The feed-in tariff for renewable energy has come to California, but it may have lost some luggage on the way in from Germany.

The new tariffs, effective immediately, were approved by the California Public Utilities Commission and apply mostly to renewable energy systems at public water and wastewater facilities.

But for customers of San Francisco-based PG&E (NYSE: PCG) and Southern California Edison, a unit of Rosemead, Calif.'s Edison International (NYSE: EIX), the tariff applies to any customer-located system up to 1.5 megawatts in capacity.

While the initiative offers users of small renewable energy systems the opportunity to sell power back to the utilities, there are some drawbacks that are likely to turn off users of solar.

"The rate that they're required to offer is essentially the market price referent," Adam Browning, executive director of the non-profit Vote Solar Initiative, told Cleantech.com.

The market price referent represents the cost of a long-term contract with a combined cycle gas turbine facility, levelized into a cent per kilowatt value.

That means customers would be getting the same price for their renewable power as utilities would pay for power from a gas turbine.

"They will offer you the cost of brown power for any excess electricity that you want to send into the grid with your solar panels," he said.

Less than a year ago, Dian Grueneich, one of California's five public utilities commissioners, said German-style feed-in tariffs were not something that was likely to happen in the near term in the U.S. (see Solar insiders lament lack of U.S. feed-in tariff).

Grueneich may still be right, as the incentives in California don't seem to stand up to the type offered in Germany, which pays out a premium for renewable energy.

Overall, the tariffs range from 8 cents to 31 cents per kilowatt hour, but customers earning the tariff can't participate in other related state incentive programs.

"The economics at this point aren't as good as what you would get under the alternative scenario, which is to take advantage of the rebate that has been supplied by the California Solar Initiative, as well as to have net metering, in which case you're not selling electricity, but you are getting retail credit for up to your annual net usage," said Browning.

Under the California Solar Initiative and the Self Generation Incentive Program, customers are offered upfront incentives to install solar, wind, and biogas generating capacity that can offset their customer load.

Renewables took a hit in the U.S. when an energy bill passed in December was signed without including an extension to clean energy tax credits (see U.S. solar & wind incentives on the way?).

A recent attempt to get the tax incentives included in an economic stimulus bill also failed.

Although the California tariffs might not work for solar, there are still other groups that could benefit from the new system.

"This'll help biomass guys, dairies that are using their biogas," said Browning. "This will help other technologies, potentially."

Bakersfield, Calif.'s BioEnergy Solutions, which turns animal waste into biogas, already has a deal to sell its biogas to PG&E (see Waste to energy shows potential).

The company, which signed its deal before the new tariff program was approved, has a biogas system set up on a 3,400 cow dairy farm in Fresno County.

Under BioEnergy's agreement, it will provide up to 3 billion cubic feet of biogas a year to PG&E.

The new tariff system requires signing a long-term contract for 5, 10, or 15 years, with the price adjusted based on the time of day of the power generation.

For example, a 15-year contract signed with PG&E in 2008 would earn about 11 cents per kilowatt hour on a summer weekday. But a system generating power from 8 a.m. to 6 p.m, such as a solar power system, would earn about 15 cents per kilowatt hour.

The tariff also has some limits. For systems at public water and wastewater facilities, the statewide capacity limit is set at 250 MW and is distributed among seven California utilities according to their size.

The utilities are PG&E; Southern California Edison; San Diego Gas and Electric; PacifiCorp; Sierra Pacific Power; Bear Valley Electric Service; and Mountain Utilities.

For any other renewable power systems, the capacity limit is 104.6 MW for PG&E, and 123.8 MW for Southern California Edison.

As for a German-style tariff in the U.S., Browning said there are other policy models that are much more cost effective.

"This idea that a feed-in tariff is a magic program would ascribe attributes to it that have nothing to do with the actual program structure."

In Germany, Browning said they offer around 56 euro cents per kilowatt hour over 20-year contracts.

"They've been handing out bags of money and calling it a feed-in tariff. People think that they want a feed-in tariff, but what they really want is those bags of money," he said.

Browning said all the benefits of the German program could be achieved in different structures if you use the same amount of money.

"If you want to get excited about replicating Germany's success, replicate their budget, don't worry about replicating their policy model."