This being an energy story, I am of course talking about the feed-in-tariff (FiT). An FiT is a financial mechanism that subsidizes residential and, sometimes, commercial, producers of solar and other forms of renewable energy. It is intended to stimulate green energy. The U.S. doesn’t have an FiT, but many countries do, including the UK, where I live.
I’m in favor of FiTs. But a warning to those of you clamoring for them: be careful what you ask for, you might get it. Someone has to pay, and that someone could be you.
FiTs come in a few varieties. A common thread is that a homeowner who installs solar panels gets paid a rate (a “tariff”) above the market rate for every watt of electricity he/she produces. The electricity can power his home, or it can “feed in” to the grid.
The FiT is indeed a solid inducement to someone considering solar. In the UK, the rate is currently (but not for long) about four times above the market rate. People who tap it make money by generating electricity – although they typically pay about $20,000 in upfront panel and installation costs.
I support FiTs as a way to spark growth in the solar and renewable market. They've succeeded on that basis in the UK. I don't have the hard numbers, but anecdotally, I now see them on one out of every 10 or 20 houses is the village where I live, a year-and-a-half after Britain implemented the subsidy. They've – not exactly the Riviera, yet it generates more solar electricity than any country in the world, thanks to FiTs that began decade or so ago.
My view, however, is more sober than it was in April 2010, when I cheered enthusiastically as the UK launched its scheme. To understand why I've calmed down, circle back to my intentionally vague, boldfaced remark above in which I note that the homeowner “gets paid”.
Who pays the lucky ones who have $20K to buy and install solar panels? In the UK, the utilities do, which means the money comes other utility customers who don’t have the capital to equip their own rooftops.
That has led to another sort of feed-in, if you will: It has helped feed in to the relentless march upwards in utility bills as the utilities take funds from the rest of its customer base. In Britain, many people don't realize that the government does not fund FiTs. Rather “have not” utility ratepayers do. The government’s role is not that of subsidizer. The government has simply approved a scheme that allows utilities to rob Peter to pay Paul.
Exactly how much the FiT factors into the relentless and recently brutal rise in utility rates is debatable, and for those of us not inside the energy companies, it’s very difficult to tell. The UK’s Renewable Energy Association says not much. It’s a vocal champion of FiTs.
Certainly, other factors are driving up utility charges: the rising price of fossil fuel, genuine costly utility efforts to go green, and, dare I say, perhaps a dose of profiteering.
But when Energy Secretary Chris Huhne told Parliament yesterday that government policies would increase the cost of electricity by 27 percent in 2020, surely FiTs were part of his equation. (He also said that energy efficiency and conservation measures would offset those increases). As noted here last month, the British government has balancing its admirable renewable energy efforts.
My SmartPlanet colleague Chris Nelder recently pointed out in a in the U.S. that some people regard them as a regressive tax. Count me among those: I’m a journalist in a “democratic” world that no longer financially values free speech, so lump me in with the “have nots” who are subsidizing the “haves.” My utility provider, British Gas, jacked up my monthly electricity rate by 52.5 percent to £61 ($100) in October - and that was after I talked them down from their attempt to raise me by 90 percent.
As a believer in a greener, more sustainable and self-sufficient future, I still support FiTs. In the long run they will help make solar panels more affordable for all of us, as production ramps up, costs come down via economies of scale, and the FiT in theory fades away as it's no longer need.
Still, I crack a bittersweet, $100 smile when I look at the shiny solar panels on the garage next door. It’s the old hard lesson about “no free lunch,” or in the spirit of November’s fourth Thursday, no free feast. Someone paid for the bird on the table, the potatoes, the sprouts, the parsnips, the cranberry sauce, the pie (I’ll have the apple AND the pumpkin the please).
If we want a "renewables" future, we all have to put skin in the game, be it via higher energy bills (although I call for the utilities to include a transparent line indicating how much of bill goes towards the FiT), taxes, $40 energy efficient light bulbs or whatever. If not, stick with fossil fuels.
Solar panels don’t drop miraculously from the sky and land bolted and wired onto your pitched roof. Someone pays for them. If you’re not flush enough to fork out $20,000 for your own photovoltaics, then with an FiT, you might end up subsidizing the gleaming array atop your neighbor’s house.
Any FiT supporter who doesn’t understand that before getting into the game is a turkey.
This post was originally published on Smartplanet.com