The argument for a national FIT
A 100 MW feed-in tariff (FIT) program for Los Angeles has been approved by the city's Department of Water and Power (DWP) Board of Commissioners, making Los Angeles the largest city in the nation to implement a feed-in tariff system with the largest rooftop solar program of its kind in the nation.
The FIT system will allow local property owners to sell solar power generated from underused rooftop space and parking lots back to the LADWP for the first time.
DWP will release five 20 MW allocations of FIT energy by 2016 and propose an additional 50 MW this March.
The program establishes an initial guaranteed price of 17 cents per kilowatt-hour and includes a fund for small projects in each of the five 20 MW allocations to ensure that local businesses also benefit from the program. Industry experts tell me that these will be major factors in encouraging participation.
Traditionally, uncertain and time-constrained solar legislation have scared off solar power investors. In order to facilitate project funding, investors must be able to determine and quantify all the risk involved in an investment. In Germany, FITs have been used to remove investor uncertainty for more than 10 years. A national FIT would be an easy way to address these concerns for investors, but a nationwide FIT is probably not going to happen any time soon.
L.A.'s FIT is already attracting investors. Solar Provider Group plans to significantly expand its investment in Los Angeles, including opening its headquarters in Los Angeles within three months and hiring up to 30 new employees in sales, engineering and construction over the next year, and evaluating additional investments throughout California and the Western United States.
During the FIT's demonstration phase, Solar Provider Group invested more than $1 million. Solar Provider Group plans to invest up to $50 million by the end of 2016.
Solar Provider Group's investment bears out some of the central findings of the Los Angeles Business Council (LABC) Institute's research.
LABC found that L.A. leaders failed to enact energy policies to take advantage of the city's resources – residents who are trained and ready to fill solar jobs in areas with substantial potential for solar power generation. LADWP has one of the weakest track records in solar-power generation among major California utilities, generating less than one sixth as much solar power per customer as the state leader, Southern California Edison, but the FIT should generate significant economic returns for Los Angeles.
Ultimately, the results of the FIT program could speed the development of a national FIT.