Al Rosen's Letter to the LA Times on feed-in tariffs article 12 12 09

December 14, 2009

Mr. Chu (Los Angeles Times:

I am a developer trying to build a 1.5 MW solar PV plant under the “CREST” program (California’s feed-in tariff program) and a member of Solar Santa Monica’s Advisory Board. Your article was an excellent explanation of the successful feed-in tariffs (FIT) in Europe and around the world.

I think the public should be aware of some of the sad facts about California’s inadequate FIT program:

• As far as I can determine, the total number of solar energy plants built under CREST to date is zero;
• The reason for this failure is that the rate the utilities are obligated to pay to renewable energy producers (which is based on the cost of electricity produced by a proxy gas plant, called the Market Price Referent [MPR]), is too low to make plant construction economically rewarding.
• Recently, as your article points out, the cost of solar PV panels went down dramatically. As a result, the CREST feed in tariff rate started to look like it might be economically feasible.
• On December 17, 2009, the PUC will adopt a LOWER feed-in tariff rate for contracts signed after that date, which will, even considering the historically low panel prices, again make these projects unfeasible!

The reason Germany’s FIT has been so successful and California’s has been a complete failure is that renewable energy producers in Germany are paid a price for each kWh they produce that is designed to cover the system’s capital costs plus a reasonable return. California pays a price based on the utility’s cost for electricity produced by gas, a price completely unrelated to the price required to make renewable energy projects viable.

The political argument against a California FIT that would actually work is that paying a higher price for the electricity produced by PV would cause rate increases for electricity consumers. This argument is misguided for a number of reasons:

• The required rate increase would be very small compared to the benefits;
• If you analyze the rate impact over time instead just for the first year or two, you will find that the average rate for solar power will actually be LOWER than the cost of electricity from fossil fuels;
• Renewable energy reduces pollution, helps prevent global warming, has health benefits, promotes national security by reducing dependence on imported fuel; distributes generation to make the grid less vulnerable, creates jobs and has many other benefits whose value will more than offset any rate impact.

Rate payers are people too, and they have other interests (like the health of their children and national security) that have a value far greater than a small, short term rate increase.

Thank you for writing about this crucial issue.

Al Rosen

back to Archive of Articles