Massachusetts Whooshes Ahead With Wind and Other Renewables

 

Photo by Oast House Archive. Some rights reserved.

Following in its own footsteps, Massachusetts again made moves to advance the use of renewables such as wind and solar in the Bay State. Late last week ML Strategies (a consulting affiliate of law firm Mintz Levin) wrote in depth about Massachusetts Governor Patrick signing into law Senate Bill 2395, An Act relative to competitively priced electricity in the Commonwealth. The bill aims to “protect Massachusetts ratepayers while providing greater reliability and energy independence for all residents of the Commonwealth,” according to a press release from the Governor’s office, through the use of expanded incentives and opportunities for renewable energy companies.

Specifically, the bill:

• Extends long-term contracts between the utilities and renewable energy companies;
• Raises the cap on net metering, allowing customers to run their meters backwards and sell power back to the distribution company for credits;
• Allows for long term contracts as an incentive for companies that purchase coal-fired power plants, and transition them to gas-fired generators, so long as they agree to completely remediate the site;
• Enables more municipalities to install solar panels on community landfills;
• Requires electric companies to file for rate cases every five years and gas companies to file every ten years;
• Requires EEA’s agencies to complete a number of studies to analyze further steps in energy efficiency as well as the exploration of other renewable energy sources;
• Establishes a three-year energy efficiency rebate pilot program for the five largest gas and electric users in each service territory;
• And more! For more details, don’t forget to check out ML Strategies’ overview.

Featured Law Firm Memo: “BOEM and FERC Issue Revised Guidelines for Offshore Hydrokinetic Energy Development” from Perkins Coie

Photo by photo fiddler. Some rights reserved.

Earlier this week, Perkins Coie published an Environment, Energy, & Resources memo that gives a basic overview of licensing issues for those interested in developing hydrokinetic projects – including wave, tidal, and ocean current projects – on the Outer Continental Shelf.  (The “OCS” is the part of the internationally recognized continental shelf of the United States which does not fall under the jurisdictions of the individual U.S. states.)

Who can hold a lease and license for a hydrokinetic project on the OCS?

Under the Federal Power Act and the Outer Continental Shelf Lands Act, a U.S. citizen or association of U.S. citizens, a corporation organized under the laws of the U.S. or any state, or a state or municipality may seek a lease or license to develop a hydrokinetic project. A lease is required if the project will be located on the OCS, will support the production, transportation or transmission of energy, and will involve attaching a structure or device to the seabed. All nonfederal hydrokinetic projects also require a FERC license, except for those projects that receive a limited testing lease from BOEM and are short-term, experimental or educational, or projects that will not transmit electricity to the grid. FERC may also grant certain waivers or modifications to allow for the expedited processing of a pilot project license if the project is small, short term, or not located in sensitive areas, among other factors. Pilot project licenses may be transitioned to standard licenses.

The memo comes on the heels of a recently released set of guidelines released by BOEM and FERC, which replace existing guidelines from 2009, and were developed as part of a Memorandum of Understanding between FERC and the Department of the Interior that same year.

In related news, word came from the Department of Energy about a week ago that Maine had deployed the first U.S. Commercial tidal energy project. You can read more about the Cobscook Bay project on developer Ocean Renewable Power Company’s website.

Insurers Offer Coverage for Solar Developments

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Challenges to “green” energy developments abound. Compared to traditional companies even in the energy sector, means of financing projects are fast-changing, subsidies and tax credits are unpredictable, and data on projects’ returns are sparse. We wrote about trends in venture capital and IPOs for clean technology companies in February in a post recently linked to by The Atlantic, seeing energy storage and generation companies faring well in 2011. The wind industry is still waiting for Congress to vote on extending its production tax credit, and as we covered here, if it is not passed, the industry’s capacity might fall by three-quarters.

However, it is becoming easier for “green” developers to secure private financing in a functioning market. In January, we posted about a Deutsche Bank study aimed at providing data on the accuracy and reliability of energy audits associated with building retrofits, to encourage private investment in retrofits, the “low-hanging fruit” of carbon reduction. Now, insurers Assurant and GCube Insurance Services are offering an insurance product to help solar developers navigate the risks of mid-size projects, aiming to fill a gap in coverage that has often prevented developers from securing financing.

In particular, Assurant’s product uniquely bundles property and liability coverage with equipment warranty management, allowing developers to move beyond their skepticism and uncertainty toward warranty management frameworks. They offer $10 million of coverage per location – initially limited to photovoltaic projects in the US – ranging from 100kW to 3MW in capacity. Environmental Finance has a detailed description of the insurance product here.

As those behind the Deutsche Bank building-retrofit study did, we can hope Assurant’s product will lay the groundwork for further comprehensive coverage products in other clean technology sectors that might open the floodgates of private financing, maybe making debates like that over the wind PTC unnecessary.

FERC Helps Renewables’ Transmission to Electrical Grid

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The Federal Energy Regulatory Commission (FERC) recently finalized a rule helping integrate Variable Energy Resources (VERs) into the US electric system. VERs are electricity generators that produce output that is not constant and controllable over time, sources like wind and solar. The existing electrical grid was designed with steady electricity generation sources in mind, and FERC’s Order No. 764 is an attempt to efficiently incorporate renewable resources into grid operations in the US by making power transmission from generator to grid more flexible.

Though renewables with variable generation are claiming a greater portion of electricity generation, the new rules could improve transmission scheduling flexibility for both VERs and traditional sources. The grid’s current setup challenges both renewable generators who struggle to work within grid rules designed for constant sources and for grid operators trying to incorporate hard-to-predict electricity sources.

The problems for VERs in the electrical grid are many. We have written about the Bonneville Power Administration struggling to cope with simultaneous surges in wind and hydroelectric power during storms, forcing it to give away or dump excess electricity. FERC’s new rule aims to help transmission from renewables to the grid in recognition of one of these problems. Under current rules, VERs incur high charges for supplying electricity in an amount above or below that committed to for each hour-long interval. With FERC’s change to scheduling transmissions in 15-minute intervals, VERs will be better able to match their committed transmission to actual output and avoid the imbalance penalties.

You can read Davis Wright Tremaine’s full advisory to learn about FERC’s Meteorological and Outage data changes, and a post of ours with background information about the new rules from November.

FERC Says No to Preferential Treatment

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Davis Wright Tremaine, in their “Northwest Energy & Environmental Law Blog,” posted earlier this week about a recent FERC Order that denied Rock Island Clean Line LLC’s “request to apply a preference for energy from renewable resources in its open season.”

Rock Island Clean Line LLC (or “Rock Island”) submitted an application to FERC back in November 2011 requesting the authority for the Rock Island Clean Line transmission project, a 500-mile transmission line capable of delivering of up to 3,500 MW from renewable energy projects in Iowa, Nebraska South Dakota, and Minnesota to customers in Illinois and other states.

In order to establish a “preference for renewable energy” and thereby secure the support of stakeholders and potential customers, part of the application included a proposal to give preference to renewable energy resources in its open season. This part of the application was rejected:

We find that Rock Island’s general arguments do not sufficiently explain how distinctions between renewable energy resources and other types of generators justify its requested preferential treatment in an open season for initial transmission capacity.

Overall, however, the Order represented a win for Rock Island, who stated in a press release that they now have the “regulatory approval” they need from FERC to “begin negotiating transmission service agreements with potential customers of the Rock Island Clean Line transmission project, likely load serving entities or wind developers.”

The Economics of Hype: Rio+20

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In June, the UN Conference on Sustainable Development will be held in Rio de Janeiro, Brazil. Known as Rio+20 because it aims to address similar issues to the 1992 Earth Summit in Rio, its official discussions will focus on building a green economy to lift people out of poverty and improving international coordination for sustainable development.

Environmental Finance highlights the opportunities the conference will create for investors. Increased attention to Rio+20’s issues will focus public scrutiny on sustainability and countries’ policies, generating what Citigroup’s analysts call “green sentiment” in the markets. In addition to its effects on investment, media coverage might increase pressure on politicians to strengthen climate policies.

To illustrate this possibility, the analysts suggest that European politicians might leave the conference embarrassed about the low price of carbon dioxide permits in Europe and seek to raise prices through legislation back home. This would stimulate the carbon dioxide market and boost the low-carbon investments that depend on it, especially those made by alternative energy companies.

The U.S. wind industry, for example, depends heavily on government support, and is in the trenches of a campaign to pressure Congress to extend the production tax credit that expires at the end of this year (see our post on the topic here). Increased visibility of climate change on the global agenda could propel the issue, causing major uncertainty in the industry, to the top of legislators’ concerns.

Finally, Citigroup’s analysts say that sustainability reporting will boost engagement between companies, governments, and activists. At the very least, there will be a lot of journalists willing to go to Rio on business.

Powering the Cloud

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As technology companies expand their cloud storage services, data servers around the country are expanding and increasing their energy consumption. Several media and advocacy groups have taken note of these huge facilities’ power usage, and this week Apple has come under the microscope. Grist raises concerns over Apple’s new data center in Maiden, N.C., citing Greenpeace estimates that the facility will draw 100 megawatts of power, and noting that its power provider, Duke Energy, is “coal-heavy.”

Their criticism is based on Greenpeace statistics estimating the portion of major technology companies’ energy coming from coal. In terms of overall reliance on coal, Apple is in the lead at 55%, above rival cloud service providers Microsoft (39%), Amazon (33%), and Google (28%). A map compiling related Greenpeace data shows 52 of the largest data centers in the country and how reliant they are on coal.

Apple, for its part, highlights its planned construction of on-site renewable energy plants near the Maiden, N.C. center, to include a solar farm and fuel cell installation from which it plans to generate 60% of the center’s energy needs. They would not be the first to explore new strategies for powering their data centers, though. As we have previously posted, in a data center in Taiwan, Google runs cooling systems at night to chill liquid coolant for use during the following day. The nighttime electricity is cheaper due to low demand, and the reduced daytime electricity usage eases pressure on Taiwan’s electrical grid.

To better appreciate the energy accounting of “cloud” storage, I would like to see an examination of the efficiency cost or gain of outsourcing our data storage from individually-powered hard drives in our homes around the country to a few massive data centers thousands of miles away.

Wind Regulation: Cooperation and Coordination?

Lake Huron. Photo by MeRyan. Some rights reserved.

The Obama Administration and five Great Lakes states signed a Memorandum of Understanding last Friday to coordinate development of offshore energy wind resources in the Great Lakes. Their potential to generate 700 gigawatts of energy represents one-fifth of the total offshore wind potential in the U.S. The memorandum follows the Obama Administration’s similar Smart from the Start initiative to speed wind energy development off the Atlantic Coast. An accompanying news release states that the memorandum will enhance collaboration between state and federal agencies and streamline the review of proposed offshore wind energy projects, as well as set shared standards for the evaluation of wind power projects that reflect their goals for efficient and responsible development. A memo from Mayer Brown discusses the memorandum in detail.

In the past, we’ve written about progress in developing offshore wind resources on the Atlantic Coast’s Outer Continental Shelf, but the Great Lakes pose different challenges. For one, individual Great Lakes states have jurisdiction over the nearby lakebed and onshore transmission points, while the Outer Continental Shelf is under exclusive federal jurisdiction. In addition, the Great Lakes states’ permitting processes are young or still undeveloped in contrast to federal regulators’ significant prior experience with oil and gas leases in the Atlantic.

On a more terrestrial level, the U.S. Fish and Wildlife Service released its final Land-Based Wind Energy Guidelines, creating a tool for developers to efficiently minimize wildlife and habitat impact and satisfy USFWS regulations. The guidelines, detailed in a Stoel Rives memo here, will informally guide developers’ decisions from early stages of site selection through project design and construction, helping developers decide how a potential project site will be judged by the USFWS for purposes of enforcement. They also encourage early communication between the Service and developers, and state the agency’s aim to respond to developers with recommendations for avoiding or mitigating impact within 60 days.

The Great Lakes’ wind resources are a long way from being harnessed, and the USFWS Guidelines don’t remove any level of regulation, but the two tell a story of increased coordination between the various agencies whose regulations affect the wind industry. Despite wind energy’s uncertain future (see our post on the production tax credit), regulators are at least looking to simplify the permitting process.

The Living Legacy of Frank Lloyd Wright’s Environmental Sensibility

Taliesin West main studio. Photo by Andrew Russeth, some rights reserved.

When Frank Lloyd Wright set his sights on a swath of Arizona desert outside Phoenix in 1937 to be his winter home and school, it was with the idea that Arizona needed its own architecture for its landscape of “long, low, sweeping lines, uptilting planes.” Taliesin West, nestled into the foothills of the McDowell Mountains, embraced its desert environment, built from nearby desert rocks and allowing the sun or immense shadows to heat or cool the home depending on the time of year. Still the winter home of the Frank Lloyd Wright School of Architecture, students continuously updated and added to the complex under Frank Lloyd Wright’s direction.

So while this week’s announcement from the Frank Lloyd Wright Foundation that Taliesin West will be updated to reduce its annual $200,000 energy bill is making headlines on the green blog circuit, it is “something that is entirely consistent with the history and values of Taliesin West,” in the words of Sean Malone, the Foundation’s president. Construction starts next month to add 4,000 solar panels covering 1.9 acres, replace 5,000 light bulbs, and improve windows and roofs.

The Foundation emphasizes that neither views Taliesin West was designed to showcase nor its historical appearance will be affected, with solar panels to be installed near existing electrical equipment. Efficient light bulbs will provide color and lighting similar to those being replaced, Lucite on some roofs will be replaced by similar-looking fiberglass, and a new air conditioning system will adjust each room’s temperature and lighting based on occupancy.

Several Arizona companies have contributed to the project, which was initiated by a free energy audit from Big Green Zero and is being propelled forward by First Solar, Inc.’s donation of solar panels and installation labor.

In other news, a 26 year old woman was arrested for burning down the 3,500 year old cypress in Florida nicknamed ‘the Senator.’ The woman told investigators that when she was sitting inside the hollow tree doing meth with a friend, she “lit a fire so they could see better.”

The Wind May Keep Blowing, Just Not From Congress

Image by Chris Winters. Some rights reserved.

The American wind energy industry has long relied on a production tax credit (PTC) that returns 2.3 cents per kilowatt-hour produced as a tax credit to investors. Following the PTC’s expirations in 1999, 2001, and 2003, the industry’s installed capacity fell each time by three-quarters or more. In the past few months as the industry lobbied Congress to pass an extension to 2016 – the year the solar PTC expires – it has presented two arguments.

First, the industry has increasingly turned to domestic manufacturing for its components, sourcing 60% of its parts from American manufacturers in 2011 compared to 25% at the time the PTC was allowed to lapse at the turn of the century. Second, the industry is at such a scale that the cost of wind energy is decreasing, and a PTC effective through the 2013-2016 window would allow the industry to “finish the job,” in the words of American Wind Energy Association Denise Bode, quoted in a Greentechmedia article.

But Congress left the PTC, which had been tucked away in the payroll tax cut bill, out of the final version of the legislation. A standalone bill to extend the PTC is unlikely to pass, but some expect a lame-duck Congress to pass an extension after November’s elections. For now, it is a race for developers to get their turbines up and running before year’s end, when the tax credit ends.

The industry expects to see frantic building in anticipation of the deadline, but for construction to stall after the summer as uncertainty over the credit’s future intensifies. Business leaders say many projects that cannot be accelerated to completion in 2012 will have to be cancelled or delayed as land leases, interconnection agreements, and other permits expires. Inexpensive natural gas in addition to generally weak demand for electricity is prompting manufacturers to look to areas with strong government support for business, including Southeast Asia, Turkey, and much of Latin America.

This does not paint a rosy picture for the industry. Where can wind look for hope? To the states, for now, perhaps. On the same day that Congress appeared to leave the wind industry to its fate, Massachusetts governor Deval Patrick announced a major step forward for Cape Wind, which is aiming to be the first offshore wind project in the United States. Massachusetts utility NSTAR agreed to purchase 27.5% of the proposed project’s capacity. In December, New England utility National Grid, agreed to a power purchase agreement for 50% of Cape Wind’s capacity.

With the Massachusetts Supreme Judicial Court’s acceptance of the Department of Public Utilities’ approved price, the project can begin financing for its estimated $2.6 billion cost. The turbines will be five to thirteen miles off Cape Cod in Nantucket Sound, and construction will take 2.5 years. By then, who knows how the wind industry will look.