The cards have been stacked against solar for the past decade here in the U.S. but that is about to change with the advent of Feed-in Tariffs (FiT's) which solve a key problem for rapid adoption of solar energy.

Despite the fact that a building owner is essentially financing the development of energy production for their local utility when they install a solar system, they are still only paid standard utility rates for that electricity (comparable to coal or other well-established forms of energy) even though their systems have significantly higher install costs and offer other value-added benefits (more stable grid, lower carbon emissions, etc).

Because of this it can take 10-20 years to pay off a solar installation, making it too cost prohibitive for the average homeowner or commercial building owner. Tax incentives and rebates help somewhat, but until last October when Congress passed the ITC extension, those were very restrictive (now the $2000 cap is lifted).

In order to really kick-start the industry, the City of Gainesville (which owns it utility) looked to Germany, a country that has seen the fastest rates of solar PV adoption (despite its typically gloomy, overcast skies). In Germany, a system called Feed-in Tariff was developed in the 90's and became a national law in 2000, and doubles (or more) the price that is paid by the utility to the homeowner for their solar energy.

The Feed-in Tariff (FiT) justifies a tariff that is levied not on the consumer directly but on the utility that is fed the energy (hence "feed-in") since it serves to mitigate the cost of carbon dioxide emissions and helps stimulate the fledgling solar industry. It requires two meters -- one that measures the home's direct energy use (which they homeowner uses free of charge), and a second meter which measures the output that is fed to the grid.

For the ground-breaking Gainesville program, even at the relatively low price of 32 cents per kWh (Germany pays about 58 cents per kWh) the city reached its quota of applications within days and is now "SOLD OUT" until 2011. Their rate is a little more than double what residents pay for standard (non-green) electricity and the rate is guaranteed for 20 years, so with a federal rebate a building owner can have their system paid for in 5-10 years.

According to the New York Times, a national Feed-in Tariff is in consideration, and several states including California and Hawaii are looking at implementing utility-wide FiT's. 

But some free-market capitalists are having "fits" about FiT's. As they see it, though it is one step better than using tax money to subsidize an industry (even those these same people seem to have no problem with oil or coal subsidies), it is still ratepayer funded, which means that the extra cost for the solar systems is then burdened on other ratepayers (with some low-income exclusions) who don't see any direct benefit.

In Florida, the program just launched seems to hit a sweet spot. The demand clearly indicates that the incentive is high enough, but not so high as to significantly raise other ratepayer's bills. The estimated cost for the program will be about 72 additional cents per month per bill on average, which as Ed Regan of the Gainesville Utility points out, is about the cost of a can of coke.

Related Posts:

Florida's FiT program pays homeowners for solar investment
Gainesville just hung SOLD OUT sign on the nation's first Feed-in Tariff program.