Saturday, June 14, 2014

PUC investigates changes to the Feed in Tariff (FiT) Program

By Henry Curtis

On October 24, 2008, the PUC opened up an investigation (2008-0273) to examine implementing Feed In Tariffs (FiTs). There were 22 parties and a PUC appointed Independent Observer (IO).

The PUC described FiTs as a "set of standardized, published purchased power rates, including terms and conditions, which the utility will pay for each type of renewable energy resource based on project size fed to the grid."

The docket established tariffs for rooftop solar, micro-wind and other resources based on the size of the system and the island it would be located on.

The rates were to be high enough to spur the market, but low enough to avoid windfall profits.

There were intense debates about which costs should be included, what a “reasonable” cost might be for each component (rent, installation, maintenance, equipment, etc.). Most of the information was based on data that various parties wanted to keep secret.

In last 2010 the PUC gave the initial approval for FiTs.

In August 2013 the PUC opened up a new FiT proceeding (2013-0194) to examine the successes and failures in implementing FiTs. Overall the PUC had serious issues that needed to be resolved. The proceeding has 20 parties. 

“In the commission's view, since its inception, the FIT program has experienced more than its fair share of challenges and setbacks. …

After the opening of the FIT program, several problems arose with respect to the administration of the FIT queues and possible gaming by FIT developers that necessitated several rounds of motions and orders from the commission. …

More recently, the HECO Companies have pointed out … that the current pricing for the FIT program was approved over two years ago and does not reflect present market conditions. …

Moreover, the IO has reported areas of poor utility management of the FIT queues, such as delay in Interconnection Requirements Study ("IRS") determinations and processing.”


Megawatts (MW)
HECO
MECO
HELCO
PUC Approved FiT Penetration Targets
60.00
10.00
10.00
Installed Capacity (December 31, 2012)
  5.96
  1.66
  0.79


“Given these results, the commission is concerned that substantial resources have been expended to develop and subsequently implement the current FIT program, which has yielded very little renewable energy capacity as compared to other procurement methods during this same time period.”

“The HECO Companies have increased the overall amount of renewable energy upon each of their respective systems. Moreover, significant amounts of renewable energy are currently slated to be added in the near-term. At the same time, net system loads are declining due to increased energy efficiency and conservation, price elasticity response to high electric rates and distributed generation.

It is important that an optimal portfolio of cost-effective renewable resources be developed. How a reasonably operable FIT program would affect the overall portfolio of renewable resources needs to be evaluated. At minimum, the commission intends to review the FIT program more holistically in this proceeding.”

Procurement methods include feed in tariffs, net energy metering, competitive bidding, waivers from competitive bidding and bilateral negotiations.

Net Energy Metering (NEM) and Feed in Tariffs (FiTs) and are similar. In both cases the grid acts as a battery.

Under Net Energy Metering, a customer exports electricity to the grid during the day and imports electricity at other times. They pay only for the net electricity used. The utility does not compensate the customer for excess energy exported to the grid.

Under Feed in Tariffs (FiTs) the utility must compensate for excess electricity exported to the grid. However, all electricity imported is transferred at the retail rate and all electricity exported is transferred at the wholesale rate.

Except for commercial systems designed for export, most customers do far better financially under NEM than under FiT.

Replacing the current FiT with a new FiT that offers less financial rewards seems like a guaranteed loser until one realizes the original intent of the FiT mechanism under the HCEI Energy Agreement was to replace net energy metering.

The Smart Grid would achieve the same thing. Rates would be lower in the day when large amounts of solar are exported to the grid, and higher in the evening and night when customers need electricity from the grid.

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4 comments:

  1. the grid is not a battery, nor does it act as one. come on Henry, even you know better than that. Stop promulgating BS that laymen don't comprehend.

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  2. As one of the co-designers of the FIT, I repeatedly warned that a core component of a proper FIT is unrestricted access to the grid. Germany decreed by law that any renewable energy has to be bought by the utility at FIT rates, which are set high enough that private investors make 6-8% on their money. The utility has to upgrade its grid as fast as possible to receive the energy.
    Here we have heard complaints about a weak grid for decades now, but HECO has no reason to upgrade the grid.
    Because the PUC did not include that requirement into the original FIT, it had to have queues and studies, which have turned into a disaster.
    Part of the problem is that there are almost no electrical engineers who are independent of HECO, so the lawyers who create policy have limited information. Obviously Hawaii has reaches the stage where the utility needs to invest billions into electrical storage, but there is no clear path and no reason for HECO to do it.
    A requirement to take all renewable energy and immediately upgrade grid and storage would get things moving.

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  3. Rates too low. HECO got their way first time around.

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  4. Henry, FITs are fundamentally different than NEM b/c a FIT is meant to provide wholesale power for export whereas NEM is about offsetting retail power consumption. FITs are a better deal for ratepayers b/c they pay wholesale rates rather than crediting any exports at retail rates. FITs are simpler also b/c all you have to worry about is the wholesale rate and you don't have to mess with utility rate schedules, projected consumption, or any of the many other factors that NEM involves. I think the IOUs have a point when they argue that rates should be reduced but it's pretty appalling that the FIT wasn't designed better initially to prevent the IOUs from dragging their feet so badly on the current FIT projects. Let's hope this new FIT 2.0 is designed a whole let better.

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