Feed-in tariffs are a relatively frequent topic here at Renew NewEngland. Mostly we've been curious about the strange absence of this proven method of spurring renewable energy development, as New England states tried seemingly everything to build a green economy. It's a sign of just how fast the field is changing that in the year that we've been writing this blog, feed-in tariffs have moved from speculation to reality in North America, with new FITs in Hawaii, Oregon, Vermont, California, and Ontario, along with smaller efforts like Gainesville, Florida. Purists--or at least energy lawyers of a certain vintage--will note that FITs in the US are actually old news, citing PURPA, which partially explains why US policymakers are reluctant to try anything that sounds like fixed price, long term contracts for renewable energy.
An NREL report issued earlier this year explores the impending collision between these new FITs and this legacy legal framework. The report, entitled Renewable Energy Prices in State-Level Feed-in Tariffs: Federal Law Constraints and Possible Solutions (pdf), discusses the limits imposed by PURPA and the Federal Power Act on states' ability to craft feed-in tariffs, and lists possible steps FERC or Congress might take to remove (or at least clarify) those constraints. Perhaps more importantly, the report provides guidance to state regulators and legislators in crafting feed-in tariffs in the existing legal landscape.
The report's detailed analysis of PURPA and the FPA doesn't easily lend itself to summary in a blog post, but the overall conclusions are relatively straightforward: under current law, a state cannot simply require a utility to purchase electricity from a seller at specified prices for a specified duration (the essence of a FIT) without conforming its actions to the mandates of PURPA. At the very least, this complicates--and may ultimately frustrate--any effort to enforce a FIT. Moreover, "given the FPA's requirements, a state-level feed-in tariff, as defined above, outside of PURPA, is not legally possible in the United States today."
It's unclear to what extent states are aware of these constraints as they craft their FIT legislation. PURPA doesn't apply in Hawaii (no interstate commerce) so that state was free to craft a PURPA-free FIT; the convoluted structure of Vermont's SPEED program may reflect these concerns. In California, Southern California Edison challenged the PUC's jurisdiction to set rates, a decision is expected soon. Unlike renewable portfolio standards, where state efforts to go it alone undermine the potential of larger markets for renewable energy credits, state (or municipal) level FITs allow for much needed experimentation, to craft FITs that account for differences in market structure, renewable resources and policy goals. For example, California's unique new solar FIT will include an auction mechanism and vary in price based on the time of day during which the electricity is generated. While successes are great, even failures can be instructive. To the extent that these requirements needlessly hinder such experimentation, they are a barrier to renewable energy development in the US.