Much talk has been made of the United State’s need to enact a nationwide Renewable Portfolio Standard (RPS). Proponents claim that it is the only way for government to commit to clean energy technology and spur real growth in what could amount to a “second industrial revolution” that rejoins America’s storied abilities for innovation and manufacturing. However, without structured policies in place that provide well-defined growth mechanisms for new energy options, any RPS is nothing more than a vague, wished-for outcome. On a hypothetical roadmap for the country’s renewable energy future, an RPS can only mark the destination at the end of a long journey. It does not create the roadways to reach that destination.

A feed-in tariff (FIT) may help to pave those roadways. Already active in more than 40 countries around the world, FIT policies have been cited as primary drivers of growth in the renewable energy markets of Spain, Germany, and Denmark — countries now supplying between 15 and 34% of their energy needs through renewable sources. Despite remarks and pledges from President Obama, the U.S. currently supplies only 5% of its electricity needs through wind, solar, and hydro plants. What accounts for this disparity? The European countries have strong FIT’s while the U.S. does not.

The most successful FIT’s work by setting the price of renewable energy types at guaranteed rates, usually slightly above their market values, for a fixed period of time. This property of a FIT immediately stabilizes the investment environment and helps to secure project financing. Energy developers can lower project costs since the volatility of renewable energy markets is eradicated. The greater availability of financing options simultaneously helps to shorten the development timeline and allow smaller companies to better compete. Over time, the fixed rates can be adjusted based on the effectiveness of the policy.

FIT’s, while already successful in European countries, are now starting to arrive in North America. The Canadian Province of Ontario, which has pledged to stop burning coal before 2014, became the first jurisdiction in North America to enact a FIT three years ago. It recently raised the guaranteed rates for wind and solar projects to 13.5 cents/kWh and 80.2 cents/kWh, respectively, to great success. In only months since, the Ontario Power Authority has attracted roughly 1,200 applications representing more than 8,000 megawatts of renewable generation. Many of these applications came from smaller developers and even residential homeowners, underlining the FIT’s ability to attract a variety of investors.

Interest in FIT’s has been slow to catch on in the United States. Some states have passed legislation containing FIT’s, most notably California, and even local municipalities like Gainesville, FL have adopted similar policies to drive significant growth in renewable energy. Other states have tried and failed to enact FIT’s in their state legislature. Minnesota, whose wind potential is significant, seems particularly determined and hard-pressed to implement a FIT. State representatives David Bly and Bill Hilty have introduced legislature that would establish fixed rates for renewable energy on two separate occasions (February 2008 and February 2009) but failed to get a hearing on their bills in both instances. A lack of guaranteed access to the electric grid, a common provision of European FIT’s, may be keeping state FIT’s from gaining traction.

In a speech to a joint session of Congress on February 24th of this year, Obama declared that America will double its supply of renewable energy over the next three years. It is a lofty goal considering that Congress has yet to pass the current energy bill. Even if that bill’s provisions that call for a federal transmission authority and a national RPS are retained, we may find ourselves without the renewable energy surge that the bill intends to ignite. It may behoove our state and federal legislators to seriously contemplate the FIT policies that have already produced this intended effect elsewhere around the globe.

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