Renewable + Law

CARB Proposes New Regulations for Alternative Diesel Fuels

Graham Noyes — Fri, 14 Jun 2013 11:36:08 -0800

In a public workshop held yesterday, the California Air Resource Board discussed its proposed new regulations for alternative diesel fuels as well as conventional diesel fuels. There are a wide range of issues on the table which can best be reviewed on the CARB website for the proceeding. Of particular interest to the advanced biofuels community, CARB is proposing a phased process for introducing alternative diesel fuels to the California market. Prior to supplying any alternative diesel fuel to market, a producer would need to obtain a Memorandum of Exemption (MOE) granted by CARB. I raised the issue that the language was sweeping and would perhaps be more restrictive than the federal standard established by the Fuels and Fuel Additive Registration system found in 40 CFR Part 79 (FFARs). FFARs authorizes producers to provide some pre-commercial supply which can be highly valuable to companies testing and proving out new fuels for the marketplace. CARB officials who attended were receptive to further input on this issue during the public comment period. CARB encouraged public comments by June 24th if possible though the formal period is longer than that.

7th Circuit Affirms FERC's Decision on Multi-Value Projects, Relying Heavily on Policy of Promoting Wind Development

Sarah Johnson Phillips — Fri, 14 Jun 2013 09:45:05 -0800

From my colleague, Andrew Moratzka:

On June 7th, 2013, the United States Court of Appeals for the Seventh Circuit issued an opinion in Illinois Commerce Commission, et al., v. Federal Energy Regulatory Commission, affirming the Federal Energy Regulatory Commission’s approval of the Midcontinent Independent System Operator, Inc. (MISO) Multi-Value Project (MVP) tariff for financing new high-voltage power lines that largely serve remote wind farms.

Six issues were before the court: (i) the proportionality of benefits to costs for MVPs; (ii) the procedural adequacy of the previous proceedings; (iii) the propriety of an energy-cost allocator for MVPs; (iv) whether MISO should be allowed to add an MVP fee to utilities belonging to the PJM Interconnection, LLC (“PJM”); (v) whether MISO should be permitted to assess some costs associated with MVPs; and (vi) whether the Commission’s approval of the MVP tariff violates the Tenth Amendment to the Constitution by invading state rights. The fourth and fifth issues were remanded. And the court quickly dismissed the sixth issue at the outset of the opinion, stating that the arguments amounted to an assertion that the MVP tariff “provides a carrot that states won’t be able to resist eating.” This entry therefore focuses on issues (i) – (iii).

The court addressed issues (i) and (ii) together. There are two important takeaways in this section of the opinion. First, MISO’s burden of establishing rough proportionality of costs to benefits under the Federal Power Act arguably changed in the name of policy. The court stated that “The promotion of wind power by the MVP program deserves emphasis” and that wind power will probably “grow fast and confer substantial benefits on the region.” The court determined there was “no reason to think these benefits will be denied to particular subregions of MISO” and found that other benefits (e.g., reliability) were real, even though they couldn’t be calculated in advance. The court then went on to find that MISO’s and FERC’s efforts to match cost and benefits, even if crude, were sufficient. It is not entirely clear how this aspect of the opinion can be reconciled with the court’s previous opinion in Illinois Commerce Commission v. FERC. But it appears the policy of promoting wind power influenced the decision in this case. Moreover, the court rejected requests for an evidentiary hearing on this issue, on the basis that requiring such proceedings after two years of appeal “would create unconscionable regulatory delay.”

The second takeaway is a comment made by the court in response to a criticism raised by the State of Michigan, which claimed it would not benefit from out-of-state MVPs because a provision in Michigan law forbids Michigan utilities from counting renewable energy generated out of the state to satisfy requirements under the state’s Clean, Renewable, and Efficiency Act of 2008. The court stated that Michigan cannot discriminate against out-of-state renewable energy without violating the commerce clause of Article I of the Constitution. This statement could have significant ripple effects on similar laws around the country that give preference to in-state renewable resources or impose limits on imported generation.

The policy of promoting wind development also seemed to influence issue (iii). The court found that the objection to an energy allocator was refuted by the fact that a primary goal of the MVPs is to increase the supply of renewable energy. It acknowledged that wind production is intermittent and not a reliable source of energy to meet peak demand. But the court concluded that MVP lines will enable plants to serve off-peak demand and stated that “MISO and FERC were entitled to conclude that the benefits of more and cheaper wind power predominate over the benefits of greater reliability brought about by improvement in meeting peak demand.”

Fourth White Paper Released by House Committee

Graham Noyes — Fri, 14 Jun 2013 08:19:51 -0800

The House Committee on Energy and Commerce released its fourth white paper on the Renewable Fuel Standard. The white paper discusses the energy impacts of the RFS and the changes in US energy demand in the five years since the RFS passed. The paper calls for comments regarding the impact of the RFS on demand, petroleum prices, and how the RFS could be improved to better meets its energy security goals. The next House white paper will address fraud issues. Comments on the RFS energy white paper are due by June 21st.

US Federal Social Price for Carbon Skyrockets

Graham Noyes — Thu, 06 Jun 2013 08:39:13 -0800

The Obama administration took another step forward with its greenhouse gas control program yesterday when it quietly posted its "Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis under Executive Order 12866." Executive Order 12866 was issued by President William Clinton on September 30, 1993, and established broad principles of regulatory process including risk assessment. In the recent Obama Technical Update, the social cost of carbon for 2020 increased in value from a range of $7 to $81 per ton, to a revised range of $12 to $81. The increased range will support more rigorous regulations with the first example being in the domain of microwave efficiency. Businesses and industries in the energy sector will be well-served to evaluate the impact of the revised risk assessment on their activities.

Failed Solar Cell Could Be Hazardous to More Than the Owner's Bottom Line

Allison C. Smith — Thu, 30 May 2013 18:14:03 -0800

See my colleague Wayne Rosenbaum's recent post on the question of how failed solar panels could be treated under federal and California waste laws:

Recently the New York Times published an article highlighting the high rate of solar panel failures well before their expected life times. While the article focused on the question of product liability, it raises another question. How does the law, particularly waste laws, define a solar panel that is no longer fit for its original intended use or purpose?

Under current federal and California law, the manufacturer of a non-functioning solar panel does not have an obligation to take back panels at the end of life as it does under the EU WEEE Directive. However, it is likely that this will change as the US PV market matures and more arrays approach end of life or fail. Panel manufactures are encouraged to monitor this issue and potentially to participate in contingency planning or rulemaking.

Regarding the disposal of defective panels, once an entity takes title to the panel it becomes the owner of that panel. This includes lenders who take title through foreclosure. As such, the owner becomes responsible for the panel's proper handling and disposal. This requirement raises the question: Once the owner takes possession what will it do with the panel or its components at the end of their useful life?

Once the panels are in the owner’s possession and are no longer functioning or are being decommissioned, there are three possible actions that could be taken.

If the panel is being repaired or is being resold for use somewhere else, it is still suitable for its original "use or purpose" and therefore is not a waste. If it is not a waste, it cannot be a hazardous waste and therefore no special handling is required. Please note, however, that any components that are replaced would either be a waste or a recycled material subject to the recycling or disposal rules described below.

To the extent that the panels or their components are recycled they are exempt from state and federal waste requirements provided that the owner complies with state and federal recycling requirements. These are as follows:

The recycled material is being sold through an arm's-length transaction or is reused in the repair or manufacture of other solar panels. As an example, the aluminum components could be sold to an aluminum recycler. The solar cells could be sold to a secondary user who uses them as solar cells even though they have a reduced power output. Usable components from one panel are cannibalized to repair or build another panel.
The recycled material is not a listed hazardous waste. This is not a problem currently as solar arrays are not listed wastes. However, this could change in the future.
The recycled material is not being burned for energy recovery. Again this should not be a problem.
The owner does not speculatively accumulate the recycled material. Inventory of recycled materials must be turned over within 180 days of receipt.

Any remaining materials that cannot be recycled would be considered to be solid wastes and possibly hazardous wastes. As solar cells are not listed hazardous wastes at this time, the owner would need to conduct TCLP and WET testing on this waste stream to determine if the materials are hazardous wastes. If the material passes the WET and TCLP tests, it can then be disposed of as a solid waste. Please note, however, that local agencies may have further regulations concerning whether these materials will be accepted at local sanitary landfills or whether these materials then need to be disposed of at some other location. If the wastes fail the WET or TCLP tests, they must then be manifested and sent to a licensed hazardous waste treatment, storage and disposal facility via a licensed transporter.

CPUC Approves Standard Contract for New California Feed-In Tariff

Allison C. Smith — Thu, 30 May 2013 16:50:53 -0800

The California Public Utilities Commission has adopted Decision 13-05-034, approving PG&E, SCE, and SDG&E’s joint standard contract for California’s expanded feed-in tariff (FiT) program. D.13-05-034 also revises several provisions of the FiT tariff and addresses two petitions to modify D.12-05-035, the Commission’s previous decision implementing the expanded FiT. The most recent legislation affecting the FiT, SB 1122 (2012), directing the utilities to procure 250 MW from bioenergy projects, is not addressed in D.13-05-034, but will be implemented in a later decision.

Barring any delays in finalizing the contract and tariff revisions ordered in D.13-05-034, the utilities will begin accepting Program Participation Requests for the new FiT on October 1, 2013 and the first bi-monthly FiT program period will commence November 1, 2013.

For details on changes to the FiT approved in D.13-05-034, and requests for modification rejected by the Commission, read on.

In response to petitions for modification of D.12-05-035, the Commission made a limited number of changes to the FiT in D.13-05-034:

The number of MWs offered in each bi-monthly program period was adjusted so that adequate capacity was offered in each product category. PG&E and SCE will offer 5 MW in each product category – baseload, peaking as-available, and non-peaking as-available – each bi-monthly period. SDG&E must offer 3 MW of each product type each program period.
The FiT price will continue to adjust bi-monthly, but D.13-05-034 places a cap of $12 on the total price period adjustment. The threshold for triggering a price adjustment in a subsequent bi-monthly period was modified to reflect market demand, rather than simple subscription rates. Now, rather than requiring 100% subscription of available capacity in a bimonthly period to trigger a price decrease, a decrease will occur if the total capacity of projects for which applicants have expressed willingness to execute a contract at the offered price is 100% (or more) of available capacity. A price increase will be triggered when the total capacity of projects for which applicants have indicated a willingness to execute a contract is less than 20% of offered capacity in a bi-monthly period. Previously, subscription of 50% of available capacity or less during a program period would trigger a price increase.
D.12-05-035 provided that contracted MWs are added back into the program’s available capacity after a change in circumstances, such as the termination of a project prior to its delivery of electricity. D.13-05-034 clarifies that MWs will be placed back into the available capacity of the product type of the terminated project. This capacity will be offered beginning in the first bi-monthly period where available capacity slips below the minimum amount that each utility must offer.
The seller concentration limit of 10MW – meaning a seller could have no more than 10MW of FiT projects – was removed.

Other requests for modification of the FiT were denied, including requests to increase the program’s total MW capacity and adopt a price floor, below which the FiT price could not be adjusted.

Changes to the Standard Contract

While most stakeholder and utility requests for modification of the joint standard contract were rejected, the Commission directed the utilities to change the following items in the standard contract:

The contract will expressly state that projects have the option, at their discretion, to convert to full capacity deliverability status.
Utility consent will be required only for material modifications to a facility, such as a change in project capacity or the type of technology used for generation.
Instead of requiring the generator to show proof of insurance at the time of contract execution, evidence of insurance must be presented 60 days after a contract is signed, or before construction begins.
All projects must provide development security of $20/kW, lowering the required collateral for projects of more than 1 MW from $50/kW to $20/kW.
Sellers are given the option to be responsible for forecasts, or pay the utility a fee for forecasting service.

The Commission declined requests for a longer timeframe for projects to reach commercial operation, to cap damages available to the utility for failure to meet the commercial operation date (COD), to allow projects to change their contract quantity more than once over the term of the contract, for a 25-year contract option, to eliminate collateral requirements after COD, a higher cost cap on permissible network upgrades, and to allow for seller’s assignment of a contract without the utility’s prior consent.

Changes to the Tariff

The Commission found that most stakeholder concerns related to the FiT tariff were resolved by the utilities’ latest revised tariff language, and further revisions were unnecessary. However, the Commission did clarify that restrictions on participation in both the FiT and a net-energy metering program, the California Solar Initiative, or the Small Generator Incentive Program are applicable to each generator, rather than the owners of generators.

No further changes were made in response to requests related to:

requisite developer experience on projects of a similar size
the cure period for deficient Program Participation Requests
the utilities' process to confirm that a project meets the requirements of a FiT eligible electric generation facility
removal of the requirement to execute a non-disclosure agreement as part of establishing eligibility
whether an interconnection restudy would result in a project losing its place in the queue to participate in the FiT program
the procedure for acceptance of price and execution of the standard contract by an applicant

Results for Third California Cap and Trade Auction Released

Allison C. Smith — Fri, 24 May 2013 13:46:51 -0800

The results are in for the third California cap and trade auction. A metric ton of CO₂e went for $14 in the third auction, which took place on May 16, 2013. The top bid at the auction was $50.01, with a mean bid of $16.67 submitted. All of the 14.5 million 2013 vintage allowances available at the auction were sold, with 1.78 bids submitted for each available allowance. Demand was down compared with the second auction, that took place in February 2013, where roughly 2.5 bids were received for every available 2013 vintage allowance. In the third auction, just over 90% of the allowances were purchased by entities that have compliance obligations under the cap and trade program. Allowance prices have continued to slowly rise, with a settlement price of $10.09 per metric ton CO₂e in November 2012, $13.62 in February 2013, and $14 in this most recent auction. See my earlier blog post for some details on auction rules.

CARB also held an advance auction of 2016 vintage allowances on May 16. 7.5 million of roughly 9.6 million allowances available were purchased at this advance auction. The settlement price was the same as the minimum bid price allowed, $10.71 per metric ton CO₂e. Though all of the 2016 vintage allowances offered were not sold in the third advance auction, demand rose over the second advance auction held in February 2013. In the third advance auction, CARB received about eight bids for every ten 2016 vintage allowances available; in the second advance auction, there were about five bids for every ten 2016 vintage allowances.

An Allowance Price Containment Reserve sale will take place June 27, 2013. The next allowance auction will be held August 16, 2013.

Governor Dayton Signs Bill Creating Solar Energy Standard

Thomas Braun — Fri, 24 May 2013 13:44:45 -0800

Yesterday, Minnesota Governor Mark Dayton signed the Omnibus Energy Bill into law. After months of negotiations, state legislators came to an agreement that brings Minnesota to the forefront of solar power following the creation of a solar energy standard, community solar garden program, and a unique value of solar tariff. Key provisions of the new law include: a solar energy standard, performance-based incentives for solar photovoltaic module manufactured in Minnesota, new pricing options for public utilities, and an expanded opportunity for distributed generation.

Solar Energy Standard

With Governor Dayton’s signature, Minnesota became the 17th state to enact a solar energy standard. Minnesota’s solar energy standard requires investor owned utilities to generate or procure a sufficient amount of solar energy so that by the end of 2020, at least 1.5 percent of the utility’s total retail electricity sales to retail customers in Minnesota comes from solar energy, with the goal of reaching ten percent solar by 2030. In addition, at least ten percent of the 1.5 percent required by 2020 must be met by solar energy generated by or procured from solar photovoltaic devices with a nameplate capacity of 20 kilowatts or less. Notably, the 1.5 percent requirement is in addition to, rather than carved out of, Minnesota’s existing renewable energy standard. Initial reports estimate that the solar energy standard will result in the development of more than 450 megawatts of solar by 2020.

Made in Minnesota

In addition to creating a solar energy standard, the new law creates a performance-based incentive for systems that use solar photovoltaic modules that were certified as "Made in Minnesota." Beginning January 1, 2014, and every each January 1 through 2023, $15 million will be collected from the public utilities and distributed to owners of eligible grid-connected solar photovoltaic modules with a nameplate capacity below 40 kilowatts as a production incentive payment. The commissioner of commerce is responsible for setting the solar energy production incentive rate for each module within 90 days of certifying a module as Made in Minnesota.

Solar Energy Incentive Program

The new law creates an additional incentive for small solar energy systems. Set to begin in 2014 and operate for five consecutive years, the program will collect $5 million a year from Xcel Energy (through its renewable development account) to fund solar energy systems of no more than a total nameplate capacity of 20 kilowatts. This program will assist the utilities in complying with their duty to secure 10% of the 1.5% solar standard from solar photovoltaic devices with a nameplate capacity of 20 kilowatts or less.

Community Solar Gardens

By September 20, 2013, Xcel Energy must file a plan with the Public Utilities Commission ("PUC") to operate a community solar garden program, which will begin 90 days after the PUC approves the plan. Community solar gardens give utility customers and other members of the designated community the option to buy solar panels that will be included in an array built in a communal location, rather than on the purchaser’s roof or in their backyard.　 Participants receive the benefit of a monthly credit on their electric bill while avoiding the cost of maintaining the panels. A community solar garden may be owned by either a public utility or any other entity or organization that contracts to sell the output and must be designed to offset the energy use of at least five subscribers in each community, of which no single subscriber has more than a 40% interest. A single community solar garden cannot have a nameplate capacity of more than one megawatt or supply more than 120 percent of the average annual consumption of electricity by each subscriber at the premises to which the subscription is attributed.

The first community solar garden (developed before the passage of the new law) in Minnesota is expected to be completed this weekend and consists of 171 panels located on an empty field owned by the Wright-Hennepin Cooperative Electric Association. Subscribers purchased panels priced at $869 each.

Value of Solar Tariff

For the first time, a public utility will be able to offer an alternative tariff that compensates customer-generators through a credit on their energy bill for the value to the utility, its customers, and society for operating distributed solar photovoltaic resources interconnected to the utility system and operated by the customer-generator primarily for meeting his own energy needs. Once approved, the utility’s value of solar tariff can be applied to a customer-generator’s interconnections occurring after the date of approval and in lieu of the rates mentioned in the net metering section below.

By January 13, 2014, the Department of Commerce’s Division of Energy Resources ("DER") is tasked to establish a methodology that utilities would follow in appropriately calculating or setting their alternate tariffs. The calculations should, at a minimum, account for the value of energy and its delivery, generation capacity, transmission capacity, transmission and distribution line losses, and environmental value. The DER may also, based on known and measurable evidence of the cost or benefit of solar operation to the utility, incorporate other values into the methodology, including credit for locally manufactured or assembled energy systems, systems installed at high-value locations on the distribution grid, or other factors. Further, the PUC may not authorize a utility to charge an alternative tariff rate that is lower than the utility's applicable retail rate until three years after the PUC approves an alternative tariff for the utility. Lastly, the utility must enter into a contract with the owner of the solar photovoltaic device receiving an alternative tariff rate that has a term of at least 20 years and pays the same rate per kilowatt-hour generated each year for the term of the contract.

Net Metering

The new law will also greatly expand the opportunity for distributed generation by raising the limit on net metering from 40 kilowatts to 1,000 kilowatts. Facilities generating less than 40 kilowatts will continue to receive the utility’s retail rate for net excess generation, while systems between 40 kilowatts and 1,000 kilowatts will receive the avoided cost rate for net excess generation. In the future, utilities will have the opportunity to decide whether to continue offering net metering or switch to a value of solar tariff. Once the cumulative generation of net metered facilities reaches four percent of the public utility’s annual retail electricity sales, the public utility may request the PUC to limit the public utility’s additional net metering obligations.

In addition to raising the cap on net metering, the new law authorizes utilities to use meter aggregation. Meter aggregation allows customer-generators to offset charges for energy usage from multiple meters located on contiguous property owned by the customer.

Setting the Stage for Further Renewable Development

Although the final version of the new law did not increase the existing Minnesota renewable energy standard, it directs all electric utilities and transmission companies to conduct an engineering study of the impacts on reliability and costs of, and to study and develop plans for the transmission network enhancements necessary to support, increasing the renewable energy standard to 40% by 2030, and to higher proportions thereafter, while maintaining system reliability. A team of 15 individuals appointed by the commissioner, in consultation with the electric utilities and transmission companies, will review the study’s proposed methods and assumptions, ongoing work, and preliminary results. The study is due to be completed by November 1, 2014. Other studies required as part of the new legislation include: the value of on-site energy storage and the value of solar thermal.

Voting Underway for Biofuels Digest Hottest Partners List

Graham Noyes — Thu, 23 May 2013 12:34:30 -0800

Voting is underway for the 2013 Hottest Partners in Biofuels and BioBased Products, a poll conducted by our friend Jim Lane of Biofuels Digest. Poll categories include:

Distributors
Engineering, procurement & construction
Enzymes, yeasts & sugars
Feedstocks (energy crops)
Feedstocks (gases and residues)
Finance (early-stage)
Finance (commercialization)
Lab services
Pretreatment systems
Professional counselors & consultants (legal, finance, etc)
Separation, microharvest, informatics & catalysis systems and services
Processing systems and services
Vehicle & vehicular equipment systems
R&D Partners
Strategic customers (fuels)
Strategic customers (bio-based products)

We encourage all Digest subscribers to vote. Of course, we'd appreciate your vote. Stoel Rives is listed in the Professional Counselors category.

If you are not already subscribing to the Digest, we recommend it as an informative and sometimes entertaining daily report that is available for both the biofuel and the biochemical industries. You can subscribe here.

Hottest Partners polling info is here.

California Public Utilities Commission Sets Fourth and Fifth Solicitations for the Renewable Auction Mechanism Program

Allison C. Smith — Thu, 16 May 2013 09:18:47 -0800

On May 9, 2013, the California Public Utilities Commission adopted Resolution E-4582, scheduling the fourth Renewable Auction Mechanism (RAM) auction to close on June 28, 2013 and setting a fifth RAM auction for no later than June 27, 2014. The RAM program allows renewable energy developers to bid their 3 MW to 20 MW projects to California’s three largest utilities – PG&E, SCE, and SDG&E – for a standard contract. The final Resolution did not differ substantively from the Commission’s draft Resolution, issued in early April 2013 and detailed in a previous blog post. Advice letters filed today with the CPUC provide the utilities' procurement targets for the fourth RAM auction. SCE will solicit projects totaling 181 MW, PG&E is seeking a total of 82 MW, and SDG&E is looking to procure 47 MW in total. The advice letters also breakdown the utilities' total procurement goals into the capacity sought in each of the three RAM product categories - baseload, peaking as-available, and non-peaking as-available.

Various parties commented on draft Resolution E-4582, attempting to influence the Commission's direction with the RAM program. Commenting on the draft Resolution, the Division of Ratepayer Advocates requested that the fourth and fifth auctions be delayed so that RAM projects from these auctions would come online during the utilities’ third RPS compliance period (2017-2020). In their comments, Recurrent Energy, the Solar Energy Industries Association, and the Large Scale Solar Association proposed that the Commission hold the fifth RAM auction within six months of the fourth auction, rather than up to a year after the fourth auction, and hold three subsequent auctions on an annual basis thereafter. They did not propose an increase in the total capacity of the RAM program; the three additional auctions would solicit capacity to replace any previously executed contracts that fail or are terminated. The Commission did not amend the draft Resolution to incorporate these recommendations.

Update: Minnesota Senate Passes Energy Omnibus Bill

Thomas Braun — Fri, 10 May 2013 13:11:13 -0800

Today the Minnesota Senate passed its omnibus energy bill by a vote of 37-26. This follows the Minnesota House of Representatives’ passage of its version of the bill on Tuesday. The bills now move to a conference committee for consolidation. After the conference committee completes its work, the consolidated bill will then return to each chamber for a final vote before heading to Governor Dayton’s desk.

Some major differences between the two bills means the conference committee has its work cut out for it. For instance, the Senate’s bill contains a 1% solar standard while the House of Representatives’ version includes a much more aggressive 4% solar standard. Whatever the number that ends up in the final bill, Minnesota is set to become only the 17th state to enact a solar standard, and one of the few whose standard is not a carve-out of an existing renewable energy standard.

Update: Minnesota House Passes Aggressive Solar Standard

Thomas Braun — Wed, 08 May 2013 05:45:21 -0800

On May 7th, the Minnesota House of Representatives passed its omnibus energy bill by a vote of 70-63. The bill includes a provision that requires investor-owned utilities to obtain 4 percent of their power from solar by 2025, with a goal of reaching 10 percent by 2030. In contrast to the aggressive House bill, the Minnesota Senate’s omnibus energy bill contains a more modest requirement for 1 percent by 2025. If signed into law, Minnesota would be the 17th state to enact a solar standard. Unlike solar standards in other states, however, this standard is not a carve-out of the existing 25 percent by 2025 renewable energy standard; rather, it is an additional mandate.

In order to protect some industries, the House bill exempts any “iron mining extraction and processing facility” or “paper mill, wood products manufacturer, sawmill, or oriented strand board manufacturer” that would otherwise be subject to potential rate increases stemming from the standard. The bill also exempts power cooperatives and municipal utilities from complying with the standard, which means that only the four investor-owned power companies serving Minnesota must comply: Xcel Energy, Minnesota Power, Otter Tail Power Co., and Interstate Power & Light.

The Minnesota House and Senate must complete any compromise bill by the May 20th deadline for votes.

RIN Futures Become a Reality

Graham Noyes — Mon, 29 Apr 2013 15:43:24 -0800

In a development that will increase liquidity and transparency in the RIN market, two major providers are making RIN future contracts available to be traded. Both CME Group and the IntercontinentalExchange (ICE) will have RIN products available to be traded by mid May. CME Group and ICE will enable over the counter trading (OTC) of D4 RINs, D5 RINs, and D6 RINs. D6 RINs are the most common RINs, typically fulfilled by corn ethanol production. D5 RINs are the most flexible premium RINs, representing advanced biofuel that may consist of biogas, advanced drop in fuels, or other fuel types that meet the 50% GHG reduction standard. D4 RINs are biomass-based diesel RINs, fulfilled primarily by biodiesel and renewable diesel fuels. The development of a futures market could provide a substantial boost to the development of advanced biofuel facilities by enabling their financing. Many financial market participants have in the past regarded RIN revenue as too speculative to include in a plant's pro forma but are likely to be reassured by the presence of RINs in the OTC market. We speculated in our recent white paper that the EPA's rulemaking on Quality Assurance Programs (QAPs) could facilitate the establishment of a RIN futures market. See http://www.stoel.com/showarticle.aspx?Show=10180

Minnesota Set to Boost In-State Solar Industry

Thomas Braun — Fri, 26 Apr 2013 12:22:06 -0800

The Minnesota State Legislature is considering a bold move to assist Minnesota’s fledgling solar industry. A new provision in the House transportation omnibus bill requires that any solar array installed on a building, highway, road, bridge, or land owned or controlled by the Minnesota Department of Transportation, must consist entirely of panels manufactured in Minnesota. After passing out of the House, the transportation omnibus bill will meet its Senate counterpart in a conference committee.

This development comes a short time after the Minnesota Senate added a provision to the energy omnibus bill that would create a solar energy standard alongside the existing renewable energy technology standard and a few years after the state legislature enacted the Minnesota Bonus Program. The new solar energy standard would require that utilities generate or procure an increasing amount of solar electric generation capacity at a minimum percentage (not yet specified) by 2016, 2020, and 2025. The Minnesota Bonus program provides Minnesota residents a financial incentive to install solar panels on their homes and businesses by requiring utilities to subsidize the solar power generated by the solar installations.

Under state law, the Minnesota State Legislature must finish its work by Monday, May 20th.

Obama Administration Releases National Ocean Policy Implementation Plan

Chad Marriott — Fri, 26 Apr 2013 10:41:40 -0800

Almost three years ago, I reported that the White House Council on Environmental Quality had issued the Final Recommendations of the Interagency Ocean Policy Task Force. Since that time, the Nation Ocean Council, formed by President Obama in Executive Order 13547, has been working diligently to prepare an agency roadmap to put the new National Ocean Policy into action.

On April 16, 2013, the National Ocean Council did just that when it published the National Ocean Policy Implementation Plan (the "Implementation Plan"). The Implementation Plan represents a significant step forward for the National Ocean Policy, and marine industries should be aware that the new interagency processes and actions it mandates – while not new law – may result in additional hurdles despite its express intent to streamline regulatory processes. For a more detailed summary of the Implementation Plan, take a look at the Ocean Law Alert we published earlier this week and feel free to contact us with any questions you may have.

IRS Issues Clarification Regarding "Binding Written Contract" in its "Start of Construction" Guidance for PTC or ITC Energy Credits

Greg Jenner — Fri, 26 Apr 2013 07:48:19 -0800

As we originally noted, the IRS guidance issued April 15 regarding the "start of construction" requirement for energy projects to qualify for PTC or ITC contained a "big surprise" regarding its definition of a binding contract. Unlike previous incentive programs, the guidance provided that contracts that limit damages to a specified amount, such as by use of a liquidated damages provision, would not be treated as “binding”. Only binding written contracts for work performed on behalf of the taxpayer are taken into account for purposes of satisfying the test for significant physical work.

Following questions about the definition, the IRS has now issued an updated version (PDF) of its Notice 2013-29.

Section 4, Physical Work, paragraph 4.03(1), originally read: “(1) Binding written contract. A contract is binding only if it is enforceable under local law against the taxpayer or a predecessor and does not limit damages to a specified amount (for example, by use of a liquidated damages provision).”

The revised Notice incorporates by reference the same 5% liquidated damages threshold that was used in the previous bonus depreciation regulations by adding the following text: “… For this purpose, a contractual provision that limits damages to an amount equal to at least five percent of the total contract price will not be treated as limiting damages to a specified amount. For additional guidance regarding the definition of a binding contract, see § 1.168(k)-1(b)(4)(ii)(A)-(D).”

If you have questions regarding the guidance's revised binding contract definition or any other issue regarding the PTC, the ITC or related matters, please contact one of the Stoel Rives attorneys listed below.

Chris Heuer at (503) 294-9206 or ckheuer@stoel.com
Greg Jenner at (202) 398-1795 or gfjenner@stoel.com
Adam Kobos at (503) 294-9246 or ackobos@stoel.com
Carl Lewis at (206) 386-7688 or cslewis@stoel.com
Kevin Pearson at (503) 294-9622 or ktpearson@stoel.com

California Links to Québec's Cap and Trade System

Allison C. Smith — Tue, 23 Apr 2013 07:34:03 -0800

On April 19, 2013, the California Air Resources Board (CARB) voted to link the California cap and trade program to Québec’s cap and trade system. CARB approved changes to the California cap and trade regulation on Friday to allow for the linkage, which is effective January 1, 2014. In practical terms, the linkage opens a new market for greenhouse gas allowances and offsets for California’s regulated entities and offset generators. As Québec’s cap and trade participants enter the California market, regulated entities in California could face tighter competition in bidding for allowances at CARB’s quarterly auctions.

CARB is also planning for additional amendments to the California cap and trade regulation this year. Many of the potential changes were teed up for consideration in CARB Resolutions 12-33, 12-51, and 11-32. Topics up for potential amendment include:

Refining the definition of resource shuffling and clarifying how CARB will deal with the problem. CARB will base proposed amendments to resource shuffling provisions on the recommended actions presented by staff in October 2012.
Providing transition assistance to electrical generating facilities with legacy power purchase agreements that do not provide for recovery of the cost of compliance with the cap and trade program.
Exemption for steam and waste heat emissions from combined heat and power.
Exemption for emissions from waste-to-energy facilities during the first compliance period (2013-2014).

Evaluate trade exposure categorizations and modify leakage risk determinations for rare earth mineral extraction activities, acid battery recycling activities, and liquid hydrogen production.
Product benchmarks for rare earth mineral extraction, acid battery recycling, dry gas extraction, food processing, foundries, metal casting, metal forging, and ethanol production. Staff may also propose benchmark modifications for thermal and non-thermal oil extraction, natural gas extraction, petroleum refining, hydrogen production, coke calcining, flat glass and container glass manufacturing, recycled boxboard manufacturing, and tissue product manufacturing.
The allowance allocation approach for the petroleum refining sector for the second (2015-2017) and third (2018-2020) compliance periods.
Allowance allocation to California universities that took early actions to reduce greenhouse gas emissions and invest in energy efficiency and combined heat and power.
Issues surrounding the implementation of the offset program.
New offset protocols for coal mine methane capture and rice cultivation practices.
Ensuring allowances prices do not exceed the highest tier price of the Allowance Price Containment Reserve.
Requirements for the retirement of renewable energy credits from electrical generating facilities to prevent double-counting.
Changes to implementation of the Auction Platform and Compliance Information Tracking Services System (CITSS) and modification of the current schedule for auctions and reserve sales.
Modification of information disclosure requirements for the CITSS.
Modification of current auction purchase limits.

CARB currently plans to release the language of draft proposed amendments in June 2013 and will consider adopting them in October 2013.

Draft California PUC Resolution Would Set Fourth RAM Auction for June 28, 2013, Authorize Fifth RAM Auction in 2014

Allison C. Smith — Fri, 12 Apr 2013 16:25:34 -0800

The California Public Utilities Commission has issued a Draft Resolution to schedule the fourth Renewable Auction Mechanism (RAM) solicitation and authorize a fifth RAM auction to take place in 2014. Draft Resolution E-4582, issued April 9, 2013, would close bidding for the fourth RAM auction on June 28, 2013. The fifth RAM auction authorized by the Resolution would close no later than June 27, 2014. Under the Draft Resolution, Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E) are directed to solicit two-thirds of their remaining RAM capacity allocation in the fourth auction. The remaining one-third of capacity, plus any unsubscribed capacity from previous auctions, would be solicited in the fifth auction. The Draft Resolution does not alter the total RAM procurement targets of the three utilities or other components of the program. However, the addition of the fifth auction provides RAM participants with an additional opportunity to bid their renewable energy projects to the utilities.

PG&E, SCE, and SDG&E are required under the current RAM Program to procure a combined 1,299 MW of renewable energy from 3 to 20 MW projects through four auctions taking place from 2011 to 2013. The third RAM solicitation closed December 21, 2012. The utilities will submit advice letters to the Commission in May 2013 with the results of the third auction. In previous submissions to the Commission, SCE stated that it sought to procure 186 MW in the fourth auction and SDG&E stated it planned to procure 44 MW in the fourth auction. Depending upon the success of its third auction, PG&E may have approximately 100 MW of remaining procurement capacity. Under the Draft Resolution, this remaining capacity will be solicited across the fourth and fifth auctions.

Comments on the Draft Resolution are due to the CPUC April 29, 2013. The Commission currently plans to vote on the Draft Resolution at its May 9, 2013 meeting.

President Obama Proposes $7.9 billion for Clean Energy Technology and a Permanent PTC

Thomas Braun — Fri, 12 Apr 2013 12:14:01 -0800

On April 10, President Obama fired the starting gun when he submitted to Congress his budget request for the 2014 fiscal year. The budget contains numerous proposals that are intended to make the U.S. "the leader in the clean energy sector and bring about a clean energy economy with new companies and jobs."

According to the White House, the budget would boost funding for work on clean energy technology by 30% over 2012’s enacted level. That amounts to $7.9 billion across all federal agencies, with the lion’s share going to the Department of Energy (“DOE”). The budget earmarks a total of $6.2 billion for DOE projects, including:

$614 million to “increase the use and reduce the costs of clean renewable power from solar, wind, geothermal and water energy,”
$80 million to advance clean energy integration into the delivery grid, and
$282 million to develop the next generation of advanced biofuels.

Perhaps the biggest news to come out of the budget announcement was President Obama’s call for a permanent and refundable production tax credit (”PTC”). The White House believes the permanent PTC would “provide a strong, consistent incentive to encourage investments in renewable energy technologies and to help meet our goal to double generation from wind, solar and geothermal sources by 2020.” Whereas in the past renewable energy developers have been subject to Congress’ yearly vacillations, a permanent PTC would create a more stable environment for the development of wind, solar, and geothermal projects.

Although the budget proposal is an important first step, it’s important to remember that at this point, President Obama’s proposal is just that – a proposal. The document must still jump numerous hurdles in Congress before it crosses the finish line and returns to the White House for his signature.

IRS Increases PTC Incentive

Thomas Braun — Mon, 08 Apr 2013 13:57:27 -0800

The IRS recently announced that the production tax credit (“PTC”) will be more valuable in 2013. In the April 3, 2013 edition of the Federal Register, the IRS issued an important piece of guidance for those in the renewable energy field, stating that the PTC incentive would increase for the 2013 calendar year, from 2.2 to 2.3 cents per kWh for fully qualifying energy sources, while remaining at 1.1 cents per kWh for sources like open-loop biomass and incremental hydro. The IRS last adjusted the PTC in 2010, when it increased the incentive to 2.2 cents per kWh. Prior to 2010, the IRS raised the incentive from 2.0 cents per kWh to 2.1 cents per kWh in 2008.

In addition to the increase, the IRS announced that because the 2013 reference price for electricity produced from wind (4.53 cents per kWh) did not exceed 8 cents when multiplied by the inflation adjustment factor (1.5063), the eventual phaseout of the credit would not begin in 2013.

While an increase in the PTC incentive will surely be greeted as good news by developers, many were hoping to have received guidance by the end of the first quarter on the new tax rules that were a part of the PTC extension. Historically, a project’s qualification was determined by the date the project was placed in service. Now, qualification is based on the date construction begins; that is, as long as construction begins before the end of the calendar year, the project is eligible for the PTC. Guidance from the federal government is necessary on what suffices for beginning construction. Until they hear otherwise, developers must operate under the assumption that they need shovels in the ground by December 31.