Army Issues Draft RFP for $7 Billion in Renewable Energy Contracts
On Friday February 24, 2012, the U.S. Army Engineering & Support Center in Huntsville, Alabama issued a draft request for proposals (Solicitation No. W912DY-11-R-0036, the “Draft RFP”) titled “Large Scale Renewable Energy Production for Federal Installations.”
The objective of the solicitation, in its current form, is to procure renewable and alternative energy through power purchase agreements (“PPAs”) or contractual equivalents for terms of up to 30 years. The government does not want to acquire generation assets, only energy. Projects may be located on or near any federal property located within the United States, including Alaska, Hawaii, territories, provinces or other property under the control of the United States. “The intent is to award contracts to all qualified and responsible offerors, both large and small businesses.” As stated in the Draft RFP, the proposed categorization of projects is as follows:
| Energy Production | Task Order Competition | Caveats |
| Greater than 12 MW | Unrestricted competition | |
| 4 MW up to 12 MW | The Contracting Officer will first consider reserving the Task Order for small businesses. The determination will examine the size of the project, the complexity of the project, and the level of financing required. | Before making the determination on a particular project, the Contracting Officer will request a letter of interest from all small business firms. If fewer than two responses are received, the Task Order will open for unrestricted competition. |
| Less than 4 MW | Reserved for small businesses | If no proposals are received, or if all proposals are technically unacceptable and/or unreasonably priced, the Task Order will open for unrestricted competition. |
Technologies that will be considered include solar, wind, biomass, and geothermal. The estimated maximum value of all contracts awarded pursuant to the Draft RFP is $7 billion over a period of 10 years.
It is important to note that the final RFP "may significantly vary from this draft." The Army is accepting comments via the ProjNet website through March 21, 2012. The final RFP will be issued at some point after that date.
Stoel Rives Offering 50% Registration Discount at Project Finance: The Tutorial
Stoel Rives partner Ed Einowski will serve as a faculty member and speaker at Infocast’s Project Finance: The Tutorial, taking place next month in New York City.
This program, now in its 25th year, is truly a critical financial tool, as it provides insights into obtaining financing in today's market environment. This is why Stoel Rives is pleased to offer a 50% registration discount to our friends and colleagues. Simply enter code 122015 during your registration to receive the discount.
The 2012 edition will provide up-to-the-minute information on how to best access today's capital and credit markets. Topics addressed will include:
- structuring deals in a post-tax grant environment
- maximizing performance through new technology
- decreasing performance risk
- putting together bankable projects in a tightening lending environment
Ed will present Commercial Issues and Risk Allocation in Project Documentation, on Thursday, March 22, from 1:00 to 1:45 p.m. This presentation will review critical terms, provisions and negotiations involved in forming project agreements, such as:
- construction and warranty issues
- technology advancements
- operation problems
- transmission interconnection issues
Click here to learn more, or to register online.
President Proposes Permanent PTC Extension
On Wednesday, February 22, the White House and the Department of Treasury issued a report entitled “The President’s Framework for Business Tax Reform.” Among other proposals for reforming the way U.S. businesses are taxed, the report calls for a permanent extension of the Production Tax Credit (“PTC”) for renewable energy projects. In addition, the President’s plan would make the PTC refundable, ostensibly to avoid the inefficiencies incurred in tax equity structures. The President’s plan does not mention the investment tax credit, which is the only subsidy available for solar energy as well as certain other renewables.
Interestingly, the President’s FY 2013 budget proposals, released just ten days earlier, included different proposals for renewable energy. Under the President’s budget, the PTC would not be made permanent. Instead, it would be extended for wind facilities (only) that are placed in service in 2013. It would also extend the election to claim the ITC for wind in lieu of the PTC). In addition, the section 1603 grant would be extended to facilities for which construction began in 2012 (if placed in service in 2012). For property placed in service after 2012, the President’s budget would replace the section 1603 grant with a refundable tax credit applicable to property for which construction began in 2009-2013. The refundable credit would apply to wind facilities placed in service in 2013 (that meet the requirements of the PTC) and for other energy property in 2013-2016. The qualification requirements for the refundable tax credit would be the same (except for the effective date provisions) as currently apply to the section 1603 grant.
It is unclear why the proposals have been changed or whether either has a serious prospect of being enacted. The original budget proposal was estimated to cost $3.87 billion over ten years. There was no revenue estimate issued for the latest proposal.
Idaho Wind Moratorium Advances
A controversial bill that would would halt development of industrial wind farms in Idaho for two years narrowly made its was out of the House Local Government Committee by a vote of 6-5 and now goes to the full House. The bill would kill any future wind development in Idaho (at least for two years), and may put the breaks on many projects currently under development.
Although Rep. Simpson, the sponsor of House Bill 561, testified that the bill would not impact already "approved" wind projects, the bill does not define at what stage a project is deemed approved. This ambiguity in the bill's language raises significant concerns about the impact on projects currently under development and is making investors and lenders, who have already invested millions of dollars in Idaho based projects, very nervous. The bill states that "Projects that have been approved and against which no legal proceedings have been filed as of February 1, 2012, shall be allowed to be constructed." However, this language provides little comfort since after the effective date the bill also flatly prohibits "municipalities, counties and state agencies" from "granting approval or issuing any new licenses or permits for the construction or operation of wind turbines that exceed one hundred (100) feet in height." Even for projects that have received their Conditional Use Permit prior to February 1 and are currently under construction, this language would prohibit issuance of individual building permits,which are required for each turbine, or prohibit the state from issuing the final electrical permits for the substation and collection systems. The bill is even more problematic for projects that have undergone lengthy and expensive pre-development studies and federal environmental reviews but have not yet received a Conditional Use Permit.
CAISO Initiates Broad Cost Allocation Stakeholder Process
Yesterday, the California Independent System Operator Corp. (“CAISO”) issued a straw proposal entitled “Cost Allocation Guiding Principles.” The straw proposal kicks off a new stakeholder process designed to establish a set of guiding principles for cost allocation that can be applied throughout the CAISO’s various markets and services.
As expected, the stakeholder community has been divided over how to address cost allocation. Recently, the CAISO has reviewed cost allocation issues in several initiatives impacting renewable energy generators in the CAISO balancing authority area, including the Renewable Integration: Market and Product Review Phase 1, the Renewable Integration: Market Vision and Roadmap, and the Flexible Ramping Product. The stakeholder comments in these initiatives and others provided the basis for the CAISO’s current straw proposal. The CAISO plans to apply this new set of guiding principles both new programs (starting with the ongoing Flexible Ramping Product initiative) and, later in 2012, existing programs (CAISO expects to make a broad-spectrum review of existing cost allocations to ensure consistency with the new guiding principles.
Read on for a summary of the guiding principles proposed by the CAISO yesterday, which are similar to the Federal Energy Regulatory Commission’s cost causation principles in Order No. 1000:
Continue Reading...BPA Seeks Comment on Draft Proposal to Split Environmental Redispatch Costs
The Bonneville Power Administration (“BPA”) made headlines this week with the release of its Draft Oversupply Management Protocol (the “Draft Oversupply Protocol”). BPA’s Draft Oversupply Protocol is intended to address concerns raised by BPA’s Environmental Redispatch (“ER”) policy of curtailing wind generation without compensation during periods of high water. Back in December, in response to a complaint filed against BPA by a group of owners of Pacific Northwest wind energy projects, the Federal Energy Regulatory Commission (“FERC”) issued an order holding that BPA’s ER policy was unduly discriminatory and preferential, in violation of Section 211A of the Federal Power Act (the “ER Order”). FERC directed BPA to file a revised Open Access Transmission Tariff (“OATT”) by March 6, 2012 addressing the comparability concerns raised in the proceeding in a manner that would provide for transmission service that is not unduly discriminatory or preferential. Click here to read our Energy Law Alert on the ER Order.
BPA and several other parties filed requests for rehearing of the ER Order. FERC’s procedural rules provide that if FERC does not act on a rehearing request within 30 days of the filing, the request for rehearing is deemed denied. Earlier this week, FERC issued an order (the “Rehearing Order”) granting rehearing in order to give itself more time to consider the matters raised in the requests for rehearing. Notwithstanding the Rehearing Order, BPA must still submit its compliance filing on the initial ER Order no later than March 6.
In preparation for its March 6 compliance filing, BPA released for comment its Draft Oversupply Protocol. In a nutshell, BPA proposes to provide approximately 50 percent compensation to operating wind generators in order to continue its ER policy of (i) curtailing wind generators during periods of high water, and (ii) using the wind generators’ reserved transmission capacity to deliver federal hydropower.
Under BPA’s Draft Oversupply Protocol, BPA would compensate wind generators for the costs of displacing wind curtailed during ER events. The displacement costs include the production tax credits and renewable energy credits the generators would have earned had their generation not been curtailed. However, for wind projects that reach commercial operation before March 6, 2012, approximately 50 percent of the displacement costs would be recovered from the wind generators through a new rate. BPA would allocate the other 50 percent of the costs to the users of the Federal Base System. Wind generators with a commercial operation date after March 6, 2012 have the choice of (i) avoiding the new rate by being redispatched without compensation or (ii) receiving partial compensation for the ER curtailments and sharing in the costs. BPA proposes to conduct a rate case to determine how it will recover the displacement costs (i.e. what percentage of the costs it will collect from the wind generators and what percentage of the costs it will collect from users of the Federal Base System).
BPA is accepting comments on the proposal until noon on February 21, and will host a workshop on the proposal on February 14, from 9 am to noon. Click here for information on the workshop and how to submit comments.
Update: California Energy Commission Postpones Action on Proposed Decision Allowing PV Projects to Opt-In to CEC Permitting Process
In a previous blog, we reported on a proposed decision pending consideration by the California Energy Commission (CEC), which would allow solar photovoltaic project developers to opt-in to the CEC's permitting process. The CEC has announced that its decision on this matter has been postponed to an as-yet undetermined date.
BioEnergy Law Alert: EPA Issues Notice of Violation to Absolute Fuels
On February 2, 2012, the Environmental Protection Agency ("EPA") issued a Notice of Violation ("NOV") of the Renewable Fuel Standard ("RFS") to Absolute Fuels, a company located in Lubbock, Texas. The NOV alleges that between August 31, 2010, and October 11, 2011, Absolute Fuels generated over 48 million Renewable Identification Numbers ("RINs") and that all of these RINs were invalid. This EPA action is likely to have a substantial impact on the overall RIN market and could be followed by related NOVs to other market participants.
The Absolute Fuels NOV represents the second major enforcement action by the EPA under the RFS. The first action alleged invalid generation of over 32 million RINs by Clean Green Fuel. The Clean Green Fuel action proceeded with a criminal filing by the U.S. Attorney for the District of Maryland and was followed by the EPA's filing of 24 NOVs against the companies that utilized the Clean Green Fuel RINs for compliance with RFS obligations. EPA did not allege that the obligated parties that received the Clean Green Fuel RINs had any knowledge or reasonable basis to have knowledge regarding the RINs' invalidity. This alert provides an analysis of the regulatory basis for these EPA enforcement actions.
The Interconnection Landscape Changes Yet Again: FERC Conditionally Accepts the California ISO's Interconnection Queue Reform Phase 2
On January 31, 2012, the Federal Energy Regulatory Commission (FERC) conditionally accepted additional reforms to the California ISO’s Generator Interconnection Procedures (GIP) that significantly change the rules that apply to developers seeking to interconnect power generation facilities in the California ISO’s balancing authority area.
The decision continues the California ISO’s efforts to reform the GIP that began in 2008, and focuses on 18 specific issues that arose from stakeholder efforts, interconnection agreement negotiations, the California ISO’s transmission planning process, or that were carried over from the previous round of reforms.
The reforms addressed the following issues and more:
• Deliverability Status
• Financial Security Deadlines
• Posting of Security and Reimbursement of Costs for Network Upgrades
• Reductions in Project Size
Click here to continue reading this alert.
To learn more about the reforms approved yesterday and how they may affect your generation development plans, please contact one of the attorneys listed below.
Maurcus Wood at (503) 294-9434 or mwood@stoel.com
Seth Hilton at (415) 617-8943 or sdhilton@stoel.com
Jason Johns at (503) 294-9618 or jajohns@stoel.com
Chad Marriott at (503) 294-9339 or ctmarriott@stoel.com
New DOE Resource Assessments Nudge Wave and Tidal Energy Forward
The U.S. Department of Energy (“DOE”) recently released two new nationwide resource assessments for wave and tidal energy projects in the U.S. The reports, funded by the DOE and prepared by the Electric Power Research Institute ("EPRI") and the Georgia Tech Research Corporation, present the most rigorous and comprehensive analysis to date on the magnitude of the resources available for electricity generation and where those resources are located.
Wave Energy: The wave energy report, “Mapping and Assessment of the United States Ocean Wave Energy Resource” states (as most expected) that the best resources are on the West Coast, including Alaska and Hawai’i. EPRI calculated the resource’s potential to be 400 gigawatts nationally.
Tidal Energy: The tidal energy report, “Assessment of Energy Production Potential from Tidal Streams in the United States” follows on the heels of the DOE’s release of its interactive national tidal resource database in July 2011. For more on the database and relevant links, see my blog on the topic.
Ocean Current, Ocean Thermal Gradients, and New Hydropower: In addition to these two new reports, the DOE anticipates releasing additional resource assessments for developers of ocean current, ocean thermal gradient, and new hydropower projects.
Based on our experience assisting clients to develop wave, current, and tidal energy projects across the country, we are encouraged by both the results of the resource assessments and the DOE's encouraging perspective on the role that new hydropower and hydrokinetic projects should have in expanding the nation's renewable energy resource mix.
For detailed information on all aspects of marine and hydrokinetic project development, download a PDF of our recently updated Law of Marine and Hydrokinetic Energy.
