Idaho PUC Considers Reducing Published Avoided Cost Rate Eligibility Cap for QFs
The Idaho Public Utilities Commission (the “Commission”) heard oral arguments today on the Joint Petition filed by Idaho Power, Avista Corporation and PacifiCorp d/b/a Rocky Mountain Power (collectively the “Utilities”) in Docket No. GNR-E-10-04, requesting that the Commission address various issues related to avoided costs for PURPA Qualifying Facilities (“QFs”), including ownership and valuation of Renewable Energy Credits, system reliability, lack of a standard contract template, and the increased size and scale of QF projects. Specifically, the Utilities are seeking an order reducing the published avoided cost rate eligibility cap for Idaho QFs from the current 10 aMW level to 100 kW. On December 3, 2010, the Commission issued a Notice of Joint Petition and Order No. 32131 (the “December 3rd Order”), denying the Utilities’ request to immediately reduce the eligibility cap, and breaking the proceeding up into two phases. In the first phase, the Commission will address whether the eligibility cap should be reduced temporarily, pending a decision on the broader avoided cost issues in phase two.
Today’s hearing focused solely on the Utilities’ request to reduce the eligibility cap, during which the Commission sought discussion on the appropriateness of exempting non-wind QF projects from the reduced eligibility cap, and the consequences of disaggregation (i.e., dividing larger wind projects into multiple 10 aMW projects in order to qualify each for the published avoided cost rate). The Utilities argued that temporarily reducing the eligibility cap while addressing the other avoided cost issues is the simplest and most effective way to proceed and would address one immediate concern – the large number of currently proposed contracts, which the Utilities argue are not from small, unsophisticated developers, but instead are from large scale wind projects that are being disaggregated to meet the 10 aMW cap. Each of the Utilities agreed that although the magnitude of the problem is related to wind resources, the reduction, if granted, should apply to all QF projects. Commission Staff testified in support of a reduction in the eligibility cap, but argued that the reduced cap should apply to wind resources only. Recent industry publications have reported that Commission Staff may be willing to consider instituting a rule that requires disaggregated facilities to be located at least five miles apart (rather than the current one-mile rule provided for under FERC regulations); however, that option wasn’t raised at the hearing.
The hearing room overflowed with the more than a dozen parties who have intervened in the case, whose interests and testimony varied, but each warned of the chilling effect of such reduction on development of renewable energy projects in Idaho and the need for further evidentiary hearings to resolve the issues presented. The Commission seemed sensitive to the impact of any temporary cap reduction, particularly on projects currently under development, and the need to resolve the broader avoided cost issues quickly. However, all parties agreed that such proceedings would not be quick, and would take six months to a year to resolve. Such a delay could certainly kill a project under development, and would undoubtedly dissuade new developments in Idaho in 2011.
The Commission did not say when to expect an order on the temporary reduction, only that they would issue one as soon as possible. Pursuant to the Commission’s December 3rd Order, any order reducing the eligibility cap will have a retroactive effective date of December 14, 2010.
For more information, or if you have questions regarding the Commission’s proceeding and the impact it may have on renewable energy development in Idaho, feel free to contact Teresa Hill at tahill@stoel.com or Chad Marriott at ctmarriott@stoel.com.
Renewable Electricity and Wine - A Perfect Pairing
An entry from our colleague Jake Storms:
While wineries and vineyards have long been moving toward being “green,” several have taken the next step by installing renewable energy generation onsite. One of the most recent is August Cellars, just outside Newberg, Oregon. The winery recently installed a 150-foot-tall, 50-kilowatt wind turbine. August Cellars maneuvered around the somewhat prohibitive cost of the project (between $70,000 and $100,000) by not actually owning the turbine, but instead leases the turbine from a third party with an option to buy.
August Cellars is following in the footsteps of such giants as Constellation Wines, which, in September 2010, announced it would increase its solar photovoltaic (PV) usage to nearly 4MW with new installations at its Estancia, Ravenswood, and Clos du Bois wineries in California. These systems would expand on the company’s already existing use of solar PV at its Gonzales winery. Constellation will own the systems and take advantage of the tax credits. Once completed, the installations will cover nearly 100% of the energy needs of Estancia and Ravenswood, 75% of Clos du Bois, and 60% of Gonzales and is projected to save the wine giant nearly $1 million annually from reduced energy costs.
The move by wineries toward renewables is not merely a “West Coast thing” either. Red Caboose Winery, a 10,000-case rural winery located in Meridian, Texas, recently released a statement that it would be using a USDA Rural Energy for America Program (REAP) grant of $15,617 to help install a solar PV system. According to the owners, the new system will allow the winery to have a net annual energy consumption of zero.
Continue Reading...Recommendations for Carbon Capture and Storage in California
The California Carbon Capture and Storage Review Panel released its final recommendations last week after nine months of fact-finding and deliberations. The Panel was sponsored by the California Energy Commission, the California Public Utilities Commission, and the California Air Resources Board (“CARB”), with participation from the California Department of Conservation and the California State Water Board. The Panel was formed to review the statutory and regulatory barriers to the use of carbon capture and storage (“CCS”) as a strategy to combat climate change. CCS is a technology with potential to reduce carbon dioxide emissions from power plants and industrial sources on a large scale by capturing the emissions and sequestering them in geologic formations underground.
The Panel’s recommendations focus on:
- ensuring that CCS can play a role in meeting California’s greenhouse gas emission (“GHG”) reduction requirements (e.g., the Panel recommends that CARB consider and integrate CCS into its GHG rules);
- addressing regulatory and permitting barriers for CCS projects (e.g., the Panel recommends establishing a coordinated permitting system with the California Energy Commission as the lead agency);
- addressing key legal issues and uncertainties (e.g., the Panel recommends that the legislature declare surface owners to be the owners of subsurface pore space that could be used for carbon dioxide storage); and
- ensuring the safe, equitable, and cost-effective use of CCS in California (e.g., the Panel recommends that the legislature establish that any cost allocation mechanisms for CCS projects be spread as broadly as possible across all Californians).
The Panel was comprised of experts from industry, trade groups, academia, and environmental organizations. Stoel Rives’ Jerry Fish served on the Panel’s Technical Advisory Committee along with representatives from the relevant state agencies and other expert consultants. With assistance from other members of Stoel’s CCS team, he contributed white papers on carbon dioxide pipelines, pore space rights, and enhanced oil recovery issues and advised on the Panel on a variety of property, liability, and regulatory issues for CCS. For more information on CCS or the Panel’s work, please contact:
- Jerry Fish, (503) 294-9620, jrfish@stoel.com
- Sarah Johnson Phillips, (612) 373-8843, sjphillips@stoel.com
- Eric Martin, (503) 294-9593, elmartin@stoel.com
Read the Panel’s key findings and recommendations after the jump or download the full background report and final recommendations report from the California Climate Change Portal.
Continue Reading...Upcoming Energy Conference Highlights
Through industry presentations and publications as well as through our blog, our energy attorneys are dedicated to helping you stay informed and knowledgeable about legal developments that affect your business.
Visit our website for the latest calendar of events. Upcoming highlights include:
Wind & Solar Integration Summit
January 24-26 – Scottsdale, AZ
Featuring speakers Stephen Hall, Ed Einowski, Bill Holmes, Jennifer Martin and Dina Dubson – use Infocast conference code 110808 for a 25% registration discount.
Electricity Storage: Business and Policy Drivers
January 24-26 – Houston, TX
Bill Holmes and Edna Vassilovski will discuss “Due Diligence Considerations in Electric Energy Storage Business Relationships” at this post conference workshop on 1/26.
Wave Energy in the U.S. Today
February 1 – via teleconference or at Stoel Offices in Portland, Seattle, and Sacramento
Chad Marriott will serve as a panelist for this teleconference presented by the American Bar Association's Renewable, Alternative, and Distributed Energy Resources Committee.
Wind Power Finance & Investment Summit
February 2-4 – San Diego, CA
Join conference speakers Duff Bryant and Greg Jenner along with Ed Einowski, Julia Pettit, Howard Susman, Morten Lund and David Quinby at the Rancho Bernardo Inn – Use Infocast conference code 110166 for a 15% registration discount.
Geothermal Energy Finance Forum
February 9 – New York, NY
Visit the Big Apple with Gary Barnum and John McKinsey, conference speaker and Geothermal Energy Association Board Member.
Next Generation Bio-Based Chemicals Summit
February 14-17 – San Diego, CA
Network with industry leaders and Stoel Rives speakers John Eustermann, David Quinby, and Edna Vassilovski – use Infocast conference code 111016 for a 15% registration discount.
The California Public Utilities Commission Lifts Moratorium on Approval of Tradable Renewable Energy Credit Transactions; Limits Use of Out-of-State Generation for California RPS Compliance
A legal update from our colleague Seth Hilton:
Ten months after initially authorizing the use of tradable renewable energy credits (TRECs), the California Public Utilities Commission (CPUC) today lifted its moratorium on approval of TREC transactions. CPUC Dec. 11-01-025. Today’s decision, however, retains restrictions on TREC transactions that could limit the amount of out-of-state generation that the three major investor-owned utilities can use to meet their California Renewable Portfolio Standard (RPS) obligations.
At its March 11, 2010 meeting, the CPUC authorized the use of TRECs for compliance with the RPS, subject to certain limitations. CPUC Dec. 10-03-021 (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 was also set to expire on December 31, 2011.
Come Learn What Every Renewable Energy Developer and Storage Provider Needs to Know About Integrating Variable Energy Resources
Wind & Solar Integration Summit, Scottsdale, AZ
January 24, 2011, 8 a.m. – 5 p.m., Workshop
January 25, 2011, 7 a.m. – 5:15 p.m., Conference
January 26, 2011, 9 a.m. – 11:45 a.m., Conference
As the Workshop Chair, I would like to extend you an invitation to the Wind & Solar Integration Summit, presented by Infocast. Join me and my colleagues in sunny Scottsdale, Arizona as we gather with industry experts—federal and state regulators, representatives from ISOs, independent power producers, and pioneers in energy storage—to discuss the challenges posed by renewable energy integration and the opportunities for businesses that make the necessary adjustments to prepare for the 21st century grid. We will be kicking off the conference with a keynote address by FERC Chairman, Jon Wellinghoff.
This 3-day event will include a pre-conference workshop on the fundamentals of integrating variable energy resources and electric energy storage (EES), and will feature a presentation by Stoel Rives partner and Conference Chair, Stephen Hall. The conference will address issues and recent developments in integration, including market solutions and investments to facilitate renewable energy integration, changes to the regulatory landscape, and the role of EES in enabling increased renewables integration. Stoel Rives partners Ed Einowski, Bill Holmes, and Jennifer Martin will present on managing the risks associated with curtailment and integration issues in PPAs.
In case you need another good excuse to get to Arizona in January, Stoel Rives is currently offering a discount on registration. For more event details and registration information, please see: http://www.stoel.com/showevent.aspx?Show=7277.
Solar Energy Development on U.S. Bureau of Land Management Lands: Opportunities and Obstacles Created by Shifting Legal Sands
A legal update from our colleagues, Aaron Courtney, Michael O'Connell & Jake Storms:
Unlike other types of energy development on lands administered by the U.S. Bureau of Land Management ("BLM") (e.g., wind, geothermal), solar energy has consistently encountered significant delays caused in large part by a regulatory authorization system that has yet to catch up to industry demand. ]
In an effort to streamline the analysis of solar energy developers seeking right-of-way grants from BLM, the agency, together with the U.S. Department of Energy, has proposed a draft Programmatic EIS for Solar Energy Development that could have significant implications for solar project development on BLM lands in Arizona, California, Colorado, Nevada, New Mexico and Utah (http://solareis.anl.gov/).
Just as the regulatory landscape appears to be heading toward a more predictable, expedient system of authorizations, however, opposition to solar development by tribes and other stakeholders is on the rise and has turned litigious. To continue reading, click here.
Bar on Military Purchases of Chinese Solar Panels
In a blow to China’s position as the world’s dominant producer of solar panels, the new military authorization law prevents the Defense Department from buying Chinese-made solar panels, but allows it to buy solar panels from any country that has signed the W.T.O.’s side agreement on government procurement.
The W.T.O. Government Procurement Agreement, which requires free trade in government purchases, has been signed by virtually all industrialized countries. China agreed to sign it on joining the W.T.O. in November 2001, but still has not done so, possibly because of internal pressure that strongly favors steering lucrative government contracts to domestic companies.
Chinese leaders have strongly criticized provisions like the “Buy America” provision in the 2009 economic stimulus legislation, despite having similar restrictions on the use of its own stimulus funds.
China accounted for at least half the world’s production of solar panels in 2010 and its market share is rising. While the United States and Europe have focused on subsidizing solar panel purchasers, China has focused on subsidizing its solar panel manufacturers. It then exports virtually all of its panels to the United States and Europe, taking advantage of American and European consumer subsidies.
Industry experts predict that the new legislation will boost the American solar panel market, partly by requiring future military contracts to specify American-made panels and partly by encouraging Chinese solar panel manufacturers to establish factories in the United States, with the concomitant higher labor and overhead costs.
Plaintiffs Question "Carbon Negative" Water
The Fiji Water Company has attracted the attention of plaintiffs lawyers with its “carbon negative” bottled water. The Newport Trial Group, a law firm representing California consumers, sued Fiji Water last month, arguing that Fiji’s carbon offset claims are deceptive and misleading. The complaint against Fiji Water argues that the product is not necessarily carbon negative because Fiji’s offsets are premised on a speculative carbon offset method that “may or may not happen in the future.”
According to the California consumers, Fiji’s carbon offsets are misleading because they rely on “forward crediting,” a method of accounting for carbon offsets based on future offsetting activities. The complaint explains that this method of carbon offsetting is unreliable and speculative according to the Stockholm Environment Institute, an independent scientific think tank.
Fiji claims that its products are “carbon negative,” based on the purchase of carbon offsets equal to 120% of the company’s carbon emissions. Even if Fiji can prove that its carbon offsets will ultimately meet that goal, expect the plaintiffs to argue that the carbon negative claim is still deceiving, on the theory that consumers were not apprised of the fact that offsets will occur in the future. If Fiji’s future carbon offsets are found to be mismanaged, disorganized, or even false, consumers may succeed in obtaining a substantial judgment at trial, or a cash settlement.
The question of whether Fiji Water has actually deceived consumers will certainly be the focus of litigation in the California proceeding for at least a couple years. In the meantime, while the Federal Trade Commission’s proposed new Green Guides, released last fall signal increasing federal enforcement against greenwashing, the Fiji Water case is an important reminder that environmental marketing claims may also be challenged by private parties.
Another interesting aspect of this case is that while the California Consumers do not make reference to the FTC’s new Green Guides, the theory of their case is consistent with FTC policy. The proposed new Guides tell marketers that they should “clearly and prominently disclose if [their] carbon offset represents emission reductions that will not occur for two years or longer.” FTC regulations are not California law, but California’s consumer protection statute actually makes reference to the Green Guides, establishing a legal defense for companies if they can prove that their marketing claims comply with the Guides.
Finally, regardless of how the Fiji water case proceeds, it teaches another valuable lesson. Whether the claim is for carbon offsets, renewable energy, or another type of green claim, marketers must follow the key principles of clarity and disclosure. A bare claim is risky – but clear, concise disclosure can reduce and potentially eliminate that risk.
Idaho QFs Petition FERC to Approve Sale of Unbundled RECs Into California
On December 15, 2010, Idaho Wind Partners 1, LLC (“Idaho Wind”) filed a petition for declaratory order with FERC (Docket EL11-12) on behalf of its eleven qualifying facilities ("QFs") in Idaho to approve an unconventional plan to sell RECs into California. Idaho Wind is seeking confirmation that the plan (1) would not violate any of the Commission’s anti-manipulation rules and (2) would in no way result in the loss of small power producer QF status.
In a nutshell, Idaho Wind proposes to sell bundled power and RECs from the eleven QFs to a third party “inside the fence” (i.e., before being placed on the grid). Idaho Wind has already applied for market based rate authority for each of the projects- a step required prior to the sales. The third party would then instantaneously sell the power back to the projects, keep the RECs, and attach them to power already scheduled for delivery into California. After buying the power back from the third party, the projects would sell it to Idaho Power (which has no need for the RECs because the state has no renewable portfolio standard) under Idaho Power’s standard PURPA contract.
In its petition, Idaho Wind states that the projects qualify as eligible renewable resource (“ERR”) facilities and that the third party can meet the California RPS deliverability requirement. After discussing the ERR qualifications, the petition cites an example from the California Energy Commission’s guidebook that it believes would allow the third-party to deliver the unbundled RECs into California:
“The retail seller [buying from the ERR] could provide firming and shaping services. The retail seller could buy energy and RECs from an RPS-eligible facility, sell the energy back to the facility, and ‘match’ the RECs with energy delivery into California from a second PPA and/or with imports under a pre-existing PPA.” CEC Guidebook at n.2 (emphasis added).
Idaho Wind has requested expedited review. Only PG&E has intervened in the docket at this point.
