Rhode Island and Minnesota have become the latest U.S. states to consider feed-in tariffs for renewable energy.
Michigan and Illinois also are considering feed-in tariffs, which guarantee a set price for energy fed into the electrical grid, while California approved tariffs for all small renewable-energy systems for two of its utilities -- as well as for renewable-energy systems at water and wastewater plants for seven of its utilities -- last month (see Policy Roundup: California Expands Feed-In Tariff).
But while individual states might be moving toward these tariffs, which are based on policies that helped launch the solar industry’s success in Germany and in Japan, the industry is struggling to extend a set of national renewable-energy tax credits that are set to expire at the end of this year.
The House of Representatives passed a bill Wednesday that would extend the current 30-percent commercial investment tax credit by eight years, extend the residential tax credit by six years and raise the cap on residential credits from $2,000 to $4,000. But the bill, which would repeal $18 billion in tax breaks for oil companies to pay for the credits, is essentially a repeat of an idea the Senate previously failed to pass.
VentureBeat blogger Chris Morrison wrote Monday that the credits are "likely to run out," which will leave the industry "in a lurch" until the new president steps into office in 2009 (see post here).
And Gunther Portfolio blogger Edgar Gunther called for the industry to end its "myopic pursuit of the elusive" investment tax-credit extensions in favor of a feed-in tariff (see post here).
"Is the ITC the best method to promote and incentivize the adoption of solar energy and photovoltaics in the United States?" he asked in his post. "In fact, the answer to this question is a resounding No."
Still, industry associations say they plan to continue to push for the tax credits (see Solar Industry’s Five-Step Plan).
The solar industry has settled on the investment tax credit as "a modest tax package that could potentially have a big impact," said Monique Hanis, a spokesperson for the Solar Energy Industries Association, or SEIA.
She said the credit would help defray the upfront cost of solar power and encourage more deployment. "It’s just enough to stimulate high growth in renewables, and specifically solar," she said.
A feed-in tariff could cost more, might be more difficult to pass than the proposed incentive package and wouldn’t necessarily increase solar installations, unless it includes specific solar pricing, Hanis said.
"We’re not pursuing it at this time," she said, adding that she thinks a feed-in tariff would be a good "longer-term" strategy.
A number of companies and financiers involved in renewable energy also are backing the incentives package.
At this week’s Washington International Renewable Energy Conference, the American Council on Renewable Energy, TechNet and the National Venture Capital Association are holding a news conference Tuesday to push for the tax-break extensions.
And while a letter to Congress warned that a delay in passing the extensions would jeopardize 42 gigawatts of planned renewable-energy projects, SEIA President Rhone Resch said he is confident the credits will be renewed -- if only for a year -- as they were at the end of 2006 (see Solar Sharpens Weapons for Incentive Battle).