U.S. cities adopt a European approach to solar power

By Kate Galbraith
Published: March 13, 2009

Solar cells adorn the roofs of many homes and warehouses across Germany, while the bright, white blades of windmills are a frequent sight in the skies above Spain.
If one day these machines become as common on the plains and rooftops of the United States as they are abroad, it may be because the financial technique that gave Europe an early lead in renewable energy is starting to cross the Atlantic.
Put simply, the idea is to pay homeowners and businesses top dollar for producing green energy. In Germany, for example, a homeowner with a rooftop solar system might get paid four times more to produce electricity than the rate paid to a coal-fired power plant.
This month, Gainesville, Florida, became the first U.S. city to introduce higher payments for solar power, which is otherwise too expensive for many families or businesses to install. City leaders unanimously approved the policy after studying Germany's solar-power expansion.
Hawaii, where high electricity prices have stirred special interest in alternative forms of power like solar, hopes to have a similar policy in place before the end of the year. The mayor of Los Angeles wants to introduce higher payments for solar power. The California state government is also considering a stronger policy, and bills have also been introduced in other states, including Washington and Oregon.

"I'm seeing it with my own eyes: It's really having a good effect on our local economy, particularly in these hard times," said Ed Regan, the assistant general manager for strategic planning at Gainesville Regional Utilities. He said he received calls from other cities and states since announcing the policy.
The surge of interest in the payment system is a recognition that despite generous state and federal incentives, the United States still lags far behind Europe in solar power. Germany, where higher payments for renewable power (sometimes called "feed-in tariffs") have been in place since 1991, has about five times as many photovoltaic panels installed as the United States, although they still account for only 0.5 percent of electricity in that country.
In the United States, said Wilson Rickerson, a Boston-based energy consultant, "a lot of people simultaneously reached the conclusion — who's moving fastest internationally? And that's definitely been Germany and Spain."
The policy affords a different way of paying for solar power systems.
If the United States were to fully switch over to such a payment system on a national scale, something that even solar advocates say is unlikely, the burden of subsidizing solar power would switch away from taxpayers, who fund a national tax credit, to electricity ratepayers.
In Gainesville, the new policy has already sparked a rush to put up panels. John Stanton, a retired civil servant living with his wife in Gainesville, put 24 solar panels on his roof in late January, as city leaders sped the policy toward approval. Gainesville's municipal utility now pays Stanton and other homeowners and businesses who generate solar power more than twice the standard electricity rate, and guarantees that rate for 20 years.
"It was the thing that sort of put us over the top," said Stanton, who gained an appreciation of European energy policies after living in Italy for more than a decade.
Wind power and other sources of renewable energy are generally included in the European payment systems, but solar — as one of the costliest renewables — has benefited the most. Payment rates for wind are substantially lower than for solar, according to Christian Kjaer, chief executive of the European Wind Energy Association.
In the United States, solar panels remain almost prohibitively expensive — a big reason why they account for far less than 1 percent of electricity generation. Generating power from the sun can cost several times as much as from coal, the largest and cheapest source of electricity in the United States.
If the utility commits to paying a higher rate for solar power over a period of years, it can offer those with solar panels or wind turbines a steady return — a particularly appealing prospect amid the economic turmoil.
"If you put your money in, you know you're going to get it back," Rickerson said.
From the utility's perspective, since it does not own the system, it avoids the cost and hassle of maintaining the panels.
But paying more for solar power also has a direct impact on ratepayers. Homeowners' electricity bills will rise 74 cents a month in the case of Gainesville, or about half a percentage point of the average homeowner's monthly bill.
"Seventy cents, what's that? A Coke?" said Regan of the Gainesville utility.
Opponents like Marcel Hawiger, a staff attorney for the Utility Reform Network in California, say that the policy, by raising electricity rates, would hit the poor the hardest, because a relatively high percentage of their income goes to utility bills.
"Why should we use regressive taxation to support the most expensive form of renewable energy?" Hawiger asked.
The programs have sometimes proved so popular that costs can spiral out of control. Last fall, blockbuster solar growth forced Spain to cap the amount of solar installations it would subsidize because it was paying too much. Ontario, which has had a feed-in tariff since 2006, also suspended its program last year after being oversubscribed, but wants to restart the policy.
Even in Gainesville, homeowners wanting to put solar panels on their roof are now out of luck — the city reached its cap on solar payments for this year and next only a few days after introducing the policy.
Julie Blunden, a vice president of SunPower, a manufacturer of solar-power systems for homes and businesses, said he feared that caps like those in Gainesville and Spain could lead to a boom-and-bust cycle for solar. Payment policies must be well designed, she said. By itself, the payment system "does not define guaranteed success, nor is it a panacea."
France — which is behind Spain and Germany in solar installations — recently announced that it was raising the amount it would pay out for renewable energy.
Details of the policy vary substantially from country to country, but the amount of the payments is usually structured to decline over time, reflecting the notion that solar panels should become gradually cheaper as companies make more of them. In Gainesville, a homeowner installing a solar array in 2016 will get about a third less than a homeowner whose system starts producing power this year.
While Gainesville is the first city in the United States to make such payments, a handful of utilities around the country are already carrying out similar programs voluntarily, albeit on a tiny scale.
"In our part of the hemisphere, solar power is so expensive. Without incentives, a lot of people wouldn't participate in the program," said Steve Kraus, media relations manager for Madison Gas Electric in Madison, Wisconsin, whose solar payment plan covers just 60 producers. The program is paid for by ratepayers who voluntarily pay more through the utility's "green power" program.
A national feed-in tariff has a few advocates like U.S. Representative Jay Inslee, Democrat of Washington, but it is unlikely to pass, even the solar industry concedes. Indeed, the industry's next planned fight is for a national "renewable portfolio standard," requiring the country to get a certain amount of electricity from renewable sources.
"I just don't think it's politically possible in the U.S.," said Mike Splinter, chief executive of Applied Materials, a solar and semiconductor manufacturer, of a feed-in tariff. "Getting a national renewable portfolio standard is going to be difficult enough."
James Kanter contributed reporting.