Renewable + Law : Renewable Energy Lawyer & Attorneys : Stoel Rives Law Firm : Climate Change, Emissions, Carbon Markets, Wind, Solar, Biofuels : Western United States

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. 

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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.

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Today, the U.S. Department of Energy (the "DOE") released the long-awaited Financial Assistance Funding Opportunity Announcement ("FOA") titled "Marine and Hydrokinetic Technology Readiness Advancement Initiative."  Federal funding for this initiative for fiscal year 2010 is expected to be up to $15.36 million, with the possibility of continued funding at, or near, that level for up to an additional two years.  (Because all federal funding is subject to annual appropriations, these figures should be treated as estimates.)

The DOE has recognized that marine hydrokinetic ("MHK") technologies can provide renewable, environmentally responsible, and predictable baseload electricity to load centers along the nation's coastlines.  And to help accelerate the development and deployment of these technologies, the DOE intends to advance the technological and operational readiness of MHK systems and components across a range of technology readiness levels ("TRLs") through this Funding Opportunity Announcement.

Although TRLs have been used for years by both NASA and the Department of Defense to develop advanced, mission-critical systems, this is the first time TRLs have been used by the DOE to assess the technological readiness of new renewable energy technologies.  Recognizing that MHK devices and components are still largely in the early stages of research and development, the DOE has adopted a simplified TRL structure for purposes of this Funding Opportunity Announcement.  The DOE is seeking applications in two topic areas: (1) MHK Technologies Concept Development (TRLs 1-3) and (2) MHK Technology Readiness Level Advancement (TRLs 4-9). 

Funding will be made available in each topic area for both "systems" and "components."  The DOE organized and grouped the TRLs into four discrete funding categories:

1. Discovery / Concept Definition / Early Stage Development, Design and Engineering (TRL 1-3);
2. Proof of Concept (TRL 4);
3. System Integration and Technology Laboratory Demonstration (TRL 5/6); and
4. Open Water System Testing, Demonstration, and Operation (TRL 7/8).

Each category has prescribed funding levels and project performance periods.  A brief summary of the expected number of awards in each topic area and the associated expected federal funding is included below.  For a complete funding breakdown for systems and components, see the Funding Opportunity Announcement.

Applications are due to DOE by 11:59 PM Eastern Time on June 7, 2010.

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DOE Secretary Chu's announcement today regarding $80 million of ARRA funding for biofuels is potentially a positive development for the long-term development of the biofuels industry.  What is worrisome from a practical perspective  is the division of funding.  The National Alliance for Advanced Biofuels and Bioproducts, centered in St. Louis, received $44 million to develop a systems approach for the sustainable commercialization of algal biofuel and bioproducts.  The National Advanced Biofuels Consortium, based here in the Pacific Northwest, received up to $34 million to develop infrastructure compatible biomass-based fuels.  Meanwhile eight infrastructure projects received up to $1.6 million to support expanded fueling infrastructure for ethanol blends. While the Administration is ahead of the curve in recognizing the importance of long-term support for the development of advanced biofuels, it is overlooking the increasingly challenging environment in first generation biofuels.  Simply put- and purely in my opinion- there will be no second generation of biofuels if the first generation does not again thrive.  The ethanol industry has hit a blend wall that the EPA has not been willing to help them overcome in the short term.  Adding $1.6 million in E-85 infrastructure is but a chip in that wall when one considers the massive costs involved in building a national infrastructure.  On the biodiesel side, the current industry has not yet received an extension of its tax credit and was already facing severe challenges.  The investors who supported the expansion of the first generation biofuels industry are still tracking their investments and the policy support for the industry.  While government funding will further the development of the science of advanced biofuels, private sector involvement will be essential to the ultimate commercialization of these fuels.  To accomplish its ultimate goals, the Administration will need to begin to address these issues in a systematic manner.

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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.

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The U.S. Department of Energy's (DOE) Wind and Hydropower Technologies program recently unveiled a new database containing information on the test capabilities and services of a variety of U.S. hydrodynamic test facilities.

The first-of-its-kind database encompasses 81 commercial, academic, and government facilities and offshore berths in 18 states, and will directly facilitate the testing of technologies designed to extract energy from waves and the currents of oceans, tides, and rivers.  The database will serve as a platform for marine and hydrokinetic technology developers to identify a U.S. facility where they can test and validate their prototype devices. Users can find out more information on dimensions, costs, and available personnel, as well as available sensors and applicable software used to gather and present data gathered during in-water testing.

For more information, please contact Cherise Oram.

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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.

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Yesterday, the Department of Energy (“DOE”) announced more than $154 million in Recovery Act funding to four states for their State Energy Programs (“SEPs”). The funds were awarded to California, Missouri, New Hampshire, and North Carolina. The funding is to be provided in two stages to the four states with the second stage requiring successful performance at the first level. The funding is to be utilized in the areas of energy efficiency, workforce training, education and related programs.

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