Climate Change Report

Update on the Status of Land-Based Wind Energy Guidelines

K&L Gates — Tue, 17 Apr 2012 08:14:03 -0800

By James Lynch (Seattle), Raymond Pepe (Harrisburg), and Marie Quasius (Seattle)

The Fish and Wildlife Service recently released the Final Land-Based Wind Energy Guidelines to help developers and operators of wind facilities minimize impacts on wildlife, especially birds and bats.

This post reviews the Final Guidelines, discusses the Service's five-tier framework and presents some practical considerations for compliance.

Mandatory Filing of Annual Photovoltaic Cell/Module Shipments Report

K&L Gates — Tue, 10 Apr 2012 16:08:29 -0800

By Stan Lewandowski (Palo Alto) and Aaron Schapiro (Palo Alto)

Each year the U.S. government relies upon mandatory data from companies that are part of the photovoltaic (“PV”) industry in order to satisfy its reporting obligations to the U.S. Congress. While providing the data on an annual basis is mandatory, many PV companies are unaware of the requirement to submit Form EIA-63B, Annual Photovoltaic Cell/Module Shipments Report (“Report”) to the U.S. Energy Information Administration. The deadline for submission of the Report for 2011 is April 30, 2012.

Profit and Purpose: Two New Types of California Corporations that Promote Social as Well as Financial Benefits

K&L Gates — Wed, 04 Apr 2012 14:58:09 -0800

By Louise Adamson (San Francisco), Yusef Alexandrine (San Francisco) and Remsen Kinne (San Francisco)

Effective January 1, 2012, California companies are able to incorporate under two new forms of corporation: the Benefit Corporation and the Flexible Purpose Corporation. These new corporate forms facilitate companies’ efforts to advance social welfare and environmental sustainability objectives while creating profits and value for their shareholders.

California is the first state to adopt the Flexible Purpose Corporation form. It is among a growing number of states that have adopted the Benefit Corporation form. Similar Benefit Corporation laws exist in Hawaii, Maryland, New Jersey, New York, Vermont and Virginia. Benefit Corporation legislation is moving forward in Michigan, North Carolina, and Pennsylvania.

These corporate forms are new and have not yet been widely adopted. It is uncertain how they will be construed in states that have not yet adopted similar statutes. As more states adopt similar statutes this alert should facilitate planning to organize a company using one of these forms.

Event: Solar Project Financing 2012 - Life After the 1603 Cash Grant

K&L Gates — Thu, 01 Mar 2012 09:43:46 -0800

Tuesday, March 13, 2012
8:00 a.m. - 10:30 a.m

Computer History Museum
1401 N. Shoreline Boulevard
Mountain View, CA 94043

The successful federal Section 1603 cash grant program expired at the end of 2011. With the cash grant no longer available what will stimulate investments in utility and other solar energy projects in the U.S. market in 2012? How “safe” are Section 1603 safe harbored projects? Will the federal investment tax credit cover the gap? What financing structures will be used and what financial incentives continue to be available in 2012? What incentives are still available in California? Are renewable energy certificates (RECs) a predictable source of financing? Which lenders and tax equity investors are active in financing solar projects?

Please join us for this valuable event at the Computer History Museum in Mountain View on Tuesday, March 13 from 8-10:30 a.m. The panelists will address the questions above and discuss the financing of solar projects at a practical, hands-on level based on experience from real solar project financings, both utility scale and other projects, including:

- Lessons learned in a real project
- Pitfalls to avoid
- How these lessons can help in securing financing and ensuring successful implementation of other solar projects

Speakers:
Don Danh, Senior Vice President, East West Bank
Sharmila Ravula, Director, Finance and Strategy, Bosch Solar
Dirk Michels, Cleantech Practice Partner, K&L Gates

Moderator:
Fred Greguras, Cleantech Practice Partner, K&L Gates

To attend, please RSVP here.

For additional information or questions, please email Christina Hendry or call 415.882.8038.

M&A in the United States: What Chinese Companies Need to Know about Exon-Florio Review in the Clean Technology and Other Business Sectors

K&L Gates — Mon, 30 Jan 2012 16:40:56 -0800

By Fred M. Greguras (Palo Alto), Michael J. O'Neil (Washington, D.C.), and Chenhao Zhu (Palo Alto)

The clean technology business sector has become very important to China’s economy. As the U.S. is still a leader in clean technology innovation, the recent sector shakeout makes strategic business or asset targets in the U.S. attractive to Chinese companies. Controlling interests in a number of U.S. solar project developers with project pipelines have already been acquired by foreign solar module companies. The federal government's Exon-Florio review process is a significant planning consideration for any Chinese company looking to complete transactions in the U.S.

This article provides an overview of the Exon-Florio review process, the timeframe for decision-making and practical guidance for Chinese companies considering transactions in the U.S. While the focus is on the clean technology sector, the guidance is applicable to other business sectors as well.

CONTINUE READING
View the Chinese version of this article.

The CJEU's Recent Judgment Closes the EU Judicial Chapter in the EU ETS Dispute

K&L Gates — Fri, 23 Dec 2011 09:46:02 -0800

By Vanessa Edwards (London), Philip Torbøl (Brussels), Christopher Tung (Hong Kong), and Sara Aparicio Hill (Brussels)

The Court of Justice of the European Union (CJEU) has delivered its Judgment on a Preliminary Ruling on the European Union’s Emissions Trading Scheme (EU’s ETS) extension to aviation. The Judgment substantially follows the Advocate General’s Opinion of 6 October 2011.

Background to the Dispute
The EU’s ETS Directive 2008/101 ("the Directive") requires all greenhouse gas emissions from aircraft landing or taking off within the EU to be included within the ETS, which aims to cut greenhouse emissions by creating a market for emission allowances. Accordingly, from that date all airlines – including those of non-EU countries – will have to acquire and surrender emission allowances for their flights which depart from and arrive at European airports.

Perspective: Recent Solarpraxis PV Power Plants Conference

K&L Gates — Mon, 12 Dec 2011 13:35:28 -0800

By Fred Greguras (Palo Alto)

The SolarPraxis PV Power Plants - USA 2011 conference in Phoenix brought together solar project developers, bankers and other investors, utilities, regulators and other stakeholders to discuss the problems and solutions for getting more utility solar projects built, particularly in the Western states.

The conference sessions included presentations on the development and status of renewable energy generation in the Western states comprising the Western Electricity Coordinating Counsel and how these states could work together more effectively. There was a consensus of stakeholders that the current approach of both independent power producer and utility-owned solar projects are needed to meet RPS requirements in western states. Concern was expressed over California's amended renewables portfolio standard (RPS) law enacted this spring. The law has a strong in-state energy sourcing requirement to meet the new goals and limits the eligibility of out-of-state energy and RECs for RPS purposes.

With the fast approaching December 31st expiration of the Section 1603 cash grant in lieu of investment tax credit, there was speculation about whether the cash grant would be extended and, if not, how to quickly and effectively qualify projects for the year-end safe harbors. There were also discussions about how the expiration would impact the financing of solar projects in 2012 and thereafter.

The U.S. International Trade Commission and the Department of Commerce's anti-dumping and countervailing-duty investigation into Chinese solar cell and module trade practices was mentioned by a number of speakers, particularly with respect to its consequences for the continued availability and pricing of solar modules in the U.S. market in 2012. On December 2, as expected, the ITC made a preliminary determination, voting 6-0, that there is a "reasonable indication" that those practices are detrimental to the domestic solar industry.

The conference concluded with a detailed and well-attended workshop on the "Dos and Don'ts of Large Scale Solar Development" led by the Clean Power Group and moderated by my colleague Dirk Michels. The workshop featured a large panel of industry veterans in project development, financing and construction.

In other news, 2011 ends on a positive note, with First Solar's announced sale of its planned 550 MW solar farm to MidAmerican Energy Holdings Co. Construction on the Topaz Solar Farm in San Luis Obispo County is expected to be completed by early 2015. This is good news for First Solar, and good news for the entire industry. Have a wonderful New Year.

The Importance of Solar Project Site Control Issues

K&L Gates — Tue, 15 Nov 2011 10:26:21 -0800

By Fred Greguras (Palo Alto) and Stan Lewandowski (Palo Alto)

The power purchase agreement (“PPA”) is the primary source of revenue in a solar project financing for debt service to a lender as well as for returns to other investors and the project developer. If the solar facility must be removed from the rooftop or ground site because of foreclosure or other superior rights, then the project cannot generate any more electricity which means there will not be any more revenue from the PPA, from electricity production subsidies such as production-based incentives or from the sale of renewable energy credits or certificates. The predictability of the revenue (or lack thereof) is the key factor in the financeability of the project. There cannot be any revenues if the solar facility is no longer operating. The value of the installed solar equipment by itself is not adequate to protect lenders or investors. While the security interests in a loan financing will include a UCC-1 filed on the solar equipment, the equipment has little resale or salvage value once it is installed and will have little value for a lender or other investor.

Site control means control over the rooftop or ground site where a solar facility will be located for the term of the PPAso that the PPA revenues can be generated without any interruption. A key business objective in financing due diligence is to identify and implement site control protections which increase the probability that the solar facility will generate such revenues for the life of the PPA. A lender will want site control for the term of its loan. The borrower/project owner will want the revenues to continue for the life of the PPA to provide a return for itself and other investors. The investors and project owner have a common interest which should drive cooperation on these issues.

The title report for the property where the project will be located will identify the deeds of trust, easements for utilities, rights-of-way, mineral and other rights and encumbrances which may restrict or prevent the use of the land for the development of the solar project. For example, a project owner may be leasing the rooftop of a building which is subject to a financing party’s deed of trust. The most common encumbrances on a title report that must be addressed are deeds of trust or mortgages held by parties that financed the property. The risk to the solar project owner is removal of the solar facility if the land owner defaults and foreclosure occurs. The title report should be ordered and reviewed at the outset of the project to identify what site protections may be needed to mitigate the financing risks and to quickly determine if they can be obtained.

Site Control Agreements
The project owner must have a basic site control agreement in place in order for a lender or other investor to consider financing the project. This agreement is usually a lease, easement or license. This agreement provides the project owner with the initial right to use the property for the solar project, subject to any third party rights to the property. The time period for this agreement must be for at least the same term as the PPA, including extensions. The project owner must have the right to operate the solar facility on the site for the life of the PPA for predictability of revenue. We have seen due diligence situations where the basic site control agreement is for a shorter term than the PPA.

In general, the lease is the strongest type of agreement for basic site control. While the label of the agreement is important, the actual provisions in the agreement, not the label, will control. The basic site control agreement must describe the parties’ rights and obligations in detail, including access to the site, non-disturbance and termination provisions and not depend on a label. The provisions in an agreement labeled “lease” may be weak and put revenue streams at risk. For example, in due diligence, we have seen leases without any non-disturbance covenants from the lessor and termination provisions without any notice and cure period so defaults can be remedied.

Following review of the title report and basic site control agreement, additional agreements from third parties and/or amendments to the existing agreement may be needed to increase the predictability of the revenues for the life of the PPA. A site non-disturbance agreement (“SNDA”) is often used with third parties for this purpose. A subordination of mineral rights, release or surface waiver agreement may be needed to protect solar surface rights against mineral rights.

Not all SNDAs are the same. They have to be carefully prepared for each project and are often negotiated. In an SNDA for a deed of trust holder, for example, the holder agrees that the solar facility may not be removed from the premises without the investor’s consent, that the roof or ground lease will continue in effect following a foreclosure, the facility is not a fixture, waives any right to the facility, provides rights of access to the premises, etc. The purpose of an SNDA is to keep the facility on the roof following a foreclosure so it can continue to generate revenue if the next occupant agrees to a PPA. There is no assurance of continuing revenue but there is the possibility, particularly if the kWh rate is lower than the utility rate.

If the site is owned by the project owner (or leasehold is not encumbered by the land owner) an investor will still want an SNDA which restricts any future encumbrances on the solar project site.

There is no obligation for a third party rights holder to sign an SNDA so the project owner may have little if any leverage. We believe it is important to ask a third party only once to sign an SNDA; therefore the first SNDA must mitigate all of the risks. A cooperative third party rights holder may become uncooperative if multiple requests are dribbled out rather than only one request. The third party’s willingness to sign an SNDA needs to be tested early as the site control risk can be a deal killer.

Some third party rights holders may only be willing to sign an acknowledgement that the solar facility is personal property and not a fixture attached to the land estate. In this case, the solar facility may have to be removed upon a foreclosure. The investor holding the security interest would have first rights to the equipment based on its UCC-1 filing, but there would not be any possibility of continuing revenue because the facility is no longer on the roof. The UCC-1 would be terminated as the equipment is removed from the roof. When such an acknowledgement is all that can be obtained, a lender may require more credit support (such as a guaranty) or may not be prepared to offer the financing. The feasibility of obtaining an SNDA should therefore be determined as early as possible since it may substantially postpone or even derail the deal if it is not possible to secure an SNDA.

Mineral Rights

Mineral rights may be identified in a title report for a proposed project. Mineral rights may be granted by lease or license, or may be created by the division of the surface and subsurface of the property into two separate estates.

In general, where the surface estate and subsurface estate (i.e., mineral rights) have been separated, the law provides the mineral rights owner with the right to the "reasonable use" of the surface in order to remove the minerals but the mineral rights owner must also reasonably accommodate the use of the surface by the surface estate owner as well. Many mineral rights conveyance and lease documents will have been drafted by the purchaser or lessee so the express language must be reviewed carefully in order to determine if there is any conflict with the surface rights needed to build and operate the solar facility. In many instances, the conveyance language may convey a right of access across the whole of the surface estate for the purpose of providing the owner of the mineral rights with access to the minerals which effectively permits the owner to remove minerals at any time, by any means, and from any location, regardless of the consequences to the surface owner. In such a situation, a surface rights waiver agreement restricting the access rights of the mineral rights owner to certain designated areas will be needed to protect the solar facility site. Even if the conveyance document is silent with respect to the surface rights, the general rule is that to the extent that the mineral rights owner has the right to access subsurface minerals, the rights of the mineral rights owner are superior to those of the surface owner so a surface rights waiver agreement will likely be needed for investor predictability.

Financing Consents

An investor may also want an agreement with the lessor or other holder of rights to the project site or structure which provides the investor with additional protective rights such as the opportunity to cure any default by the project owner/borrower under the site control agreement before termination rights may be exercised, review and approval rights with respect to any required financing assignment, so-called “step-in” rights that allow the investor to take control of the project and carry out the activities required for the continued operation of the project so it can continue to generate revenue in the event of a project owner/borrower default, as well as expanded investors rights in the event of a foreclosure.

Notice to Third Parties: Recording

The purpose of recording is to put third parties on notice of the solar project owners’ rights in the property and to perfect a security interest in the solar equipment and other collateral. Both the primary land rights agreement and any third party rights agreements such as an SNDA or surface rights waiver agreement should be recorded with the applicable county recorder’s office as notice of the rights against any third party. In the U.S., a UCC-1 financing statement should also be filed to perfect a security interest in the solar equipment and other collateral in the appropriate state or local office.

Conclusion

In summary, due diligence should be done early on site control-related issues. Investors should start with the review of the basic site control agreement and title report for the relevant property to promptly identify unacceptable risks that need to be immediately addressed. Mitigating the risk may involve execution of SNDAs, agreements with mineral rights owners and others. The sooner the site control-related issues are addressed, the better for all interested parties.

Virginia Supreme Court Rules That Insurer Has No Duty to Defend Global Warming-Related Claims

K&L Gates — Fri, 04 Nov 2011 14:07:16 -0800

By: John M. Sylvester (Pittsburgh) and Jonathan D. Christman (Pittsburgh)

In the nation’s first appellate decision of its kind, the Virginia Supreme Court has held that an insurer does not have a duty to defend an energy company policyholder for third-party liability claims alleging global warming-related damage. Specifically, in AES Corp. v. Steadfast Insurance Co., the Virginia Supreme Court upheld a lower court decision and determined that an insurer had no duty to defend AES Corporation with respect to a global warming claim lawsuit brought by a native Alaskan village against several energy and utility companies on grounds that the complaint did not contain allegations of an “occurrence” necessary to trigger the insurer’s relevant policies. This decision, however, is certainly not a conclusive statement on the issue of insurance coverage for global warming claims because the legal principles on which the decision is based are a minority view.

Event: Generating Revenue Globally: Tapping Into Markets Abroad

K&L Gates — Mon, 17 Oct 2011 10:51:06 -0800

Tuesday, November 1, 2011
10:00 a.m. - 7:00 p.m.

Computer History Museum
1401 N. Shoreline Blvd.
Mountain View, CA 94043

or

K&L Gates San Francisco
Four Embarcadero Center
Suite 1200
San Francisco, CA 94111

In partnership with Deloitte, K&L Gates cordially invites you to join us for this complimentary and valuable program on Tuesday, November 1st. For your convenience, the program will be hosted simultaneously via videoconference at the Computer History Museum in Mountain View, and at K&L Gates' San Francisco Office, with live panelists in each location.

Program Details
Markets outside of the U.S. present an excellent opportunity to generate revenue – whether from investment, alliances or other cross-border transactions. K&L Gates and Deloitte bring together experts from four important regions – Asia, Europe, Latin America and the Middle East – to share success stories and strategies making the most of the unique business and regulatory environments in markets beyond our borders. With 4 panels of speakers focused on their regions, you will walk away with practical insights into the hottest revenue-generating opportunities of 2012.

Agenda
10:00 a.m. – Registration
10:30 a.m. – Opportunities in Europe
12:00 p.m. – Lunch with casual Q&A
1:00 p.m. – Generating Revenue in Latin America
2:30 p.m. – Tapping into Asia
4:00 p.m. – Opportunities in the Middle East
5:30 p.m. – Casual Q&A and wine reception

To attend, either register below, email Christina Hendry or call 415.882.8038 by Friday, October 28th. Please indicate which location you would like to attend. This program is complimentary.

REGISTER NOW

Event: How the Patent Reform Act will Impact Your Business

K&L Gates — Thu, 13 Oct 2011 16:08:45 -0800

Thursday, October 20, 2011 8:30 - 10:30 a.m. PDT
Computer History Museum
1401 N. Shoreline Blvd.
Mountain View, CA
Register Now

On September 16, 2011, President Obama signed into law the Leahy-Smith America Invents Act (the “Act”), which will substantially affect the way that patents are procured and enforced in the United States. The Act makes very significant changes to U.S. patent law.

The Act includes many changes, large and small, affecting subjects as far-reaching as the available appeals from reexaminations to the subject matter eligibility of tax planning methods and human organisms. Please join us for a presentation and question and answer session at the Computer History Museum in Mountain View, CA.

Topics Include:

First-Inventor-to-File
Changes to What Constitutes Prior Art
New Post-Grant Administrative Proceedings
Supplemental Examination
Defense to Infringement Based on Prior Commercial Use
Fee Issues
Subject Matter Carve-Outs for Tax Strategy Patents and Human Organisms
Marking and False Marking
Impact on Your Litigation Profile and Risk Management

In addition to providing our audience with a summary of the changes in the above areas, the focus of our presentation will be on how these changes will impact your business.

Program registration is complimentary. CLE credit is available in the following jurisdictions: California, Illinois, Pennsylvania, New York, New Jersey and Texas. An application has also been made to the North Carolina Bar. Other applications will be submitted upon request. To register, please click on the link below.

For more information, please email Ellen Keiley or call 617.951.9075.
This event will be taking place in multiple K&L Gates offices.

A Blow to Airlines in EU ETS Dispute

K&L Gates — Mon, 10 Oct 2011 13:00:41 -0800

By Vanessa Edwards (London/Brussels), Philip Torbøl (Brussels), Christopher Tung (Hong Kong), and Jonathan Blank (Washington, D.C.)

In an important case pending before the European Court of Justice (ECJ), the Advocate General Juliane Kokott (AG) delivered her Opinion on Thursday 6 October. The AG considers that the inclusion of international aviation in the European Union (EU) Emissions Trading Scheme (ETS) is compatible with international law.

The AG's Opinion is not binding on the judges of the ECJ but in the majority of cases the judgment of the ECJ comes to the same conclusion. The judgments in this case should be delivered in the course of next year.

Upcoming Event: Maximizing Value for a Successful Acquisition

K&L Gates — Fri, 26 Aug 2011 12:16:32 -0800

September 21, 2011 7:30 - 9:30 a.m.
Computer History Museum
1401 Shoreline Blvd.
Mountain View, CA 94043
Register Now

SPONSORS:
Centaur Partners, K&L Gates, and Next Step

PROGRAM:
M&A is the best opportunity for most businesses to capture their enterprise value; but most companies don’t get it right! Are you ready for what is coming? Or will you end up having the value of your deal driven down because you were not prepared?

Being ready enables a business owner to respond effectively, maximize valuation, and avoid a missed opportunity in the hyper-competitive deal environment. Now is the time to prepare your Finance, Legal, Marketing, and Operational infrastructure so when an acquisition is imminent, you can survive the due diligence process and maximize your deal value.

The seminar begins with a brief update on current M&A trends. Then, our experts step you through the actions to:

Master the due diligence process
Accelerate the closing process
Avoid legal and accounting traps that can kill a deal, increase transaction costs or cause discounts in value
Build value through your sales channels, customer base and marketing approaches
Negotiate customer and partner licenses and agreements that will be acceptable to an acquirer

COST:
$25.00, payable to Next Step, includes continental breakfast and all workshop materials.

For more information and to register for the seminar in San Mateo on Sept 14, click here and for Mountain View on Sept 21, click here.

Upcoming Event: Sustainability - "Between Lip Service and True Actions," A Study Exploring American and German Consumer Psychology

K&L Gates — Thu, 11 Aug 2011 13:12:50 -0800

August 17, 2011 6:00 - 9:00 p.m.

K&L Gates - San Francisco Office
Four Embarcadero Center, Suite 1200
San Francisco, CA 94111
Center, Suite 1200
San Francisco, CA 94111

SPONSORS: German American Business Association, Rheingold International, and K&L Gates

PROGRAM:
As an international research firm, Rheingold is often asked to help clients provide insights to psychologically translate their marketing campaigns to other countries. One of the biggest obstacles is to effectively reach consumers with a different cultural background, particularly when trying to transfer successful concepts to various countries. Rheingold’s research exemplifies the differences between the American and German culture that impact, in this case, sustainability considerations. The insights presented will help understand the marketing strategic pitfalls and success factors.

Rheingold explored current sustainability considerations in 40 2h in-depth interviews with American and German consumers. The research revealed significant cultural differences in sustainability perceptions and impacts on personal everyday lives. Rheingold’s research shows how marketing measures can account for these differences and successfully speak to the psychological needs of the American vs. German consumer.

Topics to be discussed:
• How do consumers define sustainability?
• What do they truly care about and what is “lip service”?
• What are differences between the American and German consumer and what are they rooted in?

Cost:
$15 Members, $25 Non-Members, $35 At the door.

For additional details and to attend, please click here.

Perspectives on the California Solar Market: Uncertainties and Opportunities

K&L Gates — Fri, 08 Jul 2011 13:12:08 -0800

By Greg Brucia (San Diego)

California may have a dominant position within the US solar market, but the US has only a modest position in the global solar market. That was a key message from two leading solar industry analysts, Paula Mints of Navigant Consulting and Stefan Pietzsch of EuPD Research, at a June 27, 2011 webcast presented by Intersolar North America titled US Solar Market Overview and Future Trends.

Both presenters emphasized the importance of government support for the development of solar markets. Mints noted early US dominance in the supply market gave way first to Japan and Europe in 1999 and later to China and Taiwan, with increased government support being the common driver for the successive leaders. Not surprisingly, Mints suggested that increased government support would be necessary for the US to return to a more competitive position in the supply market.

Domestically, the speakers agreed government support has been a key to California’s leading position within the US, driven in large part by the plethora of incentives in California – a leading renewable portfolio standard, feed-in tariffs, utility rebates and net energy metering. Pietzsch noted other supporting factors such as a culture in California that embraces protection of the environment and a willingness among consumers to change behavior to further that goal. This has been particularly important for the development of the residential and small business sector, the historical backbone of California’s solar market. But Pietszsch also sees these factors supporting growth in the utility-scale segment, which is predicted to be the highest growth segment of the California solar market.

Both presenters foresee flat to moderate growth in 2011 and 2012 with higher rates of growth perhaps following after that. Each pointed to the nascent nature of the industry which can allow for growth opportunities that may not be available in a more mature industry. For example, Pietzsch noted something we have seen with our own clients, when he compared the California and German solar markets: the German residential solar market saw positive effects that resulted from increased efficiency of solar installers which enabled them to bring down the cost of installation and more effectively educate and market to consumers. Similarly, as the US market matures and implements new technologies, such as innovative energy storage solutions, the ability of installers to promote awareness through effective marketing and to drive affordability through efficient installations can be a key support dynamic for residential and small business market segments.

Consistently present in the discussion, however, was the specter of government support and the critical role it plays in the domestic and global solar markets. In reviewing the past and looking toward the future, both speakers acknowledged the obvious importance of governmental action for the continued development of the solar market and noted that with very low or stagnant economic growth and massive budget deficits at both the state and federal levels, nothing is certain.

At a recent program in Northern California, our own policy partners former Congressman Bart Gordon and Daniel Ritter echoed that perspective but also emphasized that advocacy by solar players both large and small can help to educate Congress when they make difficult budget decisions. Mints warned, “what the government giveth, the government can taketh away.” While that is true, we would also add to that the industry does not need to sit on the sidelines and wait for government action (or inaction) to dictate the market opportunities.

Many utility scale and other solar projects currently under development rely on government incentives, such as the energy investment tax credit and the cash grants in lieu thereof, as critical pieces of their financing plan. The uncertainty surrounding the continued availability of those incentives relates also to the timing of any changes. Given the current political and economic environment, significant change could come sooner than anticipated.

What can developers do to protect themselves? First, they need to carefully monitor developments affecting the government incentives involved in the financing plans to gather as much advanced information as possible and maximize the time available for making any necessary adjustments. Second, developers should explore steps that can be taken to accelerate the pace of development of their projects with an eye toward locking in the incentives before any negative change. Finally, developers should attempt to develop alternative financing arrangements in case the incentives on which they are relying become wholly or partially unavailable.

Solar as an Asset Class: It's About More than Technology

K&L Gates — Fri, 08 Jul 2011 13:03:44 -0800

By Dirk Michels (Palo Alto)

Today, the promise of solar PV is not about technology, but rather about creating the financial, legal and regulatory frameworks that allow for significant cost reduction, especially for the residential and commercial distributed solar sectors. Together with the utility-scale solar sector, significant growth in the distributed solar sector may be the game changer that makes solar power a viable alternative to traditional fuels.

According to GTM Research, the U.S. solar PV market was at an installation pace of 878 MWp (DC) with 636 MWp (DC) in residential and commercial distributed installations in 2010. The research also indicated that the U.S. solar PV market will grow to annual installations of more than 5,000 MWp (DC) by 2015. If the majority of new installations are utility-scale solar facilities, the residential and distributed commercial/municipal sectors could fall behind in overall growth.

To prevent that loss of market share, the sectors will need to address the most significant factor affecting their success: cost competitiveness. The installed costs for residential and distributed commercial/municipal installations are rather high, at approximately US$5.71~US$6.98. That compares to utility installations, which are already at a much lower price point of between US$4.05 and US$4.80 for the year 2010. Further, it is expected that a large number of the currently available state and federal incentives will terminate, which further complicates ‘small-scale’ solar’s attempt to achieve cost competitiveness. In the coming years, the residential and distributed commercial/municipal sectors still have some catching-up to do before they can claim their fair share of future growth in the market.

Supreme Court Sides With Energy Industry, Finding That The Clean Air Act Displaces Any Federal Common Law of Public Nuisance in Global-Warming Litigation

K&L Gates — Tue, 21 Jun 2011 10:21:24 -0800

By John Krill (Harrisburg)

The United States Supreme Court has held that the Clean Air Act[1] “displaces” any federal common-law cause of action that might exist for the alleged public nuisance of contributing to global warming by emitting carbon dioxide, but left open the possibility of state law claims.

The Court decided 8-0 in American Electric Power Co. et al. v. Connecticut et al. that the Second Circuit erred when it allowed such a federal common-law nuisance suit by eight states and three land trusts to go forward against five major electric power companies.[2]

The Opinion of the Court, reviewing the history of the federal common law of public nuisance, focuses on the litigation several decades ago over sewage pollution of Lake Michigan. In Illinois v. City of Milwaukee, the Court found that there was a common-law cause of action maintainable by the State of Illinois to abate pollution of the lake from Milwaukee’s discharges.[3] Nine years later the Court held that the Clean Water Act amendments to the Federal Water Pollution Control Act[4] had “displaced” the federal common law claims brought by Illinois.[5]

Upcoming Event: Breakfast Briefing: Renewable Energy & Emerging Technology Policy and Funding Issues

K&L Gates — Fri, 03 Jun 2011 13:32:05 -0800

June 16, 2011 8:30 - 10:00 a.m. - Computer History Museum
June 17, 2011 8:30 - 10:00 a.m. - K&L Gates - San Francisco Office

We are pleased to invite you to this exciting breakfast program on renewable energy and emerging technology policy and funding issues.

As the former Chairman of the House of Representatives Science and Technology Committee, whose jurisdiction covered everything from NASA and NIST to the Department of Energy, K&L Gates partner Bart Gordon will be speaking on a myriad of interesting topics including ARPA-E (as he was the original author of the program), SBIR funding, DOE's Office of Science, the America Competes Act and the future of science and technology policy /funding opportunities.

Whether you are an established company, an entrepreneur or an investor, if you are seeking to do business within the federal market space, you cannot afford to miss Chairman Gordon's insights. We hope you can join us!

The Honorable Bart Gordon

Former Congressman Bart Gordon joined K&L Gates as partner in the Washington, D.C. office after 26 years representing the state of Tennessee in the United States House of Representatives. Mr. Gordon, who served as Chairman of the House Committee on Science and Technology from 2007 to 2010, advises clients on innovation and technology-related issues, including clean technology, nanotechnology, renewable energy, energy efficiency, and nuclear energy. Mr. Gordon was a senior member of the House Committee on Energy and Commerce, also served on the House Committee on Financial Services and the House Committee on Rules, and is considered to be the father of ARPA-E.

To view Bart Gordon's complete biography, please click here.

Proposed CFTC/SEC Regulations May Affect RECs, Carbon Offsets/Credits, FTRs and Energy Forward Contracts

K&L Gates — Thu, 02 Jun 2011 12:13:29 -0800

by Lawrence Patent (Washington, DC)

The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) recently published proposed regulations that would further define the term “swap” under the Commodity Exchange Act, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). 76 Fed. Reg. 29818 (May 23, 2011).

Three items therein may be of particular interest to energy companies. With respect to the forward contract exclusion from the definition of “swap,” the CFTC stated that it would interpret this provision consistent with its historical interpretation of the forward contract exclusion from the definition of the term “future delivery.” Further, book-out transactions in nonfinancial commodities that meet the requirements of the CFTC’s 1990 “Brent Interpretation,” and that are effectuated by a subsequent, separately negotiated agreement, also will qualify for the forward contract exclusion from the swap definition.

The second issue relates to so-called environmental commodities, such as emissions allowances, carbon offsets/credits, or renewable energy certificates. The CFTC requests specific comment on whether these instruments should qualify for the forward contract exclusion from the swap definition, and asks those arguing in favor to describe the instruments and how transactions can be physically settled where the “commodity” lacks a physical existence, other than on paper. In another context in the same set of proposals, the CFTC distinguishes between foreign exchange forwards (excluded) and non-deliverable (due to restrictions on currency delivery by the country of issuance) foreign exchange forwards, which are not excluded from the swap definition.

The last item concerns transactions in Regional Transmission Organizations and Independent System Operators, including financial transmission rights (FTRs). Because Section 722 of Dodd-Frank gives the CFTC specific exemptive authority regarding instruments regulated by the Federal Energy Regulatory Commission (FERC), the CFTC and SEC have determined not to address FTRs in the joint definitional rulemaking. Instead, persons with concerns about whether FERC-regulated products may be considered swaps or futures should request an exemption pursuant to Section 722 of Dodd-Frank.

The comment period on these proposals will close on July 22, 2011.

Upcoming Event: Solar Project Financing Workshop 2011: An Inside Look at the Aerojet Project

K&L Gates — Mon, 09 May 2011 15:56:45 -0800

May 23, 2011 6:00-9:00 p.m.

K&L Gates - San Francisco Office
Four Embarcadero Center, Suite 1200
San Francisco, CA 94111

By popular demand, we are repeating this program. In partnership with the German American Business Association, please join K&L Gates, East West Bank and Solar Power, Inc. at our San Francisco office on Monday, May 23 for this evening event. Registration/wine reception is at 6:00 p.m., with the program beginning at 6:30 p.m.

PRESENTERS:

Steve Kircher, CEO, Solar Power, Inc., project developer
Don Danh, Senior Vice President, East West Bank, a lender for the project
Dirk Michels, Cleantech Practice Partner, K&L Gates, lender’s law firm
Moderator - Fred Greguras, Cleantech Practice Partner, K&L Gates

SPONSORS: K&L Gates, German American Business Association, East West Bank, and Solar Power, Inc.

This year will be a major growth year for solar implementation in the U.S. Why? As European feed-in tariffs are reduced, the U.S market will be a primary focus for global solar players. The extension of the successful Section 1603 cash grant program and the creation of 100% bonus depreciation for 2011 at the federal level will stimulate investments in renewable energy projects. The availability of state level incentives for solar financing is also increasing making financing more readily available for solar energy projects in 2011.

The panelists will discuss the financing of solar projects with these incentives at a practical, hands-on level using lessons learned in a real solar project by Solar Power, Inc. – the Aerojet project in Northern California. This large-scale PV solar system was built at an EPA brown field site and combines the implementation of solar for electricity generation with the reuse of a contaminated site.

What are the lessons learned in a real project? What are the pitfalls you want to avoid? How can these lessons help in securing financing and ensuring successful implementation of other solar projects?

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