June 30, 2014 - From the July, 2014 issue

Gipe: Feed-In Tariffs Are Best Tool for Reducing Greenhouse Gas Emissions

Paul Gipe, a renewable energy industry analyst, author, and advocate, spoke with MIR about feed-in tariffs—as some critics question their long-term viability. Gipe knowledgeably stands by feed-in tariffs as integral to renewable energy policy. He goes on to critique California’s efforts to reduce greenhouse gas emissions, stating that progress—contrary to California’s boasting—has been slow, ineffective, and unambitious. His concludes, in regard to California’s current policy: “Renewable energy is being reserved for only the leasing companies, for the wealthy, and for the unregulated utility subsidiaries mostly outside the United States.”

Paul Gipe

“Feed-in tariffs were never intended to be a transitional policy, nor were they ever intended as a policy just to ‘kick-start’ the industry. It’s a policy that can be used to develop renewable energy, period.” -Paul Gipe

Paul, Renewables International recently reported, “There is a growing consensus, even within Germany, that feed-in tariffs were a startup mechanism that can now be phased out.” Given your global reporting over the last decades on feed-in tariffs, do you agree? 

Paul Gipe: First of all, that’s not true. Secondly, even if it were true, it would only be applicable to Germany, where they’re getting 25 percent of their electricity from renewables—most of that new renewables, which is what we’re interested in at this stage. 

When you look around the world, what else do you have? Maybe Norway? Maybe Iceland, where they’re 90-100 percent renewable energy? But elsewhere in the world, Germany is the only nation with that high a level of penetration for renewables. So, if it were true, then it only applies to Germany and not the rest of the world. 

But it’s not even true. While that may be a consensus among some of the policymakers in Germany, that’s not what was intended by the people who actually wrote the law. Hermann Scheer, of course, is not here to comment on it, but Hans-Josef Fell commented. Feed-in tariffs were never intended to be a transitional policy, nor were they ever intended as a policy just to “kick-start” the industry. It’s a policy that can be used to develop renewable energy, period. A lot of people don’t know what it is or how it started—even Germans.

Paul, in an interview with VX News in 2010, you stated, “Currently we have feed-in tariffs in California…Most Californians don’t know it, because the feed-in tariffs don’t work. We need feed-in tariffs that work. The kinds of policies that we have had in California are not intended to work.” Has anything happened in California since 2010 to change your mind?

I’m afraid not. I’m still extremely disappointed, and I’m afraid I don’t have any good news to report. 

You were particularly dissatisfied in that 2010 interview with AB 811. How would you amend that legislation to better incent renewable energy investment and deployment?

First of all, I’d introduce real renewable energy policy. We haven’t had renewable energy policy in California for more than three decades now. It would include all technology—not a wind policy, not a solar policy. 

Currently what we have in California is a wind policy—that’s the RPF. We have a solar policy, which is net metering. And then we have a few little bastardized programs that don’t contribute much capacity. I would propose a policy that would pay for all forms of renewable energy at a price that would be fair—a price that would earn a reasonable profit. Most importantly, the policy would offer contracts to all the people of California so that they can participate in the renewable energy revolution. This would not be an alternative, but would be in addition to what we currently have, until people feel comfortable that feed-in tariffs will do what we need them to do. 

We see in places like California that renewable energy is being reserved for only the leasing companies, for the wealthy, and for the unregulated utility subsidiaries mostly outside the United States.

Our interview takes place when there are published news reports that a multi-year, multi-million-dollar solar tax break has been inserted into the California state budget and is being fast-tracked to the governor’s desk. Is this significant? Are you surprised? 

I am not surprised at all, but I’m not following that policy. It’s hard for me to comment since it’s not a policy that interests me. That is the wrong policy. It is the wrong policy for any country. It is the wrong policy in the United States. It’s the wrong policy for California, and I would probably be opposed to it.

In that same 2010 VX News interview you emphasize the importance of tariff differentiation—also called banding—where different types of renewables are priced differently when correctly implementing feed-in tariffs. Could you comment on what’s happened to that concept in California?

We don’t have that concept in California. We’ve never had that concept in California, and that’s part of the problem we have here. Where feed-in tariffs have been successful, they are differentiated by technology—each technology has its own price characteristic. It’s similar to what we had 20 or 30 years ago in our electricity-generating mix—some coal, some oil, some gas, even some nuclear. We had a mix of generating resources, and each had different cost characteristics—operations costs, capital costs, fuel costs, and so on. 

It’s the same with renewables. If we want a mix of renewables, then we will have to pay different prices to get this mix of different renewable technologies. We need prices that vary by technology. Because there are economies of scale—particularly in some forms of renewable energy like geothermal, or sometimes in the case of large wind—we need to differentiate by project size. 

Particularly in the case of wind, we need to differentiate by the productivity of the wind turbines so that we can enable broader development of wind energy instead of just putting all the wind turbines in the mountain passes, like we do in California. We should put the wind turbines where the people are—in the Los Angeles Basin. To do that, you need wind tariffs that are differentiated by the productivity of the wind turbines, which is a surrogate for the wind resource. If we do that, then we can develop a broad mix of generation technologies, get a broader geographical distribution of wind turbines, and, I would hope, get a broader distribution of who owns wind and other renewable resources. 

If we put the wind turbines where the people are and we reserve some of those contracts for the people who pay for electricity in California, then all citizens have an opportunity to participate in renewable energy. Right now, we don’t. You could put a few solar panels on your roof, but you’re not going to make money. You’re going to save money on your utility bill. Most Californians today don’t even own the solar—a leasing company owns it.

Could you address cap-and-trade vis-a-vis feed-in tariffs? A recent report by IPCC and a disagreement between Joachim Weimann and Karl-Friedrich Lenz about the impact on CO2 of one or the other policy inspires this question. Your views would be welcomed.

First of all, I don’t think we should have cap-and-trade. I think that’s a dangerously misleading policy. If we’re going to price carbon at all—and I’m not sure that should be the emphasis—then we should use a carbon tax, plain and simple. Cap-and-trade is an ideology masquerading as a public policy. 

I support feed-in tariffs because it’s a direct policy—it’s not masquerading as something else. If you want renewable energy, you pay for it. If you want solar energy of a certain size owned by residents, then it costs a certain amount and that’s what you pay. It’s not masquerading as some kind of neo-liberal nirvana.


Turning to California’s policy agenda to meet its target of 33 percent renewables by 2020, how on-track is the state, and what needs to be done to put it on track if it’s not? 

From what I understand, California will probably meet its targets. This indicates to me that California’s target—while we Californians like to thump our chests and brag about how green we are—is not very ambitious. It shouldn’t be 33 percent—it should be 50 percent. It should be 75 percent. The RPS just gives a lot of contracts to Électricité de France, Energias de Portugal, or to Florida Power and Light. Renewable energy really is the people’s resource, and we need to create an opportunity for the people of California to use renewable energy and make money from it themselves. 

The 33 percent target is pretty much spoken for now, and we don’t own it. I’m saying that target is by far not ambitious enough. If you look at the Germans, their target is 80 percent. Now, it’s not by 2020, and it’s not by 2030—it’s by 2050. But even so, it’s a much more ambitious target. If you look at different regions within Germany, like in Schleswig-Holstein, it’s 100 percent of their consumption by 2020, and they’re probably going to do that. You look at Denmark, it’s 100 percent. 

And California calls itself green, calls itself a trend-setter, calls itself a leader! The rest of the world just laughs when we say these kinds of things. We’re so immune to where we stand in the world and we’re so unaware of our place in it that we think we’re doing a great job when we’re not. 33 percent is not an ambitious target for a place like California.

Paul, how within North America and the world does California rank regarding moving away from fossil fuels toward more reliance on renewables? And, what are the stellar benchmarks to measure progress along the lines of what you suggest?

California is the leader in the development of solar photovoltaics. No other state or province has accomplished what California has accomplished. 

In the case of wind energy, that’s not true. Texas—think of that, Texas!—has done far more than California. Iowa now gets 25 percent of its electricity from wind energy alone. California gets maybe 5 or 6 percent of its electricity from wind energy. When you begin to look in comparison to the population of California, we’re far behind Spain, for example, which has a similar population and similar Mediterranean climate. Spain gets 30 to 40 percent of its electricity from renewables today, and we’re talking about a target of 33 percent sometime in the future. 

Look at Portugal. Portugal gets 50 percent of its electricity from renewables today, which does include hydro. California is not a leader in many regards, particularly if you look at it on a per-capita basis. But in the case of just megawatts of solar photovoltaic in North America, we’ve done pretty well. Not as well as New Jersey, of course, on a per-capita basis, but we have the most installed capacity of solar photovoltaics in the country. 

Paul, you have in the past eloquently described the value of Ontario, Canada’s feed-in-tariff policies. Could you give us an update?

I’d like to give you an update in another six months. They just had an election in Ontario last week, and one of the important issues in the campaign was renewable energy and nuclear power. The party that sought to gain political power, the Progressive Conservative party, campaigned on a platform of not only eliminating renewable energy, but of canceling the contracts for renewable energy that already have been signed and developed, and starting the construction of two new reactors. Talk about a crazy policy proposal!

The Progressive Conservatives were resoundingly defeated, so that’s encouraging. The party that has been in power in the past, that had been very supportive of renewable energy, now has a majority again. There’s a possibility that they might revisit and reinvigorate their renewable energy policy. 

Ontario is developing 11,000 megawatts of new renewables. That’s mostly wind and solar with very little hydro and very little biogas, and that will come online within the next year or two. They had at one time the most progressive renewable energy policy in North America in three decades, but they got cold feet. The government that was just reelected got cold feet because they were concerned about all the criticism they were receiving for the development of renewable energy in Ontario. 

50 percent of electricity comes from nuclear, and nuclear does have a lot of employees. Those employees are organized, they have an effective lobby organization, and they have put up a real struggle to try to strangle renewable energy in its crib so that they can protect their nuclear industry jobs. When these 11,000 megawatts come online in Ontario, further growth of renewable energy there will begin taking market share away from nuclear. Right now, the policy decision that Ontario will have to face is: Do you want to start phasing out nuclear? 

Remember, Ontario is the only political jurisdiction in North America that had a policy of closing all its coal-fired power plants. In the early 2000s, that represented 23-24 percent of its electricity supply. It’s the only political jurisdiction in North America that said it would do it and has actually done it.

Now they have another choice to make—will they begin phasing out some of their old reactors? The current government made a decision—the one that’s just been reelected—not to build any more nuclear power plants, but will they begin phasing out some of the existing reactors? That would create a window for more renewable energy.

That’s the status in Ontario. They had a feed-in tariff program, and it was wildly successful—so successful it generated a lot of criticism from the opposing political parties. That gave the ruling party got cold feet and they began to clamp down on new renewable contracts. 

Building off your answer and Ontario’s recent experience, the US EPA released a rule on June 1st that the White House asserts will cut carbon emissions from existing power plants by 30 percent from 2005 levels by 2030. Your assessment of the EPA’s goals and plan would be appreciated.

With that utterly unambitious target, they’re never going to approach Ontario—that’s for sure. It’s one thing for the Obama administration to fool people who don’t look at the numbers. It’s another thing for those of us who work in the industry to say these are extremely unambitious targets.

I think Christian Rosalind, a renewable energy analyst, characterized it as a form of Kabuki theater. It’s almost as though everyone has a roll to play and they’re going through the motions even though the participants don’t believe in any of the things that they’re saying. The Obama administration, the EPA, and the media say, “Wow, this is a wonderful thing that we’re doing!” Then the right-wing, fossil-fuel interests jump up and down, saying, “This is terrible, terrible, terrible.” In reality, the fossil fuel industry should stand up, applaud the Obama administration, and say, “It’s wonderful! We said all along that reasonable policy should prevail.” Because that’s what it is—it’s a reasonable policy from the fossil fuel industry’s perspective.

This policy is not going to get us anywhere that we want to go, other than the fact that it’s going to restrict some coal-fired generation. But in terms of climate change, it’s hardly even a baby step. I’m sure a number of the environmental community’s NGOs need something to feel good about, and applaud themselves for accomplishing something within the current political climate. But in the grand scheme of things, it’s inconsequential.


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