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.
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.
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:
Utah Solar Tour 2011
September 24 – Salt Lake City, UT
Join Stoel Rives attorney Julia Pettit for the Utah Solar Energy Association’s annual Solar Tour. This year’s tour features sites with geothermal heat pumps, small wind, passive solar design, solar shingles, and many energy efficiency design techniques. Stoel Rives is proud to be a Gold sponsor at this event.
In-Depth Tax Planning for Renewable Energy Projects
September 26 – Chicago, IL
Stoel Rives attorneys Greg Jenner, Adam Kobos, Carl Lewis and Kevin Pearson will serve as faculty for this course which will outline tax issues involved in developing renewable energy projects and negotiating tax equity incentives.
September 26-27 – San Francisco, CA
Join Duff Bryant, Julia Pettit, John McKinsey and over 400 senior executives and investors as they discuss opportunities for private equity and venture capital in clean tech energy companies. Review in detail the latest technologies moving the industry forward, and examine prospects for rapid renewable growth across the West Coast. Be sure to visit Stoel Rives in the exhibit hall!
National Hydropower Association Pumped Storage Workshop
October 3 – Bellevue, WA
Join Stoel Rives attorneys Bill Holmes, David Benson, Cherise Oram, and Michael O’Connell for this workshop intended for industry professionals with an interest in the development of new pumped storage projects. Bill Holmes will join the discussion panel What Would Energy Storage Asset/Revenue Modeling Look Like? from 4:00-5:00 p.m.
Independent Energy Producers Association Annual Meeting
October 3-5 – South Lake Tahoe, CA
John McKinsey and Seth Hilton will be in attendance at The IEP 30th Annual Meeting, featuring speakers from CPUC, CARB, CEC, and FERC. Stoel Rives is a proud sponsor at this event.
Developing Grid Storage Projects
October 5-6 – Dallas, TX
John Thompson, David Hattery and Bill Holmes are headed to Dallas to explore market opportunities, models, technologies and barriers to energy storage. Bill Holmes will Chair the conference, and instruct the pre-conference workshop, Developing the Business Case for Grid Storage on October 5. Other Stoel Rives presentations on October 5 include John Thompson, presenting Intellectual Property Protection for Grid Storage, and David Hattery, presenting Negotiating the Terms and Navigating the Risk of a Procurement Contract and Other Financial Documents.
Biogas USA West 2011
October 11-12 – San Francisco, CA
Visit with David Benson and Lee Smith, who will join the discussion panel Project Development Optimization on October 11. Be sure to attend the post-conference event reception, proudly hosted by Stoel Rives.
Solar Power International
October 17-20 – Dallas, TX
Stoel Rives attorneys David Benson, Kristen Castaños, Bill Clydesdale, David Hattery, Bill Holmes, Greg Jenner, Morten Lund, Jennifer Martin, Julia Pettit, David Quinby and Howard Susman are headed to Dallas! Julia Pettit will join the Financing Strategies for Utility-Scale Projects discussion panel, and Bill Holmes will moderate the discussion panel, Energy Storage Market and Policy Developments. Visit Stoel Rives at booth #3043 in the exhibit hall!
GEA Geothermal Energy Expo & GRC Annual Meeting
October 23-26 – San Diego, CA
Stoel Rives attorneys John McKinsey and Erin Anderson will be in attendance at the Geothermal Energy Association Energy Expo, co-located with the Geothermal Resources Council Annual Meeting. Erin Anderson will present during the pre-meeting workshop, held on Friday, October 21 from 8 a.m. – 5 p.m. While you’re there be sure to visit Stoel Rives in the exhibit hall!
CALIFORNIA RPS: Meeting the Mandate
October 24-25 – Los Angeles, CA
On Monday, October 24, Seth Hilton will present, In-State vs. Out-of-State Renewable Resources to Satisfy RPS Requirements from 10:30-11:15 a.m.
Green Energy M&A Outlook for 2012
November 15-16, 2011 – Santa Clara, CA
Stoel Rives’ Duff Bryant and Ed Einowski, will serve as Summit Co-Chairs, and on Tuesday, November 15, Julia Pettit will moderate the discussion panel, The Green Corporate M&A Landscape, from 8:45 - 9:45 a.m. Stoel Rives is proud to be a Platinum Sponsor of this event.
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On June 16, 2011, the Federal Energy Regulatory Commission (FERC) issued a Notice of Inquiry (NOI) seeking comments on what it described as two separate but related issues, both of which apply to electric energy storage (EES).
First, because FERC is interested in facilitating the development of robust competitive markets to provide ancillary services from all resources types, it seeks comment on “existing restrictions on third-party provision of ancillary services, irrespective of the technologies used for such provision.” In soliciting these comments, FERC noted the growing interest in rate flexibility among sellers of ancillary services, and a desire from those obligated to purchase those services to increase the available supply. Although a variety of resources can provide ancillary services, FERC believes that many are discouraged from doing so by the Commission’s restrictions on market-based pricing coupled with a lack of access to information that could help satisfy the requirements of those policies. Access to information is particularly difficult outside of areas served by RTOs/ISOs, which areas are often with the greatest need for an ancillary services market.
FERC pointedly invites comments on whether it should revise or replace the restriction set forth in Avista Corp., 87 FERC ¶ 61,223, order on reh’g, 89 FERC ¶ 61,136 (1999), which prohibits, absent a study showing lack of market power, third-party market-based sales of ancillary services to transmission providers seeking to meet their ancillary services obligations under the Open Access Transmission Tariff (OATT). Assuming that FERC revises or replaces the Avista restriction to facilitate the provision of ancillary services, it also seeks input on how it should contemporaneously ensure just and reasonable rates. In a related inquiry, the Commission is seeking comments on whether the various cost-based compensation methods for frequency regulation that exist in regions outside of organized markets can be adjusted to address the speed and accuracy issues identified in FERC’s recent Frequency Regulation Notice of Proposed Rulemaking for organized wholesale energy markets. See Frequency Regulation Compensation in the Organized Wholesale Power Markets, 76 FR 11177 (March 1, 2011), Notice of Proposed Rulemaking, FERC States & Regs ¶ 32,672 (2011). The June 16 NOI, when considered in context with this year’s NOPR on Frequency Regulation and last year’s NOI on EES, could signal that a broader rulemaking regarding EES is on the horizon.
Recognizing that “the role of electric storage and other new market entrants play in competitive markets is still evolving,” the Commission seeks comments on whether it should revise “current accounting and reporting requirements as they pertain to the oversight of jurisdictional entities using electric storage technologies” other than pumped storage hydro (for which FERC has established methods of accounting, reporting and rate recovery). Current utility accounting requirements do not appropriately fit EES due to the technology’s abilities to act like generation, transmission, and distribution assets. Accordingly, FERC is soliciting “specific details regarding whether and, if so, how to amend the current accounting and reporting requirements to specifically account for and report energy storage operations and activities.”
The NOI was published in the Federal Register on June 22, 2011, and comments are due sixty (60) days from that date.
Thanks to my colleague Jason Johns for his comments on this posting!
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.
Electric Power Research Institute (EPRI) and Technology Transition Corporation recently issued a request for information (RFI) to prepare for multiple demonstrations and the market introduction of 1MW / 2MWh lithium ion battery energy storage systems (ESS) for electric utility grid management solutions. EPRI and TTC have assembled a utility team for this project, and they encourage manufacturers of Li-ion systems and energy storage system integrators to respond to the RFI. The utility team will evaluate the responses to determine which ESS suppliers should be invited to a 2-day utility-manufacturer workshop to be held in June 2011 to discuss the project’s technical specification and demonstration plans. The responses to the RFI will also influence the forthcoming Request for Proposals and the technical specification for approximately three demonstrations scheduled for 2012.
To be considered for participation in the proposed ESS project, including receipt of the resulting RFP in Q3 2011, responses must be received electronically, by 8 pm (20:00) Eastern Time, Monday, May 2, at firstname.lastname@example.org. A detailed description of the RFI process and the RFI response form can be found on the Technology Transition Corporation's website, here.
Thanks to Emanuel Wagner, Project Coordinator for TTC, for bringing this RFI to my attention. According to Emanuel, this would be the first Li-ion storage project of this size in the US, if not the world.
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.
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.
Just a friendly reminder that the deadline to submit comments to the Federal Energy Regulatory Commission (“FERC”) on electric storage technologies is just around the corner. In its Request for Comments Regarding Rates, Accounting and Financial Reporting for New Electric Storage Technologies, FERC’s Office of Energy Policy and Innovation seeks comments on the following issues:
- The use of and rate treatment for storage facilities, including when it is appropriate to classify a storage facility as a transmission asset.
- The mechanisms by which a storage project that is used for multiple purposes may be compensated. Specifically, FERC seeks comment on whether a storage project may be compensated as transmission (e.g. for supporting unbundled transmission service by supplying reactive power) and also be compensated for providing ancillary services or for enhancing the value of merchant generation (e.g. by shifting output from an off-peak period to an on-peak period).
- The possibility of creating a stand-alone contract storage service and whether the storage provider would provide the service of electricity storage, enabling its customers to determine how to use their contracted share of the storage.
- Whether new accounting and reporting requirements should be created in order to facilitate cost of service or other rate policies for new storage technologies, such as chemical batteries and flywheels.
In addition to the issues outlined above and other specific questions posed by FERC in its Request for Comments, FERC invites comments on other related aspects of the storage issues not specifically addressed by FERC in the above-referenced document. Comments are due on Monday, August 9, 2010 and should reference Docket No. AD10-13-000.
Saturday was a great day for solar energy: the DOE offered two conditional loan guarantee commitments:
- $1.45 billion loan guarantee to Abengoa Solar Inc. for the construction and start-up of a concentrating solar power (CSP) generating facility in Solana, Arizona and a
- $400 million loan guarantee to Abound Solar Manufacturing for the assembly of state-of-the-art thin-film, cadmium-telluride solar panels.
ABENGOA SOLAR: Once operational, the CSP plant will add 250 MW of capacity to the electrical grid using parabolic trough solar collectors and a six-hour thermal energy storage system (the first of its kind in the United States). The plant which will be about 70 miles southwest of Phoenix, will use mirrors to direct sunlight onto receiver tubes that will heat molten salt fluid to over 700°F. The system's heat will turn steam turbines and the thermal energy storage can provide power during cloudy days and evenings. The plant will supply power to approximately 70,000 homes through a long-term PPA with Arizona Public Service Company.
Abengoa Solar estimates the project will employ approximately 1,600 workers during construction, of which 80 will be permanent jobs. As an added benefit, two assembly factories will be constructed on the site, and a new mirror manufacturing facility will be needed to supply more than 900,000 mirrors to the plant.
ABOUND SOLAR: A $400 million conditional loan guarantee has been offered to Abound Solar Manufacturing for the assembly of state-of-the-art thin-film, cadmium-telluride solar panels. The assembly will take place in in Longmont, Colorado, and Tipton, Indiana. Abound estimates that the project will create approximately 2,000 jobs during construction, as well as 1,500 permanent jobs.
Abound’s manufacturing technology was jointly developed by NREL, Colorado State University, and the National Science Foundation and deposits thin films of cadmium-telluride onto glass panels. This technology reduces overall product costs and provides better film quality, efficiency and reliability. Abound anticipates that it will produce millions of solar panels annually (enough panels to support up to 840 MW of new solar power per year) for less than it costs to produce crystalline silicon modules.
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?
Based on the technical analysis performed in the WWSIS, it was determined that it is operationally feasible for WestConnect to accommodate 30% wind and 5% solar energy penetration, assuming that certain changes to current practice are made over time. A summary of some of the changes items identified in the WWSIS were outlined in the Executive Summary and include the following:
- Substantially increase balancing area cooperation or consolidation, real or virtual;
- Increase the use of sub-hourly scheduling for generation and interchanges;
- Increase utilization of transmission;
- Enable coordinated commitment and economic dispatch of generation over wider regions;
- Incorporate state-of-the-art wind and solar forecasts in unit commitment and grid operations;
- Increase the flexibility of dispatchable generation where appropriate (e.g., reduce minimum generation levels, increase ramp rates, reduce start/stop costs or minimum down time);
- Commit additional operating reserves as appropriate;
- Build transmission as appropriate to accommodate renewable energy expansion;
- Target new or existing demand response programs (load participation) to accommodate increased variability and uncertainty;
- Require wind plants to provide down reserves.
Finally, the WWIS also identified a number of areas where further study is warranted:
- Characterization of the capabilities of the non-renewable generation portfolio in greater detail (e.g., minimum turndown, ramp rates, cost of additional wear and tear);
- Changes in non-renewable generation portfolio (e.g., impact of retirements, characteristics, and value of possible fleet additions or upgrades);
- Reserve requirements and strategies (e.g., off-line reserves, reserves from non-generation resources);
- Load participation or demand response (e.g., functionality, market structures, PHEV);
- Fuel sensitivies (e.g., price, carbon taxes, gas contracts and storage, hydro constraints and strategies);
- Forecasting (e.g., calibration of forecasting using field experience, strategies for use of short-term forecasting);
- Rolling unit commitment (e.g., scheduling units more frequently than once on a day-ahead basis);
- Transmission planning and reliability analyses (e.g., transient stability, voltage stability, protection and control, intra-area constraints and challenges);
- Hydro flexibility (e.g., calibration of hydro models with plant performance).
Department of Energy, Department of the Interior, and Army Corps of Engineers Sign Memorandum of Understanding for Hydropower
On March 24, 2010, three federal agencies announced a Memorandum of Understanding for Hydropower (the “MOU”) that impacts developers of traditional hydropower, hydrokinetic, pumped storage, and small-scale hydropower facilities. The Department of Energy (“DOE”), the Department of the Interior (“DOI”), and the Department of the Army, through the U.S. Army Corps of Engineers (“USACE”) (collectively, the “Agencies”), signed the MOU to "meet the Nation’s needs for reliable, affordable, and environmentally sustainable hydropower by building a long-term working relationship, prioritizing similar goals, and aligning ongoing and future renewable energy development efforts" between the agencies. The MOU comes at a time when industry representatives and eleven U.S. Senators are requesting that DOE support a $200 million appropriations request for the advancement of both conventional and advanced waterpower technologies.
In this “new approach to hydropower,” the Agencies intend to focus their collective efforts on advancing sustainable, low-impact, and small hydropower projects and promoting the goal of energy efficiency through water conservation or improved water management. Operating under the MOU, the Agencies will work together to advance four primary objectives:
- Support the maintenance and sustainable optimization of existing Federal and non-Federal hydropower projects;
- Elevate the goal of increased hydropower generation as a priority of each Agency to the extent permitted by their respective statutory authorities;
- Promote energy efficiency; and
- Ensure that new hydropower generation is implemented in a sustainable manner.
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On July 13-14, 2009, I attended Infocast’s Storage Summit in La Jolla, California. The conference attracted over 200 attendees.
On day one, Jim Woolsey, Venture Partner and Senior Advisor for VantagePoint Venture Partners and Former Director of the CIA, delivered a keynote address that focused on the theme of the role of energy storage in achieving energy independence and security. Panel discussions included the following topics:
- Bringing Energy Storage to the Power Grid
- State Regulatory Policy
- Revising Regional Market Designs to Facilitate Storage: System Operators Views
- Utility Perspectives on Implementing Energy Storage
- Views of Storage Suppliers: What Policy and Market Change are Needed to Stimulate a Robust Storage Market?
On day two, Dr. Imre Gyuk, U.S. DOE Program Manager for Energy Storage Research, reported on ARRA stimulus funding initiatives and described research funding opportunities. With respect to the challenges facing DOE as it attempts to deploy massive amounts of funding, Gyuk stated, “It’s like trying to drink out of a fire hose.”
Many storage system developers reported that they are having problems “creating value” and monetizing their systems. These developers consistently called for a national storage portfolio standard similar to the RPS for renewable energy. This vibe created a lack of confidence in the attendees that were contemplating entering the market.
There was not much discussion of co-location of storage and renewable projects, but the wind and solar developers in attendance seemed open to the concept of co-location of storage if the price is right.
There was definitely a sense that the market is still in somewhat early stages. However, a few days later, on July 16, 2009, the Federal Energy Regulatory Commission issued a policy statement that identified energy storage as one of four grid functionalities that FERC views as key to the development of future standards that will apply to smart grid technologies. Hopefully, FERC's support of the energy storage industry will stimulate further development and deployment of energy storage systems.
On July 16, 2009, the Federal Energy Regulatory Commission (FERC) issued a Policy Statement on smart grid technologies, providing guidance on future smart grid interoperability standards and establishing an interim incentive rate policy that applies to near-term smart grid deployments (even those used in pilot or demonstration projects). Notably, FERC identified four technologies as being key to smart grid development: (1) digital devices and software that provide system operators with the near real-time ability to react to bulk power system conditions; (2) demand response; (3) electric storage devices, such as batteries and pumped storage, that will help integrate new resources into the grid; and (4) electric vehicles. FERC intends that these technologies will inform both the smart grid standards development process as well as the Department of Energy's release of stimulus funds available under the American Recovery and Reinvestment Act.
In addition, FERC established an interim rate policy that, once certain showings are made, will provide public utilities with the ability to recover the costs of FERC-jurisdictional smart grid technologies and the legacy systems being replaced. The interim rate policy also allows public utilities to apply accelerated depreciation to smart grid deployments and recover the full cost of smart grid technologies that are later abandoned or made obsolete. Public utilities seeking incentive rate treatment must file an appropriate application with FERC before it adopts smart grid interoperability standards.
For more information on FERC's Policy Statement, click here for our recently-released client alert.
If you would like to read the Policy Statement itself, click here.
Although this blog is focused on renewable energy, manufacturers in the renewable space should be aware of a new tax credit included in the stimulus bill. The provisions is complicated and unlike most tax credits. Nevertheless, its benefits, especially for manufacturers on the cutting edge, may be too great to ignore.
Taxpayers who qualify are entitled to a 30 percent tax credit for investment in a “qualifying advanced energy project." A "QAEP" is defined as one that reequips, expands or establishes a manufacturing facility that produces:
1. property designed to produce energy from the sun, wind, geothermal, and other renewable resources,
2. fuel cells, microturbines, or an energy storage system for use with electric or hybrid-electric motor vehicles
3. electric grids to support the transmission of intermittent sources of renewable energy, including storage of such energy,
4. property designed to capture and sequester carbon dioxide emissions,
5. property designed to refine or blend renewable fuels or to produce energy conservation technologies, and
6. new qualified plug-in electric drive motor vehicles (and components),
The program is to be established by IRS, in consultation with Energy Department, on or before August 26, 2009.
Once the program is established, the Secretary of Treasury is to award certifications for tax credit. Applications must be submitted within 2 years, and applicants will have one year from the date their application is accepted to provide evidence that requirements for certification have been met. After certification awarded, an applicant has 3 years to place project in service.
The following are the criteria for certification:
-- Reasonable expectation of commercial viability
-- Greatest domestic job creation (both direct and indirect)
-- Greatest net impact in reducing air pollutants, greenhouse gases, etc.
-- Greatest potential for technical innovation and commercial deployment
-- Lowest levelized cost of energy generated or stored or of measured reduction in energy consumption or greenhouse gas emissions
-- Shortest project time from certification to completion.
The credit generally applies only to construction, etc. after February 17, 2009.
The credit is new and unlike anything IRS has ever administered before. Therefore, it is reasonable to expect that IRS will take some time to get the program fully functional. Nevertheless, it makes considerable sense to begin assembling materials that explain the company’s project and address the criteria for selection. In addition, it would be advisable to submit any applications as soon as possible after the program is established.
Stoel Rives would be pleased to assist in planning for and submitting applications for the credit.