In a move that took North American renewable energy advocates by surprise, tiny Rhode Island has passed a law implementing a limited feed-in tariff and set it on a fast track to implementation.

The law passed the legislature and was signed by Governor Lincoln Chafee on 29 June, 2011. Chafee is a former Republican Senator representing Rhode Island in the US Congress. He joins former Governor of Hawaii, Linda Lingle, as a GOP or former GOP office holder signing feed-in tariff legislation.

Rhode Island becomes only the second state in the Northeast to implement a feed-in tariff program and one of the few states in the U.S. to do so.

While not the first with a feed-in tariff, Rhode Island may set a record for the rate of implementation. Specific differentiated tariffs must be set by the end of September and the program launched in mid-October.

Rhode Island’s legislation, S723Aaa (as amended), calls for the state to offer 40 MW of what it calls Distributed Generation Standard Offer Contracts for wind energy, solar photovoltaics (solar PV), and biogas generators from anaerobic digestion.

The statute states explicitly the annual target of contracts for distributed generation. Five MW of contracts will be offered in 2011, that is, between mid-October and December of this year.

December 31, 2011: 5 MW

December 31, 2012: 20 MW

December 31, 2013: 30 MW

December 31, 2014: 40 MW

The statute defines distributed generation as a renewable energy generator less than 5 MW. This is substantially less than the working definition in California where Governor Jerry Brown has proposed feed-in tariffs for distributed generation projects less than 20 MW.

Other terms of the Standard Offer Contracts specified in the statute include:

Term: 15 years

Program cap: 40 MW total by 2014

Project size caps Wind: <1.5 MW Solar PV: <500 kW “Other” technologies: <1 MW

Biogas from anaerobic digestion included

Only in-state projects qualify

Cost recovery: ratepayers on the distribution system

The legislation specifically excludes biomass.

The law creates the Distributed Generation Standard Contract Board made up of various stakeholders who will determine contract details, pricing, and compliance with the act’s targets.

The Board is authorized to revisit pricing at any time to either raise or lower prices. This could prove useful if initial prices are set too low, but it can also be problematic for high-cost technologies like solar PV where regulators sometimes panic when demand for contracts is high. It is hard for business and industry to plan expansion and hiring when the market may be wiped out by the mere threat of a pricing review.

The law requires that the tariffs be “highly differentiated” says Jerry Almer, an attorney with the Conservation Law Foundation who worked on the legislation. For example, Almer suggested there could tariffs for both on-shore and off-shore wind.

For the program year 2012, the statute specifies that there must be at least four different technology classes and at least two of those will be for solar PV, and at least one for wind energy. The board may add, delete, or adjust these classes as it sees fit.

Significantly, Rhode Island’s law directs the board to set targets for each renewable energy class or tranche. This is the first state law to reflect the Federal Energy Regulatory Commission’s decision last fall on the question of whether feed-in tariffs are legal in the U.S. The Commission decided that feed-in tariffs are legal if they meet certain requirements. Rhode Island’s statute appears to have been written to meet those requirements.

The 40 MW is a relatively small target by even timid American standards. It is only 60 percent of Vermont’s target of 50 MW relative to the amount of electricity consumed in Rhode Island. However, Almer suggests that there may be political appetite to raise the target if the program is successful.

Surprisingly, Rhode Island has a more aggressive target — at least on paper — than California. The New England state’s Renewable Energy Standard is now a total of 40 percent of supply in comparison to the 33 percent target in California.

As elsewhere, renewable advocates determined that the existing Renewable Energy Standard was only benefitting large developers. Homeowners and small businesses couldn’t participate. To fix this deficiency, advocates proposed standard contracts with a “ceiling price” — as the feed-in tariff will be called in Rhode Island — that is sufficient to earn a reasonable rate of return.

Rhode Island also requires utilities to enter long-term contracts for a portion of its Renewable Energy Standard. And of those long-term contracts, 10 percent must be set aside for “distributed generation,” including solar PV.

A feature that will endear Rhode Islanders to small project developers continent wide, especially to the California Solar Energy Industries Association (CalSIA), is the Rhode Island program’s stipulation that the standard contract be no more than two pages. CalSIA president Gary Gerber has railed against the paperwork burden under California’s Solar Initiative.

To qualify for the tariffs, projects must be located in Rhode Island. Out-of-state generation will not qualify.

To date, Rhode Island has developed a paltry amount of wind energy, 2.4 MW, and an insignificant amount of solar PV, 0.6 MW.

Rode Island is the smallest state in the US encompassing only 3,000 km². Nevertheless, the state is one-third larger than Germany’s Nordfriesland district where there are more than 850 MW of wind in operation as well as an equally large number of solar PV and biogas plants.

If developed solely with wind energy, the 40-MW target could produce nearly 80 million kWh per year, or a little more than one percent of the state’s consumption. With a substantial contribution from solar PV in the mix of renewables, the amount of electricity generated by the 40 MW of small power projects will be substantially less.

Costs of the Standard Offer Contracts will be recovered from ratepayers on the distribution side of the system.

A key feature of the program that could be of use in states like Indiana (where each individual contract must be approved by the electricity regulator), Rhode Island’s act stipulates that by agreeing to the ceiling price, contracts with generators are “deemed prudent” and approved by the state’s regulatory commission.