Illinois: Renewable Energy Feed-in Tariff Introduced in House of Representatives

illinois, feed-in-tariff, feed-in, renewable-energy, midwest, energy, energy-policyIllinois Representative Karen May (D-Highland) has introduced a bill calling for a system of renewable energy “feed-in tariffs” (FITs) like those used in Germany to spur the development of electricity from renewable sources. After its initial reading, HB 5855, The Illinois Renewable Energy Sources Act has been reported to the House Rules Committee for initial action.

Feed-in tariffs have proven remarkably successful throughout Europe, and especially in Germany, where some 55% of the world’s solar power capacity resides. I have covered the nuts and bolts of the FIT here and I have made a short argument for them here (but for a more comprehensive treatment of how and why the policy mechanism works, I recommend visiting the World Future Council’s PACT website, which is a powerful resource for advocates, policymakers, environmentalists, tech geeks and regular folks).

In a nutshell, a feed-in tariff offers a long-term guaranteed price contract (usually about 15-20 years) to any entity that contributes electricity to the grid via renewable sources like solar, wind, biomass, landfill gas, small hydro, geothermal and methane. Whereas existing policy mechanisms like the production tax credit favor large corporations with sizable tax liability, and investment tax credits favor those folks who can afford a large upfront cost that comes with a 20-30 year payoff, this policy tool encourages the distributed generation of renewable energy and it levels the playing field by providing long-term investment security for small businesses, homeowners, churches, schools and others, so they are more willing to make the financial commitment that is necessary for installing renewable energy themselves.

This is not to say that our existing RE policy tools of choice (including renewable energy standards) are inherently bad, but they may be insufficient to spark the kind of growth in clean energy the public seems to be demanding.

The diffusion of renewable energy FITs has extended from Northern Europe to include some 47 countries worldwide, but the mechanism has yet to gain much political traction in the United States. The bill is modeled after the legislation proposed in the fall of 2007, when Rep. Kathleen Law introduced HB 5218 into the Michigan House of Representatives. Continued…

Ironically, while the eyes of renewable energy policy wonks (yes, there are such a thing) have been looking to California, Michigan and Minnesota for a successful German-style feed-in tariff, Rep. May’s bill took people by surprise. But the fact that Rep. May has introduced it, is less surprising, as the four-term legislator has been the recipient of the Environmental Leadership Award from the Illinois Environmental Council and has been consistently endorsed by the Illinois League of Conservation Voters.

According to renewable energy expert Paul Gipe, “Representative May’s bill would create a full system of feed-in tariffs with prices for an array of renewable energy technologies. Currently, the only true feed-in tariff system in North America is the limited program offered in Ontario.”

The Ontario limited offer program, along with the regional climate change agreement signed by the Midwestern Governor’s Association last November, and talk of FIT legislation in Michigan, Minnesota and now Illinois, is positioning the upper midwest to compete with other emerging clean energy hubs like Colorado, California, and New York/New England.

The proposed Illinois tariffs are virtually identical to those equivalent to the actual ones in Germany as well as the proposed ones in Michigan.

  • Hydro less than 500 kW……………………………………………………………$0.10/kWh
  • Biogas/Biomass less than 150 kW………………………………………………….$0.145/kWh
  • Geothermal less than 5 MW…………………………………………………….$0.19/kWh
  • Wind……………………………………………………………………………..$0.105/kWh
  • Wind energy from small wind turbines…………………………………………….$0.25/kWh
  • Rooftop solar less than 30 kW………………………………………………………..$0.65/kWh
  • Solar faΓ§ade cladding less than 30 kW………………………………………………$0.71/kWh

As you can see, not all technologies are treated the same in terms of the price the utility is required to purchase the electricity for. Solar PV has the highest payout because it is the most expensive to install, but it is also some of the easiest to adopt on a large scale. Wind has a much lower tariff because the technology costs much less to install, and the payoff-date would arrive more quickly. The formulas are essentially designed so that regardless of what RE technology you install, the payoff time will be roughly the same. And after you have finished paying off your initial investment, you begin to pocket the rest, or, as many are doing in Germany, you can re-invest in more panels with more long-term guaranteed power purchase agreements from the utility.

It should also be noted that most FITs are adjustable or they adjust automatically. By lowering the cost of the payout, it is believed to drive more technological investment and research in more efficient processes. In other words, if you have a guaranteed rate for 20 years with a 30% efficient solar panel, and businesses know that you have this guaranteed rate, why should they innovate?

Full Text of HB 5855

Written by timhurst

5 Comments

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  1. Good questions. I just looked over the text of the bill and it looks like biomass and biogas are covered by the same tariff. Thanks for pointing that out, I’ll update the post so that is clearer.-tbh

  2. I wish to question whether Government Feed In Tariff schemes, although well intentioned, is poor economic policy in its current form, and whether it should be changed (or expanded) as described below.

    It costs about $20,000 for a household to install solar panels to offset their household energy usage, and it costs more than $1,000 per year for electricity consumers to ‘subsidise’ each household receiving the generous ‘feed-in’ tariff, not to mention the cost of any installation rebate subsidy.

    It is smarter if a household is able to invest in a 1/1000 share of a 2.5 mw Government large wind turbine (estimated cost $5,000 per household), which would generate the same amount of renewable energy.

    Households cannot do this themselves, and need Government to implement and manage the scheme.

    Potentially, it would
    (1) tap a very large funding source for renewable energy (which the Government cannot fund by itself),
    (2) enabling many more households who cannot afford $20,000 for solar energy to offset their energy consumption with renewables,
    (3) not require $1,000 per year per household premium for ‘feed-in’ subsidy.
    (4) not require installation rebate
    (5) run at no nett cost to the Government or other electricity consumers.

  3. Feed In Tariff is only real solution to encourage alternative energy systems, and solar is just one, the most expensive at that, so with wind and new hybrid hydrogen generators, combining all three would be the most logical strategy to allow advancement of alternative energy industry. Sadly, with lobbyist payoffs to government for years, we see little progress, just the usual green talk, with little action. Germany and Denmark have proven how effective a good FIT would be, yet we still see little progress. We need this to encourage better system development than just solar.

    Push your gov. leaders to pass FIT fast.

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