No Future for Feed-In Tariffs

By Peter Allen

Back in 2009, the Gainesville Feed-in Tariffs (FIT) program was touted as the vehicle for making the city a global leader in solar energy generation, and recognized as the model for other cities looking to implement such programs. Less than 5 years later, the Gainesville FIT program has gone belly up. The Gainesville City Commission voted to suspend the program late last year.

Gainesville is following the boom/bust pattern of other failed FIT programs before it. For example, the Spanish, Italian and Czech Republic FITs have all ended.

Gainesville is additional evidence that FITs are unsuitable for scaling the U.S. rooftop solar industry. What’s more, leading national law firm Skadden, Arps, Slate Meagher & Flom explained in a memo filed in Arizona that FITs create significant tax liabilities for solar customers.

The memo explained that since utilities pay solar customers for all of the electricity generated by their solar systems (and not just the excess power, as is the case for net metering), and power is sold back to the customer in a separate transaction, the system can be considered income-generating equipment. Residents participating in a FIT would be ineligible for the federal tax credit and could also be expected to pay income taxes on the revenue generated by their solar equipment. In short: FITs are Feed-in-Taxes for consumers.

By requiring people to sell all of their power to the utility, FITs are also highly subject to fluctuations based on utilities’ changing business agendas. This removes control from the very hands of the people who have chosen to generate their own power.

Net metering, on the other hand, which currently exists in 43 states, came up for re-examination in four states in 2013, and was upheld in all four cases. Net metering’s success and popularity in public opinion polls show that it is the policy option that leads to stability and growth.