RenewNewEngland.com

Federal Law May Impede Development of State Feed-In Tariffs

Feed-in tariffs are a relatively frequent topic here at Renew NewEngland.  Mostly we've been curious about the strange absence of this proven method of spurring renewable energy development, as New England states tried seemingly everything to build a green economy.  It's a sign of just how fast the field is changing that in the year that we've been writing this blog, feed-in tariffs have moved from speculation to reality in North America, with new FITs in Hawaii, Oregon, Vermont, California, and Ontario, along with smaller efforts like Gainesville, Florida.  Purists--or at least energy lawyers of a certain vintage--will note that FITs in the US are actually old news, citing PURPA, which partially explains why US policymakers are reluctant to try anything that sounds like fixed price, long term contracts for renewable energy. 

An NREL report issued earlier this year explores the impending collision between these new FITs and this legacy legal framework. The report, entitled Renewable Energy Prices in State-Level Feed-in Tariffs: Federal Law Constraints and Possible Solutions (pdf), discusses the limits imposed by PURPA and the Federal Power Act on states' ability to craft feed-in tariffs, and lists possible steps FERC or Congress might take to remove (or at least clarify) those constraints.  Perhaps more importantly, the report provides guidance to state regulators and legislators in crafting feed-in tariffs in the existing legal landscape.

The report's detailed analysis of PURPA and the FPA doesn't easily lend itself to summary in a blog post, but the overall conclusions are relatively straightforward: under current law, a state cannot simply require a utility to purchase electricity from a seller at specified prices for a specified duration (the essence of a FIT) without conforming its actions to the mandates of PURPA.  At the very least, this complicates--and may ultimately frustrate--any effort to enforce a FIT.  Moreover, "given the FPA's requirements, a state-level feed-in tariff, as defined above, outside of PURPA, is not legally possible in the United States today."

It's unclear to what extent states are aware of these constraints as they craft their FIT legislation.  PURPA doesn't apply in Hawaii (no interstate commerce) so that state was free to craft a PURPA-free FIT; the convoluted structure of Vermont's SPEED program may reflect these concerns.  In California, Southern California Edison challenged the PUC's jurisdiction to set rates, a decision is expected soon. Unlike renewable portfolio standards, where state efforts to go it alone undermine the potential of larger markets for renewable energy credits, state (or municipal) level FITs allow for much needed experimentation, to craft FITs that account for differences in market structure, renewable resources and policy goals.  For example, California's unique new solar FIT will include an auction mechanism and vary in price based on the time of day during which the electricity is generated.  While successes are great, even failures can be instructive.  To the extent that these requirements needlessly hinder such experimentation, they are a barrier to renewable energy development in the US.

Bill Implementing Maine Ocean Energy Task Force Recommendations Released

The Governor's Bill implementing the recommendations of Maine's Ocean Energy Task Force has been printed as LD 1810. Senators Hobbins and Raye and Representatives Fitts and Berry are the bill sponsors.  

The 41 page bill, drafted as emergency legislation, contains a broad range of provisions that are designed to overcome the economic, technical and regulatory obstacles to to provide economic incentives for vigorous and efficient development of marine renewable energy sources.  The provisions include authorization for the PUC to conduct a competitive solicitation for proposals for offshore wind, tidal and wave energy produced in state or federal waters and to negotiate a long-term contract with a technically competent generator if the contract terms would not have an unreasonable rate impact.  A hearing on the bill are scheduled for March 11 at 1 pm at the Utilities and Energy Committee.

Previous posts on the Ocean Energy Task Force:

Maine Ocean Energy Task Force Submits Final Report

The Straw Proposal: Offshore Wind and Tidal Power Seek Surer Footing on Maine’s Submerged Lands

FERC and Maine Sign MOU on Ocean Tidal Power

Safe Passage for Ocean Energy

Rhode Island Unveils Roadmap for Green Economy

Earlier this month, at a forum entitled “Advancing the Green Economy,” Rhode Island leaders introduced a roadmap to further the state’s green economy, focusing for now on four “acceleration initiatives”:  advanced manufacturing, energy efficiency, innovation (and R&D), and wind power (both on- and offshore).  The roadmap identifies “Phase 1” and “Phase 2” activities for each initiative, including defining standards and establishing metrics (such as the number of engineering graduates or energy efficiency jobs).  For example, under the Wind Power initiative, Phase 1 projects include making the Quonset Business Park a hub for both onshore and offshore projects by employing a “business-to-business” marketing and partnership approach, and installing 100 megawatts of onshore wind power.  Phase 2 projects include amending the State’s Renewable Portfolio Standards to require that RECs come from in-state projects, and investing in R&D to produce the next generation of wind power technology.  Importantly for the two other New England states with offshore wind development goals, Rhode Island seeks to “set the East Coast standard for developing offshore wind power” through a demonstration project. 

That demonstration project, of course, is Deepwater Wind's project in Rhode Island's coastal waters, which we have written about previously.  Last June, Deepwater leased 117 acres at the Quonset site to be used for manufacturing, assembly and logistical support for the project.  The Quonset park has received two federal stimulus grants in the past year.  Last week, the Department of Transportation announced that the Quonset Development Corporation would receive a $22.3 million "TIGER" grant for "pier maintenance, rail improvements and road reconstruction" necessary to support producers of offshore wind power.  This follows an earlier stimulus grant of nearly $4 million from the Economic Development Administration to carry out other transportation infrastructure improvements at the site.

Two challenges that the roadmap recognizes face each of the four initiatives are the lack of an adequately trained workforce and uneven or inadequate funding (from a hodgepodge of federal, state, or private sources), and thus as a starting point the roadmap proposes to:  (1) identify the needed skill sets and work through a collaborative of providers (colleges, nonprofits, and industries) to develop certificate and “life-long learning” programs and (2) review the funding gaps (beginning with government-backed funding) and “develop agile practices” to direct funds to the right green place.

While in one sense Rhode Island’s “green roadmap” follows a national trend, it is also notable in its effort to coordinate various programs, align capital resources, and develop complementary training programs to streamline implementation of its goals.  Rhode Island has taken advantage of its small size to engage all the players – government, industry, academia – in a unified, focused course of action around offshore wind.  This focused support, while not without its risks (see, for example Massachusetts' experience with Evergreen Solar), may provide Rhode Island with the necessary infrastructure to become a hub for future offshore wind development in New England.

Has the Obama Administration Really Given Up On Cap-and-Trade?

President Obama’s response to an audience question during his appearance at a Nashua, New Hampshire, high school on Tuesday has been pronounced by the media as the beginning of the end for a national cap-and-trade program.  According to numerous news reports, the President “acknowledged” that controversial cap-and trade could be separated from the Senate energy bill; “retreated” from cap-and-trade (“a maneuver that could kill what once had been one of the administration's top policy priorities”); and “opened the door to disassembling the climate change legislation” currently under consideration in the Senate.  Reading the complete text of his remarks, however, reveals that cap-and-trade is hardly on its death bed. 

First, the statements quoted in the news as signaling a change in priority for cap-and-trade came in response to a long question from an audience member pushing an energy efficiency and technology plan that would “help us to avoid having to do cap and trade and other aspects with environmental controls that are going to have negative impacts on our economy.”  After touting the benefits of energy efficiency and technology at length, the President admitted the controversy over cap-and-trade:

The most controversial aspects of the energy debate that we've been having -- the House passed an energy bill and people complained about, well, there's this cap and trade thing. And you just mentioned, let's do the fun stuff before we do the hard stuff. The only thing I would say about it is this: We may be able to separate these things out. And it's conceivable that that's where the Senate ends up.

While Obama’s response certainly could be read as an invitation to consider a bifurcated approach to moving the energy bill forward, the news reports of cap-and-trade’s death may be, with apologies to Twain, greatly exaggerated.  Following this statement, the President immediately emphasized that market-based incentives to pollution control – cap-and-trade – offer the most realistic and workable solution:

But the concept of incentivizing clean energy so that it's the cheaper, more effective kind of energy is one that is proven to work and is actually a market-based approach.  A lot of times, people just respond to incentives.  And no matter how good the technology is, the fact of the matter is if you're not factoring in the soot that's being put in the atmosphere, coal is going to be cheaper for a very long time. …

And so the question then is: Does it make sense for us to start pricing in the fact that this thing is really bad for the environment? And if we do, then can we do it in a way that doesn't involve some big bureaucracy in a control and command system, but just says, look, we're just going to -- there's going to be a price to pollution. And then everybody can adapt and decide which are the -- which are the best energies.

One day after the New Hampshire speech, the President announced a “Comprehensive Federal Strategy on Carbon Capture and Storage,” which established an interagency task force (co-chaired by representatives from the DOE, and EPA, and including FERC and the Treasury Department, among others) charged with developing a plan that will result in bringing 5 to 10 commercial demonstration carbon capture and storage projects online by 2016.   In this announcement, the President reiterated his endorsement of a cap program: “Ultimately, comprehensive energy and climate legislation that puts a cap on carbon pollution will provide the largest incentive for CCS because it will create stable, long-term, market-based incentives to channel private investment in low carbon technologies.“  The President’s recently submitted budget also assumes enactment of a cap-and-trade program, with a “placeholder” expectation (i.e., unquantified) that cap-and-trade legislation would be “deficit neutral.”

Perhaps Obama’s comment was a carefully planned gesture to the opposition; perhaps the news media made more out of it than was warranted by the context.  It remains to be seen whether the combined effects of "Climategate", the struggling economy, and political necessities doom enactment of a national cap-and-trade program this year.  But worldwide trends, and the experience of states that have moved forward to develop regional programs, support a cap-and-trade approach.  For example, New England (with four other northeast states) has an established carbon cap-and-trade program, the Regional Greenhouse Gas Initiative (RGGI), designed to cap and reduce power sector CO2 emissions 10% by 2018.  Since the first auction in September 2008, this program has raised almost a half billion dollars for energy efficiency and renewable energy programs (with Maine receiving over $15 million to date).  The next auction is scheduled for March 10.  

FERC Seeks Comment on Barriers to Integration of Renewables

Last Thursday, FERC issued a Notice of Inquiry (pdf) seeking comments on the extent to which barriers exist that may inhibit the integration of certain renewable energy sources into the electric grid.   FERC particularly identified locational challenges and limited dispatchability as problems associated with resources like wind and solar that can adversely affect reliability and (in the realm of “unintended consequences”) can require the addition of more conventional resources for balancing purposes.

In this proceeding, FERC intends to explore how existing rules, regulations, tariffs, or even industry practices hinder the development of variable energy resources, through either discrimination or imposing unjust rates, and as part of this, to consider potential reforms.   In the past, FERC has adopted targeted rules to encourage renewable resource development – such as standardizing interconnection agreements for wind resources (Order 661), or adopting a reduced penalty for imbalances caused by intermittent resources (Order 890).  In this proceeding, FERC will take a “fresh look” at all existing policies and rules, “with the aim of removing unnecessary barriers to transmission service and wholesale markets for Variable Energy Resources  (“VERs”) and other technologies that may aid their integration, and promoting greater efficiencies that ultimately will reduce costs to consumers.“  The seven specific areas FERC singled out are:

1. data and reporting requirements, including the use of accurate forecasting tools;
2. scheduling practices, flexibility, and incentives for accurate scheduling of VERs;
3. forward market structure and reliability commitment processes;
4. balancing authority area coordination and/or consolidation;
5. suitability of reserve products and reforms necessary to encourage the efficient use of reserve products;
6. capacity market reforms; and
7. redispatch and curtailment practices necessary to accommodate VERs in real time.

However, FERC will not consider transmission planning and cost allocation issues, as these are being considered in another docket. (Transmission Planning Processes Under Order No. 890, Docket No. AD09-8-000) Comments are due 60 days from publication in the Federal Register, expected to be the last week in March, 2009.

Webinar: Renewable Energy in 2010

Tomorrow, January 20, Pierce Atwood will host a lunchtime webinar on the outlook for renewable energy development in 2010.  The webinar is part of a monthly series of events presented by the American Council on Renewable Energy (ACORE) in collaboration with the Renewable Energy Resources Committee of the American Bar Association's SEER Section and the Energy Bar Association's Renewable Energy Committee.  

We hope you can join us for a lively and provocative discussion concerning financing, development, legislative and regulatory initiatives that will shape the future of renewable energy in 2010.

For more information on the webinar - or to register to attend at our offices in Portland, ME, Portsmouth, NH or Boston, MA, please contact Bill Hewitt or click here. 

Maine Ocean Energy Task Force Submits Final Report

The Maine Ocean Energy Task Force  submitted its final report (pdf) with detailed appendices (pdf), to Governor Baldacci on December 31, 2009.  (We discussed earlier drafts of this proposal in this previous post.)

OETF Co-Chairperson Beth Nagusky, Director of Innovation and Assistance at the Maine Department of Environmental Protection, has indicated that The Governor's Office will submit draft legislation to implement the OETF recommendations early in the legislative session.
Key findings of the Report include recommendations that Maine:

• Make a major commitment to development of offshore wind, tidal, and wave power;
• Commit to a goal of installation of 5 gigawatts (5,000 megawatts) of offshore wind energy generating capacity in Maine’s coastal waters and adjoining federal waters by 2030, and to a goal of timely and efficient development of tidal energy resources at optimal locations in Maine’s coastal waters, including but not limited to those in the Passamaquoddy Bay region;
• Improve the siting, permitting and governance framework for renewable ocean energy development;
• Move aggressively to support strengthening Maine's current out-dated transmission and distribution infrastructure, incorporating smart-grid technologies, and explicitly recognize in law the need for new transmission and distribution capacity to achieve the State’s wind power and energy conversion goals; and
• Support the financing and development of renewable energy goals by requiring the Maine Public Utilities to issue a Request for Proposal for renewable ocean energy generation where the rate impact is reasonable.

For more information about the Ocean Energy Task Force and offshore development opportunities in Maine, contact Pierce Atwood's Lib Butler.  

A Manufacturing Tax Credit Announcement & A Production Tax Credit Order

Last week, the Obama administration announced $2.3 billion in manufacturing tax credits, specifically designed to stimulate investment (and job growth) in the manufacturing sector associated with clean energy projects.  (For more on the manufacturing tax credit, see our previous post.)  With persistent unemployment plaguing the manufacturing sector, it makes sense that this initiative is receiving a lot of attention from the administration – and in the press.

Receiving less publicity – but reducing regulatory uncertainties for banks investing in certain renewable energy projects – is a recent FERC ruling regarding the production tax credit.  As noted in the Order (pdf), renewable energy project developers rely on passive equity investors that can monetize a project’s production tax credits.  By removing any concern that tax equity investors could be viewed as “affiliates” of a public utility that would have to be disclosed in a change in status filing under Section 203 of the Federal Power Act or would require a FERC waiver prior to investing, FERC’s order helps ensure that prospective tax equity investors will not be discouraged from investing in new wind power projects due to concerns over increased regulatory burdens.

For more information on FERC’s oversight of renewable projects, contact Randy Rich in Pierce Atwood’s Washington, DC office. 

Maine Energy Commission Releases Divided Report

After meeting throughout the fall, Maine's Commission to Study Energy Infrastructure has failed to reach agreement on a process for leasing or use of any state-owned or state-leased land as an energy infrastructure corridor, voting 7-5-1 in December to approve a "three-way report" to the legislature including Majority and two Minority reports.  The major split appears to be tied to efforts to extend a moratorium on new oil and gas pipelines in Maine as leverage in negotiations with the Canadian government regarding proposed LNG terminals near Calais.  The Maine Legislature will take up the Commission's recommendations for proposed legislation in 2010.

Whatever the eventual outcome, the Commission's deliberations have also produced a great deal of information about regional energy developments, including renewable energy.  For example, this overview of proposed energy infrastructure projects provides a list of planned transmission lines that would bring energy--wind from northern Maine or the Maritimes, or nuclear from Point LePreau in New Brunswick--into the comparatively richer markets of southern New England:

• Green Line - 140 mile undersea 660 MW HVDC line linking Wiscasset, Maine to Boston, MA.
• Maine Express - 150 mile, 1000 MW HVDC line linking Wiscasset, Maine to Boston, MA.
• Northeast Energy Link - 1100 MW underground HVDC line between Orrington, Maine and Boston, MA, along the I-95/I-295 corridor.
  

Three other proposed projects, the Maine Power Connection, the Northeast Energy Corridor, and the Loring Transmission project, would interconnect with and extend Maine's existing transmission backbone.  The primary competitor to these projects outside of Maine is a 1200-1400 MW line proposed by Northeast Utilities, NSTAR and Hydro-Quebec that will carry hydro from Quebec to Massachusetts and Connecticut via New Hampshire.   

The favored technology for the long distance lines is HVDC, which is less expensive and has lower losses than equivalent high voltage AC (and is essential for any interconnection between Quebec and the US, whose systems are asynchronous).  These lines are power conduits, and will only interconnect with the grid at their endpoints, providing no real electical benefit to the communities through which they pass.  In some cases, power will only flow one way (e.g., north to south).  Siting these lines in a highway corridor or underwater is an attempt to avoid the obvious difficulty: while some people think wind turbines are pretty, most people aren't fans of transmission lines. They're an even harder sell when the benefits accrue in another town, another state, or even another country. 

Testing the Wind

Today, in accordance with LD 1465 (pdf), “An Act To Facilitate Testing and Demonstration of Renewable Ocean Energy Technology,” Maine’s Governor Baldacci announced the final selection of three offshore wind energy demonstration areas in Maine.  (The four site finalists were announced in October 2009, as discussed in this previous post.)

One of the three sites, located near Monhegan Island, is designated as the “Maine Offshor Energy Research Center,” which will be used for research and development projects run by (or in cooperation with) the University of Maine.

The other two sites – off Boon Island near York and off Damariscove Island near Boothbay - are available for R&D projects by commercial entities.  To obtain a permit for a project in one of these sites, a company must first apply for a general permit for offshore wind energy demonstration project under 38 MRS §480-HH from the Department of Environmental Protection.

With a MDEP general permit approval in hand, the company must then apply for a submerged lands lease from the Department of Conservation.  Because these sites are designated for research and development uses rather than permanent, commercial installations, permits for the Boon Island and Damariscove Island sites will good for five years from the date they were granted or three years from the date construction starts (with certain term extensions available); in applying for the permit, applicants must provide a project removal plan that details how they will remove the project at the end of the permit period.

More details about the demonstration areas, including interactive maps of the designated areas, are available at the Department of Conservation site.

This site selection process complements the work of the Ocean Energy Task Force and its recommendations concerning legislation to make near-shore and off-shore sites available for both R&D and ultimately commercial renewable energy projects.  The draft final report of the OETF can be found here.