Feed-in Tariffs Best to Deal with Climate Change Says IPCC Working Group III Renewables By Paul Gipe, Contributor
The 135-page report by the Intergovernmental Panel on Climate Change, especially Chapter 11 on Policy, Financing and Implementation, makes it clear that the overwhelming weight of academic studies conclude that feed-in tariffs — or fixed-price mechanisms — perform better at delivering renewable energy quickly and equitably than quota systems, such as Renewable Portfolio Standards in the U.S. or the Renewable Obligation in Britain. This is not the unsurprising conclusion from a surprising source: the IPCC's Working Group III on Renewables.
Excerpts from report selected by Gipe as as representative of the topic in the report:
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Several studies have concluded that some feed-in tariffs have been effective and efficient at promoting RE electricity, mainly due to the combination of long-term fixed price or premium payments, network connections, and guaranteed purchase of all RE electricity generated. Quota policies can be effective and efficient if designed to reduce risk; for example, with long-term contracts.
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Although they have not succeeded in every country that has enacted them, price-driven policies have resulted in rapid renewable electric capacity growth and strong domestic industries in several countries — most notably Germany (See Box 11.6) and Spain (See Box 11.8) but more recently in China and other countries as well — and have spread rapidly across Europe and around the world (REN21, 2006, 2009b; Mendonça, 2007; Rickerson et al., 2007; Girardet and Mendonca, 2009). (See Boxes 11.7, 11.11 and 11.12.)
The success of FIT policies depends on the details. The most effective and efficient policies have included most or all of the following elements (Sawin, 2004; Mendonça, 2007; Klein et al., 2008a; Couture, 2009):
Utility purchase obligation;
Priority access and dispatch;
Tariffs based on cost of generation and differentiated by technology type and project size, with carefully calculated starting values;
Regular long-term design evaluations and short-term payment level adjustments, with incremental adjustments built into law in order to reflect changes in technologies and the marketplace, to encourage innovation and technological change, and to control costs;
Tariffs for all potential generators, including utilities;
Tariffs guaranteed for a long enough time period to ensure adequate rate of return;
Integration of costs into the rate base and shared equally across country or region;
Clear connection standards and procedures to allocate costs for transmission and distribution;
Streamlined administrative and application processes; and
Attention to preferred exempted groups, for example, major users on competitiveness grounds or low-income and other vulnerable customers.
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