FERC Rules on MISO Queue Reform Proposal
On August 25, FERC issued its ruling on the Midwest Independent Transmission System Operator (MISO) plan to reform the generator interconnection queue process - the method by which transmission requirements for generators wishing to connect new projects to the grid in the Midwest are reviewed and approved. FERC conditionally accepted the proposed tariff revisions, with an effective date of August 25, 2008, and directed MISO to make a compliance filing within 30 days of the Order. Major changes include addition of a Pre-Queue Phase, addition of a Fast Track Process, revisions to the amount and timing of deposits, revisions to the milestones projects must meet to move forward, and limitations on the ability to suspend.
Watch for a client alert shortly!
The Price of the Expiring ITC
In one of the most critical and vibrant arenas of the U.S. economy, the looming expiration of the ITC is weighing heavily on solar developers and manufacturers.
Bend, Oregon-based PV Powered has announced it has laid off some of its 60 employees in anticipation of the sunsetting Investment Tax Credit. This week Oregon Public Broadcasting interviewed PV Powered's CEO Gregg Patterson, who summed up the mood in the solar industry with his statement: “I find it horribly ironic and paradoxical that at the same time we are struggling with energy independence, that the Congress and the current Administration can't solve this issue.”
We'll be watching Congress this fall to see if it can avert an upheaval of the solar industry and development in the U.S. Stand by.
Algae Takes Wing
The August 16-22, 2008 issue of NewScientist features a very interesting article called "A tank of the green stuff" (pages 34-37). Airlines are facing volatile and rising fuel costs, plus the risk of fuel shortages. Unlike land transport, which it least in theory can be converted to run entirely on electricity, air travel depends on energy-dense kerosene. As if that weren't bad enough, the aviation industry is a significant source of carbon dioxide emissions that will come under increasing scrutiny as countries try to manage and eventually reduce their emissions.
So the airlines are looking seriously at turning biofuels into aviation fuel. The problem with first generation biofuels (apart from an unfortunate but solvable tendency to clog in high-altitude cold conditions) is that they require large amounts of feedstock to produce. When Virgin Atlantic airlines test-flew a 747 from London to Amsterdam earlier this year, it used a biofuel made from coconut and babssu oil produced by Imperium Renewables of Seattle. But according to NewScientist, that flight alone would have consumed 3 million coconuts had it been run entirely on biofuels. That's why Virgin and its partners stressed that the flight was "proof of concept." Because of the large volumes involved, NewScientist estimates that biofuels derived from Jatropha and even biomass (e.g., waste timber) would use up huge swathes of land (much larger than France and Germany, respectively) .
Enter algae. Biofuel from algae could be produced, in theory, at 36 tonnes per hectare. To satisfy the 2007 consumption of jet fuel, that would require commiting 66,000 square kilometers to algae produce--an area about the size of Ireland. That certianly sounds a bit more manageable!
There are many technical hurdles between now and commercial production of algae, but the airlines may provide an important catalyst for the development of this new technology. Related stories on the topic can be found in The Minneapolis Star-Tribune and Biodiesel Magazine.
Recognizing that algae is likely to be among the most important next generation of biofuels, Stoel Rives is in the process of preparing the new Law of Algae, which will be our eighth "Law of" book (unless, of course, we can come up with a catchier title between now and the publication date), Stay tuned--the new book should be available in October. Please subscribe to our Renewable Energy Mailing List if you'd like to receive notice when the Law of Algae is published.
Texas Court Rules in Horse Hollow Wind Farm Case
The Texas Court of Appeals handed down its decision in Rankin v. FPL Energy, LLC on August 21, 2008. Plaintiffs had brought public and private nuisance claims against FPLE's Horse Hollow Wind Farm in southwest Taylor County, Texas. The court noted that "Texas caselaw recognizes few restrictions on the lawful use of property" and ruled that, under Texas law, there is no nuisance action for "aesthetical impact." In other words, the turbines were not a nuisance just because the plaintiffs thought they looked really ugly.
Plaintiff's remaining nuisance claims were based on the noise that the turbines allegedly produced; the trial court allowed those claims to go to the jury. The jury found against the plaintiffs, and the trial court entered a take-nothing judgment. The balance of the appellate court's opinion analyzes and upholds the trial court's decision to exclude certain testimony. In theory, the plaintiffs could have prevailed on their nuisance claim if they had proven to the jury's satisfaction that noise from the turbines amounted to "the encroachment of a sensory damaging substance." They apparently failed to do so on the evidence presented.
The limitation of nuisance actions to cases involving noise, dust, bright lights, or other health risks -- as opposed to aesthetic objections -- is consistent with the laws of other states, including Washington. See Pierce v. Northeast Lake Wash. Sewer and Water Dist., 847 P.2d 932 (Wash. App. 1993) (4.3 million gallon municipal water storage tank that "loomed" in plaintiff's view was not a nuisance or a trespass or a case of inverse condemnation. Cf. Steele v. Queen City Broadcasting Co., 341 P.2d 499 (Wash. 1959) (television transmission tower built on parcel smaller than required by law constituted a nuisance, in part because it created disagreeable wind noise). We expect that future challenges to wind energy projects will focus on noise and alleged health risks.
Industry News: Sopogy Engineering Contest Underway
Hawaii-based Sopogy Inc. is holding a design skills contest for HVAC, plumbing and solar engineers. The contest challenges engineers to design practical installations using MicroCSP solar technologies. All designs submitted to the contest will be open-sourced and posted online at SopoApps.com.
The contest period is open now and ends October 1, 2008. Judging will be conducted by an independent panel of industry experts. Key factors in judging include production efficiency, cost, completeness and best overall design. A reception for the winners will be held at Solar Power International 2008 in San Diego. For more information on the contest, visit the Sopogy Apps web site.
In related Sopogy news, the company has elected T. Michael May - the recently retired president and CEO of Hawaiian Electric Co. - to its board of directors. At Hawaiian Electric, May was responsible for developing and executing the company's long-term growth strategies. He joined the company as a senior vice president in 1992 and was elected president and CEO in 1995.
When is a Green Building Lease Like a Power Purchase Agreement? Avoiding Deja Vu All Over Again
On April 16, 2008, Northern States Power filed a petition with the Minnesota Public Utilities Commission for a determination that "Xcel Energy has all legal rights necssary to possess, use and dispose of any renewable energy credits ('RECs') arising from the production of renewable energy that Xcel purchases under its renewable energy power purchase agreements ('PPAs')." NSP's request was directed primary at "46 older PPAs that did not contain language explicity addressing the treatment of RECs." Suprisingly, until 2003, Xcel Energy's form of PPA for certain small facilities was silent on the question of which party--the generator or the utility--was entitled to the RECs associated with the renewable energy. Xcel and the affected generators are now filing pleadings before the Commission to sort out the question of who gets to claim the RECs produced by these renewable energy projects--NSP, as the utility buyer, which needs more RECs to meet Minnesota's RPS; or the generators, who wouldn't mind being able make a little more money by selling reserved, unbundled RECs in a separate transction (some of them may have already done just that, and may be unpleasantly surprised if the Commission rules that Xcel is the true owner of those RECs). The discussion rages on in Docket E-002/M-08-440. (To see the filings, go to the Minnesota Public Utility Commission's e-docket and enter "08" in the year and "440" as the docket.)
So, what do renewable energy PPAs have to do with the lease of a green building? Well, imagine this scenario. A developer designs and builds a marvelous new high performance green building with a Platinum LEED certification. The building's developer/owner leases the building to a company that wants to enjoy the prestige of occupying a top-knotch green office space. A couple of years later, the state recognizes and values "white tags" (energy efficiency credits); or, the federal government gets around to enacting a comprehensive carbon cap and trade law. Suddenly, the green building may be yielding additional value in the form of white tags, carbon offset credits or other environmental attributes.
So who gets that value? The owner, who took all that risk to develop the green building? Or the lessee, who is perhaps paying a higher than market rate to rent space in a very desirable green building? Perhaps a lender has a claim that the value was pledged as collateral for its loan. If the lease is silent on the point, the lessor and lessee may find themselves quarreling over who gets to own and sell the tags or offsets. The same issue can crop up in agreements to sell "green" condominiums or other transactions in which some feature of a green building is conveyed to another party.
To avoid re-learning the lesson that Xcel and its generators are now absorbing in a different context, the simple fix is to make sure that the green building lease or transfer agreement directly addresses the question of who gets to keep (or receive) any credits or benefits that are recognized as a result of the building's high performance, green status. Some forethought about how these agreements are drafted can avoid disputes later on.
REG Algae Biodiesel Technology
Renewable Energy Group (REG) recently issued a press release announcing that REG has technology for refining and producing large volumes of algae biodiesel at a commercial scale. The press release stated that REG looks to initiate additional partnerships for commercial-scale production of algae biodiesel at volumes comparable to those from other vegetable and animal feedstocks now in use.
REG is one of many companies currently researching and developing technologies for producing algae-based fuel. Historically, algae oil production costs have been prohibitively high. With all of the recent advances in algae production systems and extraction technologies, however, it is hopeful that cost to produce algae oil will decrease to a point where it will be a cost-effective second generation feedstock.
Quarterly Women of Wind Energy Meeting Held at Minneapolis Stoel Rives Office
The Minneapolis office of Stoel Rives hosted the quarterly meeting today for the Twin Cities Chapter of Women of Wind Energy. Beth Soholt, director of Wind on the Wires, was the guest speaker. Beth discussed Midwest transmission regulatory issues on which she and Wind on the Wires are working, including the MISO queue reform process, the progress of new transmission lines in Minnesota through the CapX2020 project, and other regulatory and legislative updates. The meeting was well attended by more than 30 people involved in the wind industry. If you would like more information about the Twin Cities Chapter of Women in Wind Energy, please contact Katie Roek or Mary Sennes.
Global Principles and Criteria for Sustainable Biofuels
The Roundtable on Sustainable Biofuels last week released Version 0.0 of its “Global Principles and Criteria for Sustainable Biofuels Production.” This diverse group includes representatives from World Wildlife Federation, BP, Bunge, the Dutch Ministry of Housing and the Environment, the Forest Stewardship Council, the University of California at Berkeley and the World Economic Forum. They have been hard at work for the past year establishing an objective framework for enabling a true cost benefit analysis of biofuels that incorporates environmental, economic and social justice criteria. They welcome input into their process and have opened the document for six months of feedback which can be provided via www.bioenergywiki.net
Hopefully, this process will yield substantial success. As an early participant in the US biodiesel industry, I can attest that the benefits of biofuels appeared quite compelling and almost self-evident as compared to conventional petroleum fuel. Those in the industry with a strong interest in environmental issues typically considered corn ethanol and soy biodiesel as transition fuels that would establish the viability of a more diverse transportation energy portfolio by leveraging the existing farm economy. After market entry with these transition fuels, the road would be paved for superior feedstocks as we are witnessing today with cellulosic material, waste feedstock material and even algae.
In retrospect, the Roundtable of Sustainable Biofuels should have been founded a decade ago rather than last year. With an earlier start, such an organization might have achieved great progress in injecting some objective criteria into the “food vs. fuel” debate and propelled the industry in a more sustainable direction. In the absence of these criteria, some of the debaters have used these crucial (and emotional) issues to advance their own agendas and the biofuels industry has lacked the framework to establish its own best practices.
More Steps Towards Biofuels at the Pump
Legislation recently introduced by Representatives Herseth Sandlin (D-SD) and Rep. John Shimkus (R-IL) would, if enacted, provide increased access to ethanol and biodiesel at the pump. The bipartisan legislation would "enhance the Alternative Fuel Vehicle Refueling Property Credit. Currently, the Alternative Fuel Vehicle Refueling Property credit allows gas station owners to claim a 30 percent tax credit for the cost of installing clean-fuel vehicle refueling property up to a maximum of $30,000. The legislation raises the amount of the credit from 30 percent of the cost of qualifying property to 50 percent, up to a maximum of $100,000, and allows station owners to claim the value for the entire cost of dual purpose fuel dispensers."
Boise partner John Eustermann believes that it has been understood for some time now that one of the hurdles the biofuels industry has been struggling with to date is the lack of appropriate mechanisms to encourage and enhance the distribution of the fuels to the end user or retail consumer, and that any mechanism that can increase the availability of biofuels at the pump should lend some relief to the industry and is welcomed by its advocates. Whether the proposed E85 and Biodiesel Access Act gains the necessary traction it needs to be fully effective at the street level will be interesting to see. The motivation behind the proposal certainly makes sense from a biofuel industry economic perspective. Whether competing interests agree, however, may be another story.
EPA Denies Texas RFS Waiver Request
EPA issued its decision yesterday on Texas' request to reduce the nationwide Renewable Fuels Standard (RFS). EPA denied the request, stating that the "RFS remains an important tool in our ongoing efforts to reduce America's greenhouse gas emissions and lessen our dependence on foreign oil, in aggressive yet practical ways." EPA stated that it received and carefully considered more than 15,000 public comments in response to the Texas request, which was the first such request under the RFS program.
For more discussion on this contested topic, see previous blog by Seattle Partner Graham Noyes.
More on The Oregon Public Utility Commission's Decision in Honeywell
For those who have been tracking the Oregon Public Utility Commission's In re Honeywell proceeding, Stephen Hall and Pat Boylston have just released a Stoel Rives Energy Law Alert explaining the significance of the decision for third party "on site" solar and wind generation and net metering.
Gail Kinsey Hill reported on the decision and its importance for solar development in a story entitled "Ruling gives solar energy projects in Oregon a big boost", which appeared in The Oregonian on August 1.
Although the OPUC's ruling is a big win for the solar industry in Oregon, the same principles would apply to third "on site" wind generation (although it would not apply to other renewable energy sources).
More Good News for Solar!
Coming on the heels of the Oregon PUC's decision in the Honeywell case (see Steve Hall's blog below), scientists at MIT announced today that they had discovered a cheap way to separate oxygen from hydrogen using techniques learned from studying plant photosynthesis. Once separated, the hydrogen and oxygen can be used to power a fuel cell. During the daytime, a home would run on solar power--at night, it would draw energy stored in the fuel cell.
Could this development be a game changer? The full story is to be published in Science today--in the meantime, check out ScienceDaily.
The New (2nd) Edition of the "Law of Biofuels"
Stoel Rives has now published seven original Law of books covering various topics in the renewable energy industry. To write these books, our attorney-authors draw on over 20 years of legal and business experience in wind, geothermal, biofuels, and other renewable energy resources. The books are intended to provide a succinct but thorough overview of industry segments in a way that is practical, business-oriented and not overly legalistic.
Of course, the renewable energy world is changing constantly. This Renewable + LawSM Blog is our effort to stay on top of these issues as quickly as they emerge. But at least once each year, we also update our Law of books. The update process helps us develop a deep and immediate understanding of complex issues, and it's a great way to build a proficient team of lawyers who know how to work efficiently together.
The Law of Biofuels (2d Ed) will be making its debut at the Stoel Rives booth (No. 718) at The American Coaliton for Ethanol (ACE) conference on August 12-14 at the Qwest Center in Omaha, Nebraska . You can also order it or download it online. The new book includes a chapters on Next Gen Biofuels, technology and licensing, financing, tax, siting and permitting, construction, commercial contracts, and real estate. Biofuels attorneys from all of Stoel Rives' contributed their insights to this book
At the ACE conference, my partner David Quinby, an old hand at biofuels and energy M&A, will be speaking on a panel addressing "Ethanol Today & Tomorrow: Growing and Selling Considerations," in which he will explain how biofuels plants can grow, diversify, recapitalize or sell in today's world of narrow margins and volatile markets. Dave promises an exciting presentation, a little like "The Dark Knight" but with more humor.
