses who go solar get paid a premium for all the electricity output from their solar PV system. This simple premise -- that each and every kWh generated will be purchased -- is linked to the second benefit: that of clarity. Unlike time of use schedules, or net excess generation purchasing at avoided-cost rates, the concept of a feed-in tariff is readily understood. For these reasons, FITs have been the policy tool of choice in Germany, for instance, a country that now leads the world in solar adoption rates.
Florida can put another notch in its "we're so trying to beat California at the solar incentive game" belt: the city of Gainesville has just approved a solar feed-in tariff of $0.32/kwh for solar electric systems installed after March 1, 2009. Not familiar with feed-in tariffs? Maybe that's because this is the first one in the nation. Europe's been rocking the feed-in tariff for some time; and in Germany, it also got its start at the local rather than federal level.
The feed-in tariff for solar is a huge incentive, especially for commercial consumers. Gainesville's tariff is set up to pay out over 20 years, a nice long time during which a company (or household) can safely predict that much larger a portion of its energy expenses. One of the biggest appeals of installing solar panels in your home or business is price security: you're reducing the amount of your electricity that can fluctuate with energy prices by replacing a portion of it with solar.
The feed-in tariff will replace Gainesville's current rebate program. One advantage of the tariff over a classic rebate is the higher return on investment for large solar installations, so the shift will hopefully attract millions of dollars in investment in solar in the city.
What could attract that level of investment, according to Don Davis, Gainesville president of Capital City Bank, is a 5 percent return on investment after taxes in a 20-year fixed contract. [Gainesville.com]
As with so much in solar these days, it seems like it will be good to get in on the ground floor of this new incentive structure, because in three years, the per-kilowatt-hour rate will drop (to accommodate an expected drop in the cost of technology, but considering how slowly the cost of solar has been declining thus far, it might be wise not to bank on that).
California and New York are the other two states whose solar associations have been pushing for a feed-in tariff incentive. Adam wrote a great post about New York's efforts a little while back. In fact, I'm going to quote Adam on why feed-in tariffs are such a sexy solar incentive:
...feed-in tariff prices are set by a government entity (not the market) and are considerably higher than the going rate for retail electricity. For example France, which recently expanded their existing feed-in tariff rates, offers up to €0.30 ($0.38) per kWh for residential systems and €0.55($0.70)/kWh for certain kinds of commercial systems. The going retail rate in France, by comparision, is about €0.14 ($0.18)/kWh.
The going rate for electricity in Florida varies depending on the utility, the type of consumer, and the rate schedule, but doesn't exceed $0.30/kwh for the most part, and that's way on the upper end (lowest end is around $0.18/kwh). So with a fixed rate for twenty years that exceeds the highest current retail price of electricity in the state, no wonder Gainesville's feed-in tariff promises to attract many more megawatts of solar capacity to the state.