Rewind the clock back a couple of years.

There I was, in my apartment, getting dressed in a suit–rare for me back then.  I was excited–it was my first ever in-person meeting with a legislator to do some citizen lobbying for a piece of legislation.  I was going in to see Mike Feuer, who represents AD-42.  Mr. Feuer is a good progressive legislator, and I’m a big fan–so I was very excited.

I was going in to talk with him about some things I had been working on with the Energize America crowd at DailyKos–especially a feed-in tariff proposal.  I’m a big fan of feed-in tariff legislation, and even went so far as to get support for FIT written into the environmental plank of the CDP platform.

So what the heck does “feed-in tariff” mean, and why is it so important?  Well, I’ll actually let wikipedia answer, because it’s 100% accurate in this case:

A Feed-in Tariff (FiT, Feed-in Law, FiL, solar premium, Renewable Tariff[2] or renewable energy payments) is an incentive structure to encourage the adoption of renewable energy through government legislation. The regional or national electricity utilities are obligated to buy renewable electricity (electricity generated from renewable sources, such as solar thermal power, wind power, biomass, hydropower and geothermal power) at above-market rates set by the government.

So, what’s so good about feed-in tariff?  A few things.  First and foremost, it increases the incentive to produce renewable energy that is fed back into the power grid. by guaranteeing buyback, rather than just having the renewable production “spin the meter backwards.”  In turn, the increase in local production actually increases the efficiency of the grid because it means that less electricity needs to be transformed and conveyed through long-distance transmission lines.  And lastly, because the mandated purchase rates are fixed by the local utility commission, it becomes much easier for those without the means to finance solar systems independently to get bank loans for them because there is a fixed rate of return and guaranteed income from the unit.

Of course, in theory, theory is the same as practice, but in practice, it isn’t.  So, how has feed-in tariff legislation worked elsewhere so far?  Let’s take Germany as an example:

The secret of German success is the “feed-in tariff” (FIT). Anyone generating electricity from solar PV, wind or hydro gets a guaranteed payment of four times the market rate – currently about 35p pence a unit – for 20 years.

This reduces the payback time on such technologies to less than 10 years and offers a return on investment of 8-9%. The cost is spread by generating companies among all users and has added about one cent/kwh to the average bill, or an extra €1.50 (£1) a month.

The Germans introduced the FIT in 1999 and tweaked it in 2004, since which time things have gone mad. FITs have now been adopted in 19 EU countries, and 47 worldwide, but not in Britain. German renewables firms are now world beaters and the German economy has been strengthened, not weakened, by a rush into renewables.

Britain, by contrast, has a few installation companies mainly importing German equipment. At the recent Intersolar trade fair in Freiburg, the air was heady with talk of expansion, cutting-edge technologies and intense competition. And everyone says the reason is the FIT.

Which brings me to the point of all this.  The one problem with FIT legislation?  Someone has to pay for it–the taxpayers, the ratepayers, or the utilities.  And that, said Mr. Feuer, was the problem, though he seemed to feel it was a great idea and looked forward to meeting with me again when–or if–the fiscal crisis in California ever abated. Well, the fiscal crisis has done anything but abate, but at least we’ve got one-half of a feed-in tariff package passed in California:

California, one of the sunniest states in the nation, and one clearly ahead of the solar energy curve, has nonetheless lagged behind other states in terms of making solar a financial win for individuals who install solar systems.

All that changed on October 12 when California Governor Arnold Schwarzenegger signed two solar energy bills into law.

The first is AB 920, sponsored by Jared Huffman (D-San Rafael), which mandates that utility companies pay customers for an excess generation from their solar photovoltaic systems which they send back into the grid. Currently, 50,000 homes and businesses in California produce solar electricity. The law also applies to small wind.

The new law not only makes solar energy financially viable at the source, but encourages customers to conserve energy. Formerly, those who were producing solar electricity either had to use it all or give it back to the utilities for free at the end of a year.

Huffman’s legislation requires utilities to foot the bill, which is where it really belongs.  Now, I would have you note that AB920 isn’t quite feed-in tariff legislation just yet.  It may seem like it, but there’s a difference between guaranteed buyback (which is all AB920 is at this point) and FIT, which guarantees a buyback at above market value.  The buyback rate still has yet to be set by the Public Utilities Commission, so it’s possible that we may yet see a true FIT come out of this bill.  But guaranteed buyback is at least a step in the right direction.