Governments that are seriousabout encouraging renewableenergy development increasinglyunderstand that feed-in tariffs areamong the most effective policyinstrument at their disposal.

A feed-in tariff is simply a guaranteedprice established for anyone whowants to sell renewable electricity tothe grid, and a guarantee that theywill have access to the grid to do so.

The price, or tariff, is set so that amodest profit is ensured, therebyunleashing the collective capitalresources of the entire province, state or country to be part of thetransition to renewable energy. Any incremental cost of purchasingthe renewable energy is sharedamong all consumers of that energyand not taxpayers.

Germany is widely considered to bethe country most successful at rapid-ly transitioning toward renewable energy systems through feed-in tariffs.

Using feed-in tariffs, Germanycurrently generates 15 per cent of its electricity from renewablesources, while employing morethan 300,000 people in the renew-able energy sector, according to theGerman Federal Ministry ofEconomics and Technology,1 and ison pace for 100 per cent by 2050.

Feed-in tariffs are the most commonpolicy for encouraging renewableenergy systems globally, in partbecause “feed-in mechanismsachieve larger deployment atlower costs” than other policymechanisms such as quotas, directincentives or voluntary goals.2

FACT SHEET

How feed-in tariffs maximize thebenefits of renewable energy

RENEWABLYFeeding the grid

Renewable energy holds the promise of reducing pollution, creating jobs and diversifying the marketwhile providing a long-term, secure, local energy supply to fuel the economy.

1 www.german-renewableenergy.com2 Stern Review on the economics of climate change,

www.hm-treasury.gov.uk

Feed-in tariffs have

consistently demonstrated

that they are, to date,

the most effective

mechanism to stimulate

a rapid, sustained and

diverse deployment of

renewable energy.

▲ Farmers such as this one in Waterloo,Ontario were quick to take advantageof the first feed-in tariffs-style law inNorth America.

PHOTO: TIM WEIS, THE PEMBINA INSTITUTE

M A K I N G R E N E W A B L E E N E R G Y A P R I O R I T Y

❚ Feed-in tariffs reward actual pro-duction, unlike capital subsidieswhich encourage installation butnot necessarily operation.

❚ No bidding minimizes develop-ment investment risks.

❚ Long-term contracts facilitateaccess to financing.

❚ Feed-in tariffs encourage small,medium as well as large-scale pro-ducers.

❚ Feed-in tariffs encourage commu-nity and local ownership andengagement, minimizing opposi-tion to projects.

❚ Tariff rates encourage renewablepower producers to use the mostefficient technology, driving downcosts by fostering industrial com-petition.

❚ Although overall electricity pricesrise slightly in the short-term, in the longer term they stabilizeas prices become increasinglyindependent of conventional fuel costs/risks.

❚ For anyone who generates powerunder a feed-in tariff program,the income more than offsets anyelectricity price increases.

While implementing renewable energy at the lowest cost, feed-in tariffs also tend to result in local job creation andindustry development. A number of factors contribute to theirfar-reaching success:

1The right to connecteasily to the grid for anyone

who wants to produce renewablepower.

2 A premium price (tariff) paid to producers to ensure

a modest return on investmentthat is tailored to each renewabletechnology and the locationwhere it is installed.

3 Long-term contractsto create stability in the

market. They send a strong signalto manufacturers and installers tomake long-term investments,which helps drive costs down.

4 A regular review of the program to ensure that

tariffs are set appropriately andthat they are lowered regularlyas costs decrease.

5 No cap, or limit, on the amount of renewable power

that can be developed.

Essential componentsfor successful feed-in tariffs

Why do feed-in tariffs work?

How do feed-in tariffs work? THE PEOPLE DECIDE THEY WANT TO MAKE RENEWABLES A PRIORITY

FEEDING THE GRID RENEWABLY

▲ Feed-in tariffs allow every home, farmand business to become providers ofclean energy such as solar power.

PHOTO: GORDON HOWELL

More than 20 countries in the world currently use afeed-in tariff model. The province of Ontario has imple-mented the most progressive feed-in tariff program inNorth America, and there are many states currently atdifferent stages of considering feed-in tariff legislation.

An important aspect of a feed-in tariff is that it does not depend on annual government budgeting cycles tobe renewed. As a result, industry can make long-terminvestments in research, development and manufacturingcapacity, facilitating cost reductions.

The three leading exporters of wind turbines areGermany, Denmark and Spain – all of which haveimplemented feed-in tariffs. In the first year of operation, at least 10 new manufacturers have set up in Ontario for solar power alone. Clear Sky advisorshave estimated Ontario’s FIT will create 70,000 solarjobs at a cost of “one Tim Horton’s donut per month.”

Feed-in tariffs can vary from jurisdiction to jurisdiction inorder to meet local objectives and accommodate constraints.

▲ Feed-in tariffs need to be tailored to support various renewables such as solar, farm biogas and wind.PHOTOS: ROGER PETERS, DAVID DODGE, TIM WEIS

❚ Land Area ❚ Wind Capacity

Land areaCanada: 9,984,000 km2

Germany: 357,000 km2

Canada ~28 times larger than Germany

Wind capacity (2010)Canada: 3,500 MW

Germany: 26,000 MWGermany ~7.5 times as much as Canada

Despite possessing marginal wind and solarresources, Germany has

used feed-in tariffs tobecome the world’srenewable energy

superpower.

With less than 5 per centof the land mass of

Canada at its disposal, Germany has more than

7.5 times as much wind power installed.

Per capita, Germany has five times more

installed wind power.

▲

Canada-Germany comparisions

More information?For more information about feed-intariffs and the success of jurisdictionsthat have implemented them see:www.feed-in-cooperation.orgwww.wind-works.orgwww.futurepolicy.orgThis fact sheet is the first in the seriesMaking Renewable Energy a Priority. It is accompanied by a more detailed primer which can be downloaded at www.pembina.org/re.

Our governments need to demon-strate a similar commitment to thedevelopment of renewable energy.

Feed-in tariffs do not involve govern-ment spending, but only the politicalwill to implement them.

There is no doubt that renewablesources will play a major role in pro-viding secure and clean energy in thefuture. The question is how quicklywill Canada adopt these emergingtechnologies and to what degree willwe lead or lag behind the rest of theworld.

There are many reasons why wemust choose to join the global lead-ers in pursuing renewable energy:

❚ Combat climate change.

❚ Create local jobs, industry andinnovations.

❚ Diversify the energy supply.

❚ Foster local technical skills.

❚ Reduce the costs of renewableenergy sources.

❚ Minimize grid losses by encourag-ing local power generation.

❚ Replace aging power plants withclean alternatives.

❚ Give communities the power tobe part of the solution.

Feed-in tariffs have been shown timeand again to be the most efficientand cost-effective way to fosterrenewable energy.

Governments who are serious aboutpursuing renewable energy need toseriously consider feed-in tariffs.With the era of clean energy uponus, it is time to start feeding the gridrenewable power.

A feed-in tariff is a long-term price(tariff ) that is set by the governmentfor anyone who wants to feed renew-able energy into the supply.

Utilities are required to allow gridaccess and pay the set price to anyonewho can produce renewable power.

Renewable systems are built all overthe province because rates reflect notonly different technology costs, butalso the different quality of localresources.

Prices are regularly reviewed for newprojects and reduced to encouragetechnical innovation and reflectfalling costs.

Incremental costs are shared amongall consumers.

Germany has achieved more than 15 per cent renewable power at anextra cost of about $2.50 per month,per home.

Why do we need feed-in tariffs now?

▲ Solar panel efficiency increasesin lower temperatures. As a result,Canadian cities have better solarresources than Germany – the current world leader in installingsolar systems.

PHOTO: TIM WEIS, THE PEMBINA INSTITUTE

The Pembina Institute is a member of theCanadian Renewable Energy Alliance(CanREA), an alliance of Canadian civilsociety organizations from the non-profitor voluntary sector that hold a commoninterest in promoting a global transitionto energy conservation and efficiencyand use of low-impact renewable energy.

www.canrea.ca

It was not long ago that the oilsands were not profitable, andbillions of dollars of government research money were spent ondeveloping technology to bring down the costs.

PHOTO: DAVE MUSSELL