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FIT in the USA

Constitutional questions about state-mandated renewable tariffs.

Fortnightly Magazine - June 2010

much more than the time-dependent wholesale value of this power to the purchasing utility.

By turning the meter backwards, net metering effectively compensates the generator at the full retail rate for transferring just the wholesale energy commodity. Most states compensate the generator for excess generation at the avoided cost or market-determined wholesale rate.

State RPS Standards

An alternative to FIT is state mandatory minimum renewable energy supply requirements, which are usually imposed on electric utilities and/or independent retail suppliers. These alternatives typically are known as RPS. State RPS program designs vary as to:

• Energy versus capacity obligations;

• Single-tier or multi-tier credit determinations;

• Duration of purchase obligations;

• Requirements for resource diversity;

• Incentives for resource or technology diversity;

• Participation requirements for default service providers;

• Geographic eligibility for credits;

• Differentiation by type of renewable resource;

• Rules governing which generation units can earn credits;

• Definitions of new or incremental generation, where applicable;

• Categorization of multi-fuel facilities and off-grid resources; and,

• Eligibility of customer-side distributed generation.

Half of the states have enacted RPS programs to promote renewable energy power production. Half of those employ differentiated tiers of RECs. Some states distinguish tiers of RECs by the year in which the REC was created or the type of renewable resource used in creation of the REC, so as to promote certain technologies. Some states create technology set-asides or bands of technology. Other states have only a single type, or tier, of REC regardless of the technology used to create the REC, with only newly constructed renewable energy projects permitted to sell RECs. Other states have a single tier that allows both new and existing projects to qualify. This creates myriad variations on state RPS models.

RPS programs exist in 29 states plus the District of Columbia; four more states have non-binding RPS goals. 29 These mandatory RPS programs cover almost half of nationwide retail electricity sales.

The RPS programs in the states are very different in terms of what qualifies as a renewable resource. In those states that have RPS programs, more than 90 percent of renewable energy additions (and more than 80 percent of average capacity supplied) is from wind power, with biomass a distant second and limited geothermal resource development. It also has been estimated that RPS motivated approximately 45 percent of the 4,300 MW of wind power installed in the United States between 2001 and the end of 2004. An additional 15 percent of these installations were motivated by state renewable energy trust funds and subsidies. The required percentage of energy delivered from renewables ranges from 2 percent to 30 percent of annual retail sales in different state programs, but these numbers can be deceiving, depending upon whether electricity produced by preexisting renewable resources are eligible to be counted.

States regard differently the geographic location where RECs are created. At least three states expressly require that the RECs be created by in-state power generation, and two additional states require that RECs be created either in-state or in the service territory of a state