By Rachel Johnson
The average cost of electricity for a German household has risen by 66 percent since they established a feed-in-tariff (FiT) system in 2000.
A recent opinion piece in this paper suggested that Michigan should look to Germany as a model for future energy policy. The author, Patrick Timmons, pointed to the boom in renewable generation in Germany — last year 25 percent of Germany’s electricity came from renewable sources, up from 6 percent when the policy was enacted in 2000.
The FiT system has effectively incentivized renewable generation, but at a cost. To understand the cost, we must first consider exactly how a FiT works.
FiTs are a generic description for a policy that pays a price, a “tariff,” for the electricity generated by renewable sources of energy that is “fed” into, or sold to, the grid. The FiT rate is what the person who generated the electricity is paid for the energy they create.
Consumers who generate electricity sell it all onto the grid at the FiT rate, they then buy back their own electric usage at the market rate. The requirement for utilities to buy electricity for as much as twice what they can sell it gets passed on to ratepayers.
Tariffs are not taxes; they are set rates paid for commodities like electricity. Germany’s FiT rate is based on the cost of generation plus a 5 to 7 percent profit.
Some might argue that FiTs are worse than taxes. They are government-mandated fees assessed to ratepayers without regard to income. This makes them very regressive; lower-income families who may already struggle to keep the lights on are most vulnerable to rising electricity costs.
At Cherryland Electric Cooperative, we have an abiding commitment to doing what is best for our members. Often, that means defending their access to affordable and reliable electricity. That’s why we are so excited about our new community solar project.