The Missed Opportunity of the Feed In Tariff

Much has been made of the proposed Feed In Tariff for renewable energy for Hawaii. Unfortunately, the Feed in Tariff is another example of a policy that draws big headlines but does little to move the State
toward energy independence.

For those of you unfamiliar with the term, a Feed In Tariff (or FIT) is type of incentive used to encourage the development of renewable energy. A FIT mandates a local utility to purchase electricity generated from a renewable energy system owned by a customer at a predetermined rate for set period of time. The rate the utility will pay for electricity is typically set higher than the current utility rates to give the customer an incentive to develop the renewable energy system.

Unfortunately, the FIT as proposed in dockets currently in front of the PUC is a FIT in name only. It does not contain any of the basic features that make FIT in Europe so successful. Specifically, there is no
mandate in the Hawaii FIT that compels the local utility to purchase power from the customer. In the current proposal, the utility will get to decide who, what, when, where and how much electricity it wants to purchase. Second, the rates currently proposed for the FIT are at or below current retail rates for electricity. Therefore there is no incentive for customers to sell power to the utility when the utility is just going to turn around and sell the power back at a higher rate. Customers will be better off using the power they generate themselves. Finally, the FIT rates are fixed for 20 years. So as utility rates continue to rise, customers lose more and more money as the rate at which a customer gets paid for power stays the same.

Until the elected officials become more interested in results than headlines, we are unlikely to make significant inroads toward energy independence in the near future.