RenewNewEngland.com

Legislative FITness Test

On June 26, Maine's Governor Baldacci ceremonially signed LD 1075, “An Act to Promote Community-based Energy Pilot Program.”  The new law establishes a six-year pilot program to encourage the development of community-based renewable energy in Maine, defined as a majority locally-owned facility that generates electricity from an eligible renewable resource.  The pilot program has an overall program cap of 50 MW, 10 MW of which is reserved at the outset for projects that have a generating capacity under 100 kW or are located in the service territory of a consumer-owned utility.  To be eligible for the program, renewable energy projects must (1) have a generating capacity of 10 MW or less, (2) secure a resolution of support from their local community (projects with a capacity of less than 100 kW are exempt from this requirement), (3) be connected to the grid, and (4) have an in-service date of September 1, 2009 or later.

Under the pilot, participating renewable energy projects can choose one of two incentives:  a long-term contract or a 150% multiplier on the value of renewable energy credits (RECs) for electricity generated.  For the long-term contract option, the Public Utilities Commission can direct investor-owned utilities to enter into long-term contracts (consumer-owned utilities to enter into long-term contracts at their option).  These contracts can be up to 20 years in duration, and the Commission is directed to contain costs by ensuring that the average price per kWh in each contract year does not exceed 10 cents.

According to Maine Rural Partners (pdf), a supporter of the bill, the law creates a economically feasible “green power option” for consumers.  But another supporter of the bill, the Midcoast Green Collaborative, points out that while the pilot program “includes key elements of the feed-in tariff concept – long term contracting on the basis of predetermined rates for small power generators that use renewable energy as defined in Maine law”, what started out as a feed-in tariff (FIT) eventually became, as passed, “only a very modest incentive effect at best.”

Concerns about long-term contracts and mandatory rates, or, as Vermont’s governor called them “statutory standard offer rates”, ordinarily make it very difficult for robust FITs to become state or federal law.  (One notable exception is the Vermont FIT, featured in an earlier post.)  In fact, concerns about costs were among those that led to the modification of LD 1450 (pdf), the original FIT proposed in Maine, into LD 1075.  While FIT advocates argue such concerns lack merit, some solar industry leaders appear to have a more pragmatic response to the political challenge, and are leaving the quest for FITs for another day.

Treasury Releases Guidance on Section 1603 Grants

Last Thursday the Treasury's Office of the Fiscal Assistant Secretary released guidance and sample application forms for grants in lieu of tax credits for specified renewable energy properties authorized by Section 1603 of the American Recovery and Reinvestment Act (ARRA).  Treasury expects to issue at least $3 billion in grants to fund over 5,000 new renewable energy facilities.

As we've discussed previously, under Section 1603 of the ARRA, owners of facilities that are eligible for the Investment Tax Credit may elect instead to receive a cash grant from the DOE equal to the amount of the ITC when the facility enters service.  The grants are available for facilities placed in service in 2009 or 2010, or for facilities which begin construction in 2009 or 2010 and are completed within four to eight years, depending on the type of facility.  Eligible properties include large and small wind facilities, closed-loop biomass, open-loop biomass, geothermal, landfill gas, hydropower, marine and hydrokinetic, microturbines, solar, fuel cells, and combined heat and power.  For most properties, the grant will equal 30% of the cost basis (10% for microturbines, combined heat and power and certain geothermal facilities).

The guidance issued last Thursday describes the application and review process for the grants, including the application form that must be completed.  The Treasury Department will begin accepting applications online on August 1^st, and the ARRA requires that the Treasury Department make payments to qualified applicants within sixty days of receiving the application. 

The guidance is the first of the two ARRA incentives that developers have been waiting for, even to the point of delaying "shovel-ready projects."  The second, the Department of Energy's loan guarantee program is still being hashed out.  Thursday's guidance was pretty much as favorable as one could expect, providing some needed clarity while allowing developers a great deal of flexibility in financing structure and project design.  For example, though some types of entities (certain non-profits, government entities) are prohibited from receiving grants, the guidance explicitly endorses the use of blocker corporations to allow those entities to participate.  Similarly, the grants are not recaptured upon any transfer of the property within 5 years, only entities that ineligble to receive grants in the first instance.  This flexibility is consistent with the intent of the stimulus act: to get money out the door quickly to support renewable energy projects.

Mission: Renewable

Normally, Maine gubernatorial trade missions are designed to promote exports from the Pine Tree State.  But Maine’s Governor Baldacci has recently announced that he will be leading a trade mission to Spain and Germany in September that will feature an equal opportunity for inward investment from well capitalized companies outside of Maine; companies that may want to construct wind towers, turbines, blades or similar components for other renewable generation technologies, in Maine and the Northeast.  The trade mission's focus on renewable energy development - especially wind - may have been inspired by the potential for wind development by companies like Iberdrola Renewables (which reported (pdf) it had 9,624 MW of installed renewable capacity globally, mostly wind, at the end of the first quarter of 2009); Governor Baldacci referenced (pdf) Iberdrola's interest at a meeting of U.S. governors in early 2008.  The trade mission, organized by the Maine International Trade Center (MITC) will include Wind Power Expo 2009, one of the largest renewable energy trade shows in Western Europe.  Pierce Atwood’s John Gulliver, who serves on the Board at MITC, has been working with the President of MITC, the Governor’s office, and others to arrange the trade mission.

For more information about the trade mission, contact John Gulliver at 207-791-1296 or jgulliver@pierceatwood.com; click here for information about how to register.

Maine PUC: Maine will stay in ISO-New England

Last Tuesday, the Maine Public Utilities Commission issued its final order in Docket No. 2008-156, finding that Maine’s transmission and distribution utilities, Central Maine Power (CMP)* and Bangor Hydro, should automatically renew their participation agreement with ISO New England (ISO-NE).  The ruling closes a two-year Commission investigation into whether Maine utilities’ continued participation in the regional transmission organization was in the interests of Maine’s electricity consumers.

The proceeding was a fascinating case study with some important lessons for the rest of  the country (The Ohio legislature recently created a Federal Energy Advocate in part to evaluate that state's continued participation in MISO).  Throughout the proceeding, the Maine Commission grappled with the state's diminished control over its own energy policy as part of a regional market, and the need to address transmission planning on regional basis.  The Commission expressed concerns with ISO-NE’s transmission cost allocation, governance, and cost containment efforts: in the final Order the Commission vowed to continue efforts for reform in these areas within the ISO.

Ultimately, none of the proposed alternatives proved viable or cost-effective.  Instead, the Commission determined that continued ISO participation was the best option.  The Commission's Order rules out Maine leaving ISO-NE, which is good news for the development of renewable energy, particularly wind, in Maine.  Some of the proposed alternatives lacked a day-2 market, which would have required wind generators to submit day ahead balanced schedules, and there were serious questions about an independent or joint Maine-New Brunswick ISA's ability to balance the combined 2,800 MW (1,300 MW in Maine) of proposed wind in the two areas.  Reliable access to the ISO-NE markets for Maine renewables will benefit all of New England.  Kudos to the Maine PUC for making the right decision.

National developments may have trumped Maine's concern for its own autonomy. The Order contains something of a call to arms, reflecting the growing concern within New England that federal electricity policy is biased toward midwestern wind and the giant transmission projects needed to bring that generation to market:

In order to fulfill our energy objectives, neither Maine nor our sister States in New England can act alone.  We in New England cannot ignore the reality that there are federal moves afoot to bring vast quantities of Midwest wind to the east coast through the construction of high voltage transmission that Maine will be required to help pay for.  A concerted and cohesive regional response by New England and its neighbors . . . will be required to thwart efforts at the national level to impose the costs of Midwest wind on New England ratepayers unilaterally.

Maine, at least for now, sees the importance of participating with rest of New England to respond to this challenge.  It remains to be seen whether New England will take up the PUC's call, though early signs are promising. 

* Pierce Atwood represented CMP throughout this proceeding.