Ameren Should LOSE the Latest Battle Over Option 1 Network Upgrade Funding in the Midcontinent ISO Region
Ameren is at it yet again--perpetuating a method for funding generator interconnection network upgrades in MISO that the Federal Energy Regulatory Commission (FERC) found to be unjust, unreasonable, and discriminatory over three years ago. Ameren has already won two cases that allowed it to continue using Option 1 funding for certain interconnection customers. But Ameren should lose this one. Here's why:
A Brief History. Prior to March 22, 2011, the MISO tariff provided three methods for funding interconnection network upgrades. Option 1 required an interconnection customer to upfront fund the cost of network upgrades (post security and pay monthly construction costs); when those upgrades became commercially operational, the transmission owner would reimburse the full amount paid by the customer and then establish a transmission rate to charge the customer for using the upgrade on an ongoing basis. Option 2 funding also required the customer to pay upfront construction costs, but then the customer was reimbursed a portion of those costs following commercial operation. Option 2 did not include an ongoing rate. As a result, over time Option 1 funding could result in multiples of the actual cost that a customer might pay under Option 2. (The third option--"self-fund"--allowed a transmission owner to pay upfront costs itself and then charge a usage rate.)
On March 22, 2011, FERC responded to a complaint about Option 1 funding by independent power producers, determining that the method was "unjust, unreasonable, and discriminatory." FERC ordered MISO to remove Option 1 funding from its tariff. That order is found here: E.ON Climate & Renewables.
However, in the past couple of years, Ameren has successfully won the right to continue using Option 1 funding in interconnection agreements that were signed prior to FERC's decision in E.ON. After FERC issued its decision in E.ON, certain customers attempted to obtain the benefit of that decision by having FERC alter their agreements where they had agreed to Option 1 funding. But FERC denied the attempts, primarily on the basis that those prior agreements expressly provided for Option 1 funding and that it would not be in the public interest to unilaterally modify the contracts. In other words, those customers who sought to benefit from the E.ON decision had express notice that Option 1 funding would apply and they failed to raise a timely dispute; FERC would not reset the contracts they had agreed to. Those decisions are available here: Rail Splitter (agreed to Option 1 funding by signing a Facilities Service Agreement) and Hoopeston (agreed to Option 1 funding in its interconnection agreement).
Now we come to the current dispute over Option 1 funding. This docket focuses on an interconnection agreement that Ameren signed with White Oak Energy in 2007. At that time, Option 1 funding existed under the MISO tariff, but White Oak's interconnection agreement said nothing expressly about Option 1 funding. In addition, Ameren was not required to select the funding method until the network upgrades reached commercial operation. At the time of signing its interconnection agreement, if White Oak had disputed the potential application of Option 1, FERC would have likely dismissed the dispute for being unripe. It wasn't a real issue yet.
Fast forward four years. Ameren completed construction of White Oak's network upgrades in 2011 and notified White Oak at that time that Option 1 would apply. White Oak disagreed repeatedly, leaving Ameren forced to file White Oak's Facilities Service Agreement unexecuted with FERC. Under the proposed funding method, White Oak's network upgrades (actual cost $2,399,128) will cost $8,292,180 over 20 years under the ongoing rate. You can see Ameren's application to FERC here: White Oak FSA Application.
So why should White Oak receive a different result than the customers in Rail Splitter and Hoopeston? White Oak should be treated differently because, until now, it had no prior opportunity to complain to FERC about this method for funding network upgrades that we know to be discriminatory. Unlike the customers in Rail Splitter and Hoopeston, who waived their opportunity to complain and consequently needed FERC to undo contracts they'd agreed to, White Oak has never agreed to Option 1 funding--there is no contract to undo As a result, White Oak should now be afforded the chance to argue against Option 1 funding on the merits (see E.ON), rather than being hung up by procedural technicalities and the Mobile-Sierra doctrine.
If FERC were to rule in White Oak's favor, then the decision would help to restrict the application of this discriminatory method of funding network upgrades to a limited group of interconnection customers (i.e., those who expressly agreed to Option 1 in a contract) and to insulate those who are just now receiving notice of Option 1 funding from the absurd results that accompany it. But we'll need to wait and see if those at FERC who call balls and strikes see it the same way.
Ralls Corp., a privately-held company owned by executives of the China-based heavy machinery manufacturing conglomerate Sany Group, recently filed an appeal in its ongoing effort to avoid President Obama’s order requiring the company to divest itself of its interest in four wind farms in Oregon. We have previously reported on the order, which was issued by the president on the recommendation of the Committee on Foreign Investment in the U.S. (CFIUS) and followed a similar CFIUS order. The CFIUS order was withdrawn following issuance of the executive order. Our earlier articles can be found at http://www.lawofrenewableenergy.com/tags/ralls-corp/.
On February 7, Ralls Corp. filed an appeal of the D.C. Circuit Court’s October ruling that Ralls Corp. was not deprived of due process and that it was not entitled to know the specific basis for the executive order. The appeal asserts, among other things, that the district court erred in finding that Ralls Corp. has no constitutionally protected interest in the wind projects and in granting undue discretion to the president to prohibit a transaction on national security grounds. Ralls Corp. takes particular issue with the federal government’s failure to state with specificity the factual basis for the orders and to give Ralls Corp. an opportunity to address and rebut such a statement.
Separately, the US government has initiated a civil action to force the sale of the wind projects, which are located adjacent to a US Naval facility that is believed to be used to test unmanned drones and other electronic warfare equipment, as required by the executive order.
A successful outcome for Ralls Corp. seems unlikely, given the deference the judicial branch has historically given the executive branch with respect to matters of national security. The ongoing dispute continues to serve as a reminder of the extensive authority of CFIUS and the president to intervene in transactions to protect national security interests and, therefore, the importance of notifying CFIUS of transactions that may concern national security.
Like other Independent System Operators have done before it, the Southwest Power Pool (SPP) is back at the drawing board in an effort to further refine its generator interconnection procedures and improve on queue reforms initially put in place in 2009. And also like other ISOs that have continued to tinker with queue reform, SPP is looking to make the interconnection process more demanding so that only the "viable" projects get through.
Among the various proposed changes, there are a few that generation developers should key in on.
- SPP proposes to allow later-queued customers pass by higher-queued customers in terms of queue priority, provided that the later-queued customer is the first to reach the Facilities Study phase. Previously, customers who reached the DISIS queue could not lose their queue priority and be passed by. But now priority goes to customers who reach the Facilities Study first. This change, of course, will impact customers' cost responsibilities, as priority to unused transmission capacity will be subject to the race to the top.
- To enter the Facilities Study phase (and lock in queue priority), customers must complete a financial milestone by providing security equal to $3,000 per megawatt of the generator size. SPP has proposed removing other choices that customers previously used for entering this phase of the study process. But watch out--customers who later withdraw from the queue may forfeit this deposit.
- Prior to signing an interconnection agreement, an interconnection customer may extend its commercial operation date by no more than three years. Anything longer will be considered a material modification and will result in a loss of queue position.
- Under proposed revisions to the interconnection agreement, a customer would have three years following its designated Commercial Operation Date to complete its generating facility. A customer who fails to do so will have its interconnection agreement terminated. In addition, customers who fail to bring their full generation capacity online within that timeframe will lose rights to any capacity that remains unused at the three-year mark.
- Lastly, customers who sign an interconnection agreement must post 20% of the costs of their network upgrades within 30 days of execution. This deposit may be non-refundable under certain circumstances.
Given the queue reforms that FERC has accepted in other regions, it's likely that much of what SPP has proposed will make it into the tariff.
SPP has asked that these latest reforms be made effective March 1, 2014, and applicable to any customer who does not have an interconnection agreement with an earlier effective date. For those customers currently negotiating an interconnection agreement: the race is on.
We last reported to you about Committee on Foreign Investment in the United States (CFIUS) activities in connection with the Ralls Corporation case. CFIUS is a multi-agency U.S. government committee charged with reviewing foreign acquisitions of U.S. businesses for national security implications
The committee recently released its unclassified Annual Report to Congress for 2013 regarding its activity during calendar year 2012. My colleague CJ Voss and myself have prepared an analysis of the report, available on our firm’s website. As we explain in our analysis, the report offers important insights for foreign companies that are considering investment and M&A transactions that could raise U.S. national security considerations.
With the holidays behind us and the cheer and reverie of the New Year trailing off, wind developers in Idaho may be realizing that the Federal Energy Regulatory Commission (FERC) left a lump of coal in their stockings on Christmas Eve. On December 24, FERC agreed to dismiss an historic legal action that it had taken to enforce the Public Utility Regulatory Policies Act of 1978 (PURPA) against the Idaho Public Utilities Commission (IPUC) on behalf of Qualifying Facility (QF) wind developers who have been beaten up by numerous decisions coming out of the state agency over the past several years. FERC had never before sought to enforce PURPA against a state agency, but the IPUC apparently found FERC’s tipping point.
In exchange for its agreement to dismiss this first-of-its-kind action, FERC extracted a simple acknowledgement of questionable value from the IPUC: “The Idaho PUC acknowledges that a legally enforceable obligation may be incurred prior to the formal memorialization of a contract to writing.” And that is as far as their substantive agreement goes. In other words, the IPUC acknowledges that a hypothetical situation may occur, without agreeing to the all-important question of when that situation does occur. The agreement signals an apparent policy change at FERC, and it also leaves QF wind developers on their own, once again, to enforce PURPA in protracted litigation in federal court, i.e., without a viable option.
For those keeping score, there was none in this dispute: FERC threw in the towel before the first bell.
On December 16, 2013, San Diego Gas & Electric Company (SDG&E) issued its 2013 Request for Offers ("RFO") seeking Eligible Renewable Resources. This solicitation will facilitate SDG&E’s compliance with California’s Renewables Portfolio Standard (“RPS”).
The solicitation seeks Eligible Renewable Resources from all types of renewable technologies providing both Renewable Energy Credits (“RECs”) and Energy (“Bundled Products”), and REC-only products. SDG&E is soliciting Category 1 and 2 products for a term of 15 years or less and with contractual deliveries beginning in 2020. The Commercial Operation Dates of these facilities may be as early as 2016 or as late as 2021. SDG&E is also soliciting Category 3 products generated in 2018 at the earliest, with a preference for those generated in 2020 and 2021.
SDG&E encourages respondents to carefully review submission documents and provide sufficient details in all required bid forms. One pre-bid conference will be held via webinar on January 15, 2014 from 9:30am-12pm PST. Webinar information will be posted on the RFO website once it is finalized. Any party interested in attending the webinar should register on the PowerAdvocate® site and must send the company name, attendees’ names, titles and contact information to firstname.lastname@example.org. Please limit your participation to two representatives per organization.
Offers in response to the RFO are due January 29, 2014 via the PowerAdvocate® online platform. In order to submit a bid, applicants must register at www.poweradvocate.com. Please monitor the RFO website and PowerAdvocate® online platform for subsequent updates, notices and announcements.
Important RFO Dates
• Bidder’s Conference: January 15th
• RFO Closing Date: January 29th (bids are due by 12 NOON PST on January 29th)
• Shortlisted Respondents Notified: March 10th
For additional information and to download the required documents visit: http://www.sdge.com/renewable-portfolio-standard-rfo-december-2013
Questions/comments can be submitted to: email@example.com
Today the U.S. Fish and Wildlife Service issued for public inspection its final rule to extend the maximum term for programmatic “take” permits under the Bald and Golden Eagle Protection Act to 30 years, subject to a recurring five-year review process throughout the permit life. The final rule will be published in the Federal Register on Monday. This is big news for the wind industry. AWEA’s reaction to the announcement can be found here. For more information, see our full alert here.
On September 9, 2013, the U.S. Army Engineering & Support Center in Huntsville, Alabama, acting in conjunction with the Army Energy Initiatives Task Force (“EITF”), issued the third round of awards under the multi-award task order contract for renewable and alternative energy (Solicitation Number W912DY-11-R-0036, the “MATOC”) issued last summer. The Army received 45 proposals for the wind technology segment of the MATOC, but only seventeen (17) Indefinite Delivery/Indefinite Quantity (“ID/IQ”) contracts were awarded, and only four (4) of those were awarded to small businesses (as defined in the solicitation). While the 17 ID/IQ contracts do not authorize the construction of any specific projects, they do give the contract recipients an exclusive right to bid on task order Requests for Proposals (“RFPs”) for wind projects that will be issued by individual installations under the MATOC.
These awards represent yet another step forward in launching the Army’s $7 billion solicitation for privately-financed renewable energy projects. The awardees submitted proposals last October. Since then, the EITF has been working diligently with industry participants on a standard form power purchase agreement- a form that is expected to serve as the “standard” contract for a wide level of renewable energy procurements, including base-level RFPs. (Stoel Rives LLP attorneys, on behalf of clients and other industry stakeholders, have provided comments on an advanced version of the standard form.)
The total number of wind-energy RFPs that will be issued under the MATOC is not known, but many in the industry expect the number to be small relative to the number of solar project proposals the Department of Defense will solicit.
The first ID/IQ contracts were awarded to five geothermal developers on May 3, 2013, and the second round was awarded to twenty-two solar developers on August 28, 2013. No task orders for geothermal or solar projects have been issued under the MATOC umbrella to date. However, several solar RFPs and requests for statements of qualifications have been issued separately in recent months. While the Army has not announced awardees under the biomass portion of the MATOC, its press release in August stated that those awards will be announced by the end of this calendar year.
As we discussed in this alert, the U.S. Fish and Wildlife Service (FWS) released its final Eagle Conservation Plan Guidance (ECP Guidance) on April 26, 2013. Intended to promote compliance with the Bald and Golden Eagle Protection Act (BGEPA) for wind development projects that have the potential to affect bald and golden eagles, the ECP Guidance provides specific in-depth guidance for conserving eagles in the course of siting, constructing, and operating wind energy facilities.
The industry norm prior to the FWS’s release of the ECP Guidance was to not pursue Eagle Take Permits (due, in part, to the 5-year term limitation in the 2009 final rule and in anticipation of the 30-year permit rule). Now that the ECP Guidance is in place, however, there is increased scrutiny on BGEPA compliance issues and the FWS has become more assertive in its efforts to persuade wind developers to apply for Eagle Take Permits. Meanwhile, the prediction that the FWS’s 30-year permit rule is imminent seems less likely. As such, we are now advising our clients to reassess their BGEPA compliance strategies to account for what appears to be a “new normal” in BGEPA compliance. If you would like more information on this issue, please contact Barb Craig at (503) 294-9166 or Sarah Stauffer Curtiss at (503) 294-9829.
Xcel Energy, the nation’s leading wind power utility, announced yesterday that it will add three large wind farms to its wind energy portfolio. The 600 megawatt increase is the utility’s single largest increase in its Upper Midwest service area.
The 33 percent increase will augment Xcel’s existing 1,800 megawatts of wind capacity and allow it to power an additional 180,000 homes via wind. The utility estimated that the increase in wind capacity will allow customers to save $180 million over the projects’ 20-year life span compared to electricity generated from Xcel’s existing power plants.
A major reason for the savings is the extension of the federal production tax credit. As long as the three projects begin construction by December 31, 2013, the projects will receive a 2.3 cents/kWh subsidy for the first ten years of operation.
In addition to providing cheaper electricity, Xcel’s planned increase in its wind portfolio will help it achieve its 31.5% mandate under Minnesota’s renewable portfolio standard. The standard requires that eligible renewable electricity account for 31.5% of Xcel’s total retail electricity sales in Minnesota by 2020.
7th Circuit Affirms FERC's Decision on Multi-Value Projects, Relying Heavily on Policy of Promoting Wind Development
From my colleague, Andrew Moratzka:
On June 7th, 2013, the United States Court of Appeals for the Seventh Circuit issued an opinion in Illinois Commerce Commission, et al., v. Federal Energy Regulatory Commission, affirming the Federal Energy Regulatory Commission’s approval of the Midcontinent Independent System Operator, Inc. (MISO) Multi-Value Project (MVP) tariff for financing new high-voltage power lines that largely serve remote wind farms.
Six issues were before the court: (i) the proportionality of benefits to costs for MVPs; (ii) the procedural adequacy of the previous proceedings; (iii) the propriety of an energy-cost allocator for MVPs; (iv) whether MISO should be allowed to add an MVP fee to utilities belonging to the PJM Interconnection, LLC (“PJM”); (v) whether MISO should be permitted to assess some costs associated with MVPs; and (vi) whether the Commission’s approval of the MVP tariff violates the Tenth Amendment to the Constitution by invading state rights. The fourth and fifth issues were remanded. And the court quickly dismissed the sixth issue at the outset of the opinion, stating that the arguments amounted to an assertion that the MVP tariff “provides a carrot that states won’t be able to resist eating.” This entry therefore focuses on issues (i) – (iii).
The court addressed issues (i) and (ii) together. There are two important takeaways in this section of the opinion. First, MISO’s burden of establishing rough proportionality of costs to benefits under the Federal Power Act arguably changed in the name of policy. The court stated that “The promotion of wind power by the MVP program deserves emphasis” and that wind power will probably “grow fast and confer substantial benefits on the region.” The court determined there was “no reason to think these benefits will be denied to particular subregions of MISO” and found that other benefits (e.g., reliability) were real, even though they couldn’t be calculated in advance. The court then went on to find that MISO’s and FERC’s efforts to match cost and benefits, even if crude, were sufficient. It is not entirely clear how this aspect of the opinion can be reconciled with the court’s previous opinion in Illinois Commerce Commission v. FERC. But it appears the policy of promoting wind power influenced the decision in this case. Moreover, the court rejected requests for an evidentiary hearing on this issue, on the basis that requiring such proceedings after two years of appeal “would create unconscionable regulatory delay.”
The second takeaway is a comment made by the court in response to a criticism raised by the State of Michigan, which claimed it would not benefit from out-of-state MVPs because a provision in Michigan law forbids Michigan utilities from counting renewable energy generated out of the state to satisfy requirements under the state’s Clean, Renewable, and Efficiency Act of 2008. The court stated that Michigan cannot discriminate against out-of-state renewable energy without violating the commerce clause of Article I of the Constitution. This statement could have significant ripple effects on similar laws around the country that give preference to in-state renewable resources or impose limits on imported generation.
The policy of promoting wind development also seemed to influence issue (iii). The court found that the objection to an energy allocator was refuted by the fact that a primary goal of the MVPs is to increase the supply of renewable energy. It acknowledged that wind production is intermittent and not a reliable source of energy to meet peak demand. But the court concluded that MVP lines will enable plants to serve off-peak demand and stated that “MISO and FERC were entitled to conclude that the benefits of more and cheaper wind power predominate over the benefits of greater reliability brought about by improvement in meeting peak demand.”
IRS Issues Clarification Regarding "Binding Written Contract" in its "Start of Construction" Guidance for PTC or ITC Energy Credits
As we originally noted, the IRS guidance issued April 15 regarding the "start of construction" requirement for energy projects to qualify for PTC or ITC contained a "big surprise" regarding its definition of a binding contract. Unlike previous incentive programs, the guidance provided that contracts that limit damages to a specified amount, such as by use of a liquidated damages provision, would not be treated as “binding”. Only binding written contracts for work performed on behalf of the taxpayer are taken into account for purposes of satisfying the test for significant physical work.
Following questions about the definition, the IRS has now issued an updated version (PDF) of its Notice 2013-29.
Section 4, Physical Work, paragraph 4.03(1), originally read: “(1) Binding written contract. A contract is binding only if it is enforceable under local law against the taxpayer or a predecessor and does not limit damages to a specified amount (for example, by use of a liquidated damages provision).”
The revised Notice incorporates by reference the same 5% liquidated damages threshold that was used in the previous bonus depreciation regulations by adding the following text: “… For this purpose, a contractual provision that limits damages to an amount equal to at least five percent of the total contract price will not be treated as limiting damages to a specified amount. For additional guidance regarding the definition of a binding contract, see § 1.168(k)-1(b)(4)(ii)(A)-(D).”
If you have questions regarding the guidance's revised binding contract definition or any other issue regarding the PTC, the ITC or related matters, please contact one of the Stoel Rives attorneys listed below.
Chris Heuer at (503) 294-9206 or firstname.lastname@example.org
Greg Jenner at (202) 398-1795 or email@example.com
Adam Kobos at (503) 294-9246 or firstname.lastname@example.org
Carl Lewis at (206) 386-7688 or email@example.com
Kevin Pearson at (503) 294-9622 or firstname.lastname@example.org
On April 1, 2013, the Army Energy Initiatives Task Force (“EITF”) and the U.S. Army Mission and Installation Contracting Command at Fort Sam Houston in Texas published a template Renewable Energy Service Agreement Performance Work Statement (the “PWS”) for comment by interested stakeholders.
The proposed scope of the PWS is broad, covering everything from insurance and OSHA requirements to interconnection responsibilities and power prices. Thus, the PWS purports to be part power purchase agreement, part EPC agreement, and part operations and maintenance agreement. As discussed in my previous entry, this comment opportunity is important to all renewable energy developers that intend to contract with the Army. However, it should be of particular interest to teams that responded to the Army’s Multi-Award Task Order Contract (“MATOC”) last fall because the final PWS will likely be incorporated into each base-level RFP issued under the MATOC.
It is important to note that the template is not a “one-size-fits-all” document and contemplates quite a bit of input from individual bases at the time RFPs are issued. Thus, the PWS is malleable and the comments the Army receives through this request for information will not result in a final form of PWS that will be incorporated into every contract issued. Rather, the Army is looking for input to create a “clear, concise and understandable” PWS template that will reduce the need for discussion and clarification of provisions common to all contracts down the line.
For more information, attend the EITF webinar on April 11, 2013 from 1:00-2:00 p.m. EST. see Solicitation No. W9124J13EITF1, which can be found on the FedBizOpps website. To register for the webinar, go to https://www4.gotomeeting.com/register/518667447. Registration is limited to the first 500 participants.
As was the case with the MATOC, comments and questions must be submitted via Bidder Inquiry on the ProjNet website (https://www.projnet.org). Comments must be submitted no later than 5:00 p.m. EST on May 29, 2013.
On February 12, 2013, the U.S. Army Contracting Command announced that the Army Energy Initiatives Task Force ("EITF") is developing a standardized Utility Service Contract Performance Work Statement ("PWS") to be used for contracts executed under its long-term power procurement authority (10 U.S.C. 2922a). The intent is to have a PWS that is clear and understandable to both the renewable energy industry and the government. The EITF intends to publish a draft utility service contract solicitation at the end of this month-i.e., on or about March 29. Once published, they will accept comments for 60 days.
This comment opportunity will be important to all renewable energy developers that intend to contract with the Army, but it will be especially important for teams that responded to the Army's Multi-Award Task Order Contract ("MATOC") last fall. The comments received through this solicitation will likely be incorporated into the PWS that is included in base-level RFPs issued under the MATOC. And interestingly, the timing lines up pretty well. Assuming that the draft PWS is issued at the end of March (like the EITF anticipates), then comments will be due at the end of May. Last year, the Army was saying that it would announce awardees under the MATOC at (or near) the end of Q2 2013. If that goal becomes a reality, then the comment period on the draft PWS will close one month prior to awards under the MATOC, which would ostensibly give the Army enough time to incorporate the revised language into any base-level RFPs that would follow quickly on the heels of the MATOC awards.
For more information, see Solicitation No. W9124J13EITF1, which can be found on the FedBizOpps website.
There has been a new development in the effort by Ralls Corporation, a company owned by two Chinese nationals, to challenge President Obama’s September 2012 order requiring it to divest its interests in four wind projects in Oregon and to remove any equipment and infrastructure it had placed on the sites of the proposed projects. The President’s order, issued pursuant to section 721 of the Defense Production Act of 1950 (“Section 721”), had cited unspecified national security risks as the reason for blocking Ralls Corporation’s acquisition of the wind projects, but the sites of the four proposed projects are near or within restricted airspace of U.S. Naval Weapons System Training Facility Boardman.
On Friday, U.S. District Judge Amy Berman Jackson ruled that she could not overturn President Obama’s order. In her opinion, Judge Jackson said that the law "is not the least bit ambiguous about the role of the courts: 'The actions of the president . . . and the findings of the president . . . shall not be subject to judicial review.'" Therefore, the judge declined to review the President’s findings on the merits. However, she did determine that the court has jurisdiction to determine whether the President followed proper procedures in implementing Section 721. The judge will rule on that due process issue following further briefing by the parties. If Ralls Corporation wins on the merits of the due process claim, it may be entitled to hear the reasons for the President’s decision to block the acquisition of the wind projects.
*Update: Ralls Corp reacted to Judge Jackson's ruling by insisting they would "persist in the lawsuit to the end and will appeal to the circuit court or the supreme court [sic] of the United States if necessary." See here for more of the company's reaction.
The Committee on Foreign Investment in the United States (CFIUS) recently issued its 2012 Annual Report to Congress. My colleague CJ Voss has summarized some of the report's key findings.
CFIUS is charged with reviewing acquisitions of U.S. businesses for national security implications. As we reported last fall, President Obama blocked Chinese-owned Ralls Corporation’s acquisition of wind farm projects in Oregon following intervention by CFIUS in the deal.
According to CJ, the report provides important insights for foreign companies considering investment and M&A transactions that could raise national security considerations, including:
- CFIUS believes foreign governments or companies likely have a “coordinated strategy” to acquire U.S. companies involved in research, development and production of critical technologies
- Filings with CFIUS have increased 70% since 2009
- Filings involving Chinese buyers have increased
- CFIUS has imposed various mitigation measures on transactions
- Certain industry sub-sectors accounted for more than half of all filings between 2009-2011
Each year, Women of Wind Energy (WoWE) awards fellowships to women college students or recent graduates to attend the annual American Wind Energy Association WINDPOWER conference.
Previous awardees include engineers, lawyers, PhDs, MBAs, technicians, meteorologists, economists and more from schools like Stanford, Columbia Gorge Community College, James Madison, UC Boulder, Appalachian State, and MIT.
Applications for Women of Wind Energy's Ninth Annual Rudd Mayer Memorial Fellowships for 2013 are due Friday February 22 at 5pm Eastern
Find more information on WoWE's website here: http://www.womenofwindenergy.org/apply-for-windpower-fellowship.html.
In the wake of the extension of the production tax credit, my colleague Ed Einowski has analyzed a key challenge – the relative scarcity of available utility-scale power purchase agreement RFPs. Having a PUC-approved PPA in place is generally a prerequisite for securing financing for utility-scale wind projects. Here’s what he has to say:
The extension of the production tax credit (PTC) allows the wind energy industry to move forward with projects in 2013. But the last few years – especially 2012 – have seen relatively few utility-scale wind power purchase agreements executed. Without the assured revenue source of a power purchase agreement (PPA), wind projects will generally find third-party financing – whether debt, tax equity or cash equity – unavailable. And few developers – even those with the financial resources to do so – will likely be willing to risk proceeding with project construction in the absence of a financeable PPA. As a consequence, for most developers the PTC extension presents the immediate challenge of securing a financeable PPA to enable the PTCs to be secured. Given the time it generally takes to negotiate and finalize a utility-scale wind PPA as well as pursue other key items such as turbine supply agreements and engineering, procurement and construction contracts, it will be necessary to move expeditiously.
For a more detailed discussion of the issues involved, read the full article.
News reports have already alerted people to the fact that Congress has extended the Production Tax Credit ("PTC") for wind as part of its agreement to avoid the fiscal cliff. The bill - named the American Tax Relief Act of 2012 - extended the sunset date for wind through December 31, 2013. This extension gives wind parity with all other renewable resources covered by the PTC.
What hasn't been as widely reported, however, is that Congress also made a significant modification to the PTC as part of the same provision.
Previously, whether a facility qualified for the PTC depended on when the facility was placed in service for federal income tax purposes. That provision has now been changed so that a facility will qualify for the PTC if construction with respect to the facility begins on or before January 1, 2014. This change applies to all renewables (biomass, marine and hydrokinetic, landfill gas, trash, hydropower) to which the PTC applies (not just wind), with the exception of refined coal and Indian coal. In other words, there is no longer a placed in service deadline for purposes of the PTC if construction begins before January 1, 2014.
For those of you acquainted with the 1603 grant, this "begun construction" requirement will seem very familiar. However, caution is required. First, the 1603 grant was administered by Treasury Department whereas the PTC will be administered by the IRS. The Treasury Department was generally viewed as favorably disposed to 1603 applicants. Second, we do not yet know how the IRS will interpret the term "begun construction." There is no requirement that the IRS interpret it consistently with section 1603. We do know, however, that the IRS included a 10% safe harbor as part of the bonus depreciation regulations (Treas. Reg. 1.168(k)-1(b)(4)(iii)(B)(2)), so it is possible that they may provide a safe harbor for the PTC as well.
It is also important to note that, along with extension and modification of the PTC, the legislation extended for one year the ability of taxpayers to elect the ITC in lieu of the PTC.
The modification of the PTC will likely make 2013 an interesting year, particularly as developers attempt to meet the "begun construction" requirements (however that term is eventually defined). If the IRS gives developers a safe harbor of some sort, it will be essential that they avoid the last minute, year-end rush we experienced in 2011 as we worked to qualify projects (mostly solar) for the “begun construction” requirements of the 1603 grant. A key gating item may well be the extent to which utilities seek to procure wind and other renewable energy is Qs1-2, 2013.
We will keep you apprised of further developments and insights.
On October 29, 2012, the U.S. Justice Department filed a motion to dismiss the lawsuit filed by Ralls Corp (“Ralls”), an affiliate of Chinese-owned Sany Group, challenging President Obama’s September 28, 2012 order that blocked four planned Oregon wind projects on national security grounds. See our previous posts for more background on the Ralls Corp. v. Committee on Foreign Investment in the U.S. case.
In its filing, the Justice Department argued the Defense Production Act prohibited judicial review of presidential orders that suspend or prohibit the acquisition of a U.S. business by a foreign person. “Neither the president’s findings nor his actions in the presidential order fall outside his extremely broad discretion, and Rall[s]’s constitutional claims are nothing more than disguised challenges to his exercise of that discretion,” wrote U.S. Attorney Joel McElvain in the filing.
Ralls has argued the Presidential Order could cost the company $20 million in lost design and construction costs. Ralls also argues it will also lose $25 million in federal tax incentives if the wind projects are not placed in service by December 31, 2012.
Stay tuned to Renewable + Law blog for more developments in this case.
In September 2012, all new electricity generation came from solar and wind projects, according to the Energy Infrastructure Update (PDF) issued by the Federal Energy Regulatory Commission’s Office of Energy Projects. Five wind projects totaling 300MW and 18 solar projects totaling 133MW came online during the month.
The Energy Infrastructure Update also noted that nearly half (43.8%) of new generating capacity coming online in 2012 through September involve renewables: 77 wind projects (4,055 MW), 154 solar projects (936 MW), 76 biomass projects (340 MW), 7 geothermal projects (123 MW), 10 water power projects (9 MW), and one waste heat project (3 MW).
The looming expiration of the Section 1603 Treasury Cash Grant and the Production Tax Credit (PTC) is likely a significant driver of this end of year surge. See our October 18 post Economists Weigh in on the PTC Extension for our latest on the PTC.
Via my colleague Thomas Braun:
Earlier this week, the Minnesota Court of Appeals weighed in on a long-running dispute between the City of Orono and city resident Jay Nygard over the installation of a small wind turbine on Mr. Nygard’s property. The dispute began two years ago when the city denied Mr. Nygard a permit on the ground that wind turbines are not listed as a permitted, accessory or conditional use in the city’s zoning ordinance. Despite the denial of his permit application, Mr. Nygard proceeded to construct the wind turbine anyway. After discovering the turbine, the city commenced an action in the district court for a declaratory judgment that the wind turbine did not comply with the city’s zoning ordinance. Mr. Nygard followed with his own action challenging the city’s denial of his application. The district court ruled in favor of the city and concluded that the city’s zoning ordinance unambiguously set forth an exhaustive list of lawful accessory uses, which does not include wind turbines. Mr. Nygard appealed.
In its ruling, the Minnesota Court of Appeals disagreed with the district court’s interpretation of the city ordinance. The court held that the language of the ordinance was not definitive as to whether the list is exhaustive and, since the city has allowed numerous uses in the past that are not expressly mentioned in the city ordinance, such as flagpoles, basketball hoops, and clotheslines, the city could not single out wind turbines. Thus, the court held that the city erred in denying Mr. Nygard’s permit application.
This decision is the latest saga in the debate in Minnesota over wind energy siting standards and setbacks. This case demonstrates the particular challenges of siting wind turbines (even small ones) in a an urban area without the benefit of an ordinance that provides clear standards.
Against the backdrop of election year politics and consideration of extension or elimination of the Production Tax Credits (PTCs), the Congressional Research Service (CRS) issued a report last week entitled, “U.S. Renewable Electricity: How Does the Production Tax Credit (PTC) Impact Wind Markets?” This report examines the possibility of an extension of the PTC, and the potential impacts such an extension (either long- or short-term) would have on the U.S. wind market. Not surprisingly, the conclusions are mixed and layered with uncertainty.
The report trumpets that 2012 will be a record year for the wind industry. Due in large part due to the pending expiration of the PTC, the U.S. wind sector deployed 10-12 GW of wind power this year—an unprecedented amount. However, all indications are that the expiration of the PTC will cause a severe market downturn in 2013 and beyond. No wonder the wind industry has been pushing Congress so hard for an extension. But does an extension make good economic sense?Continue Reading...
On Thursday, October 4, the Maine Public Utilities Commission (“PUC”) unanimously voted to table action on Statoil North America’s proposal to moor four floating wind turbines off the coast of Maine. Statoil North America, a division of Norway’s Statoil ASA, proposed the 12-megawatt pilot project in response to the PUC’s September 2010 request for proposals for deepwater offshore wind and tidal energy demonstration projects.
Two out of three PUC commissioners expressed concern that the proposed contract price—$290/MWh for 20 years—would negatively impact ratepayers and the state’s potential return on investment. While the PUC voted to reject the term sheet for now, Commission Chairman Thomas Welch said that his concerns could be alleviated if Statoil revises the term sheet to balance the project’s “potential benefits and certain costs” and “shore up the connection between the pilot and substantial benefits to Maine.”
Approval of the term sheet would enable Statoil to enter into a long-term contract to sell electricity at above-market rates to one or more of Maine’s investor-owned utilities—Bangor Hydro, Central Maine Power or Maine Public Service Company. The project is also seeking permission to connect to the ISO New England power grid.
Meanwhile, the Bureau of Ocean Energy Management has set a deadline for Tuesday, October 9, to determine if other firms besides Statoil North America are interested in bidding on the 22-square-mile offshore wind lease. A second round of comments, with a November 8 deadline, will determine the potential environmental impacts of the proposal.
Following up on our posts on the subject, I had the chance to speak with Colin O'Keefe of LXBN regarding President Obama's blocking of a Chinese-owned wind energy project out of concerns for national security. In the brief interview, I explained what exactly happened and whether or not the companies involved have any kind of legal recourse.
Ralls Corp. (“Ralls”), a company owned by two Chinese nationals and affiliated with the Sany Group, a global heavy manufacturing company (“Sany”), amended its lawsuit on Monday in an effort to overturn President Obama’s executive order requiring Ralls to divest itself of four 10 megawatt wind projects under construction near restricted airspace in Oregon (the “Oregon Projects”). Prior to the divestiture, Ralls is required to dismantle and remove all physical structures that have been installed on the site of the Oregon Projects, including at least 12 concrete foundations that have been fully or partially constructed. Citing national security concerns, the executive order gives the multi-agency Committee on Foreign Investment in the United States (“CFIUS”) broad authority to enforce its terms, including by accessing the premises and facilities of Ralls, the Oregon Projects, and Sany.
In response to both the executive order and a prior order issued by CFIUS, neither of which identify the specific nature of the national security risks arising from Ralls’s ownership of the Oregon Projects, Ralls alleges that CFIUS and the President exceeded their statutory authority by issuing the orders and asserts constitutional challenges to the orders, including that the orders violated the Due Process Clause of the Fifth Amendment. In its complaint, Ralls "emphatically denies that its acquisition of the [Oregon Projects] was intended to or will have or raise any risks or threats regarding the national security of the United States, and it denies that any credible evidence of such intent or effect exists.” The complaint goes on to assert that the development of the Oregon Projects will benefit the U.S. by creating jobs and providing a source of clean, renewable energy, albeit a small enough source of energy so as not to significantly impact the local utility’s supply one way or another. The complaint notes that, if constructed, the Oregon Projects would constitute about 0.37% of the utility’s total generating capacity. CFIUS and the President are expected to defend the orders which, according to the authorizing statute, are not subject to judicial review.
President Obama issued an order on Friday blocking the construction and ownership of a wind project by Ralls Corporation (“Ralls”), due to national security concerns including “credible evidence” that Ralls or its affiliates, including the Sany Group (“Sany”), “might take action that threatens to impair the national security of the United States.” Ralls was in the process of developing a proposed 40-megawatt wind project in Oregon, through its acquisition of four Oregon limited liability companies (the "Oregon Projects"). The President’s order imposes numerous requirements on Ralls, its two owners, both of whom are Chinese nationals, and Sany, including:
- within 90 days, Ralls must divest of all interests in the Oregon Projects and the assets of the Oregon Projects;
- within 14 days, Ralls and Sany must remove all structures and installations of any kind (including concrete foundations) on the Oregon Projects’ property, and the owners of Ralls must provide CFIUS with a signed statement certifying that such requirements have been met;
- Ralls, Sany and any of their affiliates and representatives may not access the site, except for U.S. citizens contracted by Ralls or Sany and approved by CFIUS, who may access the site solely for the purpose disassembling the facility;
- Sany, Ralls, and the owners of Ralls may not sell or facilitate the sale of any Sany equipment for use at the Oregon Projects’ sites, and
- a sale of the Oregon Projects or their assets may not be completed until all structures and installations have been removed, Ralls notifies the Committee on Foreign Investment in the United States (“CFIUS”) in writing of the intended buyer or recipient, and CFIUS does not object.
Although the order does not specify the basis of the concern, it is likely due to the proximity of the Oregon Projects to a U.S. Navy facility that conducts training missions with unmanned drones and electronic-warfare planes. In response, Sany has accused the President of electioneering, according to a report in WindPower Monthly, and Sany may continue to pursue a legal challenge to the order. This may prove to be an uphill battle for Sany, given that the Defense Production Act bars judicial review of presidential orders issued upon recommendation by CFIUS. In light of the presidential order, foreign investors should consider making CFIUS approval a condition to closing under any agreement by which they acquire US energy assets, particularly if the acquisition involves a project located near military facilities and regardless of whether the project or company has defense-related contracts or owns sensitive information.
For more background, see our prior post regarding Ralls’s lawsuit in response to the initial CFIUS mitigation measures: http://www.lawofrenewableenergy.com/2012/09/articles/wind-energy/cfius-intervenes-in-chineseowned-wind-project/.
TerraPass Inc., recently issued a Request for Information (RFI) on behalf of a client that is interested in ownership, investment and/or long-term bundled renewable energy offtake opportunities within PG&E territory. The RFI seeks information from firms with renewable energy projects that are currently under development or construction in California and have projected online dates in 2014 or 2015. TerraPass' client will consider a project or portfolio of projects with expected generating capacity of up to 230 million kilowatt-hours per year.
TerraPass' contact for this RFI is Erin Craig, who can be reached at 415-644-578. We understand that the deadline for the RFI response is October 26.
On September 12 a U.S. wind project development company, Ralls Corporation ("Ralls"), owned by two Chinese nationals, filed suit against the Committee on Foreign Investment in the United States ("CFIUS"), an inter-agency U.S. government body charged with assessing the potential national security effects of foreign acquisitions of U.S. businesses. National security concerns may arise in a number of ways when a foreign entity acquires a U.S. renewable energy business. However, the CFIUS order to which the lawsuit responds marks an unprecedented intervention by the U.S. government in renewable energy project development, which, since its inception, has benefitted from substantial investment by foreign investors.
The Ralls complaint alleged that CFIUS exceeded its authority by blocking Ralls’ investment in and development of a proposed 40 megawatt wind project in Oregon, through its acquisition of four Oregon limited liability companies (the "Oregon Projects"). Ralls and CFIUS subsequently reached an agreement regarding the resumption of preliminary construction activities but, by September 28, President Obama is expected to decide whether to let the Oregon Projects proceed or to require divestiture on terms specified by CFIUS. In light of this order, such "national security" risks may potentially prove a greater risk to renewable energy transactions than previously understood.
Seattle City Light recently issued a request for proposals f(RFP) or up to 150,000 megawatt-hours of renewable energy or renewable energy credits per year, starting in 2020. The projects that generate the RECs or energy must qualify as eligible according to Washington State’s renewable portfolio standard. In addition, City Light will require a minimum output guarantee and credit assurances. The utility will also consider proposals for equity ownership.
In its RFP announcement, City Light said that it will consider a broad range of proposals, technologies, and contractual arrangements. A party submitting a proposal must be the owner of the eligible resource or renewable energy credits, or have written authorization from the owner to submit a proposal. City Light prefers baseload or dispatchable resources to complement existing supply resources that are predominately hydroelectric.
For more information on submitting a proposal, contact Robert W. Cromwell, Jr., director of power contracts and resource acquisition at email@example.com, by phone at (206) 684-3856 or by FAX at (206) 386-4555.
My colleague Ed Einowski didn’t mince words in a recent article published by The Sindal Report. If the federal production tax credit (PTC) is allowed to expire at the end of this year, there will be a dramatic drop-off in wind installation starting in 2013. And these diminished opportunities will add up to significant changes for the industry. Among Ed’s predictions for a post PTC environment:
- Well-capitalized developers will be best suited to survive
- ‘Develop and flip’ will no longer be a viable strategy
- Growing focus on adding value to the end customer
- Developers will need to deal with transmission issues, and
- Traditional project financing will be the new financing paradigm
You can view an extended summary of Ed’s remarks on our firm’s website. It’s well worth the read.
The City of Palo Alto, California, is seeking a minimum of 20 gigawatt-hours (GWh) annually, not to exceed 80 GWh/year, from eligible renewable resources. The City will not, however, consider proposals for the sale of Renewable Energy Certificates (RECs) alone . The City intends to negotiate and execute one or more power purchase agreements with one or more selected bidders, for terms of five (5) to thirty (30) years. The energy and RECs procured will be used to meet Pal Alto's City Council-imposed renewable energy supply target of 33% by 2015.
The City will hold a pre-proposal conference at 10:00 am on Septemer 6, 2012. The deadline for bid submission is 3:00 pm Wednesday, September 19, 2012. Details of the RFP can be found here The City's Contract Administrator is Carolynn Bissett, 650-329-2460.
On August 22, 2012, the U.S. Army Engineering & Support Center in Huntsville, AL held a pre-proposal conference to discuss the final multi-award task order contract that was issued on August 7, 2012 (the “Final RFP” or “MATOC”). My colleague, Lane Tucker, and I attended to hear the Army’s presentations and to engage directly with renewable energy developers, consultants, seasoned government contractors, large energy service contractors (ESCOs), and others. The conference provided attendees a great opportunity to explore the field of potential contractors and subcontractors and start (or continue) conversations about potential teaming arrangements that could result in both a MATOC award and one or more base task order awards.
For those who could not attend, fear not; all of the presentation materials will soon be available on the Army EITF website and the Huntsville team will post all of the questions presented, along with the Army’s formal responses, to the ProjNet website. Also important is that Tonju Butler, the Procuring Contracting Officer, indicated that the deadline for questions on the Final RFP would be extended from today until September 7, 2012, so that individuals and teams can have additional time to formulate and posit questions that may be important to their proposals. However, that change has not yet been posted to the FedBizOpps website as an amendment. It is too early to tell whether this extension foreshadows an extension of the October 5, 2012 proposal deadline. Right now, the Army is holding firm to that date, so individuals and teams that intend to respond should plan accordingly. Keep an eye out for other amendments to the Final RFP, too. Conference attendees were assured that more would be forthcoming to clarify small technical issues and, hopefully, to flush out the structure for proposing prices. All amendments will be posted to the FedBizOpps website for the MATOC.
Here are a few takeaways and a short discussion about some important issues. Be sure to check the Q&A on the ProjNet website for any official responses from the Army on these topics.Continue Reading...
Senators Max Baucus and Orrin Hatch, chairman and ranking member respectively, of the US Senate Finance Committee, have just announced that they have reached agreement on legislation to extend certain expiring tax provisions. The bill will be marked up by the Finance Committee on August 2.
The details of the proposal have not been announced. However, it is possible that the package could contain an extension of the Production Tax Credit ("PTC").
Even if the PTC is included in the Baucus-Hatch proposal, the legislation still must be passed by the Senate and House of Representatives. The House (including the Ways & Means Committee) has not yet acted on expiring provisions.
We will update this blog as details are released.
On May 3, 2012, The Detroit Edison Company (DTE Energy) issued a Request for Proposals (RFP) seeking approximately 100 megawatts (MW) of nameplate rated capacity or approximately 300 gigawatt-hours (GWh) of annual supply (including associated RECs) from wind energy systems that will have a commercial operation date before December 31, 2013. DTE expects to contract for the output of the wind energy systems through a 20-year power purchase agreement (PPA).
The RFP itself can be found here, and additional important information concerning the RFP can be found here. DTE’s contact for this RFP is Lori Taylor-Wallace, firstname.lastname@example.org, 313-235-8532.
On April 30, 2012, SCE announced the launch of its second Renewable Auction Mechanism (RAM) RFO (RAM 2). SCE's RAM program is open to all RPS eligible technologies not greater than 20 MW and interconnected within any of the service territories of SCE, Pacific Gas & Electric or San Diego Gas & Electric. The RAM RFO will be conducted using the RFO website provided by Accion Group, the independent evaluator for the RAM 2 RFO. According to SCE, Interested parties should visit the RFO website for more information, to submit an Offer, or to ask a question. On May 11, 2012, SCE will host a RAM Program Forum at the SCE office in Rosemead. More information can be found on the RFO website. .
SDG&E announced its RAM 2 RFO on May 1, and the details can be found here. SDG&E notes that its RAM program is designed to procure a total of 155 MWs over the course of four solicitations. The company's first RAM solicitation, held in November of 2011, resulted in the procurement of 15 MWs, leaving 140 MWs to procure over the course of the next three solicitations. In the RAM 2 solicitation, SDG&E intends to procure 45 MWs pursuant to 10, 15 and 20-year RAM Power Purchase Agreements (PPAs) with independent power producers. SDG&E plans to hold one pre-bid conference on May 7, 2012 from 1:00 PM to 5:00 PM in San Diego-- instructions for registering can be found on SDG&Es RAM 2 web page.
For a discussion of changes to the RAM process recently approved by the CPUC, see Allison Cook's recent blog on the topic.
PG&E announced today that it expects to issue its Renewable Auction Mechanism (RAM) RFO on May 1, 2012. Offers under the RAM RFO will be due no later than 12:00 noon (PPT) on May 31, 2012.
PG&E will host a Bidders’ Conference at the company's headquarters on May 16, 2012, from 1:30 PM to 3:00 PM. The Bidder's Conference will also be available via Webinar. Attendees are required to register for the Bidders' Conference.
Following the Bidders’ Conference, PG&E will hold a Bidders’ Forum. The Forum will cover survey results and lessons learned from the first RAM RFO. It will also address the valuation of resource adequacy and proposals to address excess transmission costs.
For more information and program specifics, visit PG&E’s website.
The CPUC recently implemented some changes to the RAM program--see Allison Smith's recent blog entry for details.
A surprise to no one involved in renewable energy, the DOE (via NREL) has just issued a report concluding 1603 created tens of thousands of new jobs.
See the report at http://www.nrel.gov/docs/fy12osti/52739.pdf
In October 2011, the Federal Energy Regulatory Commission (FERC) issued Order No. 755, which requires regional transmission organizations (RTOs) and independent system operators (ISOs) to pay for frequency regulation services based on the actual amount of service provided in response to actual or expected frequency deviations or interchange power imbalances. The order directs RTOs and ISOs to implement a two-part payment for frequency regulation services consisting of (1) a capacity payment that includes the marginal unit's opportunity costs, and (2) a performance payment that reflects the quantity of frequency regulation service that a resource provides when it is accurately following the dispatch signal. In February 2012, FERC issued Order 755-A, denying a motion for rehearing filed by Southern California Edison.
On Tuesday April 10, 2012, 11 am to 12:30 pm Eastern time (8 am to 9:30 am Pacific), I'll be moderating a Webinar produced by that Infocast to discuss the implications and effect of Order No. 755. We'll review the Order itself, the process that is underway in the RTOs and ISOs to implement the Order, and the Order's implications for energy storage, demand response and other aspects of the frequency regulation market.
Infocast has assembled an excellent panel for this Webinar. Jacqueline DeRosa, Director of Regulatory Affairs, California, Customized Energy Solutions and Rahul Walawalkar, PhD, CEM, CDSM, Vice President, Emerging Technologies Markets, Customized Energy Solutions, will jointly provide a cross-market overview of the current approaches and proposed responses to Order No. 755 in key ISOs and RTOs (i.e., PJM, NYISO and CAISO) . Eric Hsieh, Regulatory Affairs Manager, A123 Systems, Inc., (which participated actively in the Order No. 755 docket) will offer a technology provider's perspective on the order and the ongoing process. Praveen Kathpal, Director of Marketing and Regulatory Affairs, The AES Corporation, will provide the perspective of a technology-neutral independent energy storage developer.
You can register for the Order No. 755 conference here. Use the Stoel Rives discount code (“128505”) to reduce the tuition to $150.
On March 23, 2012, the U.S. Fish and Wildlife Service (USFWS) released its highly anticipated final Land-Based Wind Energy Guidelines. The Guidelines present a tiered approach for the consideration and analysis of potential impacts to wildlife and habitat from onshore wind energy development. The five-tier process and other guidance found in the Guidelines aim to efficiently avoid and minimize impacts to wildlife and habitat by guiding the decisions of developers from the initial stages of site selection through the development of project design and the ultimate construction and operation of a project.
While the Guidelines are voluntary, this new publication represents the informal rulebook by which the USFWS will judge the appropriateness of a site or project design and the adequacy of mitigation, including for purposes of enforcement. The new Guidelines replace the interim guidance published by the USFWS in 2003 and are effective immediately. The final version of the Guidelines does not significantly differ from the September 2011 draft version that was issued for public comment.
Oregon Governor John Kitzhaber announced today that he has named Margi Hoffman to serve as his Energy Policy Advisor. She will join the Governor's office on April 2.
Ms. Hoffman has served as Senior Vice President and Director of Oregon Operations with Strategies360, a strategic consulting firm, and has also worked closely with Renewable Northwest Project (RNP) . The news release from the Governor's office can be found here.
I'll be moderating Energy Storage for the Grid: Watchful Waiting or the Perfect Storm? at the MIT Enterprise Forum Northwest's May 8, 2012 program at Seattle's Museum of History and Industry (MOHAI) , 2700 24th Ave East. The event, which includes a networking reception, will be held from 5:00 to 8:30 pm.
The evening's panelists will be:
- Terry Oliver, Chief Technology Innovations Officer, Bonneville Power
- Alexander H. Slocum, Professor, Massachusetts Institute of Technology
- Chris Wheaton, Chief Operating & Financial Officer, EnerG2
- Nathan Adams, Manager of Development and Emerging Technologies, Puget Sound Energy
Among other topics, the panel will address:
- The most promising energy storage strategies
- How different storage methods could work together with the grid in the Northwest and nationally
- How entrepreneurs, the changing energy marketplace, grid operators, and utilities are responding to the call to build the foundation for a clean energy economy
For more information about this event, visit MITEF Northwest's web site.
I hope to see you there! In the meantime, for those who are following energy storage, I'm "tweeting" regularly on that topic as well as Department of Defense renewables procurement at @BillHolmesStoel (#energystorage).
After years of uncertainty, the Wisconsin legislature allowed statewide wind energy siting rules to go into effect today. The new rules (known as “PSC 128”) require wind turbines to be located at least 1,250 feet from the nearest residence and at a distance 1.1 times the height of the wind turbine from the nearest property line. Cities, villages, towns, and counties are prohibited from enacting an ordinance imposing more restrictive requirements than the statewide rules.
In 2009, the legislature directed the Wisconsin Public Service Commission (“PSC”) to develop rules that limit the restrictions local governments may impose on wind energy projects. The purpose of these rules was to ensure consistent local procedures and regulation of wind energy. On December 27, 2010, the PSC adopted the final wind energy siting rules (Wisc. Admin. Code Ch. PSC 128). But on March 1, 2011, the day the rules were to take effect, the legislature’s Joint Committee for the Review of Administrative Rules voted to suspend PSC 128. This year, the legislature considered a proposal to indefinitely suspend the rules, but adjourned yesterday without taking action. As a result, PSC 128 automatically became effective today.
While PSC 128 was in limbo, the legislature considered a proposal that would have imposed much more stringent setback requirements (1,800 feet from the nearest property line). The American Wind Energy Association said that these setbacks essentially would have killed the commercial wind industry in Wisconsin. News reports suggest that the uncertainty over siting rules caused several wind projects in the state to be suspended or cancelled over the last year. But with PSC 128 now in effect, Wisconsin appears to be open for wind energy business again.
The Bonneville Power Administration (BPA) is gearing up for spring with its revised Oversupply Management Protocol (OMP), submitted last week as a compliance filing in the Federal Energy Regulatory Commission (FERC) proceeding on BPA’s “Environmental Redispatch” policy. BPA’s compliance filing was submitted in response to FERC’s December 7, 2011 order holding that BPA’s Environmental Redispatch policy of curtailing wind generation without compensation during periods of high water was unduly discriminatory and preferential. FERC directed BPA to file a revised Open Access Transmission Tariff (OATT) addressing the comparability concerns raised in the proceeding.
Under the OMP, BPA would curtail wind generation during periods of high water in order to deliver federal hydropower in place of the curtailed generation, but would provide “compensation” for the curtailments based on the wind generators’ submitted displacement costs. The “compensation” would come in part from the wind generators themselves, who would be allocated a portion of the displacement costs through a new rate.
BPA’s compliance filing is conceptually similar to the draft OMP it circulated for comment in February, although there are some changes of note. First, the OMP will now be in place for only one year, instead of the original 2015 end date. Second, wind generation with power sales contracts signed after March 6, 2012 will be compensated differently than wind generation with power sales contracts signed before then. Though both will receive compensation for lost production tax credits and lost renewable energy credits, the level of compensation for wind generation with post-March 6 contracts is not entirely clear. Third, wind generators can opt out of receiving compensation in exchange for not being allocated a share of the displacement costs; however, those opting out will be given a displacement cost of $0/MWh and thus be the first wind generators curtailed. Fourth, instead of submitting displacement costs to BPA, generators must now submit their displacement costs to a third-party evaluator. BPA will no longer impose a penalty for inaccurate costs, but may ask FERC to investigate inaccuracies (or perceived inaccuracies) in the displacement cost submissions.
FERC is accepting comments on BPA’s compliance filing through 5 pm EST Tuesday, March 27, 2012. In addition, BPA is seeking comments on its OMP Business Practice, which contains information on how BPA plans to implement the OMP. Comments on the OMP Business Practice are due by close of business on Monday, March 26, 2012.
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.
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.
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.
On December 7, 2011, the Federal Energy Regulatory Commission issued an order holding that the Bonneville Power Administration violated Section 211A of the Federal Power Act by curtailing wind energy under BPA’s Environmental Redispatch policy and requiring BPA to file a revised transmission tariff within 90 days from the date of the order.
On November 30, the California Independent System Operator Corporation ("CAISO") announced that it would not push for changes to the Participating Intermittent Resources Program ("PIRP") at the December 15-16 Board of Governors meeting. The announcement came as welcome news to intermittent renewables advocates as the CAISO and stakholders have spent the past year negotiating issues set out in one Straw Proposal, five Revised Straw Proposals, and a Draft Final Proposal on changes to PIRP eligibility requirements and cost allocation, bid cost recovery ("BCR"), and a lowering of the energy bid floor. Instead of making changes to PIRP now, the CAISO will revisit the discussions in the second quarter of 2012- when it is scheduled to begin a stakeholder process to review decremental bidding options for participating intermittent resources in the Renewable Integration- Market and Product Review, Phase 2 initiative. Changes to the BCR netting methodology and the incremental lowering of the energy bid floor are still scheduled for review by the CAISO Board this month.
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:
Southeast Biomass Conference & Trade Show
November 1-3 – Atlanta, GA
Join Stoel Rives attorneys Lee Smith, Greg Jenner, Joe Thompson, and Tim Taylor in Atlanta for this BBI conference. Stoel Rives is a proud sponsor of this event. Our attorneys will participate in discussion panels covering Environmental Compliance, Biomass Procurement and Supply Chain Management, and Federal Incentives.
WoWE Leadership Forum
November 2 – Carlsbad, CA
Stoel Rives and the Women of Wind Energy (WoWE) are pleased to announce the second installment of this special Forum. Stoel Rives attorneys Elizabeth Cason, Dina Dubson and Julia Pettit, member of the 2011 planning committee, will be in attendance.
AWEA Wind Energy Fall Symposium
November 2-4 – Carlsbad, CA
Join Stoel Rives attorneys Julia Pettit, Howard Susman and Wayne Rosenbaum at this exclusive event designed for professionals in every segment of the wind industry.
Green Energy M&A Outlook for 2012
November 15-16 – Santa Clara CA
Stoel Rives is proud to be a Platinum Sponsor at this event. Attorneys Duff Bryant, Ed Einowski and Julia Pettit will moderate discussion panels covering the Corporate M&A Landscape, Renewable Developers’ Perspectives, and Wind M&A Deals. Duff Bryant and Ed Einowski will serve as Summit Co-Chairs. We are pleased to offer a 15% registration discount with code 119631.
CalWEA 11th Annual Meeting
November 16-17 – Carlsbad, CA
Join Howard Susman, Wayne Rosenbaum, Randy Faccinto, Brian Nese, and Elizabeth Cason as they gather with other members of the California Wind Energy Association. Stoel Rives is proud to be a breakfast sponsor at this event.
Distributed Solar Summit 2011
November 30-December 2 – San Diego, CA
Hear discussions moderated by Stoel Rives attorneys Morten Lund and Brian Nese covering The California Market Environment and Business Opportunities, Asset and Portfolio Capital Providers' Appetite for Investing in Distributed Solar, and EPC/Installers Views on Contracting Relationships.
Siting & Permitting Renewable Energy Projects in the West
December 7-9 – San Diego, CA
Tim McMahan will co-present Impact of the Endangered Species Act, NEPA and Other Environmental Legislation on Current and Planned Projects and Tim Taylor will participate in the discussion panel Strategies for Working Successfully with the Regulators to Get Projects Permitted and Developed.
US-China Wind 2011: Building Strategic Cooperation
December 13-15 – San Francisco, CA
Visit with Mike Mangelson, William Clydesdale, David Benson, and Ed Einowski in San Francisco for the 2nd Annual US-China Wind Summit. Stoel Rives is proud to be a Platinum Sponsor at this Infocast event, and we are pleased to offer a 15% discount on registration with code 116011.
To see the full calendar of events, click here.
The CUB Policy Center, in partnership with the University of Oregon School of Law, will be holding its inaugural policy conference: Smart Grid: Today's Regulation and Tomorrow's Technology, on Friday, October 21, 2011, at the University of Oregon White Stag Block (70 NW Couch St., Portland, OR 97209). The luncheon keynote speaker will be former FERC Commissioner Nora Mead Brownell, who is the co-founder of ESPY Energy Solutions.
The conference is designed to educate utility analysts, policy analysts, attorneys, industry professionals, stakeholders and others on the current regulatory environment in Oregon and the region and to provide a forum for investigating the opportunities and challenges of integrating the Smart Grid into that environment. The CUB Policy Center notes that space for this conference, which promises to be well attended, is limited and encourages attendees to register early.
I'll be participating in the Closing Panel to recap and discuss lessons learned during the day, and I hope to see you there.
For those who like to pay close attention to developments in the energy storage industry, take a look at Stationary Electricity Storage, which collects and presents articles about storage industry news, noteworthy projects, and other topics. It's well organized (with articles filtered by category, storage provider, organization and location), offers a free daily newsletter and looks like a good way to stay on top of developments in this expanding sector. (Thanks to Greg DelSesto for introducing me to this new site.)
On a related note, I'll be chairing Infocast's Developing Grid Storage Projects in Dallas from October 5 through October 6. Stoel Rives partner John Thompson will be speaking on "Intellectual Property Protection for Grid Storage," and Dave Hattery, a partner in our Seattle office, will be speaking on "Negotiating the Terms and Navigating the Risk of a Procurement Contract and Other Financial Documents." The conference features an impressive list of speakers who are very active in the energy storage industry, and I hope to see you there!
On August 15, 2011, Great River Energy (GRE) issued a request for proposals (RFP) for community-based energy development (C-BED) renewable energy resources. Eligible energy technologies include: wind, solar, hydroelectric of less than 100 megawatts, biomass, municipal solid waste, landfill gas and anaerobic digesters, and hydrogen produced from any of the previous resources.
In announcing the RFP, GRE noted that it already has enough renewable resources in its energy portfolio to meet Minnesota's Renewable Energy Standard. Minnesota's RES requires electric utilities to supply an increasing percentage of their energy sales from renewable energy sources, reaching 25 percent by 2025. Nevertheless, GRE issued the RFP to "evaluate if additional C-BED renewable resources can provide value to our member cooperatives in the future," according to Jon Brekke, Great River Energy vice president of member services. GRE plans to evaluate proposals based on their impact to wholesale power rates and other factors.
Proposals are due before 4pm Central Prevailing Time on Sept. 9, 2011. GRE plans to notify short listed bidders by September 30 and has targeted November 1, 2011 as the execution date for a power purchase agreement (PPA). GRE is clearly looking for bargains from developers who can take advantage of the Section 1603 cash grant, a program that expires on December 31, 2011, and who can place a project in service by December 31, 2012. Since projects seeking the cash grant will need to "begin construction" (as that concept is defined in Section 1603) by December 31, 2011, the November 1 target execution date will likely be critical for developers seeking to arrange project financing before year end.
GRE is interested in entering into a PPA rather than a build-transfer or other ownership arrangement. GRE's form of PPA can be found here. The RFP itself can be found here. For more information about the RFP, contact Mark Rathbun at 763-445-6104 or email@example.com.
With the end of 2011 drawing near, many renewable energy developers are seeking to qualify their projects for the Section 1603 cash grant. Developers continue to try to understand the complexities surrounding the grant requirements, especially the determination of when projects are considered to have met the “beginning construction” requirement.
On August 24, I'll moderate a Law Seminars International (LSI) Telebriefing on Section 1603, featuring Stoel Rives partner Greg Jenner and Victoria McDowell, the Compliance Program Manager, Section 1603 Program, U.S. Department of the Treasury.
The TeleBriefing will take place from 10 AM – 11 AM Pacific Time/ 1 PM -- 2 PM Eastern Time. During the briefing, attendees will learn how to meet the “beginning construction” test and receive clarification from the Treasury Department on project requirements. We'll also discuss the fate of projects that fail to qualify for the cash grant.
Registration is available online through Law Seminars International.
Puget Sound Energy (PSE) has filed with the Washington Utilities and Transportation Commission (WUTC) a Request for Proposals for All Generation Sources (the all-source RFP) and a Request for Proposals for Electric and Demand Side Resources (energy-efficiency RFP). PSE filed the draft all source RFP on August 1, 2011 and plans to issue a separate energy efficiency RFP later.
Under the all source RFP, PSE is seeking proposals for energy generation resources as capacity generation resources, as well as transmission products from BPA’s system to PSE's system. PSE is willing to consider both existing generation resources and resources that are under development but expected to achieve commercial operation no later than December 2015. According to PSE, a revised assessment of its portfolio needs and peak customer power requirements demonstrates a need for approximately 500 MW of capacity by the end of 2012. PSE would be willing to consider various commercial arrangements under the RFP, including power purchase agreements, temporal exchange agreements, ownership arrangements (e.g., a transfer of development assets, a build-transfer arrangement, or sale of an existing asset), as well as transmission-only products from BPA’s system.
PSE will be hosting an RFP Proposal Conference on August 16, 2011, in Bellevue, Washington, to discuss the all-source RFP. To register for the conference, email firstname.lastname@example.org. Public comments on the draft RFP are due on September 2, 2011, and PSE expects to receive WUTC approval by September 28. If the schedule holds, PSE plans to issue the final RFP solicitation on October 5, 2011. PSE expects to select a final short list and notify respondents in 1Q 2012.
PSE’s web page for the RFP (including its proposed schedule and the draft RFP itself) can be found here.
My colleagues Heath Curtiss and Sarah Stauffer Curtiss are reviewing the final directives for US wind energy special use authorizations that the Forest Service issued today. Here’s their brief update, which will be followed by a more detailed energy law alert:
Nearly five years after issuing its draft directives, on August 4, 2011, the U.S. Forest Service issued final directives for wind energy special use authorizations. The new directives supplement existing Forest Service guidance on wildlife and special uses, but specifically address issues associated with the permitting and siting of wind energy facilities. Key components of the new directives can be found in a new chapter, “Wind Energy Uses,” in the Special Uses Handbook and a new chapter, “Monitoring at Wind Sites,” in the Wildlife Monitoring Handbook. Generally speaking, the Forest Service modeled its wind energy directives after the Bureau of Land Management Instruction Memoranda on wind energy development. There are, however, key differences, including, for instance, significantly greater potential for competitive bidding and substantially more explicit wildlife monitoring requirements. See the Federal Register notice here: http://www.gpo.gov/fdsys/pkg/FR-2011-08-04/pdf/2011-19673.pdf.
Please read our legal update for more information.
California’s AB 2514 directs the California Public Utility Commission (CPUC) to determine appropriate targets, if any, for load-serving entities to procure viable and cost-effective energy storage systems. If the CPUC decides that targets are appropriate, it is supposed to set dates for achieving those targets.
As a follow up to an AB 2514 workshop held on June 28, 2011, Administrative Law Judge Amy C. Yip-Kikugawa issued a ruling asking for comments on the presentations made at the workshop by the California Energy Commission, the California Independent System Operator, Southern California Edison, the California Energy Storage Alliance, AES Energy Storage, Beacon Power Corporation and KS Engineers, all of which were attached to the ruling. The ruling asks the parties to comment on whether they agree or disagree with the presentations.
In addition, the ruling seeks comments from parties on the following questions:
- Which barrier(s), either identified by the presenters or the CPUC, do you believe present the greatest impediment to more widespread usage of energy storage and development of ESS in California?
- Are there other barriers that were not identified during theworkshop? Please explain how these other barriers impede theusage or development of energy storage and whether they needto be resolved at the Commission or other forums.
- To whatextent can the Commission assist in removing these barriers?In your opinion, are there certain barriers that need to beresolved first, and therefore have higher priority?
The deadline for comments is August 29, 2011, and reply comments will be due September 16, 2011. Your can find a copy of the ruling and attachments here.
Several requests for proposals ("RFPs") have been issued recently with July deadlines. Here's a brief summary of each:
- Progress Energy Carolinas is seeking proposals for energy and renewable energy certificates from newly constructed or existing wind projects of at least 5 MW to comply with North Carolina's renewable energy portfolio standard. Projects do not have to be located in North Carolina. The deadline for proposals is currently set at 5:00 p.m. EST, July 25. The utility anticipates shortlisting in August and executing final contracts in late October. More information can be found here.
- Tucson Electric Power and UniSource Energy Services are seeking up to 50 MW of Arizona-based wind generation. There will be a bidder teleconference at 1:30 p.m. PST on Monday July 18. Bids are currently due by 4:00 p.m. PPT on August 25 and the utilities expect to make a decision by September 30. Information about the joint request for proposals can be found here.
- The City of Roseville, California, through its electric department, Roseville Electric, seeks to procure eligible renewable energy resources from renewable electrical generation facilities as defined by California's SBX1-2. Targeted procurement is outlined on the request for offer document. The deadline to submit questions is July 22. Responses are currently due July 26 and the City anticipates shortlisting on or about September 30. More information is available here.
- National Grid has issued a second request for proposals for renewable energy in Rhode Island. The Narragansett Electric Company d/b/a National Grid is seeking proposals for capacity, energy, and renewable energy credits under 10-15 year contracts. A bidders conference will be held on July 15 in Rhode Island. Notices of Intent to Bid are currently due by 5:00 p.m. EPT on July 20, and proposals will be due by 5:00 p.m. EPT on August 4. Details can be found here.
This summer, the Center for Public Service at the Hatfield School of Government at Portland State University will be offering a series of short, 2-3 day classes under an umbrella called the "Summer Series on the New Energy Economy." These are non-credit courses, specifically designed for energy industry leaders, a wide range of professionals, and other community members with an interest in learning more about key energy topics.The series is being coordinated by Jeff Hammarlund, one of PSU’s adjunct faculty, who in recent years has taught a series of popular classes on various aspects of the Smart Grid.
The summer series will kick off with the first class on July 11-12. Entitled "Dissolving Complex Problems in the New Energy Economy," this course will bring a systems science focus to core energy structure, regulation, and policy questions. Other classes, which will run in July, August, and September, include
* Green Inc: Business Models for the New Energy Economy (July 13-15);
* Comprehending the Climate Conundrum (July 25-27);
* Riding the Waves of Change: Project Management and the New Energy Economy (August 10-12); and
* The Smart Grid and Sustainable Energy Systems (September 14-16);
Additional information and registration instructions can be found here. If you have specific questions, contact Christine Hanolsy at PSU at 503-725-5114 or email@example.com.
Yesterday U.S. Energy Secretary Steven Chu today announced that six projects have been selected to receive nearly $7.5 million over two years to advance next-generation designs for wind turbine drivetrains. Drivetrains, which include a turbine's gearbox and generator, are at the heart of the turbine and are responsible for producing electricity from the rotation of the blades. The selected projects selected will also help promote and accelerate the deployment of offshore wind turbines.
Some of the projects are early stage R&D projects which will focus on reliability or may redesign drivetrains to eliminate certain components altogether. Other projects will focus on increasing the amount of energy produced by turbines, or designs that minimize the use of rare earth materials.
The awards will be issued through DOE's Wind and Water Power Program, which funds research, testing, development and deployment of innovative wind energy technologies.
Each project listed in the table below will receive up to $700,000 to conduct technology cost and readiness assessments during the 6-month Phase I. Some of the projects will be selected for Phase II and each Phase II project could receive up to an additional $2 million over 18 months.
Advanced Magnet Lab
Palm Bay, Florida
A superconducting direct-drive generator for large wind turbines
Boulder Wind Power
Magnet-based direct-drive generator to validate performance and reliability of large utility-scale turbine. Has offshore applications
Drivetrain design that enables increased serviceability over conventional gearboxes
Santa Barbara, California
Drivetrain configuration that eliminates gearboxes, power electronics, transformers, and rare earth materials
GE Global Research
Niskayuna, New York
10 MW direct-drive generator using low-temperature superconductivity technology that reduces the risk of fluid leakage.
Hybrid design that uses a single-stage gearbox and non-permanent magnet generator that reduces the need for rare earth materials
Stoel Rives Partners to Present Wind Project Development Case Study at Chinese Wind Conference in Beijing
Stoel Rives Partners Alan Merkle, Ed Einowski and Michael Mangelson will participate in the upcoming Workshop on Investment in U.S. Wind Energy by Chinese Companies, held in Beijing, China on June 30, 2011.
The opportunities for mutually beneficial cooperation between U.S. and China wind power industries have become increasingly profitable. Now more than ever it’s important for key players on both sides to understand and evaluate where their best prospects lie, as many basic business assumptions can become lost in translation.
This workshop, organized by the Chinese Wind Energy Association (CWEA), the U.S.-China Energy Cooperation Program (ECP) Wind Power Working Group (WPWG), and the National Energy Administration (NEA), gathers wind experts from across the U.S. and China to discuss the globalization of the Chinese wind energy industry, strategies for undertaking M&A transactions in the U.S., and a variety of case studies based on wind energy development projects.
Stoel Rives attorneys prepared their own case study, which will be presented during the workshop by Alan Merkle. Case Study: Development of a Wind Project in California, is based on a hypothetical 200 MW wind development project in Southern California. The case study covers the legal framework for a project of this scale, including real estate, permitting, transmission and interconnection, power purchase agreement, renewable energy credits, turbine supply and balance of plant agreements, and financing. It is available as a PDF for download in English and Chinese.
Ed Einowski will provide workshop attendees with a presentation titled Setting the Stage for Investing In U.S. Renewable Energy Projects: The Business and Legal Environments. The PowerPoint presentation is available as a PDF for download in English and Chinese.
The Stoel Rives Law of Wind Energy (now in its 6th edition) is also available for download in both English and Chinese editions here.
On Tuesday, June 28, 2011, the CPUC will hold an “Electric Energy Storage Workshop” as part of its R10-12-007 proceeding for AB 2514, which defines the process by which the CPUC will consider electric energy storage standards for California’s investor owned utilities. The workshop will be held at in the Golden Gate Room at CPUC’s headquarters from 9:30 am to 4:00 pm.
According to a draft agenda circulated by the CPUC, the theme of the workshop will be addressing barriers to entry facing Electric Energy Storage (EES). The workshops goals are to identify actions that the CPUC should consider, as well as whether and how it should participate in other forums.
The morning will feature presentations from several different perspectives, with each presentation to be followed by Q&A:
- Presentation from UC Berkeley and California Energy Commission (CEC) team on “2020 Vision Project”
- Presentation from CAISO about recent storage-related activities at the Independent System Operator, including findings from recent studies.
- Presentation from Southern California Edison (SCE) discussing a white paper entitled Moving Energy Storage from Concept to Reality.
- Presentation from California Energy Storage Alliance about developer’s perspectives
The afternoon will feature a facilitated presentation about a staff straw proposal concerning potential CPUC actions. The CPUC will allow parties to provide post-workshop comments on both the presentations and the staff straw proposal.
The CPUC is willing to accommodate short presentations (five minutes or less) or share prepared material pertinent to the workshop. Any party who wishes to do so may contact Michael Colvin at firstname.lastname@example.org. For reference (or inspiration), a series of energy storage presentations made to the CPUC as part of its 2011 IEPR process can be found here.
Late last week, an administrative law judge (“ALJ”) found that the Minnesota Public Utilities Commission (the “Commission”) is not obligated to consider or apply a county wind ordinance containing siting standards that are stricter than the Commission’s statewide standards. And even if the Commission were obligated to consider and apply the more stringent standards, the ALJ recommended that the Commission be excused from doing so for lack of good cause under the Minnesota Wind Siting Act (the “Act”). The ALJ’s recommendations to the Commission were released at the same time Minnesota legislators are considering a proposed state law that would require larger setbacks for wind turbines from neighboring property lines statewide.
In October 2010, Goodhue County amended its zoning ordinance for wind projects to, among other things, require turbines to be setback 10 rotor diameters (or about half a mile) from dwellings of landowners not participating in the project. In comparison, the project developers proposed setbacks of 1,500 feet from non-participating dwellings and the Minnesota Office of Energy Security recommended this setback distance as a permit condition. State standards typically require setbacks of 750 to 1,500 feet to comply with noise standards. Two weeks after Goodhue County adopted its wind ordinance, the Commission determined that it did not have a sufficient record before it to determine how or whether to apply the county’s standards. To develop that record, the matter was referred to an ALJ at the Office of Administrative Hearings for a contested case proceeding.
The Act provides that a state site permit for a wind project 5 MW or larger is the only site approval required. The state permit supersedes and preempts all local zoning, building, or land use rules, regulations, or ordinances. Local governments retain authority to regulate siting and construction of wind projects 5 MW and smaller. The Act allows counties to assume responsibility for permitting wind projects 5 MW and larger up to 25 MW using general permit standards developed by the Commission. However, the Act includes a provision that allows counties to adopt more stringent standards for wind energy projects 5 MW and larger, which the Commission must consider and apply before granting a site permit in that county unless the Commission finds good cause not to do so. The ALJ found that the Act does not require the Commission to consider or apply Goodhue County’s ordinance and that, even if it did, there would not be good cause to do so. The case now moves back to the Commission for a final decision.
Recent attention to wind siting standards in Minnesota hasn’t been limited to the Goodhue County case. Yesterday, the Minnesota Senate Energy, Utilities and Telecommunications Committee heard wind siting/setback legislation (S.F. 1069) that would require wind turbines to be set back one-half mile or more from property lines of non-participating landowners in townships exceeding certain population densities. The House companion bill (H.F. 811) was heard last week and failed to pass out of committee on a tied vote. The setback requirements proposed in these bills could significantly reduce the amount of land area available for wind development in Minnesota.
The 2011 IEPR Committee Workshop on Energy Storage for Renewable Integration was held Thursday, April 28th at the California Energy Commission (CEC) offices in Sacramento. The Workshop was presented in a three panel format, with each panel addressing specific topics, including (1) the need for energy storage in light of California’s renewable portfolio standard, greenhouse gas goals, smart grid and demand response, (2) the costs, benefits and revenues from energy storage applications, and (3) utility perspectives on energy storage. The full agenda, which describes the topics and the questions addressed at the Workshop, can be found here.
The CEC is not planning any further workshops on energy storage, but it will be making recommendations about the topic in its 2011 Integrated Energy Policy Report (IEPR). We understand that the CEC is seeking input on energy storage from all arenas, including developers and owners of gas-fired peaker plants. Among other things, the CEC wants to understand the economic and environmental benefits and impacts of peakers (i.e., facilities that have the ability to ramp up in ten minutes, generate for a full hour, then be taken off line) compared to the cost and benefits of various energy storage technologies. The CEC will use the information it gathers to determine if it makes sense economically to recommend a lower or a higher target for energy storage in its 2011 IEPR.
The CEC’s report will be taken into account by the California Public Utility Commission (CPUC), which is conducting a separate proceeding under AB 2514 to determine appropriate energy storage targets for California’s investor-owned utilities. You can find our previous descriptions of the AB 2514 process here , here and here. A report on last year's CPUC staff whitepaper describing energy storage technologies and their potential use in the California market can be found here.
Parties who want to weigh in on energy storage in California must submit their comments to the CEC by 5 p.m. on May 16, 2011. The comments must include the docket number “11-IEP-1N” and indicate “Energy Storage for Renewable Integration” in the subject line or first paragraph of the comments. All filings in the IEPR proceeding are now accomplished electronically and can be submitted in either Microsoft Word format or as a PDF by e-mail to email@example.com.
Thanks to Kimberly Hellwig in our Sacramento office for her help in preparing this Blog!
Stoel Rives attorney Heath Curtiss, one of the
co-authors of "Federal Land Issues with Siting
and Permitting" in our Law of Wind, describes
a Bureau of Land Management ("BLM") plan to
protect certain land suitable for renewables
development from the location of mining claims :
As many of our clients with right-of-way (“ROW”) applications pending before BLM know, mining claims located prior to a final ROW grant can prove difficult obstacles to clear in the context of project permitting, finance, and development. Unfortunately for renewables developers, mining claims are easy to locate, and difficult to invalidate. This gives mining claimants leverage vis-à-vis other public land developers. As one might expect, with the recent uptick in renewable ROW applications, we’ve also seen an increase in mining claims. According to BLM, over the last two years, 437 new mining claims were located within wind energy ROW application areas on BLM lands, and another 216 new mining claims were located within solar energy ROW application areas.
In an effort to address such conflicts, on April 25, 2011, BLM published notice of an Interim Rule effective immediately, and a nearly identical proposed rule, that gives BLM the ability to segregate lands included within wind and solar ROW applications, or lands that BLM identifies for potential wind and solar ROWs. Once segregated, such lands would no longer be subject to appropriation under the appropriations laws, including location under the General Mining Law of 1872. Segregation would not, however, explicitly restrict leasing under the Mineral Leasing Act of 1920, or sales under the Materials Act of 1947, presumably because those acts already give BLM significantly more discretion to balance competing uses. Likewise, neither the interim nor proposed rule purport to affect existing mining claims.
The foregoing segregation would take effect once BLM publishes notice in the Federal Register, and would terminate on the earliest of (i) a decision to grant or deny the ROW application, (ii) automatically at the end of the segregation period, not to exceed 2 years from the date of publication, or (iii) upon publication of a notice of termination.
BLM is accepting comments on the interim and proposed rules until June 27, 2011.
California Public Utilities Commission Holds Prehearing Conference on Energy Storage Procurement Targets
As we’ve previously discussed, California’s AB 2514 requires the CPUC and municipal utilities in California to open proceedings by March 1, 2012 to determine appropriate targets, if any, for the procurement of viable and cost-effective energy storage systems by load-serving entities. Over a year before that deadline, the CPUC opened Rulemaking 10-12-007 in December of last year to both implement AB 2514 and “on [the CPUC’s] own motion to initiate policy for California utilities to consider the procurement of viable and cost effective storage systems.” In early March, the CPUC held an initial workshop on the scope of the rulemaking proceeding.
On April 21, the Commission held a prehearing conference to determine the scope and schedule for the proceeding. Stoel Rives partner Seth Hilton attended the conference. Among the issues discussed at the prehearing conference, led by Administrative Law Judge Yip-Kikugawa, was whether to conduct the proceeding in phases (e.g., first examining how storage might be applied, and then in a subsequent proceeding setting what the mandate will be for storage procurement), the issues to be covered in each phase , and whether evidentiary hearings would be necessary.
According to ALJ Yip-Kikugawa, a scoping memo should issue in the next two to three weeks. The scoping memo will set out the issues to be considered in the proceeding and a schedule for their resolution.
We'll be posting further information on Renewable + Law Blog when the scoping memo comes out, so stay tuned for further developments.
Having first reported to our readers in February that LexisNexis had nominated the Stoel Rives Renewable + Law Blog for its Top 50 Environmental Law & Climate Change Blogs for 2011 award, we are pleased to announce we made the list of winners! In publishing its Top 50 list, LexisNexis declared that our Renewable + Law bloggers’ “avowed passion for solar energy, wind energy, biofuels, ocean and hydrokinetic energy, biomass, waste-to-energy, geothermal and other clean technologies is evident in the care they take with this blog-the posts are frequent, the topics are interesting and cutting edge, and the writing is top notch.”
Thanks again to all our readers who make regular use of Renewable + Law Blog and those who wrote in to support us for this award. We're honored and inspired, and we plan to keep those Blogs and letters coming.
On April 11, 2011, FPL Energy, LLC, et al., filed with the Texas Supreme Court a petition for review of the Texas Court of Appeals’ decision FPL Energy, LLC, v. TXU Portfolio Management Company, L.P. The case illustrates the significant economic impact that curtailment can have on variable energy resources. For a detailed description of the case and its implications, see our Renewable + Law Blog entry on the Court of Appeals’ decision here.
The petition for review focuses on the question of whether the Court of Appeals was correct in enforcing the liquidated damages provisions contained in three wind energy power purchase agreements. The pertinent provisions in each PPA required the petitioners to pay $50 for every MWh that the plants fell short of achieving the their minimum REC output guarantees—the Court of Appeals’ holding meant that the petitioners owed TXU roughly $29 million in shortfall damages for a four year period of curtailment imposed by the transmission provider (ERCOT), on top of the pain of losing the contract price and the production tax credit on each MWh of energy curtailed.Continue Reading...
We are pleased to announce for our Chinese readers the publication of a new Chinese translation of the Stoel Rives Law of Wind guide. Purposed for Chinese investors and companies exploring business opportunities in the U.S. wind energy market, the guide covers such issues as real property procedures, permitting requirements, EPC agreements, project finance, tax, interconnection, transmission and power purchase negotiations, labor management, U.S. Securities regulations and U.S. Foreign Corrupt Practices Act compliance. The translation was prepared in cooperation with our friends at the U.S.-China Energy Cooperation Program (“ECP”) Wind Power Working Group, the only non-governmental organization with bi-lateral government recognition in the U.S.-China sustainable energy sector.
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The current version of the budget compromise provides relatively good news for projects seeking DOE loan guarantees. During the past several months, renewable energy projects in the DOE’s Loan Guarantee pipeline have been exposed to substantial uncertainty as a result of the budget crisis in DC. The developers of these projects have previously invested substantial resources to apply to the program which would become wasted effort if the program funds evaporate as the projects wait for DOE approval. The Loan Guarantee Program Office led by Jonathan Silver was clearly aware of this issue and prudently allowed all open solicitations to expire in early 2011 without issuing any new ones. The renewable energy project developers’ concern has been that the budget deal would involve a substantial claw back of previously appropriated funds that have not yet been committed to projects.
The battle is not yet resolved but the current compromise is encouraging for these projects. There is a claw back of $18.183 billion in uncommitted funds but these were funds appropriated under provisions that required that the Credit Subsidy Cost to be paid by developers. The Credit Subsidy Cost was the bane of the Loan Guarantee Program as it essentially required the program applicant to cover the present value risk that the project would default on the loan. The Stimulus Bill solved this problem and greatly increased the attractiveness of the Loan Guarantee Program by appropriating funds to cover the Credit Subsidy Cost. Similarly, the current budget compromise appropriates an additional $1.183 billion in funds and allows these funds to be utilized to cover Credit Subsidy Costs. Thus, while the provision claws back funds, these are funds that were not attractive due to program limitations whereas new funds are appropriated to the preferred program. In addition, the proposed legislation imposes an Office of Management and Budget certification of compliance requirement as a control on the program.
The current bill is HR 1473 and is likely to be voted on later this week and thus is still subject to amendments. To obtain the latest details and access to the bill, see the Open Congress site at http://www.opencongress.org/bill/112-h1473/show
A Legal News Alert from Seth Hilton and the Stoel Rives Renewable Energy Law Group:
California’s Governor Jerry Brown signed Senate Bill ("SB") X1-2 on Tuesday requiring California's electric utilities to procure 33% of their energy from renewable resources by 2020. Upon signing the bill, Governor Brown stated the "bill will bring many important benefits to California, including stimulating investment in green technologies in the state, creating tens of thousands of new jobs, improving air quality, promoting energy independence and reducing greenhouse gas emissions."
Details concerning the implementation of the new legislation will have to be worked out at various California regulatory agencies, including the California Public Utilities Commission and the California Energy Commission. The legislation will likely spawn numerous regulatory proceedings as the various regulatory agencies struggle to come to grips with the new RPS mandate.
Yesterday, the Montana legislature sent HB 295, the Wind Energy Rights Act (the “Act”), to Governor Schweitzer to be signed into law. The Act revises wind easements and wind energy rights in the state in several ways and will become effective on the date signed by the Governor:
- Wind Easements. The Act sets out the contents and requirements for wind easements. A wind easement is defined as “the right granted . . . to a wind energy developer guaranteeing the developer the right to use the real property legally described . . . and the wind resource on and flowing over its surface to develop a wind energy project.” Such wind easements would be interests in real property that run with the land.
- Wind Option Agreements. The Act sets out the contents and requirements for wind option agreements.
- Severance of Wind Rights Prohibited. The Act prohibits the severance of wind energy rights from the underlying real property. However, the Act does not “prohibit or limit the right of a seller of the real property to retain any payments associated with an existing wind option agreement or wind energy agreement” (including leases, licenses, and any other agreement that contains a wind easement).
- Mineral Estate Remains the Dominant Estate. The Act does not “change or alter common law” with respect to “the rights belonging to or the dominance of the mineral estate.” Therefore, even though a developer may acquire a real property interest in the wind resource under the Act, that right – like the right of the landowner to occupy the surface – is subject to oil and gas and other mineral interests that were recorded prior in time to (and without prior notice of) the wind energy agreement. Although the Act requires landowners to “ensure the undisturbed flow of wind over the property,” they are not required to restrict structures and equipment “necessary to access minerals as they relate to the rights belonging to or the dominance of the mineral estate.” But what if they did anyway? Because the mineral estate is the dominant estate, even if a landowner agreed to restrict future development of senior mineral interests by, for example, limiting the height or location of exploration equipment, that covenant could be subject to challenge by the mineral interest holder under common law.
- Grandfathering. Wind energy rights created by lease, contract, or other agreement prior to the effective date of the Act will not be affected by the Act.
- Repealer. The current law governing wind energy easements, MCA 70-17-303, would be repealed upon approval of the Act.
The severance of wind rights and conflicts between wind project developers and oil & gas and other mineral interest holders are some of the leading issues facing project developers. These issues can be quite complex and have implications for project financing as well as project siting. For more information on these issues, contact:
Richard Hall, firstname.lastname@example.org, (208) 387-4211 (Boise)
Chad Marriott, email@example.com, (503) 294-9339 (Portland)
California’s AB 2514 requires the CPUC and municipal utilities in California to open proceedings by March 1, 2012 to determine appropriate targets, if any, for the procurement of viable and cost-effective energy storage systems by load-serving entities. By October 1, 2013, the CPUC must (1) determine whether a procurement target for energy storage is appropriate and, if so, (2) adopt a procurement target for each load-serving entity under its jurisdiction to be achieved by December 31, 2015 and a second target to be achieved by December 31, 2020. Municipal utilities have an additional year to meet these requirements.
In December of last year, the CPUC opened Rulemaking 10-12-007 both to implement AB 2514 and “on [the CPUC’s] own motion to initiate policy for California utilities to consider the procurement of viable and cost-effective energy storage systems.” Order Instituting Rulemaking (“OIR”) at 1, R.10-12-007.
On March 9, 2011, a workshop was held to address the scope of the rulemaking proceeding. The workshop included discussions of current and emerging energy storage technologies, the goals and applications of energy storage, existing barriers to storage implementation, and whether a unified storage policy would work or whether the policy should be written to address specific barriers to entry. The workshop also considered how the CPUC could and should work with other agencies addressing energy storage or related issues, including the California Energy Commission, the California Independent System Operator, and the Federal Energy Regulatory Commission. You can find Seth Hilton’s report about the March 9 workshop here.
The CPUC has scheduled a pre-hearing conference in the rulemaking proceeding for April 21, 2011. The conference will be held before ALJ Amy C. Yip-Kikugawa, beginning at 10 am, in the Commission Courtroom, State Office Building, 505 Van Ness Avenue, San Francisco, California. Stoel Rives partner Seth Hilton will attend the conference.
In addition, as part of its 2011 Integrated Energy Policy Report (IEPR) Schedule, the California Energy Commission has scheduled a committee workshop on energy storage for renewable integration, which will begin at 9:30 on April 28 in Hearing Room A, CALIFORNIA ENERGY COMMISSION, 1516 Ninth Street, First Floor, Sacramento, California. Stoel Rives attorneys are planning to attend the workshop.
A report from Stoel Rives attorney Jake Storms (Sacramento):
The California Public Utility Commission (“CPUC”) recently announced that it will reopen the Rule 21 Working Group. Rule 21 governs the interconnection of distributed generation to a utility’s distribution system.
Each of the three largest investor-owned utilities—Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric—have a version of Rule 21 in their electric tariffs, which are subject to approval by the CPUC. The last Rule 21 workshop was held in 2008. The CPUC stated that, given the substantial changes in the technical and regulatory landscape in the past several years, Rule 21 is in need of reconsideration and has set forth a list of issues it believes should be addressed by the new Working Group. These include:
• The need for transparency in processing, queue information, and customer application information
• The need for review and potential reconsideration of technical screens within Rule 21 to ensure that the appropriate issues are being studied
• The need for articulation of cost-allocation methodology when network upgrades are required
• The need for review of utility tariffs for consistency with each other and with state law
• The need for additional standard interconnection agreements to accommodate the different types of distributed generation projects anticipated to come online
The first meeting of the Rule 21 Working Group will be Friday, April 29, 2011 from 10:00 a.m. to 3:00 p.m. at the Auditorium of the CPUC located at 500 Van Ness Avenue, San Francisco, CA.
Stoel Rives partner Bev Pearman reviewed the complaint filed Monday in American Tradition Institute, et al., v. Colorado and prepared this analysis:
On April 4, 2011, the American Tradition Institute (“ATI”), the American Tradition Partnership (“ATP”), and Rod Lueck filed suit in the U.S. District Court for the District of Colorado arguing that Colorado is unconstitutionally discriminating against out-of-state renewable energy producers. ATI is a nonprofit organization “dedicated to the advancement of rational, free-market solutions to America’s land, energy, and environmental challenges,” and ATP is a lobbying organization “dedicated to fighting environmental extremism and promoting responsible development and management of land, water, and natural resources in the Rocky Mountain West and across the United States.” Rod Lueck is a member of ATI and ATP.
Colorado’s renewable energy standard (“RES”) states that by 2020 the state’s two major investor-owned utilities must get 30 percent of electricity sold from recycled or renewable resources. Renewable energy resources are “solar, wind, geothermal, biomass, new hydroelectricity with a nameplate rating of ten megawatts or less, and hydroelectricity in existence on January 1, 2005, with a nameplate rating of thirty megawatts or less.” “Fossil and nuclear fuels and their derivatives” are not “eligible energy resources” for complying with the RES. Additionally, each kilowatt of electricity generated in Colorado from certain recycled or renewable sources is given an enhanced value of one and one-quarter kilowatt-hours for purposes of meeting the mandated standards.
Plaintiffs raise both a sweeping Commerce Clause claim and a more focused Commerce Clause claim. The sweeping claim is that the statutory scheme is unconstitutional because it discriminates against non-renewable generation resources, both in-state and out-of-state, with plaintiffs alleging that such non-renewable generation is “legal, safer, less costly, less polluting and more reliable than renewable generation. A more focused claim is that the statutory preference given to in-state renewable electricity establishes a “market-bias against otherwise qualifying renewable sources located outside of Colorado and an inflated cost of complying with the RES requirements.”
Plaintiffs’ Commerce Clause claim is grounded in a U.S. Court of Appeals for the Tenth Circuit’s decision in KT&G Corp. v. Attorney General of the State of Oklahoma, 535 F.3d 1114, 1143 (10th Cir. 2008), which says a state may violate the dormant Commerce Clause by:
· Discriminating against interstate commerce in favor of intrastate commerce, unless “the discrimination is demonstrably justified by a valid factor unrelated to economic protectionism;” or
· Imposing “a burden on interstate commerce incommensurate with the local benefits secured;” or
· Creating mandates with the “practical effect of extraterritorial control of commerce occurring entirely outside the boundaries of the state in question.”
We expect that Colorado will vigorously defend the RES as being constitutional because its interest in promoting renewable energy generation is an important policy choice. Plaintiffs are attacking that position head-on, however, by challenging the policy of favoring renewable resources, particularly wind energy. They allege that wind energy is not reliable, causes more pollution due to the cycling of coal and natural gas plants during times when wind generation is not possible, and drives up utility costs for consumers. They do not attack other forms of renewable energy as vociferously, but still argue that any scheme favoring renewable resources over other energy sources burdens interstate commerce and violates the Commerce Clause.
The more focused claim (based on the preference given in-state renewable resources) is similar to a Commerce Clause challenge was brought nearly a year ago in Massachusetts by TransCanada Power Marketing, Ltd. (“TransCanada”). The Massachusetts suit did not challenge the policy of promoting renewable energy over non-renewable energy sources. It instead focused on renewable energy mandates and incentives favoring in-state generation. We do not know what arguments Massachusetts would have raised in defense of its program because the case was stayed after the state suspended the regulation underlying the statute in question. It issued emergency regulations, which were later adopted as final regulations, but the statute that establishes the challenged policy has not been amended. On April 1, 2011, the Alliance to Protect Nantucket Sound, an advocacy group that is leading the opposition to the Cape Wind project, filed a motion to intervene in that proceeding. It argued that TransCanada does not represent the interests of Massachusetts ratepayers. Their economic interests are allegedly harmed because the program at issue discourages utilities from entering long-term contracts with out-of-state generators, which has the effect of reducing out-of-state competition and increasing the cost of renewable energy for ratepayers.
The outcome of both of these cases could have far-reaching effects on other state’s RESs and renewable portfolio goals (RPGs). If the plaintiffs are successful with their claims, then the states with RESs and RPGs may have to modify their standards so they are not discriminating against out-of-state renewable energy generators. As we have noted before, the RESs with regional preferences may not be as much at risk. A key question that the courts have yet to answer are whether the RESs and RPGs create protectionist barriers to interstate trade. Check here for regular updates as these groundbreaking cases moves forward.
NRG Bluewater Wind won the exclusive rights to negotiate with the federal government to build an offshore wind farm off the Delaware coast on March 24, 2011. As the first developer to enter into the “Smart from the Start” program released by the BOEMRE on February 7, 2011, NRG Bluewater Wind signed a non-competitive lease agreement for a proposed 450 MW offshore wind energy facility.
The reason for non-competitive lease? After the DOI released a RFI on April 26, 2010, only two commercial parties submitted interest, Occidental Development & Equities, LLC and NRG Bluewater Wind. The RFI, reviewed by the BOEMRE, invited submissions for interested parties to obtain one or more commercial leases for the construction of a wind energy project(s) on the Outer Continental Shelf (OCS) offshore Delaware. Subsequently BOEMRE determined that Occidental’s proposal “lacked development, construction, operation and maintenance or decommissioning cost details,” and as a result was rejected by the committee.
NRG Bluewater Wind has had their eye on the project since 2006, after Delaware's signed a RPS into law, requiring that 10% of the state's electricity come from renewable sources by 2018. In June and July of 2008 NRG Bluewater Wind and Delmarva Power finalized a 25 – year PPA for up to 200 MW. The project proposes 49 large turbines and 150 smaller ones approximately 13.2 miles off the Delaware coast. The contract requires the turbines start producing electricity no later than 2016. (NRG timeline link below)
The future is still unknown. Although the non-competitive lease agreement is in place, there are a whole slew of rigorous environmental reviews and an extensive permitting process at the federal, state, and local level. Ironically, the goal of “Smart from the Start” program was to cut, in half, the time associated with permitting processes. Optimistically, NRG Bluewater Wind allotted 12 – 24 months for permitting into the timeline. However, if Cape Wind can provide any insight to construction and operation, NRG Bluewater Wind may be in for a long ride.
For more information on BOEMRE announcement: http://www.doi.gov/news/pressreleases/Interior-Initiates-Process-for-First-Smart-from-the-Start-Lease-for-Commercial-Wind-Power-Offshore-Delaware.cfm
NRG Bluewater Timeline: http://www.bluewaterwind.com/de_timeline.htm
“Smart from the Start” http://www.doi.gov/news/pressreleases/loader.cfm?csModule=security/getfile&PageID=186636
Legal News Alert from Stoel Rives Renewable Energy Law Group
The California Legislature has passed Senate Bill (“SB”) X1-2, which requires California’s electric utilities to increase their renewable generation to 33% by 2020. Passage of the legislation is the culmination of years of effort to increase California’s Renewable Portfolio Standard (“RPS”) from its current 20%. In 2009, the Legislature passed SB 14, which also would have increased California’s RPS to 33%, but the bill was vetoed by Governor Schwarzenegger on the ground that it imposed too many restrictions on the use of out-of-state generation to meet California’s RPS requirement. Governor Schwarzenegger then issued an executive order directing the California Air Resources Board to develop its own 33% Renewable Energy Standard under the Board’s authority pursuant to Assembly Bill 32, the Global Warming Solutions Act of 2006. Last year, the Legislature again tried to pass another 33% RPS bill, SB 722, but the session expired before the legislation could reach a final vote. Two bills were introduced in this session: SB 23 and SBX1-2. SBX1-2 was identical to SB 23, but it was introduced in special session in an attempt to speed passage of the legislation. SBX1-2 now goes to Governor Brown for signature, and he is expected to sign the legislation into law.
My partner Seth Hilton attended last Friday's all-party meeting on California's 2011 RPS procurement and prepared the following update:
On February 11, 2011, California Public Utilities Commission (CPUC) Administrative Law Judge Burton Mattson issued a Proposed Decision (PD) conditionally accepting the 2011 Renewables Portfolio Standard (RPS) Procurement Plans for Southern California Edison (SCE), Pacific Gas and Electric Company (PG&E), and San Diego Gas and Electric Company (SDG&E). If adopted, the Decision would set a schedule for the utilities’ 2011 RPS solicitation. The PD was on the agenda for the CPUC’s March 24, 2011 business meeting, but was held at Commissioner Florio’s request until the April 14 meeting.
On March 25, Commissioner Florio held a well-attended all-party meeting on the PD. Among the issues raised by Commissioner Florio was where California’s investor-owned utilities stood relative to the current RPS procurement targets and the targets contained in pending legislation (SBX1-2), and whether a 2011 RPS solicitation was necessary.
All three investor-owned utilities—PG&E, SCE and SDG&E—stated that holding a 2011 RPS solicitation would be prudent. PG&E stated that it was on track to meet the current 20% RPS this year and through 2013. However, future compliance, especially with the higher procurement targets under SBX1-2, is dependent on several large projects that are scheduled to come online in the next few years. Any delay or failure of those projects would require PG&E to procure additional resources to get to the 2016 target under SBX1-2, and therefore holding a solicitation this year made sense.
According to SCE, a 2011 solicitation would be prudent for a number of reasons, not only to assist SCE to reach the goals in SBX1-2. SCE noted that a solicitation would be beneficial for current contract administration by setting the price for any replacement power and that annual RPS solicitations were important for maintaining a vigorous RPS market.
SDG&E stated that it too was not done with procurement and would need further procurement to comply with the 2016 goal under SBX1-2.
Other parties also advocated in favor of a 2011 solicitation, with TURN noting that there may be some bargains available to the utilities due to the fact that no RPS solicitation was held last year and that competition would be fairly robust for RPS contracts.
The Division of Ratepayer Advocates was one of the few dissenters (along with CARE), arguing that because a new cost containment mechanism would apply under SBX1-2, the CPUC should consider waiting until it had addressed cost containment before commencing a new RPS solicitation.
The parties also discussed various issues to be resolved by the PD, including how economic curtailment should be handled in the pro forma RPS contract, congestion adders and integration cost adders. As currently drafted, the PD would require all three utilities to amend their pro forma agreements to use the economic curtailment provisions proposed by PG&E, which would allow utilities to economically curtail projects up to five percent of the project’s expected annual generation, for which PG&E would pay the project the full contract price but would not reimburse the project for any lost production tax credits. The California Wind Energy Association noted that although it supported PG&E’s proposal, the proposal should be amended to make it clear that the cap applies to any economic curtailment caused by the utility, even if the curtailment was in fact ordered by the California Independent System Operator, and to provide for the payment of any lost production tax credits as well.
As for congestion adders, the PD would require the utilities to consider congestion costs when evaluating projects and order the utilities to release congestion cost information in their 2012 and future plans, so that project developers will be fully informed when making siting decisions.
Finally, the PD declined to allow the use of integration cost adders when evaluating bids, despite both SCE’s and SDG&E’s requests that they be permitted to do so.
If you have any further questions on this all-party meeting or any other California energy regulatory issue, please contact:
Santa Fe-based Chamisa Energy Corporation recently announced a request for proposals for up to 250MW of nameplate wind generation resources to be used to provide energy to a 135 MW or larger compressed air energy storage (CAES) facility under development in Swisher County in the Texas panhandle. The proposed CAES facility would compress air and store it in solution-mined underground caverns. To convert the stored potential energy back into electricity, the stored air would be released and mixed with a small amount of natural gas to drive a turbine. The RFP describes CAES as a "bulk electric storage technology used to complement wind energy generation so that wind energy becomes a fully dispatchable resource suitable for peaking, intermediate, baseload or tolling resource."
The energy would be provided to the facility pursuant to a power purchase agreement (PPA). Chamisa invites wind plants located either in the Southwest Power Power (SPP) or the Electric Reliability Council of Texas (ERCOT) to respond. Chamisa will consider proposals that supply wind energy for seven years, but prefers a minimum term of 15 years. The target date for delivering electricity to the Storage Facility is the second quarter of 2014.
Chamisa notes that it is not aware of completed or pending PPAs between WGR and CAES facilities, and thus anticipates that the successful proposal "will be creative in its approach to the RFP." Although the RFP isn't explicit on the point, Chamisa's plan may be to purchase energy from a wind generator or wind generators pursuant to the PPA, store the energy, and then sell the electricity and ancillary services from the facility to a third-party off-taker. If Chamisa can take the bulk of the energy into CAES primarily in off peak hours and then sell the stored energy during on-peak hours, might in theory be able to profit on the arbitrage between the two price points, although past efforts to get grid-scale storage to pencil out on that basis have had limited success. Alternatively, the facility may be able to profit by using the stored energy to provide ancillary services, grid congestion relief, grid stability and support for grid expansion.
In principle, the CAES facility could also be used in a tolling arrangement by which a utility or a seller of wind energy hires the CAES facility for storage, pays a reservation and storage charge to Chamisa, and then dispatches the stored energy at will--in other words, the third-party offtaker could be the same party as the generator delivering the wind energy to the facility (e.g., a utility that is buying wind energy that it wants to shift from off-peak hours to on-peak hours). Under this structure, the party tolling electricity would retain title to the electicity being stored and could arbitrage or otherwise deploy the stored energy into the market as it saw fit. However, a tolling transaction of that type isn't clearly called for by the RFP (although it doesn't appear to be precluded).
Regardless, Chamisa's RFP will be worth monitoring to see whether an independent storage developer can create a workable market structure for its storage assets in order to facilitate financing. The outcome of this effort will be of great interest to developers of solar and wind resources, as well as to developers of pumped storage and other grid-scale storage solutions.
The deadline for written or email questions is March 31, 2011, and proposals are due no later than 5pm Mountain Standard Time on May 16, 2011. If submitted by mail, proposal(s) must be postmarked May 16th. E-mail submission is preferred. You can access Chamisa's RFP by clicking here.
Legal News Alert from Stoel Rives Environmental Law Group
March 23, 2011
San Francisco Superior Court has issued a final decision in Association of Irritated Residents v. California Air Resources Board. For the moment, the California Air Resources Board (CARB) is enjoined from further rulemaking to implement the California Global Warming Solutions Act (A.B. 32), including for the cap-and-trade program. The Court upheld the validity of CARB’s Scoping Plan for implementation of A.B. 32, saving CARB from having to revise the Plan. But, the Court found flaws with CARB’s environmental review of the Scoping Plan under the California Environmental Quality Act (CEQA), in particular its analysis of alternatives to the Plan’s recommended greenhouse gas (GHG) reduction measures, such as cap and trade. CARB is enjoined from further rulemaking until the agency has come into compliance with CEQA by amending its environmental review of the Scoping Plan.
For entities facing regulation under A.B. 32, this decision has important implications. Scoping Plan GHG reduction measures that have already made their way through the rulemaking process appear unaffected. But CARB’s cap-and-trade program never made it out of the formal rulemaking process. While the Board members of CARB approved the cap-and-trade program in December 2010, it left it to the Executive Officer to take final action to adopt the proposed regulation (or bring it back to the Board) after more details were finalized. CARB had a packed schedule this year to finalize cap and trade prior to its January 1, 2012 start date. Under the Court’s final decision, these activities will have to be shelved if they fall within the rubric of further rulemaking or implementation. Regulated entities may thus have a temporary reprieve from the onset of cap and trade in 2012. But continued uncertainty over the details of CARB’s planned GHG regulation of stationary sources is a less than ideal situation for regulated sources.
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Legal News Alert from Stoel Rives Environmental Law Group
March 23, 2011
San Francisco Superior Court has issued a final decision in Association of Irritated Residents v. California Air Resources Board. For the moment, the California Air Resources Board (CARB) is enjoined from further rulemaking to implement the California Global Warming Solutions Act (A.B. 32), including for the cap-and-trade program. The Court upheld the validity of CARB’s Scoping Plan for implementation of A.B. 32, saving CARB from having to revise the Plan. But, the Court found flaws with CARB’s environmental review of the Scoping Plan under the California Environmental Quality Act (CEQA), in particular its analysis of alternatives to the Plan’s recommended greenhouse gas (GHG) reduction measures, such as cap and trade. CARB is enjoined from further rulemaking until the agency has come into compliance with CEQA by amending its environmental review of the Scoping Plan.
For entities facing regulation under A.B. 32, this decision has important implications. Scoping Plan GHG reduction measures that have already made their way through the rulemaking process appear unaffected. But CARB’s cap-and-trade program never made it out of the formal rulemaking process. While the Board members of CARB approved the cap-and-trade program in December 2010, it left it to the Executive Officer to take final action to adopt the proposed regulation (or bring it back to the Board) after more details were finalized. CARB had a packed schedule this year to finalize cap and trade prior to its January 1, 2012 start date. Under the Court’s final decision, these activities will have to be shelved if they fall within the rubric of further rulemaking or implementation. Regulated entities may thus have a temporary reprieve from the onset of cap and trade in 2012. But continued uncertainty over the details of CARB’s planned GHG regulation of stationary sources is a less than ideal situation for regulated sources.
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COMMISSIONER FLORIO NOTICES ALL-PARTY MEETING CONCERNING 2011 RENEWABLE PORTFOLIO STANDARD PROCUREMENT
On February 11, 2011, California Public Utilities Commission (CPUC) Administrative Law Judge Burton Mattson issued a Proposed Decision conditionally accepting the 2011 Renewables Portfolio Standard (RPS) Procurement Plans for Southern California Edison, Pacific Gas and Electric Company, and San Diego Gas and Electric Company. If adopted, the Decision would set a schedule for the utilities’ 2011 RPS solicitation. The Decision was on the agenda for the CPUC’s March 24, 2011 business meeting, but was held at Commissioner Florio’s request until the April 14 meeting.
On March 17, 2011, Commissioner Florio noticed an all-party meeting on the Proposed Decision for March 25, 2011. Yesterday, Commission Florio circulated an agenda for the meeting. Among the issues raised by the agenda is whether an RPS solicitation in 2011 is necessary and prudent.
Stoel Rives’ Partner Seth Hilton will be present at the all-party meeting, and will provide an update afterwards.
Today, the State Affairs Committee of the Idaho House of Representatives rejected H265, the bill that would impose a two-year moratorium on new wind projects in the state, by a vote of 11-8. Discussions at the hearing suggest that at least some of the bill's opponents believed the rapid development of wind in the state should be addressed by individual counties, rather than through a statewide moratorium on development. Although it appears that the bill will not make it out of committee, it cannot be considered dead. The bill may yet be rewritten in a process known as "gutting and stuffing" and brought up again this legislative session. For now, though, wind-industry advocates are breathing a sigh of relief.
For more information on H265, see Teresa Hill's blog from last week.
Two bills were introduced in the Idaho legislature last week, both of which could significantly impact the wind industry in Idaho. The first, H250, extends a sales or use tax rebate available to purchasers of qualifying machinery and equipment used in generating electricity from renewable resources. The rebate is currently set to expire as of July 1, 2011. Under the proposed legislation, the rebate would be extended for such purchases but only if the purchaser achieves commercial operation by December 31, 2014.
The second bill, H265, would impose a moratorium on the construction of new wind projects in Idaho for two years and directs the Interim Energy Committee to meet during that time and report on various wind related issues, including the impact of wind on power rates and the ability of utilities to integrate wind into their systems. The relevant moratorium language is excerpted below. Although initial reports of the bill stated that it would not apply to wind projects that are already under construction or have permits, that is not how the legislation is written. As proposed, it 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 and have a nameplate capacity that exceeds one hundred (100) kilowatts." A plain reading of this language means that a fully developed and "almost" fully permitted project with wind turbines already delivered on-site could be subject to the moratorium because of the inability to obtain building or other ministerial permits, which some Idaho counties require as each individual turbine is constructed.
We'll continue to monitor closely as the future of Idaho's wind industry is debated by the legislature.
61-1802. MORATORIUM ON CONSTRUCTION OF CERTAIN INDUSTRIAL WIND FARMS AND WIND TURBINES FOR A TIME CERTAIN. (1) From the effective date of this act until July 1, 2013, municipalities, counties and state agencies are prohibited 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 and have a nameplate capacity that exceeds one hundred (100) kilowatts. Projects that have been approved and for which the statute of limitations for legal proceedings of the state of Idaho against the project expire without any legal action against the project shall be allowed to be constructed. Projects for which legal proceedings are pending shall not be allowed to be constructed until the legal proceedings are complete and a court of competent jurisdiction finds that construction may proceed.
The Army Corps of Engineers (the “Corps”) is seeking comments on a new proposed nationwide permit (“NWP”) for offshore wind and hydrokinetic pilot projects. In its February 16, 2011 Proposal to Reissue and Modify Nationwide Permits, the Corps described a new NWP for “Water-Based Renewable Energy Pilot Projects” that could give developers a reprieve from obtaining permits under § 10 of the Rivers and Harbors Act and § 404 of the Clean Water Act for the “construction, expansion, or modification of water-based wind or hydrokinetic pilot projects and their attendant features.”Continue Reading...
There’s good news for offshore wind and hydrokinetic project developers looking to site projects on the Outer Continental Shelf (“OCS”). The Bureau of Ocean Energy Management, Regulation and Enforcement (“BOEMRE” or the “Bureau”) issued a Notice of Proposed Rulemaking (“NOPR”) on February 16, 2010 to delete a step in the regulatory process for issuing noncompetitive leases to renewable energy projects on the OCS when an applicant responds to a Request for Interest (“RFI”) or a Call for Information and Nomination (“Call”) issued by BOEMRE.Continue Reading...
The Oregon Department of Fish and Wildlife (“ODFW”) posted the final draft rules and draft conservation strategy related to the greater sage-grouse. After years of negotiation and numerous public meetings on the ODFW’s approach, the final drafts are open for public comment. On April 22 they will be presented to the Fish and Wildlife Commission for consideration for adoption.
In March of last year the US Fish and Wildlife Service (“USFWS”) determined that protection of the greater sage-grouse was warranted under the federal Endangered Species Act (“ESA”) but was precluded from listing by the USFWS’s need to take action on species facing more immediate or severe threats. The species is now a candidate for listing, but it is uncertain if or when a formal ESA listing may occur. Oregon, through ODFW’s approach to sage-grouse conservation, joins other western states (e.g., Wyoming) in taking preventative state action, at least in part, to preclude the need for an eventual federal listing.
Both the USFWS determination and the ODFW’s conservation strategy identify energy, and renewable energy development specifically, as posing threats to the specie. The ODFW’s conservation strategy points out that there is great potential for geo-thermal, solar and wind energy in most sage-grouse regions in Oregon, but the same windswept ridges that make for great wind facility siting, for example, may also be important sources of accessible winter forage for sage-grouse.
Among other things, the draft rule would formally adopt the ODFW’s Core Area Approach to Conservation and directs the ODFW to maintain maps of sage-grouse core areas. The rule stops short of directly equating sage-grouse core areas with habitat categories under the Fish and Wildlife Habitat Mitigation Policy. By referencing the ODFW’s conservation strategy, the rule instead outlines micro-siting guidance for development projects (e.g. a wind facility) proposed in identified core areas. As part of the siting process, the ODFW recommends that sage-grouse habitat in core areas be classified as “irreplaceable, essential habitat” and impacts on such Habitat Category I areas avoided. In past iterations of the core area maps, much of eastern Oregon, and southeastern Oregon in particular, was identified as being home to sage-grouse core areas.
In a long-awaited announcement, last week the New Jersey Board of Public Utilities adopted rules to codify the State’s Offshore Wind Economic Development Act. The new rules provide the process for an applicant to submit project information and to propose a pricing method and structure for Offshore Renewable Energy Credits (ORECs) for the Board’s consideration. If approved, each retail provider of electricity in New Jersey will be required to buy Board mandated levels of ORECs in proportion to retail sales.
The application process requires detailed disclosures concerning the proposer’s business information, its collective project experience, and key employees. A proposal must describe the proposed technology, the anticipated schedule for completion, the financial details of the project including a specified cost-benefit analysis, and documentation that the project has applied for all applicable State and federal grants, rebates, tax credits and other incentive programs. In addition, the applicant must describe its anticipated operations and maintenance plan, its decommissioning plan and must provide segregated decommissioning funds. Upon receipt of completion of application, the Board shall approve, conditionally approve, or deny the application within 180 days. Perhaps the most complex aspect of the required application is the cost-benefit analysis. The rules suggest the use of one of four listed input-output models, but will allow applicant to us any model that successfully calculates the economic benefit that the proposed project will bring to the State of New Jersey. The Board will assess the net economic benefit, with a “particular emphasis” on in-state manufacturing employment, as well as the net environmental benefit of the project in terms of anticipated reductions in carbon dioxide and air emissions. The rules also allow the Board to perform its own net benefit analysis, which may result in additional conditions of approval.
Separately, even before the Board issued its rules, Fishermen’s Energy of New Jersey, LLC filed an application for the first phase of its proposed 300MW project offshore Atlantic City.
On Friday, GE Energy announced the acquisition of new tower construction and erection technology from Utah based Wind Tower Systems, LLC. Wind Tower Systems has developed a space frame tower design to accommodate tower heights of over 100 meters that can be installed without the use of heavy lift cranes during construction.
“We see great potential in the addition of this technology to our portfolio not only for our customers but also for the wind industry as a whole,” said Victor Abate, vice president-renewable energy for GE Power & Water. “Taller towers are an essential complement to longer blades. Longer blades capture more energy and in turn improve return on investment for wind farm developers.”
“The taller space frame towers and integrated lifting system concepts, developed with the support of the U.S. DOE and California Energy Commission, have been designed to drive lower wind energy costs,” said Thomas Conroy, CEO of Wind Tower Systems. ”We are delighted that the development of the company’s products will be completed and commercialized by GE.”
On Monday February 7, 2011, the DOE issued an ambitious plan to spur development of offshore wind facilities in federal and state waters off the eastern seaboard. The report identifies the key challenges to widespread development are reducing both the cost and the timeline of project development. It estimates that the current cost of offshore facilities must be cut by more than half from the current installed capital cost of $4,250 per kW in order to achieve the report’s goal of 54 GW of offshore power by 2030.
In an effort to drive this massive effort forward, the DOE offers $50.5 million in grants for the development of tools and hardware in wind turbine factories, market studies and research on electrical infrastructure and funding for research into next-generation wind-turbine drive trains. Perhaps more importantly, the report designates four “Wind Energy Areas” for expedited approval evaluation and possible lease offerings by the end of 2011 or in early 2012. The report promises that this “Smart from the Start” program will accelerate the leasing process by cutting the current approval timeline of 7 to 10 year in half.
Most notably, the National Offshore Wind Strategy presents the eastern United States with tremendous potential to generate significant economic activity through the installation of facilities that will produce clean, renewable energy. The industry will benefit from the program outlined in this report, particularly if it is followed by an extension of tax credits applicable to these types of renewable energy projects.
Click here for the complete National Offshore Wind Strategy: Creating an Offshore Wind Industry in the United States.
Click here for more information on the Smart from the Start Initiative.
Click here for a map of the mid-Atlantic WEA’s.
More information is available at: http://www.boemre.gov/offshore/RenewableEnergy/index.htm andwww.windandwater.energy.gov.
Idaho Temporarily Reduced the Availability of Published Avoided Cost Rates for Wind and Solar. Now What?
On February 7, 2011, less than two weeks after hearing oral arguments on the issue, the Idaho Public Utilities Commission (“IPUC”) issued Order No. 32176 (the "Order"), temporarily reducing the published avoided cost rate eligibility cap for wind and solar qualifying facilities (“QF”) from 10 aMW to 100 kW. The reduction applies to wind and solar projects only, and was given a retroactive effective date of December 14, 2010.
The Order is the latest in the Joint Petition docket filed by Idaho Power, Avista Corporation and PacifiCorp d/b/a Rocky Mountain Power (the “Utilities”), whereby the Utilities petitioned the IPUC “to investigate and address various avoided cost and other related issues” regarding QFs under the Public Utilities Regulatory Policies Act of 1978 (“PURPA”). Joint Petition at 1. In particular, the Utilities requested a reduction in the eligibility cap from 10 aMW to 100 kW for all resources, “to be effective immediately.” Joint Petition at 7. The Utilities focused specifically on the need to address the “excessive” number of wind QFs currently requesting contracts under the published 10 aMW avoided cost rate, and the disaggregation of wind resources (i.e., dividing large wind projects into multiple 10 aMW projects to qualify for the avoided cost rate), arguing that the Utilities’ ability to continue to accept the QF energy without negatively impacting the electric system and their customer’s is at risk.
In the Order, the IPUC found that “a convincing case has been made to temporarily reduce the eligibility cap . . . for wind and solar only,” but the IPUC maintained the current 10 aMW cap for other QF projects including biomass, small hydro, cogeneration, geothermal, and waste-to-energy facilities. Order at 9.
The IPUC was careful to note that it is “supportive of all small power producers contemplated by PURPA, including wind and solar, and it is not the Commission’s intent to push small wind and solar QF projects out of the market.” Order at 11. The IPUC is instituting additional proceedings specifically to investigate an avoided-cost rate structure that “(1) allows small wind and solar QFs to avail themselves of published rates for projects producing 10 aMW or less; and (2) prevents large QFs from disaggregating in order to obtain a published avoided cost rate that exceeds the utility’s avoided cost.” Order at 11. During the temporary eligibility cap reduction, the Utilities are still required to purchase power produced by wind and solar QFs, but projects larger than 100 kW must individually negotiate avoided cost rates.
So, now what?Continue Reading...
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...
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.
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.
As we approach the beginning of a new year, financing options for energy projects (both conventional and renewable) under the current economic conditions continue to be a challenge and a focal point for the energy industry. In order to gear up for financing opportunities in 2011, I, along with my colleagues Marcus Wood, Graham Noyes and Adam Kobos, will be heading to the Big Easy for Projects & Money 2011. Stoel Rives is proud to be a Gold Sponsor at this engaging conference, where Capital Providers, Project Developers and other dealmakers in the financing community will gather together to share information, discuss deal leads and capitalize on new market opportunities.
Projects & Money incorporates its comprehensive market updates with networking opportunities, introductions to new project developments, and interactive multimedia components. Presentations from industry professionals provide an inside look at some of the most ground-breaking deals of 2010, examine the trends they reveal, and provide a better understanding of what it takes to make deals happen.
Stoel Rives attorney Graham Noyes will present "DOE's Loan Guarantee Program: Crucial Financing Mechanism or a Costly Distraction?" on Tuesday, January 11, at 1:30 p.m. during the Pre-Summit Briefing.
On Wednesday, January 12, Partner Marcus Wood will moderate the discussion panel, "Transmission Outlook," at 2:15 p.m. during Track II: Project Sector Outlooks.
Hope to see you there!
To learn more about the conference or to register online, please visit: http://www.infocastinc.com/index.php/conference/416
Projects & Money
When: January 11-13, 2011
Where: Harrah's New Orleans – New Orleans, LA
Yesterday, December 16, 2010, the Federal Energy Regulatory Commission (FERC) conditionally approved a proposal by the Midwest Independent Transmission System Operator (MISO) that significantly changes how large transmission upgrades are funded across the MISO region.
MISO’s proposal creates a new category of transmission projects called Multi-Value Projects (MVPs) for upgrades that are determined to enable reliable and economic delivery of energy in support of public policy mandates or laws that address transmission reliability and congestion across multiple transmission zones.
MISO’s proposal is effective as of July 16, 2010 and thus applies to transmission projects identified in Appendix A of 2010 MISO Transmission Expansion Plan (MTEP).
If you have any questions about the order, how it may affect your generation or transmission project, or wind energy development in the Midwest, please contact one of the following attorneys:
Mark Hanson at (612) 373-8823 or firstname.lastname@example.org
Kevin Johnson at (612) 373-8803 or email@example.com
Kevin Prohaska at (612) 373-8805 or firstname.lastname@example.org
David Quinby at (612) 373-8825 or email@example.com
Joe Thompson at (612) 373-8822 or firstname.lastname@example.org
Sarah Johnson Phillips at (612) 373-8843 or email@example.com
Jennifer Martin at (503) 294-9852 or firstname.lastname@example.org
Marcus Wood at (503) 294-9434 or email@example.com
Sara Bergan at (503) 294-9336 or firstname.lastname@example.org
Jason Johns at (503) 294-9618 or email@example.com
The Federal Energy Regulatory Commission (FERC) opened the door today for new investment in transmission lines in the Upper Midwest that will deliver new wind energy to market. By establishing a methodology for sharing the cost of new transmission lines, FERC’s decision could provide a significant boost to wind development in the region. For more information, see our full alert.
Minnesota Power has announced a request for proposals (RFP) seeking up to 100 MW of wind generation. Proposals must be for wind generation that is deliverable to Minnesota Power's service territory prior to the expiration of the Federal Production Tax Credit on December 31, 2012. Minnesota Power serves northeastern Minnesota.
Details about the RFP and a Model Power Purchase Agreement are available on Minnesota Power's website.
The deadline for submissions is 4:00 pm Central Standard Time on January 5, 2011.
IN THIS EDITION:
- FERC opens a rulemaking on variable energy resources.
- FERC extends the comment deadline in the appeals by wind farms registered for transmission reliability functions.
- FERC denies a petition to protect priority to interconnection capacity rights.
FERC Opens Rulemaking on Intra-Hour Scheduling, Forecasting Requirements, and Integration Services for Variable Energy Resources
The Federal Energy Regulatory Commission (FERC) proposed amending its pro forma open access transmission tariff to correct practices that are unduly discriminate against variable energy resources (VERs) such as wind and solar energy generators. In the November 18, 2010 Notice of Proposed Rulemaking, FERC outlines measures that, if adopted, will (a) require transmission providers to offer transmission service that can be scheduled on 15-minute intervals, (b) require interconnection customers that operate VERs to provide site-specific forecasting and meteorological data to transmission providers that are deploying and/or developing power production forecasting processes, and (c) add a new rate schedule for generation regulation (i.e., integration) services. The proposed rulemaking is the first to come out of the January 2010 Notice of Inquiry on the Integration of VERs—a docket that received well over 100 comments from industry stakeholders.
FERC Extends Comment Period in Wind Farms’ Appeal of NERC Decision to Uphold Registration as Transmission Owners/Operators
FERC has extended the comment deadline in an appeal by two wind farms that were registered for Transmission Owner and Transmission Operator reliability functions, a potentially costly registration for the wind farms that was affirmed by the North American Electric Reliability Corporation (NERC) in October. The NERC decision and its supporting analysis, if affirmed by FERC, have the potential to broadly apply to many generation developers, owners, and operators.
FERC Denies Puget Sound Energy's Request to Protect Interconnection Capacity Rights
In June of this year, Puget Sound Energy (Puget) filed a petition with FERC for a declaratory order to protect its rights to 1,250 MW of interconnection capacity that would eventually serve the Lower Snake River Project wind farm. Puget argued that constructing the entire interconnection capacity needed for the full project upfront was financially efficient and environmentally responsible, and that other developers should not be able to claim rights to the capacity. On November 18, 2010, FERC distinguished the petition from an earlier decision in Milford and denied Puget’s request to establish its priority rights to the interconnection capacity. FERC reasoned that the capacity over Puget’s generator lead lines must be governed by its open access transmission tariff. FERC also found that any interconnection capacity that is not appropriately reserved for Puget’s native load must be made available to other open access customers.
If you have questions about the issues addressed in this report, please contact:
Marcus Wood at (503) 294-9434 or firstname.lastname@example.org
Jennifer Martin at (503) 294-9852 or email@example.com
Jason Johns at (503) 294-9618 or firstname.lastname@example.org
Sara Bergan at (503) 294-9336 or email@example.com
The Oklahoma legislature passed three bills (H.B. 2973, S.B. 1787, and H.B. 3028) in 2010 that affect the renewable energy industry. Two have already gone into effect and the third will go into effect on January 1, 2011. A summary of each bill is included below.
The Oklahoma Wind Energy Development Act (the “Act”), H.B. 2973, becomes effective on January 1, 2011 and will be codified in Okla. Stat. tit. 17 §§160.11-17 (2010). The Act includes the following:
- Decommissioning: Decommissioning requirements apply to any wind energy facility entering into or renewing a power purchase agreement (PPA) on or after January 1, 2011. If energy is not being sold under a PPA, the requirements apply to wind energy facilities which commence construction on or after January 1, 2011. The requirements include:
- Restoration: Owners of a wind energy facility must remove wind energy equipment (to a depth of 30”) and restore land surfaces to substantially the same pre-construction condition (excluding roads) within 12 months of abandonment of a project or the end of the useful life of the equipment.
- Cost Estimate and Posting of Financial Security: After the 15th year of operation, facility owners must file a professional estimate of the decommissioning costs together with a financial security (either a surety bond, collateral bond, parent guaranty or letter of credit) to cover such costs. Those failing to so file may incur an administrative penalty of up to $1,500/day.
- Payment Statements and Access to Records: Any owner or operator making payments to landowners based on the amount of electrical energy produced is required to deliver a statement to the landowner, within 10 business days of payment, explaining the payment calculation and a means for the landowner to confirm its accuracy. Landowners have the right to inspect owner/operator records to confirm the accuracy of payments for up to 24 months following payment. Records must be made available for review within the state of Oklahoma.
- Insurance: Owners or operators are required to obtain commercial general liability insurance policy with limits consistent with prevailing industry standards (or a combination of self insurance and excess liability insurance policy), which name the landowner as an additional insured and certificates of insurance must be delivered to landowner prior to commencing construction of the facility.
In response to the National Oceanic and Atmospheric Administration's federal funding opportunity ("FFO") to support Regional Ocean Partnerships ("ROPs"), the West Coast Governors' Agreement on Ocean Health ("WCGA") will hold workshops in California, Oregon, and Washington next month to help develop its proposal for a portion of the funding. The WCGA is the ROP for the West Coast and as such will be engaging tribal governments, state and federal agencies, scientists and technical experts, and stakeholders to identify regional coastal and marine spatial planning priorities and needs that will support a coordinated response to the FFO. Prior to the meetings, the WCGA will prepare a scoping document that will provide the foundation for workshop discussions. The deadline for WCGA's submission is December 10, 2010, so these meetings will be an essential way to engage in the process.
The meetings will take place at the following times and locations:
California Workshop: Friday November 12, 2010, from 11 a.m. - 5 p.m. at the San Francisco Bay Conservation and Development Commission, 50 California Street, Suite 2600, San Francisco, CA 94111 (lunch will be provided).
Oregon Workshop: Monday November 15, 2010, from 10 a.m. - 4 p.m. at the Oregon Coast Community College, Central Campus, 400 SE College Way, Room 140, Newport, OR 97366 (lunch will be provided).
Washington Workshop: Tuesday November 16, 2010, from 10 a.m. - 4 p.m. at the Heritage Room at Capitol Lake, 604 Water Street, Olympia, WA 98501 (lunch will be provided).
Everyone is invited to attend the workshops, but space is limited. Please RSVP by emailing the WCGA Coordinator, Lisa DeBruckere, at firstname.lastname@example.org.
Wednesday, December 8, 2010 7:30 a.m. – 5:30 p.m., San Francisco
Thursday, December 9, 2010 9:45 a.m. –5:30 p.m., San Francisco
As a member of the Advisory Board and the Conference Chair, I would like to extend to you an invitation to US-China Wind 2010, presented by Infocast. Join me and my fellow colleagues in San Francisco as we gather with industry experts from both the US and China for an unparalleled educational and networking opportunity.
This 3-day event will include dual track tutorial workshops, and presentations from Stoel Rives Partners William Clydesdale, Ed Einowski, and Michael Mangelson. Hear in-depth discussion and analysis of how wind works on both sides of the Pacific, and explore the opportunities for mutual profits between industries.
Infocast does in fact have a LinkedIn Group for the US-China Wind Summit set up. We would appreciate your support along with your connection’s support in growing our group and making our event better than ever! Here’s a link to our group: http://www.linkedin.com/groups?mostPopular=&gid=3526091
For more event details and registration information, please see our website: http://www.stoel.com/showevent.aspx?Show=7113
Don't forget that the deadline for Phase I grant applications under the U.S. Department of Energy's ("DOE") Small Business Innovation Research ("SBIR") and Small Business Technology Transfer ("STTR") programs is 8:00 p.m. Eastern, November 15, 2010. Qualified small businesses with strong research capabilities in science or engineering in any of the research areas identified in the September 28, 2010 Funding Opportunity Announcement are encouraged to apply. Phase I grants of up to $150,000 will be awarded in FY 2011 under the SBIR; and grants of up to $100,000 will be awarded under the STTR.
The Phase I Technical Topics document lists several areas of particular interest for the renewable energy industry. Note that the following is not an exhaustive list. The full list and descriptions can be found in the Phase I Technical Topics document.
- Advanced Cooling and Waste Heat Recovery: Advanced Cooling; Advanced Waste Heat Recovery; Geoexchange heat pump (GHP) component R&D; Innovative GHP System/Loop Designs.
- Production of Bioenergy and Biofuels from Cellulosic and Non-Food Biomass: Biomass Feedstock Stabilization and Drying; Biomass Torrefaction; Sugar Catalysis to Advanced Biofuels and Chemical Intermediates; Pyrolytic Thermal Depolymerization.
- Hydrogen and Fuel Cells: Reducing the Cost of High Pressure Hydrogen Storage Tanks; Fuel Cell Balance-of-Plant; Demonstration of Alternative-Fuel Fuel CElls as Range Extenders.
- Innovative Solar Power: High Efficiency, Low Cost Thin Film Photovoltaics; Low Cost Building Integrated Photovoltaics; Static Module PV Concentrators; Solar-Powered Water Desalination; Distributed Concentrating Solar Power ("CSP").
- Advanced Water Power Technologies: Pumped Storage Hydropower; Advanced Hydropower Systems; Wave and Current Energy Technologies; Advanced Component Design for Ocean Thermal Energy Conversion Systems.
- Wind Energy Technologies: Transportation and Assembly of Extremely Large Wind Turbine Components for Land-Based Wind Turbines; Wind Energy Capture in Non-Conventional Wind Resources; Offshore Grid Infrastructure Hardware Development; Offshore Mooring and Anchoring Technology.
Detailed descriptions of each subtopic are included in the Phase I Technical Topics document.
The Idaho Public Utilities Commission (PUC) has issued a straw man proposal that lays out plans to revise the surrogate avoided resource (SAR) methodology used to calculate avoided cost rates for wind generators. The "avoided cost" is the price paid to Qualifying Facilities that are selling power to Idaho utilities under the Public Utility Regulatory Policies Act (PURPA).
The PUC included six cost categories in the wind SAR: capital costs; fixed and variable O&M costs, transmission costs; tax credits; wind integration; and forecasting costs. The PUC assumed transmission costs of $1.90/kw-month, production tax credits at $0.021/kWh, a $0.00 REC premium, and wind integration at $6.50/MWh. With those inputs and others, the PUC arrived at 20-year levelized wind rates for a 2010 project as follows:
|Utility||Wind SAR||Gas SAR|
The PUC proposed that where the Wind SAR is higher than the Gas SAR, a wind developer may choose whether to sell power at the wind or gas rate. If the wind developer opts for the latter, it retains ownership of RECs. If the wind developer opts for the former, RECs go to the utility. However, when the Gas SAR is higher than the wind SAR, wind developers would only be eligible for the wind SAR, meaning that the utility would automatically receive RECs under a PPA. Non-wind projects would be entitled to the gas SAR when the gas rate is higher, and RECs would remain with developers.
The PUC is accepting written comments on the straw man proposal until November 23, 2010.
Xcel Energy is seeking to acquire up to 250 MW of new wind generation in the Upper Midwest in a Request for Proposals (RFP) announced today. Xcel will consider purchasing energy output from new wind projects through a power purchase agreement or owning the wind generation assets.
Xcel will accept proposals of any size so long as they will be ready to be placed in service by December 31, 2012, the current expiration date for the Federal Production Tax Credit. Xcel explained the timing and purpose of this request in the RFP and in its Application for Resource Plan Approval 2011-2015 (MPUC Docket E002/RP-10-825):
"Because the Federal Production Tax Credit ("PTC") is scheduled to expire at the end of 2012, we believe we should continue to explore acquisition of wind power to capture PTC savings for our customers. However, we do not need to add wind power to comply with RES/REO milestones in the next five years. Requesting proposals for additional wind generation prior to the expiration of the PTC provides us with an opportunity to achieve pricing that remains cost-effective for customers under a variety of future scenarios. If the results of our bidding program do not provide adequate benefits we have the option to defer acquisitions and still stay on track with compliance."
The RES/REO milestones are Minnesota's Renewable Energy Standard and Renewable Energy Objective, which ultimately require Xcel to have 30% renewable energy by 2020.
Proposals are due by October 15, 2010. The full RFP is available here.
WoWE – Women of Wind Energy – has been promoting the education, professional development, and advancement of women in the renewable energy workforce since its inception in 2005. It has since grown into a network of over 1,000 members strong. It was founded to ensure that women are given the opportunity to play full, productive roles in the development of wind power.
Stoel Rives also believes in this mission, and is proud to be an active member in the Twin Cities, Portland, San Diego, and San Francisco Bay Area chapters. During the month of September we are sponsoring three unique WoWE events.
Our San Diego office will sponsor the local chapter’s September 15 social gathering at Orfila Vineyards and Winery, and the following day our Minneapolis office will host a WoWE Speed Networking Social. The SF Bay Area Chapter’s September 23 program is being hosted in our downtown Sacramento office and will feature speaker Debi Le Vine with California ISO, who will discuss “Renewable Status and Integration Impacts to the CAISO.”
For more information about WoWE please visit: http://www.womenofwindenergy.org.
Twin Cities Chapter: http://www.meetup.com/Women-of-Wind-Energy-Twin-Cities/
Portland Chapter: (linkedIn) http://www.linkedin.com/groups?home=&gid=2339246
SF Bay Area Chapter: (linkedIn) http://www.linkedin.com/in/wowesfbayareachapter
San Diego Chapter (lindedIn) http://www.linkedin.com/groupInvitation?groupID=2306706&sharedKey=35FB4D359402
In recent months, the State of Maine has sought the spotlight in the offshore renewable energy space. This entry summarizes three major events that have marked the state's move toward a leadership role.
Maine Signs MOU with Nova Scotia
On July 12, 2010, Governor John E. Baldacci signed a Memorandum of Understanding (“MOU”) with Nova Scotia Premier Darrell Dexter to work cooperatively on renewable ocean energy development. Many similar memoranda have been signed between states and federal agencies in the United States, but this is the first that reaches beyond the Nation’s borders. The MOU states that the two governments will work together to advance tidal and offshore wind development efforts by furthering academic research in the area and establishing a formal council to “work together to shape the region’s leadership position in this important new area of renewable energy development.” Although largely a “plan to start planning,” the MOU demonstrates the State of Maine’s desire to be on the leading edge of offshore energy policy and development.
ORPC Reports Successful Test of Commercial-Sized Underwater Turbine
On August 18, 2010, Ocean Renewable Power Company (“ORPC”) reported that its Beta Power System has successfully generated grid-compatible power from tidal currents. The 60 kW Turbine Generator Unit met or exceeded ORPC’s expectations for testing at a range of current velocities. The company will use the data gathered to complete the design of its 150 kW TidGen Power System, which is scheduled for installation in Eastport, Maine in late 2011, and will interconnect to the New England grid through the Bangor Hydro Electric Company system. The TidGen Power System will generate enough electricity to power 50-75 homes.
The full text of ORPC's press release can be found here.
Maine PUC Seeks Proposals for Offshore Wind & Tidal Energy
Following on the heels of ORPC’s announcement, the Maine Public Utilities Commission (“PUC”) announced on September 1, 2010, that it is seeking proposals for long-term (20-year) contracts to supply energy and renewable energy credits from one or more offshore wind energy pilot projects or tidal energy demonstration projects. The PUC is looking for a wind developer with experience relevant to the construction and operation of floating wind turbines and has the potential to construct a deep-water (300 feet or more) offshore wind energy project of at least 100 MW in the future. Any proposed tidal energy demonstration project must have a total installed generating capacity of 5 MW or less.
Proposals will be due on or before May 1, 2011. The full text of the request for proposals ("RFP") can be found here.
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.
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.
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
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.
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.
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.
Last week, Senators Jeff Bingaman (D-NM), Ron Wyden (D-OR), and Jeanne Shaheen (D-NH), introduced legislation that would add grid-connected energy storage property to the list of technologies eligible for the federal investment tax credit (the "ITC"). Under the Storage Technology for Renewable and Green Energy Act of 2010 (the "STORAGE 2010 Act"), eligible energy storage property would include hydroelectric pumped storage and compressed air energy storage, regenerative fuel cells, batteries, superconducting magnetic energy storage, flywheels, thermal energy storage systems and hydrogen storage. Systems that can sustain a power rating of at least one megawatt for a minimum of one hour would be eligible for a 20% tax credit under the ITC program. Should the bill become law, the tax credit would provide significant assistance to intermittent energy resource developers that are seeking new ways to shape and firm their projects' output.
The STORAGE 2010 Act would limit the available credits to $1.5 billion, and no single project may be allocated more than $30 million.
Importantly, the bill creates special extended deadlines for hydroelectric pumped storage facilities. Whereas the majority of energy storage property considered under the bill would be required to be placed in service within two years of the date the ITC was allocated, pumped storage facilities would have three years to secure required licenses and permits, five years to begin construction, and eight years to be placed in service.
Compressed air energy storage systems would enjoy similar extended deadlines- i.e., would be reqired to begin construction within three years and be placed in service within five years.
The bill would also allow grid-connected energy storage property to qualify for Clean Renewable Energy Bonds under section 54C of the Internal Revenue Code. The full text of the bill can be viewed here.
On June 30, 2010, the U.S. Department of Energy ("DOE") launched its Technology Commercialization Portal (the "Portal"). The Portal is an online resource that provides a mechanism for investors, entrepreneurs and companies to identify new technologies coming out of DOE laboratories and other participating research institutions. Relevant technologies include:
- Advanced Materials
- Biomass and Biofuels
- Building Energy Efficiency
- Electricity Transmission and Distribution
- Energy Analysis Models, Tools and Software
- Energy Storage
- Hydrogen and Fuel Cell
- Hydropower, Wave and Tidal
- Industrial Technologies
- Solar Photovoltaic
- Solar Thermal
- Vehicles and Fuels
- Wind Energy
The Portal contains marketing summaries about the various DOE technologies that are available for licensing. Each marketing summary describes a technology's applications, advantages, benefits and state of development. Further, the Portal also provides access to information on patents and patent applications that have been created using DOE funding since 1992.
The Portal is located at http://techportal.eere.energy.gov/
To follow up on my colleague Janet Jacobs' blog on this exciting topic, here's some more detailed information about the MOU, especially as it relates to marine and hydrokinetic ("MHK") technologies:
The United States Department of Energy’s Office of Energy Efficiency and Renewable Energy (“EERE”) and the United States Department of the Interior’s newly-renamed Bureau of Ocean Energy Management, Regulation, and Enforcement (“BOEMRE”) (see Note below) signed a Memorandum of Understanding for the Coordinated Deployment of Offshore Wind and Marine and Hydrokinetic Energy Technologies on the United States Outer Continental Shelf (the “MOU”).
The purpose of the document is to prioritize and facilitate environmentally-responsible deployment of commercial-scale offshore wind and MHK energy technologies on the Outer Continental Shelf (the “OCS”) through collaborative efforts. In a recent blog, I mentioned that the DOE has committed $15.36 million to help researchers and developers alike to bring various MHK technologies closer to commercial deployment. This MOU represents yet another effort to spur the growth of the burgeoning offshore renewable energy industry.
An interagency working group has been tasked with developing an action plan that addresses the deployment of offshore renewable energy projects, including both offshore wind and MHK technologies, within 30 days. The action plan will outline how the BOEMRE and EERE can work together to streamline leasing and regulatory processes on the OCS for those sites with high energy resource potential. The MOU also outlines how the agencies will share information and undertake collaborative activities such as stakeholder engagement, technical and environmental research, joint evaluation of standards and timelines for development, and the dissemination of information to decision makers.
Note: On June 21, 2010, DOI Secretary Ken Salazar issued Order 3302 renaming the Minerals Management Serivce the BOEMRE.
The DOE has issued a Request For Information ("RFI") to get the public's input on the development of a Wind Energy Workforce Roadmap, which will provide details on the current workforce landscape in the wind industry as well as future steps necessary to train and develop a green workforce for the sector. Ultimately, the Roadmap will help shape policy objectives and the overall development of a wind energy workforce.
Here is the link to the RFI: https://www.fedconnect.net/FedConnect/?doc=DE-FOA-0000392&agency=DOE
Yesterday, the Department of the Interior (“DOI”) and the Department of Energy (“DOE”) entered into a Memorandum of Understanding (“MOU”) to bring together resources and expertise from both agencies as the US develops commercial-scale offshore wind and water energy projects on the U.S. Outer Continental Shelf.
The wind and water resources off the US’ coastline are vast yet largely untapped energy potential. According to DOE's “20% Wind Energy by 2030” report, offshore wind alone has the potential to produce 54,000 megawatts by 2030. The MOU allows for priority leasing and more efficient regulatory processes (including permitting) for sites with high, commercial-scale offshore wind and water power development potential.
The U.S. Treasury Department today released on its website additional guidance regarding the "begin construction" requirement for qualifying for the 30% ARRA cash grant. To qualify for the grant, a project either must be placed in service in 2009 or 2010 or, if construction begins on or before December 31, 2010, must be placed in service by a specified credit termination date (December 31, 2012 for large wind projects; December 31, 2013 for biomass, certain geothermal and other projects; and December 31, 2016 for solar and other projects). For the Stoel Rives Energy Tax Alert on the topic, click here.
Midwest ISO Final MVP Cost Allocation Proposal Won't Charge Generators for New Transmission Needed for Wind Energy
From our colleague Sarah Johnson Phillips:
Much to the relief of wind developers in the Midwest, the Midwest ISO has backed off a plan to charge new and existing generators 20% of the cost of new transmission needed to meet renewable energy development goals.
Yesterday, the Midwest ISO released its final cost allocation proposal, which it will file with the Federal Energy Regulatory Commission on July 15, 2010. In the final proposal, the cost of Multi-Value Projects (MVPs) will be spread evenly to load throughout the MISO footprint on an energy basis. MVPs are transmission projects needed to support renewable energy development, other policy drivers, or have multiple benefits such as reliability and market efficiency. Previous cost allocation proposals would have allocated 20% of the cost of MVPs to new and existing generators. That potential cost burden and resulting cost uncertainty had caused some wind industry observers to speculate that wind projects would abandon the Midwest for other parts of the country where transmission is cheaper.
Yesterday DOE announced that up to $6 million to be awarded to one or two teams over two years to improve short-term wind energy forecasting, which will enhance the ability of utilities and electricity grid operators to forecast wind power generation.
One to two competitively-selected recipient team(s) will work with DOE and the National Oceanic and Atmospheric Administration (“NOAA”) to deploy atmospheric measurement systems, and demonstrate the value of these forecasting improvements for electric utility operations. The recipient team(s) will include wind plant operators, wind forecasting and meteorological services companies, electric utility system operators, and research organizations.
DOE will provide $3 million this year - $2 million to NOAA to fund its technical support of the selected projects and $1 million to the selected team. DOE also anticipates providing an additional $3 million in fiscal year 2011 to NOAA and the recipient team(s) to complete the project.
Go to the FedConnect Web site for additional details.
The National Renewable Energy Laboratory ("NREL") recently announced the release of the "Western Wind and Solar Integration Study" (the "WWSIS"), which investigated the operational impact of up to 35% energy penetration of wind, photovoltaic, and concentrating solar power on the power system operated by the WestConnect group of utilities in Arizona, Colorado, Nevada, New Mexico and Wyoming. The WestConnect group includes the following: Arizona Public Service, El Paso Electric Co., NV Energy, Public Service of New Mexico, Salt River Project, Tri-State Generation and Transmission Cooperative, Tucson Electric Power, Western Area Power Administration, and Xcel Energy.
The WWSIS was prepared by GE Energy and conducted over two and a half years by a team or researchers in wind power, solar power, and utility operations. The WWSIS was designed to answer questions that utilities, Public Utility Commissions, developers, and regional planning organizations had about renewable energy use in the West, such as:
- What is the operating impact of up to 35% renewable energy penetration and how can this be accommodated?
- How does geographic diversity help to mitigate variability?
- How do local resources compare to remote, higher quality resources delivered by long distance transmission?
- Can balancing area cooperation mitigate variability?
- How should reserve requirements be modified to account for the variability in wind and solar?
- What is the benefit of integrating wind and solar forecasting into grid operations?
- How can hydro generation help with integration of renewables?
The wind energy businesses at General Electric and Mitsubishi have come to blows over their competing wind turbine technology. At the center of the dispute are the companies’ patent portfolios. The New York Times reports that Mitsubishi opened up the battle on two new fronts on May 20, with an antitrust complaint filed in a U.S. District Court in Arkansas and a patent infringement complaint filed in a U.S. District Court in Florida. (Mitsubishi has put up a page on its web site devoted to the dispute, with media coverage and copies of its complaints.)
That two competing wind turbine manufacturers would develop a dispute over the scope of their patents is not terribly surprising. The technology involved requires substantial capital investments that are worth defending. What’s most interesting is that Mitsubishi has filed antitrust claims arguing that General Electric monopolized the wind turbines market through “baseless claims of patent infringement” – in other words, “sham litigation.”
The Supreme Court has recognized that filing lawsuits (including patent infringement suits) is a right protected by the First Amendment. One can only prevail on a sham litigation theory challenging a given suit by proving that the underlying claims were “objectively baseless.” In the patent context this typically means that a party must prove that the underlying patent was fraudulently obtained, or clearly did not cover the technology found in the “infringing” product. A Federal Trade Commission report explains that a sham litigation claim also requires proof that a defendant deliberately wielded baseless claims as an “anticompetitive weapon.”
Mitsubishi argues that General Electric filed baseless patent infringement claims that prevented Mitsubishi from selling its variable speed wind turbines for almost two years. At the same time, Mitsubishi’s counterattack includes a separate lawsuit arguing that General Electric infringes Mitsubishi patents. Mitsubishi’s theory of how General Electric monopolized the market is that General Electric used its patent infringement suits to scare developers away from Mitsubishi’s allegedly infringing wind turbines. The resulting lost sales, claimed by Mitsubishi, are in the billions. Then again, if General Electric’s patent claims were objectively reasonable (they don’t have to be ultimately successful), General Electric was within its rights to defend its patents.
In an industry requiring major capital for research and development, these types of disputes will not be uncommon. And where there are few competitors, it is easy to challenge an aggressive competitor as a “monopolist.” (Mitsubishi and General Electric share the large scale wind turbine market with only three other major competitors, Gamesa, Siemens, and Vestas.) If Mitsubishi can prove that General Electric’s patent infringement suits really did lack merit, expect Mitsubishi to hold out for a generous cash settlement. If Mitsubishi’s theory is not as strong as its press releases suggest, watch for a different type of settlement, perhaps a cross licensing agreement of Mitsubishi and General Electric patents – a deal which would allow the companies to compete head to head, while maintaining the right to sue other challengers using technology that might infringe the cross licensed patents.
Mitsubishi Alleges that General Electric, Co. Is Engaging in Anti-Competitive Behavior in the Variable Speed Wind Turbine Market
From our colleagues Beverly Pearman and Jeremy Sacks:
Mitsubishi Heavy Industries, Ltd. and Mitsubishi Power Systems Americas, Inc. v. General Electric Company
On May 20, 2010, Mitsubishi Heavy Industries, Ltd. (“MHI”) and Mitsubishi Power Systems Americas, Inc. (“MPSA”) (collectively “Mitsubishi”) filed suit in the U.S. District Court for the Western District of Arkansas contending that General Electric Company (“GE”) is engaged in a scheme to monopolize the sale of variable speed wind turbines in the United States in violation of state and federal statutes. They seek a compensatory damages award in excess of $100 million, an award of treble damages, punitive damages, and a permanent injunction prohibiting further litigation by GE for infringement of specified patents that GE claims to own. Mitsubishi’s claims are brought pursuant to Section 2 of the Sherman Act, Section 43(a) of the Lanham Act, and a state law claim of tortious interference with contractual and prospective business relationships.
DOE today announced that it will provide up to $6 million over 2 years for the development, testing, and commercialization of domestically manufactured, midsize wind turbines (i.e. nameplate capacity of between 100 kilowatts and 1 megawatt). DOE anticipates making up to four grants under this competitive solicitation and is looking to support U.S. turbine manufacturers and supply chain vendors.
Midsize turbines are used on site at schools, farms, factories, and other private and public facilities, alleviating the pressure on transmission lines. However, the midsize turbine market has not kept pace with the market for large, utility-scale turbines (larger than 1 megawatt ) or for small turbines (under 100 kilowatts) because few manufacturers build that size of turbine and unhealthy project economics.
For more details, please view the Funding Opportunity Announcement.
From our colleague Eric Martin:
After over two years of work, the federal Wind Turbine Guidelines Advisory Committee (“Committee”) recently released its final policy recommendations on how wind energy developers and operators can best assess and prevent adverse impacts to wildlife. Comprised of government, environmental, and wind industry stakeholders, the Committee recommends a five-tier approach that begins with the preliminary evaluation of potential wind energy sites and continues through post-construction studies. These consensus recommendations are designed to cover all elements of wind energy facilities—from access roads through transmission line connections. Following Secretary of the Interior Ken Salazar’s review, the U.S. Fish and Wildlife Service (“USFWS”) will use the Committee’s recommendations as the basis for new guidelines replacing the problematic interim guidance that the USFWS had issued back in 2003.
Compliance with the voluntary guidelines could have significant legal benefits for developers and operators. Perhaps most importantly, in the event of death or injury to species protected under the Migratory Bird Treaty Act or the Bald and Golden Eagle Protection Act, the Committee recommends that the USFWS exercise its enforcement discretion by not prosecuting developers and operators that have complied with its recommendations. The Committee has identified the implementation of company- or project-specific Avian and Bat Protection Plans as one way to evidence compliance. This alone, however, would not shield developers and operators from liability for the “take” of species protected by the Endangered Species Act.
The Committee’s recommendations are available here. For more information on these recommendations and their potential effects, please contact:
Greg Corbin at (503) 294-9632 or email@example.com
Barb Craig at (503) 294-9166 or firstname.lastname@example.org
Eric Martin at (503) 294-9593 or email@example.com
The Washington State Department of Commerce (formerly the Department of Community, Trade and Economic Development or CTED) has announced that it is attempting to revise Washington’s comprehensive energy plan (the “State Energy Strategy”).
The State Energy Strategy was last revised in 2003, and it does not serve current energy realities and forecasts. Therefore, the Washington State Legislature has tasked the Department of Commerce with updating the State Energy Strategy while taking account the following three goals and nine principles:Continue Reading...
Secretary of the Interior Ken Salazar announced today that he was approving the Cape Wind Project, the Nation’s first deep water offshore wind project. Secretary Salazar’s decision overcomes a recommendation from the Advisory Council on Historic Preservation (ACHP) to disapprove the Project because of impacts to properties listed in or eligible for listing in the National Register of Historic Places, including Nantucket Sound. Earlier this year the Keeper of the National Register determined the Sound is eligible for listing in the National Register for several reasons, including as a traditional cultural property because of its association with cultural practices or religious beliefs of two Indian tribes.
The Cape Wind Project would deploy 130 wind turbines. It is the Nation’s first commercial wind project to be located in marine waters. Several opponents have announced plans to file suit to block the Project.
Secretary Salazar’s decision sends an important signal on the Administration commitment to develop renewable energy resources despite objections from some environmental groups, local governments and Indian tribes. The Project is supported by Massachusetts Governor Deval Patrick, who stood beside Secretary Salazar when the Secretary announced his decision.
Grand Valley State University (GVSU) and its Michigan Alternative and Renewable Energy Center (MAREC) have issued a Request for Proposals seeking funding partners to develop an offshore research platform and wind assessment meteorological (MET) tower installation. GVSU and MAREC have acquired $3.1 Million in grants and research monies to fund a portion of the Project. Partners are being sought to: contribute the additional funds, expertise, and resources needed to complete the Project beyond those already committed by GVSU/MAREC and federal/state sources; design the MET Tower/Research Platform; construct the MET Tower/Research Platform (to be completed by September 1, 2011); and provide the overall operation and maintenance of the structure to support data collection and research.
A pre-proposal conference is being held at GVSU on May 3, 2010, and proposals are due June 10, 2010.
The Nebraska Public Power District has two open RFPs that may be of interest to renewable energy developers.
In Request for Proposal (RFP) 10018, the District announced that it intends to expand its power supply by adding wind-powered resources to its generation portfolio . The District seeks proposals to provide power from wind projects between 50 megawatts (MWs) and 300 MWs capacity. The resulting PPAs would have a term of 20 years. Bids are due by 5:00 pm Central Time on June 4, 2010.
The District also issued Request for Proposal (RFP) 10005, a separate request for energy, capacity and environmental attributes from small renewable energy projects. The solicitation defines a small project as one with a nameplate capacity at each location of less than ten (10) MW but greater than the maximum size allowed in the interconnecting utility’s Net Metering Policy. Bids are due by 5:00 pm Central Time on September 1, 2010.
The District's contact for each RFP is Sarah Hopwood, Tel 402 563-5405, Fax 402 563-5034
Last week, the Rhode Island Public Utilities Commission rejected a power purchase agreement (PPA) between Deepwater Wind and National Grid, the state's largest utility, stating that the deal’s projected cost of electricity did not qualify as “commercially reasonable” under a test required by state law. Deepwater would have charged National Grid 24.4 cents per kilowatt-hour in 2013, the first year of the contract. Prices would increase 3.5 percent per year after that.
The state previously passed legislation requiring National Grid to purchase the energy output from an offshore wind project. The PPA that was ultimately signed was for the output of a 28.8 MW project near Block Island.
The news of the PUC rejection comes shortly after receipt of $23.3 million in stimulus funds by the Quonset Business Park to improve piers, roads and rails and to install a crane in preparation for offshore wind development. Deepwater Wind has signed an agreement to lease 117 acres in the Quonset Business Park to store and assemble components, and ultimately create 800 jobs, as projected by Deepwater.
On Thursday March 11, 2010, the California Public Utility Commission (the "CPUC") created a market for tradable renewable energy credits ("TRECs") in the state. That's big news. In its 149-page decision, the CPUC stated that investor-owned utilities ("IOUs"), energy service providers, and community choice aggregators may now use TRECs to comply with California's ambitious renewable portfolio standard ("RPS"). These entities are now permitted to purchase a portion of their RPS compliance from generation sources other than those they own (e.g., distributed solar generation facilities within the state and certain out-of-state facilities).
In late February, the Associated Press reported that the Minerals Management Service received proposals from two Virginia companies for leases on the outer continental shelf to develop offshore wind farms. Apex Wind Energy Inc. is proposing to lease 116,000 acres for an undetermined number of wind turbines with the potential to generate up to 1,500 megawatts of power, and Seawind Renewable Energy Corp. envisions building 240 turbines to generate enough power for more than 250,000 homes annually, according to a company statement.
Both wind farms would be located 12 miles off of Virginia Beach.
The Virginia Offshore Wind Coalition estimates the development of a wind power hub in Virginia has the potential to become an $80 billion industry creating more than 10,000 jobs. Coalition members include the Cities of Virginia Beach and Norfolk, Apex Offshore Wind, AREVA, BAE Systems Ship Repair, Colonna’s Shipyard, Dominion Virginia Power, Earl Energy, Fugro Atlantic, Old Dominion Electric Cooperative, Science Applications International Corporation, Seawind Renewable Energy Corporation, Weeks Marine and W. F. Magann.
Proposed legislation in the Senate would greatly limit the effectiveness of the grant in lieu of tax credits for renewable energy projects under section 1603 of the American Recovery and Reinvestment Act.
The section 1603 grant currently applies to renewable energy projects, such as wind, solar, geothermal and biomass, that are placed in service before 2011 or for which construction begins in 2009 or 2010 (and that are placed in service by certain dates). In its current form, if a project qualifies for the grant, the Treasury Department is required to pay the grant.
Expressing concern that a significant portion of the grants paid so far have gone to non-U.S. companies, Senator Charles Schumer (NY) and three other Democratic senators have sponsored a bill that would make payment of the grant subject to the discretion of the Treasury Department. It also would make the grant subject to the Buy American requirements of the stimulus bill, and would require that Treasury conduct an analysis of the "domestic job preservation and creation provided by" a project for which a grant application is submitted.
Various trade associations involved in renewable energy (such as AWEA, GEA and SEIA) are taking immediate action to register their opposition. Their focus will be on the incorrect assumptions underlying the proposal (for example, that it does not create U.S. jobs) and that, if enacted, it likely would destroy the effectiveness of the program.
We encourage our readers to register their strong opposition with their members of Congress and with the trade associations with which they are associated. The more opposition that is registered, and the longer the proposal drags out, the less likely it is to be enacted.
Read the March 4, 2010 Stoel Rives Law Alert on this proposed legislation.
Michigan's Great Lakes Wind Council (GLOW Council), an advisory body within the Michigan Department of Energy, Labor & Economic Growth to examine issues and make recommendations related to offshore wind development in Michigan, has issued recommendations for a regulatory framework for offshore wind in Michigan's Great Lakes. These recommendations follow the GLOW Council's September 1, 2009 report (see previous blog entry), which contained proposed steps forward to developing an offshore wind industry in Michigan.
The recommendations, dated March 3, 2010, include a process that the Council recommends for inclusion in any bill introduced into the legislature to regulate offshore wind energy development in the Great Lakes, as well as recommendations for changes to transmission siting laws when the transmission relates to service of an offshore wind energy development.
Yesterday the U.S. Fish and Wildlife Service (FWS) announced the addition of 186 migratory birds to its list of species protected by the MBTA. Effective at the end of this month, this is the first update to the MBTA list in 25 years and will bring the total number of species receiving federal protection under the MBTA to over 1,000. Because the MBTA protects the vast majority of birds in the country, it covers many species not covered by the Endangered Species Act (ESA) or other laws.
Similar in some respects to the ESA, the MBTA prohibits the “take” (e.g., wounding or killing) of migratory birds. However, unlike the ESA, the MBTA does not have a routine mechanism for permitting incidental take of migratory birds. Accordingly, there is no way to be completely free of legal liability if a wind project results in the take of a migratory bird. Project developers, though, can seek assurances from the FWS that it will exercise its enforcement discretion if the project developer implements measures to protect migratory birds, such those that might be contained in an Avian & Bat Protection Plan. The measures necessary to avoid or mitigate impacts to migratory birds are project specific and always result in some additional cost, whether through changes to project layout and operation, or supplying mitigation funds.
In light of this newly expanded list of species protected by the MBTA, developers and operators of wind project would be well advised to review their strategy for minimizing the risk of prosecution under the MBTA.
The complete list of birds that will be protected by the MBTA is available at http://www.fws.gov/migratorybirds/.
Register Now for Live Meeting/Teleconference: Perspectives on Current Issues Facing Midwest Wind Projects
RENEWABLE ENERGY & DEMAND-SIDE MANAGEMENT COMMITTEE
Midwest Wind Development: Perspectives on Current Issues Facing Regional Wind Projects
February 23, 2010
12:00 noon - 1:30 p.m. (Eastern Time)
11:00 a.m. - 12:30 p.m. (Central Time)
9:00 a.m. - 10:30 a.m. (Pacific Time)
In this seminar, the expert panelists will discuss current issues for developing commercial wind projects in the Midwest. In particular, the panelists will address:
- State regulatory issues for regional wind projects;
- Current prospects for developing wind energy on the Great Lakes;
- Community wind projects: current prospects for small scale wind projects;
- MISO cost allocation and market/operational issues affecting regional wind projects.
|Moderator:||David Gilles, Godfrey & Kahn, S.C.|
|Presenters:||David Sapper, Customized Energy Solutions (Presenting from Madison Host Location)
William H. Holmes, Stoel Rives, LLP (Presenting from Minneapolis Host Location)
Jeffery C. Paulson; Jeffery C. Paulson & Associates, Ltd. (Presenting from Minneapolis Host Location)
|Organizers:||David Gilles, Godfrey & Kahn, S.C.
Jeff Dennis, Edison Electric Institute
|Host Locations:||Godfrey & Kahn, S.C. (beverages and light lunch provided)
Stoel Rives LLP (beverages and light lunch provided)
McCarthy, Sweeney & Harkaway, P.C. (beverages provided)
|Questions for the Panelists:||Please send any questions for the panelists to David Gilles at firstname.lastname@example.org at any time prior to the Program.|
To register for this Live Meeting/Teleconference, please complete and return the registration form.
Pre-registration is required and registration forms along with payment must be returned by no later than February 18, 2010. If you have questions, please contact Marlo Brown at email@example.com.
Godfrey & Kahn, S.C., One East Main Street, Suite 500, Madison, WI 53703
Stoel Rives LLP, Minneapolis City Center, 33 South Sixth Street, Suite 4200, Minneapolis, MN 55402
McCarthy, Sweeney & Harkaway, P.C., 1825 K Street N.W., Suite 700, Washington, DC 20006
On February 10, 2010, the Oregon House passed HB 3680, which if enacted would substantially curtail the BETC for certain renewable energy projects. HB 3680 would impose an overall statewide cap, on the amount of potential tax credits that the Department of Energy could certify. The statewide cap would be $300 million for the 2009-11 biennium, and $150 million for the year beginning July 1, 2011 and ending June 30, 2012. HB 3680 would also authorize the Department of Energy to write rules relating to the priority to be given if applications for preliminary certification exceed those caps. In addition to the overall cap discussed above, HB 3680 would also impose the following cutbacks for large wind facilities (more than 10 megawatts):
- For facilities that obtain preliminary certification between January 1, 2010 and January 1, 2011, the BETC would be limited to $3.5 million
- For facilities that obtain preliminary certification between January 1, 2011 and January 1, 2012, the BETC would be limited to $2.5 million
- For facilities that obtain preliminary certification after January 1, 2012, the BETC would be limited to $1.5 million
HB 3680 would adopt several criteria implemented by the Department of Energy in the Temporary Rules adopted in November 2009, and would modify the definition of a “transportation facility” to include efficient truck technology for commercial motor vehicles. These provisions would apply retroactively to July 1, 2009. HB 3680 would also allow the Department of Energy to suspend or revoke a final certificate if a facility is no longer operating. This provision would apply retroactively to January 1, 2009. Finally, HB 3680 would extend the sunset date to January 1, 2014, for renewable energy resource equipment manufacturing facilities, but would not extend the sunset date for other facilities.
Congress is considering a complete rewrite of the 1603 grant program. Some of the changes being considered are very helpful while others would be extremely troubling. Please continue reading to get the full story ...
On February 8, 2010, the Michigan Public Service Commission issued an order approving $1.6 million in Michigan Energy Efficiency grants, $1.3 million of which will go to Grand Valley State University, Michigan Alternative and Renewable Energy Center, in partnership with the University of Michigan Memorial Phoenix Energy Institute to conduct and/or perform studies to explore the feasibility of deployment of offshore wind technologies in Michigan.
The grants are part of the Low‑Income and Energy Efficiency Fund, which provides energy bill assistance for low‑income customers and promotes the efficient use of energy by all customer classes.
On January 27, Arizona Public Service (APS) announced two requests for proposals (RFPs), one for new sources of photovoltaic (PV) solar energy and the other for Arizona-based wind.
The RFP for solar PV seeks proposals for projects that are between 15 and 50 megawatts and that employ commercially proven technology. APS's goal is to procure approximately 220,000 megawatt hours per year from this PV solicitation. Respondents are required to provide proposals for long-term power purchase agreements and/or "turn-key" agreements. The latter are sometimes called BTAs (Build-Transfer Agreements) or DBS (Design-Build-Sell) agreements--however named, APS anticipates that the agreement would require the developer to build the project and transfer it to APS when the project is completed. (As an aside, turn-key agreements that do not transfer the asset until commercial operation require very careful attention to "notice to proceed" clauses and conditions, lest defects in title, permits or some other matter thwart the closing and leave the developer's asset unsold or, worse, stranded.)
In its press release, APS encouraged parties to participate in the photovoltaic RFP bidder's conference on March 12, 2010. Additional information about the conference and the RFP is available online at www.aps.com/rfp. RFP submissions are due April 7, 2010.
On the wind side, APS is looking for wind projects between 15 and 100 megawatts located entirely within Arizona. Respondents are required to provide proposals for long-term power purchase and/or "turn-key" agreements. Interested parties are encouraged to participate in the Arizona-based wind RFP bidder's teleconference on March 17, 2010. Additional information about the conference and the RFP is available online at www.aps.com/rfp. RFP submissions are due April 14, 2010.
The first wind farm developed by juwi in the U.S. will soon generate clean and safe electricity. Construction works at the Flat Water Wind Farm in Richardson County, Neb., have already started. By the beginning of 2011, 40 turbines will be up and running, thereby producing roughly 220 million kilowatt hours of carbon-dioxide-free power per year. The project will be constructed by Gallop Power LLC, a U.S.- based company established to develop, own, and operate clean energy projects. Gallop has acquired Flat Water Wind Farm from juwi's J.W. Prairie Wind Power LLC. Stoel Rives LLP represented juwi in the transaction.
"We were very pleased to have assisted juwi in accomplishing the transaction that will result in the construction and operation of their first wind farm in the United States. juwi, as an international player in the wind and solar energy with operating generation facilities in Europe and elsewhere, is the kind of company that we need active in the U.S. markets to help move our renewable energy sector forward," said Ed Einowski, Stoel Rives LLP partner who represented juwi in the transaction.Continue Reading...
On January 21, 2010, the Great Lakes Energy Development Task Force, under the authority of Cuyahoga County, issued a Request for Proposals to agencies and organizations interested in providing Avian and Bat ecological studies. The studies supplement the Task Force's Feasibility Study for an early stage commercial deployment project consisting of up to eight (8) turbines with total rated capacity at 20 MW for a Lake Erie Wind Power Project near the water intake crib of the City of Cleveland, Ohio.
Completed proposals must be submitted to the Cuyahoga County Office of Procurement and Diversity, no later than 11:00 a.m. on February 22, 2010.
Stoel Rives would like to congratulate REC Silicon and SolarWorld on their awards of tax credits by the IRS and DOE. These two companies, combined, received over 10 percent of all the tax credits awarded nationwide under section 48C of the tax code.
On Friday, January 8, the Department of Energy awarded to 183 companies $2.3 billion in tax credits for projects designed to expand, re-equip or establish manufacturing facilities for the production of equipment used to produce renewable and other green energy. The $2.3 billion was the full amount authorized by Congress in the stimulus bill as part of new section 48C of the tax code.
Applications for the credit far exceeded the dollar amount of credits available. Stoel Rives is proud to have been directly involved with these companies in preparing the complex applications for the credit. REC Silicon received the largest award of any company -- $154.8 million. SolarWorld received the seventh largest award -- $82.2 million. These credits will provide these companies with a dollar-for-dollar offset against their federal income tax liability.
There is considerable discussion in Congress regarding adding additional funds to the section 48C program, which will permit another round of awards. Please contact your favorite Stoel Rives attorney if you have any questions about these awards or extension of the section 48C credit.
Upcoming Webinar: Impact of State RPS's and the Prospect of a Federal RPS on What Utilities are Doing in Terms of Purchasing the Output of Wind Farms - January 27, 2010
With 3/5 of the States having Renewable Portfolio Standard in place and the prospect of a Federal RPS, many utilities are seeking to become first time purchasers of the output from wind projects. And utilities with a history of purchasing wind are seeking additional resources. In 2009, the presenters collectively worked on over 40 wind power purchase agreements for projects located throughout the United States, enabling them to present a comprehensive overview of the impact of these developments. A number of first time purchasers have been using the RFP process as a vehicle for educating themselves about wind, and often experience difficulty in translating PPA terms that are appropriate for base load resources into PPA terms that work for intermittent resources like wind. Through various PPA terms, utilities are increasingly seeking to place the risk of non-compliance with the RPS on the wind project developer. These developments can result in PPA terms that are very problematic for the financing of the project. This webinar will explore these recent developments, including issues related to output and availability guarantees, allocation of curtailment risk for long-distance transmission to load, wind integration charges, delay damages, conditions precedent, termination rights and the measure of damages.
Edward D. Einowski, Partner, STOEL RIVES LLP
To register: http://infocastinc.com/index.php/conference/255
In a January 8 letter to the Minnesota Public Service Commission, Xcel Energy informed the Commission that it intends to conduct competitive negotiations with wind projects that are able to interconnect at Xcel's Angus Anson generating station in Sioux Falls.
The Angus Anson plant is a gas-fired peaking facility that has firm transmission to deliver its output. Xcel wants to make better use of this transmission by looking at ways to locate wind generating capacity nearby and connect it to the transmission system at Anson. Over the next several months, Xcel plans to accept proposals and conduct competitive negotiations for wind projects that can interconnect at the Anson site. Xcel does not believe that transmission upgrades will be needed for the proposed interconnection.
The California Public Utilities Commission ("CPUC") issued a proposed decision on December 23, 2009 that would, if adopted, allow California investor-owned utilities, energy service providers, and community choice aggregators to purchase renewable energy credits alone, without the associated energy (sometimes referred to as "unbundled renewable energy credits ("RECs)" or "tradable RECs"), to satisfy their obligations under California's RPS. California's largest investor-owned utilities—Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric—would be limited to meeting no more than 40% of their annual procurement targets under the RPS with tradable RECs, and a price cap of $50 would be imposed. The CPUC will revisit both the percentage cap and the cost cap and whether those caps should be revised within 24 months of the decision.
Out-of-state renewable energy projects could be adversely impacted if the proposed order were adopted. The proposed decision would define all renewable generation purchased from out-of-state facilities1 as the purchase of unbundled or tradable RECs, making any out-of-state renewable energy sale subject to the cap that bars the large investor-owned utilities from using such sales to meet more than 40% of their overall RPS obligation. Although the proposed decision states that this classification would apply only to contracts signed on or after the effective date of the decision, contracts signed prior to the effective date would be considered REC-only contracts from the effective date forward, and would be "subject to the limits and rules applying to REC-only contracts" according to the proposed decision. Furthermore, although the purchase of tradable RECs from out-of-state facilities would be permitted, the delivery requirement in the RPS legislation would still have to be met, so a comparable amount of power would have to be imported into the state, along with the RECs. The jurisdiction to determine whether and how this delivery requirement is met, however, still remains with the California Energy Commission.
Comments on the proposed decision are due on January 19, 2010, and reply comments are due January 25, 2010.
For additional information about the history and effect of the proposed decision, see our Stoel Rives alert on the topic.
Interior Secretary Salazar Invites Parties Interested in Cape Wind Project to Resolve Impact of Determination that Nantucket Sound Is Eligible for Listing as an Historic Property
Stoel Rives partner Michael O'Connell reports:
On January 4, 2010, the Keeper of the National Register determined that Nantucket Sound is a traditional cultural property (TCP) of two Indian tribes that is eligible for listing in the National Register of Historic Places, even though the area is submerged. The Keeper made that determination in response to a request from the Mineral Management Service (MMS), which is considering a request for a lease of outercontinental shelf land for 130 wind turbines for the Cape Wind Project. MMS and the Massachusetts State Historic Preservation Officer (SHPO) disagreed on whether Nantucket Sound was eligible for listing.Continue Reading...
The ZINO Society, a Seattle-based angel investment group, announced last week that its annual “ZINO Green Investment Forum” would be held on March 4, 2010, at the McKinstry Innovation Center in Seattle. Up to fifteen early-stage companies in “green tech, clean tech, and sustainable products or services” will be selected by the ZINO Green screening board to present their businesses to angel investors and business leaders attending the investment forum. Finalists will be selected to compete for a $50,000 award from ZINO’s investment fund.
Last year’s winner of ZINO Society’s $50,000 GreenFund award was Hydrovolts, the developer of a hydrokinetic turbine. After winning the award last year, Burt Hamner, CEO of Hydrovolts, stated that “Our new technology makes it possible to generate renewable energy from fast water currents that could not be tapped before, using a really novel turbine design. It’s a challenge to explain [our technology] quickly and the presentation, coaching and business model feedback we received from ZINO Society members was incredibly helpful.” Hydrovolts went on to win the 2009 Clean Tech Open National Sustainability Award.
Stoel Rives has been a proud sponsor of The Zino Society since its inception.
The application to apply to present at ZINO Green may be found at https://angelsoft.net/angel-group/zino-society. More information about the event is available at ZINO’s website http://www.zinosociety.com/calendar/1143/ or by contacting Rob Brown at firstname.lastname@example.org or 206-621-0466.
United State District Court Judge Roger W. Titus recently issued an injunction halting the construction of the Beech Ridge wind project in Greenbrier County, West Virginia to protect the Indiana Bat, a species listed as "endangered" under the Endangered Species Act ("ESA"). The ruling is the first of its kind in the law developing around the intersection of wind project development and the ESA, and provides valuable guidance for future wind projects that may encounter protected species.
Specifically, for wind project developers, the decision highlights the importance performing diligent site assessments for protected species, working cooperatively with agency personnel, hiring qualified and thorough consultants, and obtaining counsel with specific experience in the intricacies of the ESA permitting framework.
Click here to read an analysis of the case details, Judge Titus' ruling and implications of this decision.
The Wyoming Game and Fish Department ("WGFD") has extended the public comment period on a draft document: "Wind Energy Issues: Impacts and Mitigation for Wildlife in Wyoming" from December 18, 2009 to February 1, 2010. The document provides recommendations for assessing impacts to wildlife from wind energy projects, for collecting data, and for mitigating effects on wildlife. The WGFD is especially concerned about the potential impacts of wind energy on sage grouse, which are highly sensitive to disturbances and habitat modification. The adoption of the proposed recommendations could greatly impact the future siting and development of those wind energy projects in Wyoming that are required to obtain a permit from the Wyoming Industrial Siting Council. The Interwest Energy Alliance, a trade association focused on furthering renewable energy development in the intermountain region (Arizona, Colorado, Nevada, New Mexico, Utah and Wyoming), will be working with wind energy developers and concerned stakeholders in this matter, including the Wyoming Power Producers Coalition and Pacificorp, in preparing comments to the WGFD's recommendations. Parties interested in becoming a member of the Interwest Energy Alliance should contact Craig Cox, Executive Director, Interwest Energy Alliance, P.O. Box 272, Conifer, Colorado 80433, (303) 679-9331, email@example.com.
On December 2, House Ways & Means Chairman Rangel and Ranking Member Camp introduced a tax technical corrections bill (H.R. 4169). We will likely see an identical version introduced in the Senate very soon.
Included among the technicals are changes to the Grant in Lieu of ITC under section 1603 of ARRA. The most important change is one that allows the grant to be made to certain tax-exempt organizations.
Under current law, the grant may not be made to a governmental entity, tax-exempt entity, certain other entities (including Indian tribes and electric coops), or a pass-thru entity that includes any of the former as an equity owner. This provision has made it impossible for these organizations (or funds that include such organizations) to invest in renewables and receive the grant unless they establish a blocker (taxable) corporation to hold their interest in the project. Many entities are uncertain whether they have the authority to establish taxable corporations.
The technical, if enacted, would provide that a grant may be made to tax-exempt organizations, retirement funds, and to state colleges and universities (but not other governmental entities) if the income from the project is treated as income from an unrelated trade or business (“UBTI”). In most situations, this would be the case where power from the qualified facility was being sold. It is not clear whether this provision would apply if the power was being used for the entity’s own purposes (not sold). Where applicable, the technical will eliminate the need for a blocker corporation in cases where the tax exempt or retirement fund is an investor or where a college or university is selling the power. Note -- the technical does not eliminate the need for a blocker corporation in order for the entity to qualify for accelerated depreciation.
Nevertheless, this could be a major change, particularly for colleges and universities that are selling renewable power but which otherwise could not receive the grant.
A cautionary note: the technical has not yet been enacted and it is not clear when it will be. However, to even be introduced, a technical has to have been agreed upon by both tax writing committees, which means its enactment is virtually assured eventually.
Please contact your favorite Stoel Rives attorney with any questions.
Earlier this week, the New York Power Authority issued a Request for Proposals for the development of offshore wind projects in either Lake Ontario or Lake Erie. The Power Authority is soliciting proposals for the development of a utility scale, offshore wind power project in the range of 120 to 500 MW. The date for submitting an optional Notice of Intent to submit a proposal is March 20, 2010. Questions about the RFP will be accepted until April 9, 2010. The due date for proposals is June 1, 2010. Any winning project(s) would be expected to be awarded by December 2010. The target date for completion of the power purchase agreement (PPA) negotiations is May 31, 2011. Prospective developers are encouraged to periodically check the NYPA website to see if there are any modifications to the dates.
The RFP can be accessed directly through the NYPA website.
As a brief update to the "Animal Rights Group Seeks Injunction to Halt Wind Project on ESA Grounds" article we posted on September 4, 2009, the Court in Animal Welfare Institute et al. v. Beech Ridge Energy LLC held a 4-day bench trial, which ended on October 29, 2009. The Court currently has the case under advisement, but once the Court issues an opinion, we will post a new article describing the implications from the Court’s opinion. Stay tuned.
On November 18, 2009, the Wyoming interim Joint Revenue Committee (the "Committee") considered two bills, each of which proposed to tax wind generated electricity. Neither bill passed the committee on tie votes of 6-6 (4-4 House members and 2-2 senate members). One of the bills sponsored by Sen John Schiffer, R-Kaycee, chairman of the Committee (legisweb.state.wy.us/interimCommittee/2009/10LSO-0126w4.pdf) proposed a tax of $.0010 upon each kilowatt hour for electricity produced and sold in the State of Wyoming. An exemption was provided for electricity produced for the personal consumption of the producer. A power producer using coal or other fuels would break even on the generation tax through a credit equal to the severance tax portion of their electricity production costs. The proposed tax works out to be an approximately 5 percent tax on generation. The second bill considered by the Committee was sponsored by Rep. David Miller, R-Riverton, (legisweb.state.wy.us/interimCommittee/2009/10LSO-0062w2.pdf). Rep. Miller's bill was similar to Sen. Schiffer's bill, but would only provide the credit to traditional power producers if they agree to use 90 percent of the credit on electricity generation or transmission projects and put the other 10 percent into the state's low income energy assistance program. Proponents of the proposed tax cited a number of factors in favor of the bill including the fact that wind projects should contribute to state and local governments equally with other energy industries. For example, Wyoming imposes a severance tax on natural resources, which includes (approximately) a 6 percent tax for oil and gas and a 7 percent tax for coal. Opponents of the tax bills, including the group of wind energy developers represented by the Wyoming Power Producers Coalition, argued, among other things, that (i) wind energy projects already pay property taxes and provide other financial benefits to the local communities and (ii) the taxation issue should be studied carefully so as not to discourage wind energy development in Wyoming.Continue Reading...
Come Visit Us at E3, The Midwest's Premier Energy, Economic and Environmental Conference, on Nov. 17, 2009
As a proud Exhibit Hall sponsor of E3, the Midwest’s premier energy, economic and environmental conference, Stoel Rives LLP would like to encourage you to attend this annual event. Hosted by the University of Minnesota’s Initiative for Renewable Energy and the Environment, E3 will focus this year on the intersection of innovative technologies and policies, environmental benefits and emerging market opportunities across the renewable energy spectrum.
Stoel Rives attorneys Mark Hanson, Bill Holmes and Greg Jenner are part of the event faculty. Mark will moderate a panel presentation on the challenges and opportunities of converting carbon dioxide to fuels. Bill will moderate a panel discussing exactly how sophisticated smart power grids need to be in order to scale up renewables as a major U.S. energy contributor. Greg, meanwhile, will participate in a panel discussion on the most efficient and effective strategies for financing renewable energy projects.
For more information and to register, please visit the following link: http://bit.ly/XUUjJ. We hope to see you there, and encourage you to visit our booth (#24). In addition to our presenters, Debra Frimerman, Kevin Johnson, Kevin Prohaska, Katie Roek, Mary Sennes, Joe Thompson and Vicki Twogood will be available to discuss any questions you may have. Don’t forget to pick up complimentary copies of our Law of Series handbooks, including The Law of Solar, The Law of Wind, The Law of Biofuels, The Law of Building Green, Lava Law,and our most recent additions The Law of Algae and Show Me the Money: The Law of the Stimulus (2d ed).
This afternoon, the Federal Energy Regulatory Commission conditionally approved the Midwest Independent Transmission System Operator's (MISO) proposed tariff amendment regarding allocating the cost of network upgrades for generation interconnection projects meeting MISO's regional expansion criteria and benefits (RECB) standards. See my previous blog entry for a more detailed discussion on the history of the tariff amendment, as well as protests to the amendment filed by AWEA and others.
Under the decision rendered today, FERC found that the proposed solution provides an interim solution, and directs MISO to make a compliance filing (1) to fulfill its commitment to file superseding tariff revisions regarding the Phase II cost allocation methodology on or before July 15, 2010, and (2) to reflect certain conforming changes to its tariff. In addition, FERC expects MISO to provide the Commission with status reports on the Phase II process.
To see any of the documents filed in this proceeding, go to FERC's eLibrary website and enter in Docket No. ER09-1431.
Avista announced earlier this week that it is seeking proposals from suppliers of renewable energy. Avista wants to acquire roughly 35 average megawatts (aMW) of long-term qualified renewable energy, to be supplied by the end of 2012 . The company is looking for proposals from wind, solar, geothermal, biomass, qualified hydroelectric and other renewable resources that meet Washington's RPS standard.
Avista plans to host a conference call for potential bidders on September 30. Responses to the request for proposals are due by October 23, 2009. The full RFP and instructions for bidders can be found here.
Wisconsin Governor Jim Doyle has signed a bill into law that will require the state Public Service Commission (PSC) to promulgate rules establishing common standards for political subdivisions to regulate the construction and operation of wind energy systems. The legislation seeks to address the patchwork regulatory framework created by local jurisdictions' development of their own siting regulations, and to address the concerns of developers who have been hesitant to develop wind energy systems in the state.
Previously, a municipality was prohibited from placing any restriction on the installation of a wind energy system unless the restriction satisfies certain conditions, including protection of public health or safety. The new law allows limited and generally uniform regulation of wind energy systems, and specifies that a municipality (i) may not regulate wind energy systems unless it adopts an ordinance that is no more restrictive that the PSC rules, and (ii) may not impose any restriction on a wind energy system that is more restrictive than the PSC rules.
The Maryland Energy Administration has issued a Request for Expression of Information and Interest to gather information from industry representatives on the potential for offshore wind development in the state. The MEA is also simultaneously initiating a study to evaluate opportunities for offshore wind energy on the Maryland coast (state waters) and the Outer Continental Shelf (federal waters). This study will "assess the viability of offshore wind energy generation and build on important marine spatial planning work being currently developed by the Maryland Department of Natural Resources and The Nature Conservancy."
Under Maryland's Renewable Portfolio Standard, at least 20 percent of the retail sales of electricity in the state must come from renewable resources by 2022. Responses to the REII are due by January 31, 2010. Prospective developers interested in participating in the strategy process must submit a response to the MEA by February 28, 2010.
In an earlier blog, my colleagues, Debra Frimerman and Janet Jacobs reported about the Rural Energy for America Program (“REAP”), in general and specifically in regards to small wind projects. REAP is a Department of Agriculture (“USDA”) program that provides grants and loan guarantees to agricultural producers and rural small businesses to purchase renewable energy systems, make energy efficiency improvements and conduct feasibility studies for renewable energy systems. Eligible renewable energy systems include those that generate heat, electricity or fuels from wind, solar, biomass, geothermal, hydro power, and hydrogen based feed stocks.
The USDA has announced that it has awarded more than $13 million in REAP funds for 233 renewable energy projects in 38 states. Examples of the awards include a $1.8 million guaranteed loan and $500,000 grant for Milford Wind Energy, LLC; a $435,271 guaranteed loan and $435,271 grant for Unaka Forest Products, Inc.; and a $15,000 grant to Pacifica Marine, Inc.
On a webinar yesterday, Michael Fraser, Senior Program Manager at the DOE, advised that the DOE plans to release a commercial solicitation for the loan guarantee program later this month or in early October. The current solicitation that is active for renewable energy projects requires that projects satisfy the innovative requirement. A project is defined as innovative only if it has not been employed in three or more similar applications in the US of five years duration. Thus many established renewable energy projects such as those utilizing wind or geothermal technology that is tested and proven, cannot apply under the current solicitation. The release of a commercial soliciation has been eagerly awaited by renewable energy project developers. These loans will be backed by private banks as well with DOE typically only guaranteeing 80-90% of the loan. DOE hopes that this structure will motivate private lenders to perform much of the due diligence necessary and only bring shovel-ready and bankable projects to the table. Interest rates on the loan are anticipated to run at Treasury plus 25 to 75 basis points. This is a very attractive interest rate but there are substantial fees associated with the program that will offset a portion of this value. The other key factor for projects to consider is whether they will be able to meet American Reinvestment and Recovery Act requirements and thus be eligible to have their credit subsidy costs covered by government funding. I am cautiously optimistic that DOE will be successful with these efforts and we will see a flurry of good projects moving forward Q1-Q2 2010 with the assistance of this program.
From our colleague Ryan Steen:
On July 10, 2009, the Animal Welfare Institute and others (”Plaintiffs”) filed a motion for a preliminary injunction to halt construction of the Beech Ridge wind project in Greenbrier County, West Virginia (the “Project”). The Plaintiffs seek the injunction to prevent unavoidable harms that they allege the Project will cause to the Indiana bat, a species listed as endangered under the Endangered Species Act (“ESA”). The Plaintiffs’ injunction request follows closely on the heels of the complaint the Plaintiffs filed in the Federal District Court for the District of Maryland (Civ. No. 09-1519), which alleges that the Project will unlawfully “take” Indiana bats in violation of Section 9 of the ESA. In their complaint and request for an injunction, the Plaintiffs assert that the Project cannot lawfully move forward without an incidental take permit (“ITP”) issued under Section 10 of the ESA. Judge Titus recently ordered that the hearing on the Plaintiffs’ motion for a preliminary injunction will be addressed in conjunction with the trial on the merits of the case, currently scheduled for October 2009.Continue Reading...
The University of Minnesota’s annual conference on Energy, Economics and the Environment – E3 – will be held in St. Paul on November 17. Hosted annually by the University of Minnesota’s Initiative for Renewable Energy and the Environment (IREE), this year’s conference will explore current technologies, environmental benefits and market opportunities in renewable energy.
Stoel Rives will be a sponsor of the E3 conference and will, as usual, host a booth at the event. Minneapolis tax partner Greg Jenner will join a panel to discuss “What’s the most efficient and effective strategy for financing renewable energy projects?” To review the agenda and register for the conference, click here.
The U.S. Department of Energy is hosting a free webinar on "How to Build a Strong Application" for the DOE Loan Guarantee Program on Tuesday, September 8, 2009 from 1:00 PM - 2:00 PM EST. The webinar is intended to explain the loan guarantee program and help lenders and applicants navigate the application process. DOE will also be providing suggestions on how to create a strong loan guarantee application.
DOE recently released two solicitations under the program for innovative energy efficiency, renewable energy and advanced transmission and distribution technologies and transmission infrastructure investment projects. DOE is particularly interested in wind, closed-loop biomass, open-loop biomass, geothermal, landfill gas, trash-to-energy, hydropower and solar projects that are able to commence construction before September 30, 2011.
DOE will be hosting a series of free webinars on the application process over the next few months.
On September 2, 2009, the Federal Energy Regulatory Commission issued a letter of deficiency to the Midwest Independent Transmission System Operator in MISO's RECB Phase I generator interconnect cost allocation tariff amendment proceedings (Docket No. ER09-1431). See my previous blog entry on AWEA's protest to the MISO filing for additional background.
The letter instructs MISO to provide certain supplemental information within fifteen days. Specifically, MISO is instructed to provide a list of all of the interconnection projects that will be affected by the tariff amendment, an explanation of MISO's position on the relevant date for determining which cost allocation method methodology will apply, and additional support for certain statements made in its filing regarding attrition rates and elimination of certain requirements of interconnecting generators resulting from the filing. Finally, MISO is instructed to provide a timeline and description of the anticipated RECB Phase II methodology stakeholder process that will be followed to permit MISO to meet its commitment to file a succeeding tariff proposal by July 15, 2010.
On September 1, 2009, the Great Lakes Wind Council, created by Michigan Governor Jennifer Granholm in February 2009, issued its final report to the Governor. The intended purpose of the report is to identify criteria that can be used to review applications for offshore wind development in the Great Lakes, and to identify criteria for identifying and mapping areas that should be categorically excluded from offshore wind development as well as those areas that are most favorable to such development.
Recommendations contained in the report include a set of criteria (broken out into most favorable areas, conditional areas, and categorical exclusion areas) to identify and map prudent siting for offshore wind, legislative and rule changes to establish a bottomland leasing process, the state ask the U.S. Army Corps of Engineers prepare a Programmatic Environmental Impact Statement, and the Public Service Commission convene a forum to work with stakeholders on the economic analysis of different policy scenarios.
The report further recommends exclusion of offshore wind permits and leases from Part 325 of Michigan’s Natural Resources and Environmental Protection Act, clarification of state law to provide for offshore waters to be included in the public trust, and creation of a new statute governing offshore wind that would outline application requirements, permit review criteria, site assessment requirements, construction and operation plans requirements, decommissioning plans, and uses of funds by the state.
Treasury Secretary Tim Geithner and Energy Secretary Steven Chu announced the first awards of cash grants in lieu of the investment tax credit (ITC) today. The total award value was over $502 million. Recipients include projects in Colorado, Connecticut, Maine, Minnesota, New York, Oregon, Pennsylvania and Texas. Click here for a detailed list of the awards announced today. Additional awards will be announced in the coming weeks.
For more information on this program and the application process, please see the Stoel Rives Energy Law Alert: Treasury Issues Guidance on Applications for Grants in Lieu of the ITC and PTC.
From my colleague Adam Walters:
On August 20 the Australian government announced the passage of a bill quadrupling its Renewable Energy Target (RET) to ensure that 20% (approximately 45,000 GWh) of Australia’s electricity is generated from renewable energy sources by 2020.
How does Australia’s RET Scheme Work?
The RET scheme is an expansion of Australia’s Mandatory RET scheme introduced in 2001, the first of its kind in the world. It works through the creation and sale of Renewable Energy Certificates (RECs) by renewable power generators to “liable parties” (mainly large-scale electricity utilities and consumers), who must provide a designated quantity of REC’s to Australia’s renewable energy regulator to demonstrate compliance and avoid having to pay charges for any shortfall. One of the changes brought about the new legislation is to increase from $40/MWh to $65/MWh.
Renewable energy sources eligible for accreditation under the RET scheme include: solar, wind, hydro, tidal, wave, biomass and geothermal, as well as solar water heaters and other smaller generation units. Hydro has historically dominated Australia’s renewable energy landscape, but recent project announcements and funding opportunities for wind and solar projects signal greater diversification of the industry, particularly for proven technologies.Continue Reading...
On August 21, NV Energy issued a press release reminding renewable energy developers of that it has issued a Request of Information (RFI) for renewable energy that can be provided on a short-term basis. This solicitation is separate from NV Energy's recently announced 2009 Renewable Energy Request for Proposals. NV Energy will consider proposals for solar, wind, geothermal, biomass and other resources eligible for portfolio energy credits under the Nevada renewable portfolio standard.
NV Energy is now looking for proposals from entities that can deliver renewable energy to its system on or after Oct. 1, 2009 and for a period of one month to three years.
Parties interested in submitting a response to the RFI, or those seeking more information related to the RFI or renewable energy laws can contact NV Energy at: ShortTermRFI@nvenergy.com . In addition, prospective bidders can email any questions to Ron Helbing, firstname.lastname@example.org.
Bidders must submit their responses to NV ENergy's short term renewables solicitaion by 9:00 AM (PPT) on Sept. 2, 2009.
On August 13, 2009, the American Wind Energy Association, Wind on the Wires and certain wind developers filed protests at the Federal Energy Regulatory Commission to the Midwest Independent Transmission System Operator's (MISO) recent filing at FERC. The MISO filing proposes to revise MISO's cost allocation methodology for network upgrades for generator interconnection, and resulted from MISO's Regional Expansion Criteria & Benefits (RECB) Task Force.
The current cost allocation methodology in place provides that the cost of network upgrades for generator interconnection are funded initially by generator interconnection customers, and the customer is entitled to a 50% reimbursement where it is demonstrated that the output will serve MISO’s network customers or the facility has been designated a network resource. For facilities rated 345 kV and higher, 20% of the refund cost is allocated to all MISO pricing zones on a postage-stamp basis, and 80% is allocated among pricing zones using a line outage distribution factor (LODF) method.
Under the MISO proposal, cost allocation would be as follows: (i) for network upgrades below 345 kV, 100% to the interconnection customer, and (ii) for network upgrades 345 kV and above, 90% to the interconnection customer and 10% to all transmission customers through a postage stamp-type charge.
To read any of the documents related to the MISO filing, go to the FERC eLibrary website and enter in Docket No. ER09-1431.
On August 18, 2009, Detroit Edison issued request for proposals (RFPs) seeking additional renewable energy resources for its portfolio.
The first RFP involves development of a Michigan-based wind farm (or farms) capable of producing up to 75 MW of new wind power. The facilities must be operational by Dec. 31, 2011. Detroit Edison plans to take ownership of the facilities upon completion of construction, and to receive 100 percent of the wind energy and renewable energy credits. Responses to this RFP are due by Nov. 2, 2009.
The second RFP seeks long-term (20-year) agreements for the purchase of capacity, energy and renewable energy credits from approximately 106 MW of renewable energy resources. Eligible facilities include wind, solar, landfill gas and biomass. Responses to this RFP are due by Oct. 23, 2009.
U.S. Representatives Collin Peterson (MN) and Tim Walz (MN) introduced the Wind Energy Promotion Act (WEPA) last month. If WEPA becomes federal law, the Renewable Energy Production Tax Credit (PTC) promises to become an even more potent driver for wind power project development. Under current law, the PTC may only be used to shelter passive activity income from tax liability.
If adopted, WEPA would allow the use of the PTC to shelter up to $40,000 of ordinary income, a modification that would boost the effectiveness of the PTC.
Click here to read the full analysis on WEPA and the opportunities this presents.
Today, the Department of Energy (DOE) issued a notice of proposed rulemaking to amend 10 CFR Part 609, the rule regulating the loan guarantee program authorized by section 1703 of Title XVII of the Energy Policy Act of 2005. The two principal goals of section 1703 of Title XVII are to encourage commercial use of new or significantly improved energy-related technologies and to achieve substantial environmental benefits. (See these recent alerts regarding the DOE loan guarantee program and the related application process)
After reexamining Title XVII, the DOE has concluded that the statute does not require a first lien on all project assets. DOE has discovered that its current requirement that it be in lien position is in conflict with the financing structure of many energy projects. For example, many utility scale power plants are jointly owned by public power agencies, cooperative power systems and investor-owned utilities. In these cases, it may not be commercially feasible to obtain a lien on all project assets or the credit of a sponsor may be sufficient to support a more modest pledge of assets.
Furthermore, DOE has found that other parties are interested in participating as co-lenders, co-guarantors, or insurers of Title XVII loans. However, these other parties expect to share, on a pari passu basis, in any collateral securing such loans.
Consequently, DOE proposes two amendments to the current rules:
- Delete the requirement of a first priority lien on all project assets and leave to the Secretary (of DOE) the determination of an appropriate collateral package, as well as intercreditor arrangements; and
- Allow the Secretary (of DOE) to determine if pari passu lending is in the best interests of the United States
In a recent report published by Minnesota 2020, a non-partisan think tank focused on public policy matters including economic development, health care, education and transportation, the group notes that Minnesota needs an additional 4,000 MW of wind power to meet its Renewable Energy Standard, set at 25% by 2025. The think tank also notes that achieving the RES would "create up to 2,200 new jobs during the 17-year construction phase and more than 900 sustained jobs during the wind farms lifetime operations," which numbers may increase as Minnesota reaches beyond its minimum 25% requirement. The report also includes several short- and long-term recommendations to encourage the presence of wind energy companies in Minnesota, and thus the market (including training) for jobs within the wind industry as well.
About a month ago we issued an alert regarding a $45 million funding opportunity announcement ("FOA") for the development of a wind turbine drivetrain testing facility (alert available here).
Today, the Department of Energy ("DOE") announced that they are hosting a webinar regarding this FOA. The webinar will be held July 30, 2009 at 11:00 a.m. Eastern. Through this webinar, DOE will provide a brief overview of the FOA and will participate in a question and answer period. However, all questions must be submitted in advance (by July 27, 2009 at 2:00 p.m. Eastern) to windDynamometer@go.doe.gov
To attend this webinar, register in advance by clicking here.
Today, the Bonneville Power Administration (“BPA”) issued its Final Record of Decision (“Final ROD”) in the 2010 Rate Case. The Final ROD is part of an early wave of efforts by transmission providers to charge wind generators for the costs of providing “integration” or “balancing” services. Transmission providers are responsible for maintaining reliability of the transmission system. To do so, they must balance both loads (the electrical power consumed by customers) and resources (generation from hydro, thermal, or wind power plants) on their systems. BPA reserves part of its hydro resources so that if a large wind “ramp” event occurs, in which the wind output increases or decreases in a short amount of time, BPA can deploy its hydro reserves to keep the grid in balance. Before 2009, BPA did not charge a wind integration rate for providing such balancing services.
BPA first proposed a wind integration charge in the 2009 Wind Integration Rate Case. This case was settled, with BPA's wind generator customers agreeing to a rate that was approximately four times lower than what BPA initially proposed in the 2010 Rate Case in exchange for BPA working toward the implementation of operational advances that would bring down the cost of providing wind integration services.
In its 2010 Rate Case Initial Proposal, BPA sought to charge its wind generator customers a wind integration rate of approximately $12 per megawatt-hour (“MWh”). BPA's wind generator customers argued that this rate would deter renewable energy development in the Pacific Northwest and make it difficult for the region to meet the Obama Administration's clean energy goals. BPA maintained that this charge was necessary, in part because the wind fleet had increased to such an extent that BPA feared it would be unable to provide enough reserves while also preserving system reliability. BPA argued that the increased size of the wind fleet was compounded by the wind generators’ inability to accurately account for wind ramp events in their schedules, thereby requiring BPA to hold a significantly larger amount of reserves in order to provide balancing services.
Once the wind generators on BPA’s system were made aware of their scheduling inaccuracies, they began taking steps to improve their scheduling. As BPA acknowledged in its Final ROD, over the next several months, BPA’s wind generator customers made significant improvements. Due in part to the wind fleet’s improved scheduling accuracy, the Final ROD sets the wind integration rate at approximately $5.70/MWh—less than half the rate in the Initial Proposal. This rate is subject to Federal Energy Regulatory Commission approval and varies somewhat depending on a project’s capacity factor.
The rate ultimately set by BPA has been criticized as not being cost-based, partly as a result of the way in which BPA allocated its embedded costs and its decision to also charge wind generators for lost "surplus" sales as a result of holding generation in reserve. BPA's wind generator customers argued that BPA's cost allocation violates Federal Energy Regulatory Commission policy. The wind generators also pointed out that BPA has been slow to implement the operational advances that would significantly lower the cost of wind integration. Despite the disparate views of BPA and its wind generator customers, the Final ROD echoes some of the arguments made by the wind generators in bringing the rate down from the initial $12/MWh and demonstrates a willingness by BPA to continue to work with the wind industry on improving its wind integration services.
Stoel Rives represented the Northwest Wind Group, a coalition comprised of Renewable Northwest Project and five major wind energy developers—BP Alternative, Columbia Energy Partners, enXco, Horizon Wind Energy, and RES America Developments Inc.—in this proceeding. We will be sending out an Energy Law Alert discussing the Final ROD and its implications for the wind industry shortly. If you’d like to receive Stoel Rives Energy Law Alerts, click here and fill out the form.
The Department of Energy (DOE) announced this week that up to $22 million from the Recovery Act would be allotted to up to 4 eligible communities nationwide in order to encourage utility-scale renewable energy systems that provide clean, reliable, and affordable energy supplies for their communities, while creating jobs and new economic development opportunities. The projects will demonstrate how multiple renewable energy technologies, including solar, wind, biomass, and geothermal systems, can be deployed at scale to supply clean energy to communities. Eligible applicants are local and state governments, Indian Tribes and Tribal Energy Resource Development Organizations or Groups.
Successful applicants will be awarded financial assistance to support the implementation of an integrated renewable energy deployment plan for a community, and the construction of renewable energy systems. DOE expects each project to also have substantial private sector investment in addition to the funds from DOE. Completed applications are due September 3, 2009 and the DOE will select awardees by the end of November 2009.
Today, U.S. Department of Energy Secretary Steven Chu announced that 28 new wind energy projects will receive up to $13.8 million in funding for wind turbine research and testing and transmission analysis, planning, and assessments. Most of the $13.8 million comes from Recovery Act funds. Recognizing the struggles that Americans are facing in the current economic climate, Secretary Chu noted that the Recovery Act funds are intended to rebuild the fundamentals of the economy, in part by “spur[ring] a revolution in clean energy technologies.” Chu added that wind energy is a “critical factor” in achieving President Obama’s clean energy and job growth goals.
Secretary Chu’s funding announcement was coupled with the release of the Department of Energy’s 2008 Wind Technologies Market Report. As detailed in the report, the U.S. wind industry continues to reach impressive milestones. For the fourth year in a row, the U.S. boasted the fastest-growing wind power market. Also for the fourth consecutive year, wind power was the second largest new resource added to the electrical grid, contributing 42 percent of all new U.S. electrical generating capacity in 2008. As a result of increased demand for wind, the share of domestically manufactured wind turbine components increased dramatically in the last three years, with about 50 percent of these components now being manufactured in the U.S. In 2008, approximately 8,400 new domestic manufacturing jobs were added in the wind sector. Given these statistics, it is no wonder that cultivating a strong domestic wind industry is one of the keys to meeting the Obama Administration’s clean energy and economic recovery goals.
Washington previously received $60.9 million in Recovery Act funding for its State Energy Program (“SEP”). The Washington Legislature later provided $38.5 million to the Washington State Community, Trade and Economic Development (“CTED”) agency to administer a loan and grant program for eligible projects in the areas of energy efficiency, renewable energy and clean energy innovation (see our earlier blog entry here for more details). The deadline for submitting a notice of intent to apply is July 27, 2009 at 5:00 p.m. Pacific time, and the application is due August 17, 2009 at 5:00 p.m. Pacific time.
I attended an informational meeting held by CTED on July 13, 2009. The meeting provided an overview of the loan and grant program, as well as funding details, eligibility guidelines and evaluation criteria. Eligible projects can receive between $500,000 to $2 million in loans and grants in the first round, with the requirement that applicants provide other sources of funding at least equal to the amount of the loan or grant request. The non-SEP funding may include amounts spent or committed to the project since January 1, 2009. Projects will be evaluated based on the feasibility and quality of the project plan, the experience and qualifications of the project team, the ratio of matching funds to SEP funds, job creation, and energy savings/production. CTED intends to announce award decisions in September 2009.
Farmers, ranchers and rural business owners have until July 31, 2009 to apply for a Rural Energy for America Program ("REAP") grant from the USDA for the purchase and installation of small wind turbines. The grants provide up to 25% of the total installed cost of a small wind turbine system, and together with the Federal Investment Tax Credit ("ITC"), can cover up to 50% of the costs of the system for an eligible candidate. Additional funds may also be available from local utility cooperatives or rural electric associations which give rebates to their members.
Applications must be submitted to local USDA Rural Development offices by July 31, 2009. However, the application itself takes time to complete, and applicants should give themselves 2 weeks to fill it out.
The American Recovery and Reinvestment Act of 2009 (ARRA), which was enacted in February, permits an applicant to receive a grant from Treasury in lieu of claiming investment tax credits (ITCs) or production tax credits (PTCs).
Today the U.S. Treasury Department issued much-anticipated guidance concerning applications to receive cash grants in lieu of claiming income tax credits for certain renewable energy projects. Although the guidance includes a sample application form, the U.S. Treasury has stated that it will not accept applications until August 1.
If you have questions about today's Treasury Department guidance and grants in lieu of ITCs or PTCs, contact:
On July 1, 2009, Washington State’s Department of Community, Trade and Economic Development (“CTED”) issued application guidelines and forms for its State Energy Program (“SEP”) (available by clicking here). The American Recovery and Reinvestment Act of 2009 (the “Recovery Act”) provided $60.9 million in new funding for Washington’s SEP. Subsequently, the Washington Legislature allocated $38.5 million to CTED to administer a loan and grant program for energy efficiency and renewable energy program (see our client alert, available here, regarding the legislative action).Continue Reading...
On July 2, 2009, the Department of Energy ("DOE") announced $59 million in conditional loan guarantees in the form of $16 million for a wind turbine assembly plant and $43 million for a 20 megawatt flywheel energy storage plant.
Nordic Windpower, USA has been conditionally offered a $16 million loan to support the tooling and commercial-scale set up of its assembly plant in Pocatello, Idaho. This assembly plant produces one megawatt two blade turbines which are 10% less costly to manufacture, install, operate, and maintain than competing systems.
Beacon Power was conditionally offered a $43 million loan to support the construction of a 20 megawatt flywheel energy storage plant in Stephentown, New York. The flywheel system is utilizing a newly developed technology to provide frequency regulation services by absorbing and discharging energy to maintain the consistency of power on the electric grid.
We welcome energy attorneys Morten Lund and David Quinby to the firm’s San Diego office as members of the Energy and Telecommunications group. They join attorneys Howard Susman and Brian Nese. The San Diego office has relocated to a larger space at 12265 El Camino Real, Suite 303, to accommodate further expansion (new contact information below).
The California energy team's capabilities also include real estate, land use and permitting, equipment procurement and construction, state and federal regulation, environmental matters, and dispute resolution.
Stoel Rives has received a national ranking for its Renewables and Alternative Energy practice from Chambers USA: America's Leading Lawyers for Business (2009), rating among the top law firms in this category. The firm has been at the forefront of growth in renewables in recent years and represents many of the industry leaders in solar, wind energy, geothermal, biomass, hydroelectric, ocean, combined-cycle natural gas, carbon sequestration and biofuels project development in California, the United States, Canada and abroad.
For more information about the Stoel Rives Renewable Energy Group, visit www.stoel.com/renewableenergy or contact:
In its final days of session, the North Dakota legislature passed a bill creating certain requirements for leases or easements for wind energy development that are entered into in the state.
The bill's requirements for wind leases and easements include: placement of a cover page on every wind lease encouraging the landowner to review the agreement with his or her attorney; negotiations may not be maintained as confidential (although the terms of the final agreement may be kept confidential under a mutual confidentiality provision); the lease may not be signed until at least ten days after it has been delivered to the landowner; and the landowner may terminate the lease if the wind energy facility has not operated for a period of at least three years (unless certain payments are made to the landowner under the lease).
On June 23, 2009, the Minerals Management Service, a