How feed-in tariffs for renewable energy affect your electric bill

Electric power meter for monitoring energy usage.

Feed-intariffs are the world’s most widely used policy to drive theimplementation of renewable or clean energy. This tool has helpedtransform cloudy places such as Germany, internationally, and New Jersey,nationally, into leaders for their surrounding regions of installedsolar power and manufacturing. Feed-in tariffs are now part of U.S. andstate legislationglobal warming reduction in the country, but the term is not fully understood.  to enable greater renewable portfolio standards and

One major obstacle for the adoption of renewable energy sources such as: biomass, solar, geothermal and windis the retail price of electricity, which is typically more expensivethan the retail price of electricity generated from nuclear or fossil fuels such as natural gas and coal.

Afeed-in tariff is a revenue-neutral way of making the installation ofrenewable energy at the residential, commercial or utility level moreappealing. The electricity that is generated is bought by the utilityat above market prices. In some instances, the retail price ofelectricity purchased from this power source might be 40¢/kWh, which isnot competitive with a conventional fossil fuel plant at 10¢/kWh; sothe difference is distributed to all of the customers of the utility.For example, if $100,000 worth of green power is bought in a year by autility that has 1,000,000 customers, then each of those customers willhave 10¢ added on to their bill annually.  

Feed-in tariffsguarantee long-term payments at pre-established rates for theelectricity generated from renewable sources. While utilities areobligated to buy the power, the long-term payments help encouragerenewable energy development by reducing risks for investors. Any addedcosts are typically passed along to ratepayers and, for technologiessuch as wind and biomass power, it may offer a hedge againstelectricity price volatility over the long-term. 

As a result, asmall annual increase in the price of electricity per customer canresult in a large incentive for people to install residential renewable energy systemsor for a company to build a solar power plant. These are the basics ofhow the feed-in tariff works for clean energy; it is often phased outonce approximately 20% market penetration has occurred. In Californiait covers the first 500 MW of generation for a particular facility. InGermany, the feed-in tariff for roof-top solar panels is reduced by 8%in 2009 and 2010 and then by 9% annually from 2011 onwards, instead ofby a constant 5% per year.

U.S. National Renewable Energy Lab(NREL) analysts are reviewing these policies in a series of technicalreports designed to inform government policy makers, clean energy investors,utilities, and the general public. This laboratory has suggested thattariffs should be lowered over the life of the contract period,according to a transparent and incremental plan, as innovation andgrowth reduce technology costs in order to encourage rapid deploymentand increase competition among manufacturers. 

According to theNREL studies, experience around the world suggests that feed-in tariffscan effectively expand a renewable energy portfolio and enable a Green stimulus, while creating Green jobs and helping meet renewable energy mandates.The feed-in tariff system has been enacted in Australia, Austria,Brazil, Canada, China, Cyprus, the Czech Republic, Denmark, Estonia,France, Germany, Greece, Hungary, Ireland, Israel, Italy, the Republicof Korea, Lithuania, Luxembourg, the Netherlands, Portugal, Singapore,Spain, Sweden, Switzerland, and in some states the U.S.

U.S.states such as Arizona with enormous solar potential and skyrocketingsummer energy demand during blazing-hot summers have a majoranti-recession opportunity at hand once the proper feed-in tarifflegislation and business agreements are in place.

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For more info:  NREL Report: Feed-in Tariff Policy: Design, Implementation, and RPS Policy Interactions



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