What do Rhode Island, Feed-in Tariffs, CREST, and Soccer All Have in Common?

Travis Lowder's picture

Despite their international popularity, feed-in tariffs (FITs), like soccer, have yet to really catch on in the United States. However, some states and municipalities have decided to buck the trend and implement their own versions of FITs to stimulate renewable energy development. Rhode Island is the latest entrant to this club.

The Rhode Island FIT, notable for the swiftness of its adoption, was enacted on June 29, 2011 when Governor Lincoln Chafee signed legislation that contained the Distributed Generation and Standard Contracts Act, under which the FIT is authorized. [1] The Office of Energy Resources (OER) submitted their recommendations for the 2011 solar PV and wind tariffs in late September (see Table 1), and a 5-MW quota must be achieved by Dec 31, 2011. [2]

Technology Size/Class Contract Ceiling Price Total Class Target for 2011 Class Target w/o Wind Project Enrollment
Solar PV 10-150 kW $0.3335/kWh 0.5 MW 1 MW
Solar PV 151-500 kW $0.316/kWh 1 MW 1.5 MW
Solar PV 501-5000 kW $0.2895/kWh 2 MW 2.5 MW
Wind Turbine 1.5 MW $0.1335/kWh 1.5 MW  

Table 1: RI Office of Energy Resources recommendations for 2011 specific differentiated tariffs based on project size (class), contract ceiling price, class target, and availability of wind generation [1]

The target market in this program is distributed generation (DG), or power produced at or below a certain MW output (Rhode Island specifies a 5 MW per project threshold), and interconnected to the distribution grid to serve nearby load. DG offers some potential advantages over central generation, such as avoidance of costly transmission upgrades, reliability through geographic dispersion, and speed of commercial operation. For these reasons, and others, we have lately seen an increase in policy support and business/financial innovation targeted to this market segment (e.g., California's Renewable Auction Mechanism and Project Amp).

Two soccer players from Arsenal and Manchester United vie for the ball.

Source: Wikimedia Commons

The Rhode Island FIT is a four-year, 40-MW program with annual cumulative targets and project size caps as follows [3]:

  • • Dec 31, 2011: 5 MW
  • • Dec 31, 2012: 20 MW
  • • Dec 31, 2013: 30 MW
  • • Dec 31, 2014: 40 MW

The program is mostly dedicated to "small" projects (see Table 3 for provisions by technology), but up to 1/3 of each annual goal may be comprised of "large" projects (up to 5MW). Electric distribution companies will conduct 3 two-week contract enrollment periods throughout each program year, with the exception of 2011 in which there will only be one. Contracts are for 15 years (terms may be adjusted in negotiation), stipulate a fixed payment (differentiated by technology), and include the purchase of power, RECs, and any other attributes of the project. They are to be awarded to small generators on a first come, first served basis if all requirements are met. Large generators are eligible for standard contracts as well, but they must submit bids that are considered on a lowest-price basis only. All generators must be within state borders.

Technology Project Size Cap
Solar PV <500 kW
Wind 1.5 MW
Ocean-thermal ≤1 MW
Geothermal ≤1 MW
Small hydro ≤1 MW
Biomass (compliant with current air permits ≤1 MW
Renewable fuel cells ≤1 MW

Table 2: RI FIT Eligible Technologies (waste-to-energy sources explicitly excluded in bill)

There will also be standard fees and schedules for interconnection feasibility and impact studies, both of which must be paid for by the electric distribution company.

The Act establishes a Distributed Generation Contract Board made up of various stakeholders that will determine (but can later adjust) the provisions of the program, including contract details, contract ceiling prices (the Rhode Island Public Utilities Commission ultimately approves these prices), schedules, compliance, project size caps, and others. Importantly, the board may recommend a reduction in annual targets based on the market data for renewable power prices. This is meant to protect ratepayers, who are ultimately amortizing the cost of the FIT over a 20-year period. [3] Until this board is convened, the OER will enact all program details as they did with the ceiling price recommendations for 2011.

Of note is Rhode Island's use of NREL's Cost of Renewable Energy Spreadsheet Tool (CREST) in the process of determining the standard contract ceiling prices for 2011. Several considerations figure into the establishment of these prices and, as FIT policies can live or die by them, it is important for the policymakers to conduct their due diligence. CREST is an economic cash flow model designed to assist governments in the implementation of cost-based incentives (such as FITs) and the evaluation of existing support policies. For Rhode Island, inputs to the model were based renewable energy industry stakeholder submissions and regional data, as well as on information obtained from consultancy and industry databases.

FITs still have a long road to hoe in the United States before they can achieve the levels of deployment apparent in their most successful applications (read: Germany). If the Rhode Island example is any indication, however, there may yet be a chance for this policy to gain traction at the state level. And this may be where the parallel with soccer ends. Because as we all know, nothing…not even David Beckham…can save soccer in this country.

 

[1] Gipe, Paul. "Rhode Island Rapidly Implementing Feed-in-Tariffs for Distributed Generation." Renewable Energy World, September 15, 2011.

[2] Rhode Island. The Distributed Generation Standard Contracts Act. Signed June 29, 2011.

[3] Rhode Island Office of Energy Resources. Distributed Generation—Standard Contracts: Classes and Ceiling Prices for 2011. Filed Sept. 27, 2011.