In a public workshop held yesterday, the California Air Resource Board discussed its proposed new regulations for alternative diesel fuels as well as conventional diesel fuels. There are a wide range of issues on the table which can best be reviewed on the CARB website for the proceeding. Of particular interest to the advanced biofuels community, CARB is proposing a phased process for introducing alternative diesel fuels to the California market. Prior to supplying any alternative diesel fuel to market, a producer would need to obtain a Memorandum of Exemption (MOE) granted by CARB. I raised the issue that the language was sweeping and would perhaps be more restrictive than the federal standard established by the Fuels and Fuel Additive Registration system found in 40 CFR Part 79 (FFARs). FFARs authorizes producers to provide some pre-commercial supply which can be highly valuable to companies testing and proving out new fuels for the marketplace. CARB officials who attended were receptive to further input on this issue during the public comment period. CARB encouraged public comments by June 24th if possible though the formal period is longer than that.
7th Circuit Affirms FERC's Decision on Multi-Value Projects, Relying Heavily on Policy of Promoting Wind Development
From my colleague, Andrew Moratzka:
On June 7th, 2013, the United States Court of Appeals for the Seventh Circuit issued an opinion in Illinois Commerce Commission, et al., v. Federal Energy Regulatory Commission, affirming the Federal Energy Regulatory Commission’s approval of the Midcontinent Independent System Operator, Inc. (MISO) Multi-Value Project (MVP) tariff for financing new high-voltage power lines that largely serve remote wind farms.
Six issues were before the court: (i) the proportionality of benefits to costs for MVPs; (ii) the procedural adequacy of the previous proceedings; (iii) the propriety of an energy-cost allocator for MVPs; (iv) whether MISO should be allowed to add an MVP fee to utilities belonging to the PJM Interconnection, LLC (“PJM”); (v) whether MISO should be permitted to assess some costs associated with MVPs; and (vi) whether the Commission’s approval of the MVP tariff violates the Tenth Amendment to the Constitution by invading state rights. The fourth and fifth issues were remanded. And the court quickly dismissed the sixth issue at the outset of the opinion, stating that the arguments amounted to an assertion that the MVP tariff “provides a carrot that states won’t be able to resist eating.” This entry therefore focuses on issues (i) – (iii).
The court addressed issues (i) and (ii) together. There are two important takeaways in this section of the opinion. First, MISO’s burden of establishing rough proportionality of costs to benefits under the Federal Power Act arguably changed in the name of policy. The court stated that “The promotion of wind power by the MVP program deserves emphasis” and that wind power will probably “grow fast and confer substantial benefits on the region.” The court determined there was “no reason to think these benefits will be denied to particular subregions of MISO” and found that other benefits (e.g., reliability) were real, even though they couldn’t be calculated in advance. The court then went on to find that MISO’s and FERC’s efforts to match cost and benefits, even if crude, were sufficient. It is not entirely clear how this aspect of the opinion can be reconciled with the court’s previous opinion in Illinois Commerce Commission v. FERC. But it appears the policy of promoting wind power influenced the decision in this case. Moreover, the court rejected requests for an evidentiary hearing on this issue, on the basis that requiring such proceedings after two years of appeal “would create unconscionable regulatory delay.”
The second takeaway is a comment made by the court in response to a criticism raised by the State of Michigan, which claimed it would not benefit from out-of-state MVPs because a provision in Michigan law forbids Michigan utilities from counting renewable energy generated out of the state to satisfy requirements under the state’s Clean, Renewable, and Efficiency Act of 2008. The court stated that Michigan cannot discriminate against out-of-state renewable energy without violating the commerce clause of Article I of the Constitution. This statement could have significant ripple effects on similar laws around the country that give preference to in-state renewable resources or impose limits on imported generation.
The policy of promoting wind development also seemed to influence issue (iii). The court found that the objection to an energy allocator was refuted by the fact that a primary goal of the MVPs is to increase the supply of renewable energy. It acknowledged that wind production is intermittent and not a reliable source of energy to meet peak demand. But the court concluded that MVP lines will enable plants to serve off-peak demand and stated that “MISO and FERC were entitled to conclude that the benefits of more and cheaper wind power predominate over the benefits of greater reliability brought about by improvement in meeting peak demand.”
The House Committee on Energy and Commerce released its fourth white paper on the Renewable Fuel Standard. The white paper discusses the energy impacts of the RFS and the changes in US energy demand in the five years since the RFS passed. The paper calls for comments regarding the impact of the RFS on demand, petroleum prices, and how the RFS could be improved to better meets its energy security goals. The next House white paper will address fraud issues. Comments on the RFS energy white paper are due by June 21st.
The Obama administration took another step forward with its greenhouse gas control program yesterday when it quietly posted its "Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis under Executive Order 12866." Executive Order 12866 was issued by President William Clinton on September 30, 1993, and established broad principles of regulatory process including risk assessment. In the recent Obama Technical Update, the social cost of carbon for 2020 increased in value from a range of $7 to $81 per ton, to a revised range of $12 to $81. The increased range will support more rigorous regulations with the first example being in the domain of microwave efficiency. Businesses and industries in the energy sector will be well-served to evaluate the impact of the revised risk assessment on their activities.
See my colleague Wayne Rosenbaum's recent post on the question of how failed solar panels could be treated under federal and California waste laws:
Recently the New York Times published an article highlighting the high rate of solar panel failures well before their expected life times. While the article focused on the question of product liability, it raises another question. How does the law, particularly waste laws, define a solar panel that is no longer fit for its original intended use or purpose?
Under current federal and California law, the manufacturer of a non-functioning solar panel does not have an obligation to take back panels at the end of life as it does under the EU WEEE Directive. However, it is likely that this will change as the US PV market matures and more arrays approach end of life or fail. Panel manufactures are encouraged to monitor this issue and potentially to participate in contingency planning or rulemaking.
Regarding the disposal of defective panels, once an entity takes title to the panel it becomes the owner of that panel. This includes lenders who take title through foreclosure. As such, the owner becomes responsible for the panel's proper handling and disposal. This requirement raises the question: Once the owner takes possession what will it do with the panel or its components at the end of their useful life?
The California Public Utilities Commission has adopted Decision 13-05-034, approving PG&E, SCE, and SDG&E’s joint standard contract for California’s expanded feed-in tariff (FiT) program. D.13-05-034 also revises several provisions of the FiT tariff and addresses two petitions to modify D.12-05-035, the Commission’s previous decision implementing the expanded FiT. The most recent legislation affecting the FiT, SB 1122 (2012), directing the utilities to procure 250 MW from bioenergy projects, is not addressed in D.13-05-034, but will be implemented in a later decision.
Barring any delays in finalizing the contract and tariff revisions ordered in D.13-05-034, the utilities will begin accepting Program Participation Requests for the new FiT on October 1, 2013 and the first bi-monthly FiT program period will commence November 1, 2013.
For details on changes to the FiT approved in D.13-05-034, and requests for modification rejected by the Commission, read on.Continue Reading...
The results are in for the third California cap and trade auction. A metric ton of CO2e went for $14 in the third auction, which took place on May 16, 2013. The top bid at the auction was $50.01, with a mean bid of $16.67 submitted. All of the 14.5 million 2013 vintage allowances available at the auction were sold, with 1.78 bids submitted for each available allowance. Demand was down compared with the second auction, that took place in February 2013, where roughly 2.5 bids were received for every available 2013 vintage allowance. In the third auction, just over 90% of the allowances were purchased by entities that have compliance obligations under the cap and trade program. Allowance prices have continued to slowly rise, with a settlement price of $10.09 per metric ton CO2e in November 2012, $13.62 in February 2013, and $14 in this most recent auction. See my earlier blog post for some details on auction rules.
CARB also held an advance auction of 2016 vintage allowances on May 16. 7.5 million of roughly 9.6 million allowances available were purchased at this advance auction. The settlement price was the same as the minimum bid price allowed, $10.71 per metric ton CO2e. Though all of the 2016 vintage allowances offered were not sold in the third advance auction, demand rose over the second advance auction held in February 2013. In the third advance auction, CARB received about eight bids for every ten 2016 vintage allowances available; in the second advance auction, there were about five bids for every ten 2016 vintage allowances.
An Allowance Price Containment Reserve sale will take place June 27, 2013. The next allowance auction will be held August 16, 2013.
Yesterday, Minnesota Governor Mark Dayton signed the Omnibus Energy Bill into law. After months of negotiations, state legislators came to an agreement that brings Minnesota to the forefront of solar power following the creation of a solar energy standard, community solar garden program, and a unique value of solar tariff. Key provisions of the new law include: a solar energy standard, performance-based incentives for solar photovoltaic module manufactured in Minnesota, new pricing options for public utilities, and an expanded opportunity for distributed generation.
Solar Energy Standard
With Governor Dayton’s signature, Minnesota became the 17th state to enact a solar energy standard. Minnesota’s solar energy standard requires investor owned utilities to generate or procure a sufficient amount of solar energy so that by the end of 2020, at least 1.5 percent of the utility’s total retail electricity sales to retail customers in Minnesota comes from solar energy, with the goal of reaching ten percent solar by 2030. In addition, at least ten percent of the 1.5 percent required by 2020 must be met by solar energy generated by or procured from solar photovoltaic devices with a nameplate capacity of 20 kilowatts or less. Notably, the 1.5 percent requirement is in addition to, rather than carved out of, Minnesota’s existing renewable energy standard. Initial reports estimate that the solar energy standard will result in the development of more than 450 megawatts of solar by 2020.
Made in Minnesota
In addition to creating a solar energy standard, the new law creates a performance-based incentive for systems that use solar photovoltaic modules that were certified as "Made in Minnesota." Beginning January 1, 2014, and every each January 1 through 2023, $15 million will be collected from the public utilities and distributed to owners of eligible grid-connected solar photovoltaic modules with a nameplate capacity below 40 kilowatts as a production incentive payment. The commissioner of commerce is responsible for setting the solar energy production incentive rate for each module within 90 days of certifying a module as Made in Minnesota.
Solar Energy Incentive Program
The new law creates an additional incentive for small solar energy systems. Set to begin in 2014 and operate for five consecutive years, the program will collect $5 million a year from Xcel Energy (through its renewable development account) to fund solar energy systems of no more than a total nameplate capacity of 20 kilowatts. This program will assist the utilities in complying with their duty to secure 10% of the 1.5% solar standard from solar photovoltaic devices with a nameplate capacity of 20 kilowatts or less.
Community Solar Gardens
By September 20, 2013, Xcel Energy must file a plan with the Public Utilities Commission ("PUC") to operate a community solar garden program, which will begin 90 days after the PUC approves the plan. Community solar gardens give utility customers and other members of the designated community the option to buy solar panels that will be included in an array built in a communal location, rather than on the purchaser’s roof or in their backyard. Participants receive the benefit of a monthly credit on their electric bill while avoiding the cost of maintaining the panels. A community solar garden may be owned by either a public utility or any other entity or organization that contracts to sell the output and must be designed to offset the energy use of at least five subscribers in each community, of which no single subscriber has more than a 40% interest. A single community solar garden cannot have a nameplate capacity of more than one megawatt or supply more than 120 percent of the average annual consumption of electricity by each subscriber at the premises to which the subscription is attributed.
The first community solar garden (developed before the passage of the new law) in Minnesota is expected to be completed this weekend and consists of 171 panels located on an empty field owned by the Wright-Hennepin Cooperative Electric Association. Subscribers purchased panels priced at $869 each.
Value of Solar Tariff
For the first time, a public utility will be able to offer an alternative tariff that compensates customer-generators through a credit on their energy bill for the value to the utility, its customers, and society for operating distributed solar photovoltaic resources interconnected to the utility system and operated by the customer-generator primarily for meeting his own energy needs. Once approved, the utility’s value of solar tariff can be applied to a customer-generator’s interconnections occurring after the date of approval and in lieu of the rates mentioned in the net metering section below.
By January 13, 2014, the Department of Commerce’s Division of Energy Resources ("DER") is tasked to establish a methodology that utilities would follow in appropriately calculating or setting their alternate tariffs. The calculations should, at a minimum, account for the value of energy and its delivery, generation capacity, transmission capacity, transmission and distribution line losses, and environmental value. The DER may also, based on known and measurable evidence of the cost or benefit of solar operation to the utility, incorporate other values into the methodology, including credit for locally manufactured or assembled energy systems, systems installed at high-value locations on the distribution grid, or other factors. Further, the PUC may not authorize a utility to charge an alternative tariff rate that is lower than the utility's applicable retail rate until three years after the PUC approves an alternative tariff for the utility. Lastly, the utility must enter into a contract with the owner of the solar photovoltaic device receiving an alternative tariff rate that has a term of at least 20 years and pays the same rate per kilowatt-hour generated each year for the term of the contract.
The new law will also greatly expand the opportunity for distributed generation by raising the limit on net metering from 40 kilowatts to 1,000 kilowatts. Facilities generating less than 40 kilowatts will continue to receive the utility’s retail rate for net excess generation, while systems between 40 kilowatts and 1,000 kilowatts will receive the avoided cost rate for net excess generation. In the future, utilities will have the opportunity to decide whether to continue offering net metering or switch to a value of solar tariff. Once the cumulative generation of net metered facilities reaches four percent of the public utility’s annual retail electricity sales, the public utility may request the PUC to limit the public utility’s additional net metering obligations.
In addition to raising the cap on net metering, the new law authorizes utilities to use meter aggregation. Meter aggregation allows customer-generators to offset charges for energy usage from multiple meters located on contiguous property owned by the customer.
Setting the Stage for Further Renewable Development
Although the final version of the new law did not increase the existing Minnesota renewable energy standard, it directs all electric utilities and transmission companies to conduct an engineering study of the impacts on reliability and costs of, and to study and develop plans for the transmission network enhancements necessary to support, increasing the renewable energy standard to 40% by 2030, and to higher proportions thereafter, while maintaining system reliability. A team of 15 individuals appointed by the commissioner, in consultation with the electric utilities and transmission companies, will review the study’s proposed methods and assumptions, ongoing work, and preliminary results. The study is due to be completed by November 1, 2014. Other studies required as part of the new legislation include: the value of on-site energy storage and the value of solar thermal.
Voting is underway for the 2013 Hottest Partners in Biofuels and BioBased Products, a poll conducted by our friend Jim Lane of Biofuels Digest. Poll categories include:
- Engineering, procurement & construction
- Enzymes, yeasts & sugars
- Feedstocks (energy crops)
- Feedstocks (gases and residues)
- Finance (early-stage)
- Finance (commercialization)
- Lab services
- Pretreatment systems
- Professional counselors & consultants (legal, finance, etc)
- Separation, microharvest, informatics & catalysis systems and services
- Processing systems and services
- Vehicle & vehicular equipment systems
- R&D Partners
- Strategic customers (fuels)
- Strategic customers (bio-based products)
We encourage all Digest subscribers to vote. Of course, we'd appreciate your vote. Stoel Rives is listed in the Professional Counselors category.
If you are not already subscribing to the Digest, we recommend it as an informative and sometimes entertaining daily report that is available for both the biofuel and the biochemical industries. You can subscribe here.
California Public Utilities Commission Sets Fourth and Fifth Solicitations for the Renewable Auction Mechanism Program
On May 9, 2013, the California Public Utilities Commission adopted Resolution E-4582, scheduling the fourth Renewable Auction Mechanism (RAM) auction to close on June 28, 2013 and setting a fifth RAM auction for no later than June 27, 2014. The RAM program allows renewable energy developers to bid their 3 MW to 20 MW projects to California’s three largest utilities – PG&E, SCE, and SDG&E – for a standard contract. The final Resolution did not differ substantively from the Commission’s draft Resolution, issued in early April 2013 and detailed in a previous blog post. Advice letters filed today with the CPUC provide the utilities' procurement targets for the fourth RAM auction. SCE will solicit projects totaling 181 MW, PG&E is seeking a total of 82 MW, and SDG&E is looking to procure 47 MW in total. The advice letters also breakdown the utilities' total procurement goals into the capacity sought in each of the three RAM product categories - baseload, peaking as-available, and non-peaking as-available.
Various parties commented on draft Resolution E-4582, attempting to influence the Commission's direction with the RAM program. Commenting on the draft Resolution, the Division of Ratepayer Advocates requested that the fourth and fifth auctions be delayed so that RAM projects from these auctions would come online during the utilities’ third RPS compliance period (2017-2020). In their comments, Recurrent Energy, the Solar Energy Industries Association, and the Large Scale Solar Association proposed that the Commission hold the fifth RAM auction within six months of the fourth auction, rather than up to a year after the fourth auction, and hold three subsequent auctions on an annual basis thereafter. They did not propose an increase in the total capacity of the RAM program; the three additional auctions would solicit capacity to replace any previously executed contracts that fail or are terminated. The Commission did not amend the draft Resolution to incorporate these recommendations.
Today the Minnesota Senate passed its omnibus energy bill by a vote of 37-26. This follows the Minnesota House of Representatives’ passage of its version of the bill on Tuesday. The bills now move to a conference committee for consolidation. After the conference committee completes its work, the consolidated bill will then return to each chamber for a final vote before heading to Governor Dayton’s desk.
Some major differences between the two bills means the conference committee has its work cut out for it. For instance, the Senate’s bill contains a 1% solar standard while the House of Representatives’ version includes a much more aggressive 4% solar standard. Whatever the number that ends up in the final bill, Minnesota is set to become only the 17th state to enact a solar standard, and one of the few whose standard is not a carve-out of an existing renewable energy standard.
On May 7th, the Minnesota House of Representatives passed its omnibus energy bill by a vote of 70-63. The bill includes a provision that requires investor-owned utilities to obtain 4 percent of their power from solar by 2025, with a goal of reaching 10 percent by 2030. In contrast to the aggressive House bill, the Minnesota Senate’s omnibus energy bill contains a more modest requirement for 1 percent by 2025. If signed into law, Minnesota would be the 17th state to enact a solar standard. Unlike solar standards in other states, however, this standard is not a carve-out of the existing 25 percent by 2025 renewable energy standard; rather, it is an additional mandate.
In order to protect some industries, the House bill exempts any “iron mining extraction and processing facility” or “paper mill, wood products manufacturer, sawmill, or oriented strand board manufacturer” that would otherwise be subject to potential rate increases stemming from the standard. The bill also exempts power cooperatives and municipal utilities from complying with the standard, which means that only the four investor-owned power companies serving Minnesota must comply: Xcel Energy, Minnesota Power, Otter Tail Power Co., and Interstate Power & Light.
The Minnesota House and Senate must complete any compromise bill by the May 20th deadline for votes.
In a development that will increase liquidity and transparency in the RIN market, two major providers are making RIN future contracts available to be traded. Both CME Group and the IntercontinentalExchange (ICE) will have RIN products available to be traded by mid May. CME Group and ICE will enable over the counter trading (OTC) of D4 RINs, D5 RINs, and D6 RINs. D6 RINs are the most common RINs, typically fulfilled by corn ethanol production. D5 RINs are the most flexible premium RINs, representing advanced biofuel that may consist of biogas, advanced drop in fuels, or other fuel types that meet the 50% GHG reduction standard. D4 RINs are biomass-based diesel RINs, fulfilled primarily by biodiesel and renewable diesel fuels. The development of a futures market could provide a substantial boost to the development of advanced biofuel facilities by enabling their financing. Many financial market participants have in the past regarded RIN revenue as too speculative to include in a plant's pro forma but are likely to be reassured by the presence of RINs in the OTC market. We speculated in our recent white paper that the EPA's rulemaking on Quality Assurance Programs (QAPs) could facilitate the establishment of a RIN futures market. See http://www.stoel.com/showarticle.aspx?Show=10180
The Minnesota State Legislature is considering a bold move to assist Minnesota’s fledgling solar industry. A new provision in the House transportation omnibus bill requires that any solar array installed on a building, highway, road, bridge, or land owned or controlled by the Minnesota Department of Transportation, must consist entirely of panels manufactured in Minnesota. After passing out of the House, the transportation omnibus bill will meet its Senate counterpart in a conference committee.
This development comes a short time after the Minnesota Senate added a provision to the energy omnibus bill that would create a solar energy standard alongside the existing renewable energy technology standard and a few years after the state legislature enacted the Minnesota Bonus Program. The new solar energy standard would require that utilities generate or procure an increasing amount of solar electric generation capacity at a minimum percentage (not yet specified) by 2016, 2020, and 2025. The Minnesota Bonus program provides Minnesota residents a financial incentive to install solar panels on their homes and businesses by requiring utilities to subsidize the solar power generated by the solar installations.
Under state law, the Minnesota State Legislature must finish its work by Monday, May 20th.
Almost three years ago, I reported that the White House Council on Environmental Quality had issued the Final Recommendations of the Interagency Ocean Policy Task Force. Since that time, the Nation Ocean Council, formed by President Obama in Executive Order 13547, has been working diligently to prepare an agency roadmap to put the new National Ocean Policy into action.
On April 16, 2013, the National Ocean Council did just that when it published the National Ocean Policy Implementation Plan (the "Implementation Plan"). The Implementation Plan represents a significant step forward for the National Ocean Policy, and marine industries should be aware that the new interagency processes and actions it mandates – while not new law – may result in additional hurdles despite its express intent to streamline regulatory processes. For a more detailed summary of the Implementation Plan, take a look at the Ocean Law Alert we published earlier this week and feel free to contact us with any questions you may have.