Gainesville in Florida plans to launch a program in March next year that would make the city the first in the nation to enact a solar feed-in tariff.

The city commissioners last week approved a proposal from Gainesville Regional Utilities (GRU) that would increase the money to be paid for solar power to 32 cents per kilowatt hour. The GRU had previously proposed 26 cents per kilowatt hour, but decided that the rate would provide minimal profits and likely attract few takers.

The commissioners still have to formally adopt an ordinance to create the feed-in tariff, and are scheduled to do so on Jan. 15. The city-owned GRU said the plan is to launch the program on March 1.

The program would be similar to the one that has made Germany the world's largest solar market. Germany's feed-in tariff program requires the utilities to buy all the solar power generated by their customers at government-set prices. The prices are higher than those paid for conventional power, and they are locked into long-term contracts between the utilities and sellers.

As a result, many homeowners and farmers in Germany have installed solar energy systems on their rooftops or on the ground of their properties to profit from the lucrative incentives (see Solar Prices Set in Germany).

After countries have since followed suit. Japan, which gutted its feed-in tariff program in 2006, plans to reintroduce one in January, the Reuters reported on Wednesday.

Gainesville's feed-in tariff program would require the GRU to sign a 20-year contract with any of its residential or business customers that want to participate.

Gainesville would be the first city in the country to offer a feed-in tariff. California's Public Utilities Commission (CPUC) also approved a feed-in tariff program in early 2008, but it applies mostly to solar energy systems installed at public water and wastewater facilities.

The CPUC also requires the Pacific Gas and Electric, the Southern California Edison and the San Diego Gas & Electric to buy solar energy from their other customers. But the utilities only allow residents to get reductions on their electricity bills for sending any excess electricity to the grid - rather than making a profit by selling all of power they generate (see Gainesville Considers German Solar Tariff).

The GRU initially proposed to pay 26 cents per kilowatt hour, but feedback from local solar businesses and its own analysis prompted it to recommend a higher rate. Ed Regan, an assistant general manger at the GRU, said the original rate didn't take into account taxes, which would cut into the profits for anyone participating in the program, reported The Gainesville Sun.

The higher rate, at 32 cents per kilowatt hour, could provide a 3 percent to 5 percent return on the investment. At 26 cents per kilowatt hour, the return would be 0.67 percent.

The GRU already runs a rebate program that pays cash to its customers for installing solar energy systems. The rebate program will continue for residential customers, but will likely be phased out for business customers, according to a fact sheet posted on the GRU website,

The costs of running the program would be passed on to ratepayers. The GRU said its customers could expect an average increase of 42 cents per bill in 2009, provided that there isn't a dramatic increase in the amount of solar power generation.

The Gainesville city commissioners sought to prevent that scenario by voting to include a provision that would stop the program when the increase on the bills reaches 1 percent. That kind of increase could happen if 4 megawatts worth of solar energy systems are installed in a year, Regan said.

Solar incentives can become so popular that they lead to unintended consequences. Some cities and states have seen their solar rebates becoming so sought after that they've run out of money for those programs (see Big Renewable-Energy Subsidies Backfire and Green Light post).

The GRU provides electricity, water, natural gas, wastewater treatment and telecommunication services to about 89,000 customers.