Two House Democrats, Reps. Jay Inslee of Washington and Bill Delahunt of Massachusetts are preparing a bill to encourage renewable energy. This feed-in tariff proposal will require utilities to purchase small-scale renewable energy from developers at rates equal to the cost of production plus a premium. This provides a security for investors that encourages the development of renewable energy technology. A feed-in tariff can be more effective than other renewable energy initiatives because it staggers rate incentives for different energy sources based on their production costs. For example, utilities would pay a lower rate for wind energy that right now is less expensive than solar energy. One weakness is that it the feed-in tariff is only an incentive for the next-closest-to-competitive technology (right now, wind). However, proponents assume that what is cheapest today won’t be cheapest tomorrow and it actually creates a race to be the next competitive alternative to fossil fuel.
One successful example of this is in Germany. A feed-in tariff is credited with the recent boom in solar energy. Germany has since become the world’s largest market for photovoltaic systems and wind energy. It has more than doubled its supply of renewable energy between 2000 and 2007. It has also generated 117,000 jobs between 2004 and 2008.
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