Puget Wind Integration Charge REJECTED.
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.
DOI/DOE MOU for Offshore Renewable Energy Projects, Part 2
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.
DOE Issues RFI on Wind Energy Workforce Development Roadmap
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
$6 Million for Short Term Wind Energy Forecasting
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.
APS Announces Wind and Solar RFPs
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.
Wyoming Game & Fish Department Extends Comment Period for Wind Energy Recommendations
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, cox@interwest.org.
Will Wyoming Tax Electricity Generated From Wind Energy Projects?
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.
The taxation issues was studied at great length by the Wyoming Wind Energy Task Force (the "Task Force"), which issued its Final Report and Recommendations on November 1, 2009 (legisweb.state.wy.us/). The Task Force report indicated that the "industry leaders strongly encouraged a taxation policy which is based on an accurate and comprehensive understanding of the costs and burdens faced by the industry, as well as the direct and indirect benefits that will be realized by Wyoming from wind energy development." The Task Force went on to recommend the following with respect to taxation:
- that the Joint Revenue Committee comprehensively study the issues surrounding taxation of the wind energy industry;
- any proposed new tax be imposed in a way so as to encourage the diversification of Wyoming's economy and so as not to force the wind energy industry out of Wyoming;
- any tax should be designed to encourage the development of employment opportunities for Wyoming's people and to encourage the development of businesses ancillary to the wind energy industry;
- that the Legislature conduct a careful examination of all burdens placed on wind energy producers and weigh those burdens against any benefits the producers realize by harnessing Wyoming's high quality resources; and
- any tax burden proposed be calculated to maintain some competitive advantage for Wyoming's wind energy producers as they deliver electricity to distance markets where a demand for their product exists.
On a final note, although the proposed tax bills did not pass out of Committee, individual legislators can still attempt to gain introduction votes for such legislation during the February 2010 legislative session. However, since the 2010 legislative session is a budget session, introduction of such bills would require a two-thirds vote, which appears unlikely given the current economy. It is important to point out that the taxation debate in Wyoming (and perhaps other states) is a signal to wind energy developers that they may want to revisit or consider the "change of law" risk under a long term power purchase agreement and whether the levy of a generation tax could be passed on to the purchaser under those contracts.
Wisconsin Bill Addresses State Wind Siting Standards
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 Wind Energy Promotion Act: Turbo Charging the Renewable Energy Production Tax Credit
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.
For more information, please contact Joel Dahlgren of our Minneapolis office, or any of our other energy attorneys.
Minnesota Think Tank Estimates 4,000 MW of More Wind Power Needed
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.
Show me the Money: Webinar Explaining the Wind Turbine Drivetrain FOA
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.
FERC Aims to Accelerate Smart Grid Deployment
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.
USDA Small Wind Grants Cover 25% of Costs
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.
Show me the Money: Applications Available now for Washington's State Energy Program
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).
Eligible energy efficiency, renewable energy, and clean energy projects may be eligible for SEP funding between $500,000 and $2 million.
Eligible energy efficiency projects are those that use technologies that have been deployed at commercial scale that result in the reduction in energy consumption through increases in the efficiency of energy use, production, or distribution, and high-efficiency cogeneration. Ineligible projects are those that are eligible for Recovery Act Funding for community wide urban residential and commercial energy efficiency upgrades as described in (i) Chapter 379, Laws of 2009; (ii) Low income weatherization projects and programs which are eligible for funding through the state’s low-income weatherization program; (iii) Loans support to financial institutions for energy efficiency projects as described in Chapter 379, Laws of 2009; (iv) state energy efficient appliance rebates; and (v) green jobs training as described in Chapter 536, Laws of 2009.
Eligible renewable energy projects are those that are located in Washington and use existing commercial scale technologies that generate liquid fuels, process heat or electricity using algae, bark, biodiesel, biomass, biosolids, food waste, fresh water, gas from sewage treatment facilities, landfill gas, geothermal, pulping liquors, sawdust, solar, hydrokinetics, wind, wood chips and various other waste products. Ineligible projects include those that use the following feedstocks: municipal solid waste, wood from old growth forests, and chemically treated wood.
Eligible clean energy innovation projects include are those that offer innovative new technologies or service delivery models for energy efficiency, renewable energy, or other areas of clean energy. Projects must have a solid chance at commercial scale deployment within two to three years. Ineligible projects include carbon sequestration projects, lab scale projects, and those excluded under federal SEP guidelines.
Interested parties must file a notice of intent to apply by July 27, 2009 at 5:00 p.m. Pacific.
Full applications are due on August 17, 2009 at 5:00 p.m. Pacific.
Information workshops will be held on July 13, 14, 15, and 16. Click here for the specific dates and times. I will be attending the July 13 workshop in Everett, WA. An informational webinar will also be held on July 23.
DOE Announces $59 million in Conditional Loan Guarantees
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.
San Diego Gas & Electric Issues RFO for Renewable Resources
Today, San Diego Gas & Electric (SDG&E) issued a Request for Offers seeking eligible renewable resources that the utility will use to meet its California Renewable Portfolio Standard requirements. Respondents may submit one or more of three alternative proposals:
- Power Purchase Agreement (PPA). Respondents are asked to propose a 10, 15, or 20-year PPA for capacity and/or energy, but SDG&E will nevertheless consider proposals with shorter or longer durations. Eligible Resources must be delivered to a point within California and must be begin deliveries sometime between 2010 and 2013.
- PPA with Buyout. Respondents offering PPAs may also submit an option price that SDG&E may exercise to purchase the resource as well as associated environmental attributes, land rights, permits, and other licenses upon conclusion of the PPA term. This alternative is limited to resources located in San Diego County, parts of Orange County within SDG&E's service territory, or Imperial Valley areas. Like respondents offering under the PPA alternative, respondents interested in offering resources under the PPA with Buyout alternative must begin delivering energy and/or capacity between 2010 and 2013.
- Turnkey Facilities. Respondents to the RFO may also propose to develop and construct a new renewable energy generation facility that SDG&E will acquire. SDG&E is proposing the same locational requirements that apply to PPA with Buyout projects.
A limitation that applies to all respondents is that resources located in SDG&E's service territory must be no smaller than 1.5 MW, and resources outside of SDG&E's service territory must be no smaller than 5 MW.
This RFO may be a great opportunity to transact with SDG&E as it endeavors to comply with California's ever-increasing RPS standards. SDG&E will hold two pre-bid conferences: one in San Diego on August 5, 2009, and the other in El Centro on August 12, 2009. Those interested in attending a pre-bid conference should register by July 31.
For more information, click here: SDG&E 2009 RFO Info
Cowlitz and Klickitat PUDs Share DOE Public Power Wind Pioneer Award
The U.S. Department of Energy Wind Powering America Program today announced that two Washington state public utility districts, Cowlitz County PUD and Klickitat PUD, are the co-winners of the 2009 Public Power Wind Pioneer Award for their outstanding teamwork and innovation in the development of the White Creek Wind Farm. The annual award was created in conjunction with American Public Power Association (APPA) and the Demonstration of Energy-Efficient Developments (DEED) Program to recognize pioneers in wind power.
A panel of wind, government, national laboratory, and public power experts from across the United States selected Cowlitz and Klickitat from sixteen public power utilities nominated for the award.
Show me the Money: $24 million Funding Opportunity for Wind Energy Research and Development
On June 2, 2009, the Department of Energy ("DOE") issued a Funding Opportunity Announcement ("FOA") providing $24 million for the development of consortia between universities and industry to focus on critical wind energy challenges.
DOE intends on awarding two to three grants of $8-12 million. The grants will be used to address two areas:
- Partnerships for Wind Research and Turbine Reliability. Universities in wind resource areas are encouraged to apply with industry partners to study major challenges facing today's wind industry. DOE is highly encouraging research in turbine reliability, but projects are eligible if they meet one or more challenges described in the 20% Wind Energy by 2030 report.
- Wind Energy Research & Development. Universities are encouraged to apply with industry partners for grants to fund R&D to advance material design, performance measurements, and analytical models related to wind energy development. The goals of this research shall be to improve power systems operations, wind turbine and/or component manufacturing, and interdisciplinary systems integration.
Applicants interested in either area must file a letter of intent by June 16, 2009 and FOA applications are due by July 29, 2009.
*****UPDATE******
On June 19, 2009, DOE announced an extension to the deadline for submittal of a letter of intent for this program. Letters of intent must now be submitted by June 29, 2009. Applications are due on July 29, 2009.
Client Alert: Summary of Final MMS Regulations on OCS Leasing
As promised in a recent blog entry, we've issued a client alert providing a detailed analysis of the final Minerals Management Service (MMS) regulations governing leases for energy production on the Outer Continental Shelf (OCS), including wind and ocean energy. Please contact us with any questions!
Green Power Express Receives Green Light from FERC
On April 10, the Federal Energy Regulatory Commission approved a request for various transmission infrastructure investment incentives submitted by Green Power Express LP (GPE), a transmission-only partnership that proposes to build a 765 kV "green superhighway" consisting of three interconnected loops in North and South Dakota, Minnesota, and Iowa. GPE's proposal will also extend radially into Wisconsin, Illinois, and Indiana, making use of existing substations in some locations and constructing high voltage substations in others. In total, the project will include approximately 3,000 miles of transmission lines that reach 12,000 MW of wind and stored energy. GPE estimates the project's cost at $10-12 billion and hopes the project will be in service in 2020.
FERC's approved the following (non-exhaustive) key incentives that reduce GPE's exposure to risk in moving the project forward.
Abandoned Plant. FERC granted GPE's request to recover prudently incurred expenses if the project is abandoned for reasons outside of GPE's control. FERC stated that the recovery of abadonment costs is a means for encouraging transmission development, reducing the risk that GPE's investors may lose their entire investment.
Regulatory Asset. FERC will allow GPE to create initial and subsequent vintage regulatory assets in order to defer pre-construction, development, and start-up costs until GPE has customers from which it may later recover those costs. Such cost deferral will also help GPE attract financiers.
Construction Work in Progress. FERC approved GPE's request to include 100 percent of construction work in progress in its revenue requirement, allowing GPE to service its debt and reduce borrowing over the project's development--something that would otherwise be difficult for a $10-12 billion project with a 2020 in-service date.
The incentives granted to GPE, as well as other recent changes to FERC's transmission policies, show that the agency is becoming increasingly serious about spurring transmission development forward. If we are to reach the 62 GW of wind currently in the Midwest ISO interconnection queue, as well as other renewable resources elsewhere, transmission developers will need creative regulatory solutions to help attract financiers and gain firm commitments from generation developers. FERC continues to take positive steps forward.
A Superconductor Pipeline for Renewable Energy
Among all the interesting presentations at this month's AWEA transmission and wind workshop, American Superconductor's presentation about developments with superconducting transmission lines was particularly noteworthy. Superconducting direct current lines offer greater efficiency, as well as siting and aesthetics benefits, but have historically fallen victim to much higher costs when compared to traditional overhead transmission lines. However, with talks of extra-high voltage "green superhighways" transmitting renewable energy from the nation's interior to load zones, it appears from American Superconductor that the costs of a 5 GW, 200 kV superconductor line are nearly equivalent to 765 kV overhead lines when built on a 1,000 mile scale. Perhaps we will see a superconducting pipeline instead of an extra-high voltage overlay.
For more information about the viability of superconducting transmission lines, look for American Superconductor's White Paper in the near future.
