A Guaranteed 5 Year, $100/MWh FIT For Renewable Thermal Sources Could Eliminate Oil Use for Single Family Homes in Vermont

“A Simple Plan for Eliminating Oil Usage for Single Family Homes in Vermont” was the message of my talk at Renewable Energy Vermont 2012 last Monday.

If you’re working in the renewable energy industry in Vermont, you should join REV. For your viewing pleasure, here is my recorded presentation.

Just to give you some perspective about the “cost” of this incentive for Vermont; currently, the solar PV incentive in Vermont is $271/MWh for 25 years, this incentive is $100/MWh for 5 years. And it’s directly replacing oil use. However, people will still ask “how will you pay for it?”, so I go more into that subject below.

But first, production-based incentives solve a lot of issues at once.

1. You don’t need to pick a specific technology. Since the goal is to eliminate oil usage and there are many different technologies, client needs, and buildings, etc, it makes sense to incentivize all technologies evenly. This way, the best technology can be used for the right site in the right application. This hits on the fundamental point that we’ll need all these technologies to eliminate oil usage.
2. Quality Across the Supply Chain. By only paying for production and energy that is actually used, the program will maintain quality across the whole supply chain – manufacturing, design, installation – something that we’ve learned “installed costs incentives” are horrible at.
3. Transparency reduces risk and increases trust. By being able to track the performance of a system, the property owner can make sure it’s running correctly and that they are saving money. Additionally, if anything goes wrong, it’s much easier to figure out what exactly is happening. Also, if the state publishes the data, it will be very clear the firms that are doing the best and worst work. This will allow property owners and the private industry to determine best projects, good projects and bad projects. The best firms will quickly rise to the top and win all the business, and the worst firms go out of business.

How would this look look across many technologies? A sample home is 2000 square foot home that requires 63MM BTU per year

The “production payment to the homeowner per year” is the line that describes the amount of the $100/MWh FIT inventive. Who could pay for this? On the heat pump side the argument for the electric utility could be made, on the biomass side, the argument could be made to the pellet suppliers. The argument is simple: they are acquiring a new customer for the next 20 years so it would make sense for them subsidize the initial investment to overcome the primary barrier for the consumer.

Here’s the lifetime value of a customer and how much it would cost to incentivize the fuel cost for 5 years.

I put together another small video to explain these numbers in more detail.