Understanding "Beginning Construction" Under Section 1603
The Treasury Department recently issued a series of FAQs in an effort to clarify when projects will be treated as having "begun construction" for purposes of the section 1603 grant. As you may be aware, a project that otherwise qualifies for the grant but is not placed in service before the end of 2010 may still be eligible for the grant if construction on the project is begun in 2009 or 2010 and the project is eventually placed in service before the applicable "credit termination date." The new FAQs address a number of the unanswered questions. However, the framework adopted by the Treasury Guidance and the new FAQs is complex, and there appears to be a considerable amount of confusion among developers about how the "beginning construction" requirement can be met. Therefore, we thought it important to issue this alert.
Continue Reading...RNP and AWEA respond to WSJ editorial about wind energy
Tuesday's Wall Street Journal included an editorial by Robert Bryce titled "Wind Power Won't Cool Down the Planet," claiming that wind power does not reduce carbon pollution, based on fossil fuel industry studies. In response to Bryce's editorial, Renewable Northwest Project has released a statement from Ken Dragoon, RNP research director, countering Bryce's claims with facts from independent sources. (http://www.rnp.org/index.php?q=node/1001)
American Wind Energy Association (AWEA) has also issued a similar statement. http://awea.org/newsroom/pdf/08-27-10-Wind_and_emissions_response.pdf.
Energy Law Alert: CPUC Proposes to End Moratorium on TREC Transactions; Increase Cap to 40%
On August 25, the California Public Utilities Commission (“CPUC”) issued a proposed decision (“PD”) that would end the CPUC’s moratorium on approval of tradable renewable energy credit (“TREC”) transactions and increase the cap on such transactions for large investor-owned utilities to 40%.
Previously at its March 11, 2010 meeting, the CPUC authorized the use of TRECs for compliance with California’s Renewable Portfolio Standard (RPS), subject to certain limitations. CPUC Dec. 10-03-021 (Mar. 15, 2010)(“March Decision”). Among the limitations that the March Decision imposed was a cap limiting the use of TRECs for RPS compliance for the largest investor-owned utilities (Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric) to 25% of their annual RPS compliance obligations. That cap was to remain in place until December 31, 2011, when the CPUC would consider modifying or removing that limitation. The March Decision also imposed a price cap of $50 per TREC. The price cap also expires on December 31, 2011.
Continue Reading...Minnesota PUC Settles Longstanding Dispute over REC Ownership
Last week, the Minnesota Public Utilities Commission resolved a longstanding dispute over who owns Renewable Energy Credits (RECs) when the Power Purchase Agreement (PPA) is silent. Following the establishment of an REC tracking system for Minnesota, Xcel Energy asked the Commission to clarify ownership of RECs associated with 46 wind, biomass, hydro, and landfill gas facilities totaling 467.5 MW. These PPAs were written before the concept of RECs existed.
On August 17, 2010, the Commission resolved the dispute partially in favor of Xcel and partially in favor of the generators. The Commission divided the disputed PPAs into two categories: 1) PPAs signed under 1978 federal Public Utilities Regulatory Policy Act (PURPA) and 2) PPAs signed under Minnesota’s 1994 wind and biomass mandates (Minn. Stat. §§216B.2423 and 216B.2424).
For the PURPA contracts, the Commission decided that the generators are the rightful owners of RECs because they had only been paid avoided cost with no premium for the electricity being from renewable sources.
For the wind and biomass mandate PPAs, the Commission favored Xcel and decided that the utility had acquired ownership of the RECs, unless the generator can make a showing that the PPA is not silent on REC ownership. For this category, the Commission reasoned that Xcel had contracted to buy electricity that would meet specific renewable mandates. Without the RECs, the electricity would not satisfy the renewable mandates.
The Commission exempted two PPAs close to being privately settled from its decision as well as 13 PPAs that were already privately settled.
Filings related to the "silent PPAs" dispute can be found by searching for Docket No. E-002/08-440 in Minnesota’s eDocket system.
Mitsubishi Wind Turbine Antitrust Claims Put on Ice
A federal judge has stayed Mitsubishi’s antitrust monopolization claims against General Electric in an Order issued this week. Opening a new front in the battle with General Electric over wind turbine technology, Mitsubishi tried to raise the stakes last May, claiming that General Electric’s patent infringement actions (proceeding in three other venues) were baseless, calculated to help General Electric maintain a monopoly in the market for variable speed wind turbines. Mitsubishi also filed its own patent claims against General Electric, in yet another court. As we reported when the claims were filed last spring, Mitsubishi’s antitrust claims were premised on the theory that General Electric’s patent infringement claims were a “sham.”
Not surprisingly, General Electric asked the court in the Western District of Arkansas to either dismiss Mitsubishi’s claims or stay the claims, pending the outcome of General Electric’s patent infringement lawsuits. On the motion to dismiss, the court found that “[n]either of [General Electric’s] arguments has merit” – holding that there is insufficient evidence in the record to definitively establish that General Electric’s patent infringement claims were not objectively baseless. The court held that pending the outcome of the ongoing patent infringement claims in other courts, Mitsubishi may be able to prove that General Electric engaged in sham litigation with the intent of excluding Mitsubishi from the variable speed wind turbine market. For this reason, it would be inappropriate to dismiss Mitsubishi’s antitrust claims, the court held.
However, the court also noted that Supreme Court precedent establishes that Mitsubishi’s sham litigation claim cannot proceed if General Electric ultimately prevails on one or more of its patent claims against Mitsubishi. Even if a favorable verdict of patent infringement is ultimately overturned, under controlling precedent, a favorable trial verdict is sufficient to establish a patent holder’s probable cause to file its underlying claim – and thus eliminates any sham litigation claim. Because there are pending patent claims before other courts where General Electric may ultimately prevail, the Arkansas court decided to stay Mitsubishi’s antitrust claims while General Electric’s patent claims proceed.
The gambit to raise an antitrust action against General Electric has suffered an initial setback. Much as Mitsubishi may have relished a concurrent antitrust counterattack against General Electric, the Arkansas court, sitting where Mitsubishi (not coincidentally) plans to build a major wind turbine manufacturing plant, has refused to put the cart before the horse. The good news for Mitsubishi of course is that its sham litigation claims survived the motion to dismiss. If Mitsubishi can ultimately prove that General Electric knowingly sued on fraudulently obtained patents, look for more action back in the Western District of Arkansas, but not any time soon.
THIS WEEK IN BIOFUELS, A PATENT PERSPECTIVE
By our colleague Edna Vassilovski:
The US and PCT patent organizations published the following patents and applications during the week of August 15, 2010:
- WO2010093835 (Xyleco) relates to a utilizing existing manufacturing facilities, such as those used for the production of starch-, sucrose-, or lactose-based ethanol, to produce non-starch, non-sucrose, and non-lactose based products. The disclosure contemplates using the facility as-is, adding or removing equipment from the facility, as well as adapting the facility to include additional functionalities such as including a recalcitrance reducing system, and/or an enzymatic hydrolysis system.
- WO2010093832 (Xyleco) relates to methods for converting cellulosic and lignocellulosic feedstocks to a concentrated form which can be easily transported and utilized. The disclosed method involves mixing a cellulosic or lignocellulosic feedstock with a solvent such as water and a saccharifying enzyme and transporting the resulting mixture.
- WO2010093829 (Xyleco) relates to methods for processing biomass, for example in the context of producing biofuels. The method involves measuring the lignin content of the biomass and adjusting process parameters based in empirically determined relationships between lignin content and recalcitrance. According to the specification, the disclosed process enables manufacturing plants to utilize different types of feedstock and compensate for variations within the feedstocks.
- WO2010093765 (Arch Chemicals) relates to an antimicrobial composition for use during the fermentation step in the conversion of sugarcane to ethanol. The composition comprises an antimicrobial agent of the guanidine family, e.g. poly(hexamethyl biguandine) (PHMB), an antibiotic agent, and a surfactant in amounts sufficient to control wild yeast, Lactobacilli and bacteria microbiota contamination.
- WO2010093399/U.S. Patent Pub. No. 20100209548 (ENE003) relates to a portable apparatus for ethanol production and extraction from organic feedstock such as corn mash. According to the specification, the apparatus is designed to be mechanically simple and affordable so that it is suitable for use by farmers in small farms, yet can be upscaled for larger facilities.
- WO2010093365 (Helio Biotechnology Corporation) relates to cyanobacteria nucleic acid sequences, vectors and host cells useful in the production of ethanol, and methods of producing ethanol from solar energy and CO2 using cyanobacteria. For example, the specification discloses a genetically engineered cyanobacteria comprising a polynucleotide construct having a polynucleotide sequence encoding pyruvate decarboxylase enzyme (which can be obtained from Acetobacter pasteurianus plasmid pGADL201) and a copper ion inducible promoter (such as the pPetE promoter). According to the specification, in contrast to biomass ethanol production, the disclosed help reduce greenhouse gas by utilizing large quantities of CO2 as a carbon source for fuel production.
- WO2010093310 (Boson Energy) relates to a process for pelletization of biomass to increase its bulk density and reduce its storage and transportation costs. The process, which can be continuous, involves distinct heating, defibration and pelletization steps, which are all carried out in an substantially oxygen-free atmosphere. The heating and pelletization steps are carried out at a temperature within the glass transition or softening temperature interval of the lignin contained in the raw material.
- WO2010092924 (University of Miyazaki), which is published in Japanese, appears to relate to pentose-assimilating recombinant E. coli, useful in the production of ethanol. According to the abstract, the specification discloses E. coli obtained by destroying or eliminating the ptsG gene of the K011 strain of E. coli and that consequently improve or resolve the diauxy problems of the K011 strain of recombinant ethanol-producing E. coli.
- WO2010091507 (Natural Energy Systems) relates to a process for converting organic material to a methane-rich fuel gas. The process involves forming a first mixture by vaporizing the organic material in a substantially oxygen-free, enclosed chamber, and then mixing the vaporized organic material with an excess amount of hydrogen gas, and optionally superheated steam, at temperature ranging from 450 C to 650 C; forming a gaseous mixture containing methane, hydrogen and acid by heating the first mixture to a temperature ranging from 600 C to 900 C in the presence of an excess amount of hydrogen gas and superheated steam; and, neutralizing the gaseous mixture with a base.
- US Patent Pub. No. 20100210741 (Range Fuels) relates to catalyst compositions for converting syngas to alcohols such as ethanol. The catalyst compositions comprise cobalt-molybdenum-sulfide powders in which sulfur is present in a total amount of at least 40% by weight of the catalyst composition, for example in a total amount of 42% to 44% by weight. The amount of elemental sulfur present in the composition is preferably low, for example between 100 ppm – 5000 ppm calculated on a total catalyst weight basis. According to the specification, the molar ratio of sulfur to cobalt, given and initial assignment of sulfur to molybdenum to yield MoS.sub.2 is an important parameter, and is preferably between 0.1 to 4.
- US Patent Pub. No. 20100205857 relates to a eukaryotic cell capable of producing butanol and ethanol at a ratio of butanol:ethanol of between 1:2 to 1:100. The eukaryotic cell is preferably a Saccharomyces cerevisiae, which comprises at least one inactivated nucleotide sequence encoding an enzyme required for the production of ethanol, for example an alcohol dehydrogenase. The eukaryotic cell can comprise a nucleotide sequence encoding a butyryl-CoA dehydrogenase and at least one nucleotide sequence encoding a heterologus electron transfer flavoprotein. The eukaryotic cell can further comprise a nucleotide sequence encoding a heterologous enzyme having enzymatic activity for converting pyruvate, acetaldehyde or acetate into acetyl-CoA in the cytosol. According to the specification, it was surprisingly found that such a eukaryotic cell can be used in a large-scale ethanol fermentation process with minor to no adaptations in fermentation and distillation equipment.
- US Patent Pub. No. 20100205854 (Chevron U.S.A.) relates to low melting point triglycerides made esterification of Fischer-Tropsch acid by-products and the glycerol by-product from biodiesel generation. According to the specification, the low melting point triglycerides are useful as a fuel or fuel blending additive component for cold climates.
DOE:$15 million for Innovative Geothermal Recovery Methods
On Friday, the US Department of Energy ("DOE") announved a $15 million funding opportunity for geothermal energy research and development projects that:
- Address the environmental risk factors associated with heat recovery from the earth's subsurface (earthquakes, water consumption and pollution);
- Add innovative methods for extracting heat from geotlogic formations, particularly permeable sedimentary formations; and
- Reduce financial risks.
Successful applications will address all three of the listed issues. Applicants should note that if the application does not address the first two elements listed above, it will be tossed out. Applicants must submit a pre-application concept paper by October 1, 2010, and will be informed by DOE if they are eligible to submit a full application (whihc will be due November 30, 2010).
The funds will divided between feasibility studies (Phase 1) and validation and proof (Phase 2) with the bulk of the funds being awarded for Phase 2 activities. The funds will be paid out over 3 years and there is a 20% cost share.
Eligible applicants include most domestic entities who are encouraged to form consortia to apply. Foreign entities or persons may participate as a subrecipient of the funds.
Sen. Kerry's Energy Tax Bill Would Help Energy Storage Technologies
On August 5, 2010, Sen. John Kerry (D-Mass.) introduced S.3738—the Clean Energy Technology Leadership Act of 2010—which would have some impact on the growth of energy storage technologies in the United States.
Among other things, the bill would provide for an extension and modification of the Advanced Energy Manufacturing Tax Credit (the “MTC”), a credit authorized under the American Reinvestment and Recovery Act aimed at stimulating and expanding the domestic manufacturing industry for clean energy technologies. The MTC is also referred to as Section 48C of the Internal Revenue Code (the “IRC”). The proposed modifications would extend the MTC to “statutory advanced energy property,” the definition of which includes property used exclusively to manufacture or fabricate fuel cell power plants and systems for the electrochemical storage of electricity (other than lead-acid batteries) for use in connection with electric grids.
Also noteworthy is that S.3738 is similar to the STORAGE 2010 Act, introduced by Sens. Bingaman (D-NM), Wyden (D-OR), and Shaheen (D-NH) in July. Click here for more on that bill. Both bills amend Section 54C of the IRC to allow grid-connected energy storage systems to qualify for Clean Renewable Energy Bonds (“CREBs”). In addition to including energy storage technology in the CREBs program, S.3738 would expand the program by increasing the national new clean renewable bond limitation by $3.5 billion in 2010; sixty percent (60%) of that amount must be allocated by the Department of the Treasury to public power providers, and forty percent (40%) must be allocated to electric cooperatives.
A major distinction between Sen. Kerry’s bill and the STORAGE 2010 Act is that Sen. Kerry’s bill does not add energy storage devices to the list of technologies eligible for the federal investment tax credit. The full text of the bill can be found here.
Clean Energy Jobs Focus of New Manufacturing Solicitation Issued by the DOE
On August 12, 2010, Energy Secretary Steven Chu announced a new loan guarantee solicitation for renewable energy manufacturing projects. The Commercial Technology Renewable Energy Manufacturing Projects solicitation (the "Solicitation") is supported by the American Recovery and Reinvestment Act (the "Recovery Act") through Section 1705 of the Loan Guarantee Program and is focused primarily on providing new green energy jobs and the deployment of renewable energy technologies that reduce greenhouse gas emissions.
The solicitation specifically identified "Eligible Projects" to include renewable energy manufacturing projects or facilities located in the United States that:
- Manufactures Commercial Technology products that support the generation of electricity or thermal energy from renewable resources;
- Has Project Costs greater than seventy-five million dollars ($75,000,000);
- Is able to obtain a credit rating equivalent of "BB" or better from Standard & Poor's or Fitch, or "Ba2" or better from Moody's, as evaluated without the benefit of any DOE guarantee or any other credit support;
- Will create or retain jobs in the United States; and
- Otherwise meets all applicable requirements of Title XVII, including Section 1705, the Solicitation, including all attachments and all applicable requirements of the Recovery Act.
The Solicitation also provided, for illustrative purposes, examples of the types of Eligible Projects that may qualify, which include the following:
- wind energy component or systems manufacturing facilities;
- solar photovoltaic (PV) component or system manufacturing facilities;
- concentrated solar power component or system manufacturing facilities;
- hydropower component or system manufacturing facilities;
- geothermal component or system manufacturing facilities;
- other geothermal power cycle component or system manufacturing facilities; or
- ocean wave, tidal, and river current (e.g. hydrokinetic) component or system manufacturing facilities
Puget Wind Integration Charge REJECTED.
With a swift 13-page order today, FERC rejected Puget Sound Energy’s proposed wind integration rate, stating that the rate was not shown to be “just and reasonable” under section 205 of the Federal Power Act. “Changing system conditions, such as an increasing amount of wind generation described by Puget, present unique challenges that may require novel solutions. However, such solutions must fit the problems they are intended to solve, and the Commission must ensure that ratepayers are protected from rate proposals—such as the one proposed by Puget here—that are not shown to be related to the actual, demonstrable costs incurred in providing service.”
To determine the rate, Puget had used a proxy rate calculated using hypothetical capacity costs from a hypothetical generator. Puget chose its proxy from a group of five commercially available peaking units in the area. FERC stated that although it will allow for the recovery of legitimate and verifiable opportunity costs, Puget’s proposed rate was not a “reasonably accurate representation of the opportunity costs Puget incurs” in providing wind integration service. Because FERC cannot permit Puget to over-recover its costs in providing the service, the rate was rejected. Puget will undoubtedly be back to FERC with a rate that attempts to be consistent with FERC’s order.
Click here to read the order.
DOE Issues Waiver Under Section 1605 of ARRA for Solar PV Equipment Projects
From our colleagues Jere Webb and Jason Davis:
On August 6, 2010, the Assistant Secretary for Energy Efficiency and Renewable Energy (“EERE”), through delegated authority by the Department of Energy, issued a nationwide limited public interest waiver under Section 1605 (the “Buy American Provisions”) of the American Recovery and Reinvestment Act of 2009 (the “Recovery Act”) for EERE-funded projects for incidental and/or ancillary solar Photovoltaic (“PV”) equipment when such equipment is used in solar installations containing either domestically manufactured PV cells or panels.
After recognizing that the Buy American Provisions do not contain a requirement with regard to the origin of components in manufactured goods used in a project, but rather that the focus of the Buy American Provisions is on whether the solar panels are manufactured in the United States, the EERE granted a public interest waiver to the Buy American Provisions for six months (ending February 6, 2011) for the purchase of the following solar PV equipment: (1) domestically-manufactured panels containing foreign-manufactured PV cells; (2) foreign-manufactured panels comprised of 100 percent domestically-manufactured PV cells; and (3) any ancillary items and equipment (including without limitation charge controllers, combiners and disconnect boxes, breakers and fuses, racks, trackers, lugs, wires, cables, and all other incidental equipment with the exception of inverters and batteries) utilized in either #1 or #2, regardless of country of origin. According to the EERE’s research on the domestic solar manufacturing industry, this waiver would allow approximately nine companies to compete for grantees’ solar PV projects (of the nine, four companies produce solar PV panels in the United States). The EERE also states that the waiver does not apply to thin-film solar PV panels.
As noted above, this waiver expires on February 6, 2011, but the waiver is unclear whether the solar PV project must be completed by the expiration date or whether the solar PV equipment (that qualifies under the waiver) simply must be purchased by the expiration date. A review of an EERE waiver, dated March 19, 2010, applying to the purchase of light emitting diode LED lighting and HVAC units (although the waiver circumstances in this instance were quite different from the solar PV equipment waiver), might suggest that the solar PV equipment waiver will apply to those circumstances where the recipient of Recovery Act funds has taken substantial steps to commit funds for the purchase of solar PV equipment, such as placing an order or executing a contract for such equipment prior to the waiver expiration date; however, the absence of similar detail in the solar PV equipment waiver leaves quite a bit of uncertainty. Hopefully the EERE will issue future guidance to clarify the expiration date terms.
The complete solar PV equipment waiver is expected to be posted soon to the EERE’s website at http://www1.eere.energy.gov/recovery/buy_american_provision.html.
Good News and Bad News for DOE's Loan Guarantee Program
There has been a wave of good and bad news this past week regarding the DOE's Loan Guarantee Program. On the positive side, Secretary Chu announced on Friday that the Department would be adding an additional compliance period for the Innovative Solicitation. The current deadline for the Part I application under the program is August 24th. Secretary Chu announced the applications would be accepted until October 5th thus providing six more weeks of time to applicants. Secretary Chu did not extend the Part II deadline and cannot extend the September 30, 2011 start construction deadline as that deadline was established by the Stimulus Bill itself. Still, the extension was generally viewed as a respite and perhaps an indication of a willingness to further extend the program.
On the bad news side, the Senate approved the FMAP state aid bill to avert teacher layoffs and pay for Medicaid which is to be funded in part by taking $1.5 billion in funds that the Stimulus Bill appropriated to the DOE Loan Guarantee program. Clearly driven by Pay-Go requirements, this is a reminder of the $2.0 billion fleecing that the Loan Guarantee Program suffered when Cash for Clunkers program was passed. While it has been promised that the funds will be restored, the fact that the Cash for Clunkers funding has not yet been restored raises concern about whether the restoration will occur.
USDA Issues Notice of Funding Available for Renewable Energy Feasibility Studies
From our colleague Sarah Johnson Phillips:
Today, the U.S. Department of Agriculture (USDA) released a Notice of Funding Available (NOFA) for up to $3,000,000 in renewable energy feasibility study grants under the Rural Energy for America Program (REAP).
- The grants are available to farmers, ranchers, and rural small businesses for conducting feasibility studies for renewable energy systems.
- The maximum amount for a feasibility grant is $50,000 or 25 percent of the eligible project cost of the study (whichever is less). Eligible costs include, but are not limited to, resource assessment, transmission studies, and environmental studies.
- Applications are due to USDA Rural Development State Offices by October 5, 2010.
The REAP program also provides grants and loan guarantees to support renewable energy systems and energy efficiency improvements as well as energy audit and renewable energy development assistance grants. The REAP program is administered by the Rural Business-Cooperative Service
The full NOFA is available in today’s Federal Register (Federal Register, Vol. 75, No. 151, 47525-47535, August 6, 2010).
CPUC Lifts Hold On CSI Applications
From our colleague Morten Lund:
On July 29, the California Public Utilities Commission (“CPUC”) issued a ruling lifting a prior temporary hold on certain applications under the California Solar Initiative (“CSI”). The CPUC had on July 9 placed a hold on new CSI applications for PBI projects and government/non-profit projects pending comments on certain proposed program changes. Generally, the CPUC and the State of California are concerned over the costs of the program going forward, despite the fact that the program provides ever decreasing incentives as more capacity is installed. But the condition that California finances are in has state regulators in all agencies looking closely at programs that dispense funds to try and find ways to cut such expenditures.
In the July 29 ruling, Commissioner Peevey declared that the temporary hold created an “unacceptable level of market disruption,” and that the temporary hold was therefore lifted. All applications submitted during the hold will be processed, and new applications accepted.
The July 29 ruling can be found on the CPUC’s website here: http://docs.cpuc.ca.gov/efile/RULINGS/121304.pdf
The July 9 ruling can be found on the CPUC’s website here: http://docs.cpuc.ca.gov/efile/RULINGS/120427.pdf
This Week in Biofuels, A Patent Perspective
From our colleague Edna Vassilovski:
On July 29, 2010, the following U.S. patent applications were published relating to biofuels:
U.S. Pat. Pub. No. 20100191022 (Undisclosed assignee) relates to the use of Arundo donax feedstock in a gasification process to produce ethanol. According to the application, ethanol is produced substantially without by-products except for an ash stream of the inorganic plant nutrients.
U.S. Pat. Pub. No. 20100191008 (Energy & Environmental Research Foundation Center) relates to a process for the simultaneous production of chemical feedstocks and fuel blendstocks such as jet fuel from biomass feedstock, and specifically from unsaturated and polyunsaturated vegetable oils and/or algal oils. The process involves integrating metathesis reactions with other processes to produce suitable chain-length fuel components and chemicals.
U.S. Pat. Pub. No. 20100191004 (Sartec) relates to the use of certain metal oxides to catalyze the production of pentose and hexose derivatives from carbohydrates. Embodiments include the use of alumina, hafnia, titania and zirconia to catalyze the production of 5-hydroxymethylfurfural (HMF) or a biofuel from glucose, sucrose, fructose, and cellulolose at a temperature of greater than 100 degrees C.
U.S. Pat. Pub. No. 20100190259 (Undisclosed assignee) relates to a recombinant thermophilic, Gram-positive bacterium, a strain of B. thermoglucosidasius, having an ldh (lactate dehydrogenase) mutation and in which the stability of the ldh mutation has been enhanced. The application also relates to a process for improving the stability of the mutation by specific homologous recombination between a plasmid and the insertion sequence within the ldh gene. According to the specification the strain is useful for producing of ethanol in fermentation.
US Pat. Pub. No. 20100190226 (Iogen Energy Corporation) relates to a process for feedstock pretreatment. The process involves wetting grasses, cereal straws or stover of a particular length, pressing the wet feedstock through one or more roll presses, slurrying the pressed feedstock, and subjecting the slurried feedstock to dilute acid pretreatment to produce pretreated feedstock. According to the specification, the process allows for the crushing and shearing of feedstock and the removal of much of the soluble salts, proteins, sugars, alkaline compounds and organic acids from the feedstock.
U.S. Pat. Pub. No. 20100189076 (Verenium) relates to lignocellulolytic enzymes that hydrolyze sugarcane bagasse. According to the specification, the enzymes hydrolyze soluble cellooligsaccharides and arabinoxylan oligomers into monomer xylose, arabinose and glucose.
U.S. Pat. Pub. Nos. 20100187822 and 20100187818 (Louisville Clean Energy) relate to a combined heat and power production system, which improves the energy efficiency of individual production systems in the combination. Specifically, gasification, combined heat and power/combined-cycle, methane reactor, biodiesel, and ethanol fermentation methods of energy production are combined such that waste heat from one method serves directly as the heat reservoir for a successive method.
U.S. Pat. Pub. Nos. 20100186736 and 20100186735 (SunOpta BioProcess Inc.) relate to a method and apparatus for conveying cellulosic feedstock. The ‘736 application discloses an apparatus comprising a holding tank having an inlet and an outlet, wherein the outlet is at an elevation below the inlet, and at least one screw conveyer having a variable pitch along its length. In operation, the apparatus withdraws cellulosic feedstock from the tank in a direction transverse to the direction of travel of the feedstock through the tank. According to the specification, embodiments of the invention enable actively withdrawing feedstock from different portions of the outlet, preferably evenly from across the outlet, leading to a achieving a generally uniform residence time of feedstock in the tank. The ‘735 application discloses a similar apparatus but which includes two conveyers, the first conveyer delivering a first portion of the feedstock in a first direction, and the second conveyer delivering a second portion of the feedstock in a second direction.
U.S. Pat. Pub. No. 20100186291 (China Fuel (Huabei) Bioenergy Technology Development Co., Ltd.) relates to a process for producing biofuel via co-gasification of cellulosic biomass and coal in the presence of a catlyst. According to the specification, the process is a highly effective method of producing biofuel because the mixed use of cellulosic biomass and coal provides syngas, with a composition approaching the optimal ratio for producing methanol and ethanol, in a one-step gasification. The specification also suggests that co-gasification can reduce the ash fusion temperature of coal.
DOE Designates New Southeast National Marine Renewable Energy Center
The U.S. Department of Energy ("DOE") continued its support of marine and hydrokinetic ("MHK") technology development on Tuesday, announcing that Florida Atlantic University has been designated as the nation's third national center for ocean energy research and development. The Southeast National Marine Renewable Energy Center ("SNMREC") joins centers in the Northwest, at the University of Washington and Oregon State University (jointly, the Northwest National Marine Renewable Energy Center) and in Hawai'i, at the University of Hawai'i.
With an additional $250,000 grant from DOE, the SNMREC will continue to focus research efforts on technologies designed to convert ocean currents like the Gulf Stream as well as ocean thermal energy into electricity for the grid. On a personal note, I had the opportunity to visit FAU's Dania Beach (SeaTech) campus in November 2009 to take part in the USNC TAG/TC-114 "Marine Energy- Wave and Tidal Energy Converters" international standards process. I was impressed by the students, faculty, and the facilities at the Institute for Ocean and Systems Engineering and I look forward to seeing FAU excel in its new role.
Illinois Legislation Passed to Encourage Renewable Energy Investment
From our colleague Sarah Johnson Phillips:
Last month, Governor Pat Quinn of Illinois signed two pieces of legislation expanding state policies that encourage investment in the state’s renewable energy sector.
H.B. 4797 extends the Illinois program providing for uniform statewide property-tax assessment of wind energy systems through 2016. Prior to 2007, assessments were made based on a county-by-county basis, which created significant inconsistency across the state. The uniform program allows wind projects to anticipate operating costs.
H.B. 4758 expands Property Assessed Clean Energy (PACE) financing opportunities to unincorporated areas of the state. PACE programs allow local governments to issue bonds to help finance energy improvements on homes and businesses. The PACE funding is then repaid by property owners through a surcharge on their property tax bills. At least 23 states have authorized PACE programs since 2008. Illinois first adopted PACE enabling legislation in August 2009 (SB 583) and now expands access to the program in 2010.
While popular, PACE programs around the country are facing an uncertain future following actions by the Federal Housing Finance Agency (FHFA), Fannie Mae, and Freddie Mac that have effectively shut down many programs. At issue is the fact that under most PACE programs, a lien is placed on the property that has priority over the mortgage. FHFA is characterizing these liens differently from routine tax assessments, arguing that they pose “unusual and difficult management challenges for lenders, servicers, and mortgage securities investors” that justify calling a halt to PACE financing while these concerns are addressed. The State of California has sued Fannie Mae and Freddie Mac for blocking its PACE program.
But despite the near standstill in implementation, Illinois and other states (including Minnesota and Missouri) have continued to authorize and expand PACE programs this year.
FERC Comments on Electric Storage Technologies Due August 9
Just a friendly reminder that the deadline to submit comments to the Federal Energy Regulatory Commission (“FERC”) on electric storage technologies is just around the corner. In its Request for Comments Regarding Rates, Accounting and Financial Reporting for New Electric Storage Technologies, FERC’s Office of Energy Policy and Innovation seeks comments on the following issues:
- The use of and rate treatment for storage facilities, including when it is appropriate to classify a storage facility as a transmission asset.
- The mechanisms by which a storage project that is used for multiple purposes may be compensated. Specifically, FERC seeks comment on whether a storage project may be compensated as transmission (e.g. for supporting unbundled transmission service by supplying reactive power) and also be compensated for providing ancillary services or for enhancing the value of merchant generation (e.g. by shifting output from an off-peak period to an on-peak period).
- The possibility of creating a stand-alone contract storage service and whether the storage provider would provide the service of electricity storage, enabling its customers to determine how to use their contracted share of the storage.
- Whether new accounting and reporting requirements should be created in order to facilitate cost of service or other rate policies for new storage technologies, such as chemical batteries and flywheels.
In addition to the issues outlined above and other specific questions posed by FERC in its Request for Comments, FERC invites comments on other related aspects of the storage issues not specifically addressed by FERC in the above-referenced document. Comments are due on Monday, August 9, 2010 and should reference Docket No. AD10-13-000.
Texas Court of Appeals Hands Down Decision in Important Wind Curtailment Case
On July 27, 2010, the Court of Appeals of Texas, Fifth District, Dallas, issued its decision in TXU Portfolio Management Company, L.P., v. FPL Energy, LLC, et al., 2010 Tex. App. Lexis 5905 (2010). The case arose when three FPL wind farms (the "Wind Farms") located in the McCamey area of West Texas experienced ERCOT-imposed generation curtailments imposed by the Electric Reliability Council of Texas ("ERCOT") during 2002-2005. The Wind Farms had each entered into a power purchase agreement (“PPA”) with TXUPM under which they agreed to deliver a minimum quantity of energy and renewable energy credits (RECs) each year. Because of the deficiencies caused by the ERCOT generation curtailments, TXUPM sued the Wind Farms for deficiency damages under the PPAs. The Wind Farms counterclaimed, asserting that TXUPM materially breached each of the PPAs by failing to insure enough "transmission capacity" to allow the three wind farms to generate and deliver all of the electricity they were theoretically able to generate given wind conditions.
Section 2.03 of the PPAs required TXUPM to arrange for "all services, including without limitation Transmission Services . . . necessary to deliver Net Energy." The Texas Court of Appeals concluded that this provision required TXUPM to supply transmission service sufficient to accept delivery of energy actually generated by the project and delivered to the interconnection point. Contrary to the Wind Farms' argument, however, Section 2.03 did not require TXUPM to make sure there was enough transmission capacity in the McCamey area to make sure that the three wind plants could in fact generate every MWh they were theoretically capable of generating given wind conditions.
This outcome is not too surprising--it would have been very unusual had the Court of Appeals concluded that an offtaker's duty to supply transmission services at the delivery point amounted to an implied duty to arrange for the construction of (very expensive) transmission infrastructure sufficient to avoid generation curtailments. Utilities everywhere can breathe a sigh of relief that the Court of Appeals did not read this duty into the PPAs.
The fact that the Wind Farms had failed to deliver enough output to meet the annual minimum quantities specified in the three PPAs was not in dispute. Since the court concluded that TXUPM had not breached the PPAs by failing to supply transmission capacity, the only remaining question was the calculation of damages.
Stepping away from the court’s decision for a moment, though, it’s worth noting that there's a separate provision that is typically included in PPAs for intermittent renewable energy, and it apparently was not included in the three PPAs in dispute here, perhaps because of their 2000-2001 vintage. An annual minimum output guarantee requires a wind developer to take both mechanical availability risk and wind risk--the plant's output can be reduced below the minimum level if the wind doesn't blow as hard or as often as expected, or if the wind turbines and other equipment are not available as often as they should be. However, these risks are to some extent within the developer's control--wind risk can be addressed by thorough wind studies, and mechanical availability can be managed using the developer’s O&M program. Generation and transmission curtailment, on the other hand, are typically outside the developer's control and can be affected by delays in completing transmission infrastructure, additions of other intermittent resources to the grid, routine maintenance of the transmission system, emergencies and other factors.
Recognizing this, renewable energy PPAs usually provide that curtailed energy is counted as if it were generated for purposes of determining whether a plant has achieved its output guarantees. Although the requisite language is often omitted from utility pro forma renewable PPAs, most utilities are willing to agree if pressed that energy that could have been generated but for curtailment(s) should be counted as if it were generated for purposes of testing the project’s output guarantee. There may be a little scuffling over the proper method for calculating the quantity of energy and RECs that would have been generated “but for” the curtailment, but the real fight is usually over whether the PPA is in whole or in part a "take or pay" contract in which the utility is required to pay for some or all of the output that is actually curtailed. Cf. FPL Energy Upton Wind I, L.P., v. City of Austin, 240 SW3d 456 (2007), reh’g denied 2007 Tex App LEXIS 9306 (Tex App Amarillo 2007) (the Texas Court of Appeals ruled that ERCOT-imposed curtailments are not the same as voluntary economic curtailments by the power purchaser under a PPA and thus are not curtailments that the purchaser must pay for).
In any case, the Wind Plants in this case did not receive credit for curtailed energy under the three PPAs, so the court considered the deficiency as a given and turned to calculating the amount of damages. The three PPAs had hard-wired $50/MWh as the liquidated damage payment due for each MWh of deficiency below the annual output guarantee. This number was based on the per MWh penalty the Texas PUC was expected to impose, as of the time the PPA was entered into, on utilities that failed to secure enough renewable energy. The Wind Plants argued that this amount bore no resemblance to TXUPM's cover damages at the time of the alleged breach and had persuaded the trial court to declare the liquidated damages clause to be unenforceable. The Texas Court of Appeals reversed, concluding that the Wind Farms had failed to prove (1) that a measure of damages was ascertainable when the PPAs were entered into, or (2) that the $50/MWh rate was an unreasonable estimate of TXUPM's actual damages.
Using the deficiency rate of $50/MWh and the Wind Farms' total net deficiencies of 580,465 MWh for 2002 through 2005, TXUPM claimed $29,023,250 in deficiency damages. Bear in mind that these are just the deficiency damages, and thus only a part measure of the pain the plants suffered--they also had to forego a sale at the contract price and lost a Production Tax Credit (PTC) on each MWh curtailed. For utilities that are slow to acknowledge that curtailment risk is an important issue for the intermittent energy developer, this case offers a very succinct $29 million dollar explanation of why developers, lenders, and equity care so much about the topic.
