Renewable + Law

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.

Community Solar Projects Coming to Minnesota

Thomas Braun — Thu, 04 Apr 2013 11:35:14 -0800

At a time when the Minnesota Legislature is considering a proposal that would create a solar electricity standard, community solar projects are gaining popularity. Six weeks from now, Wright-Hennepin Cooperative Electric Association will begin construction on Minnesota’s first community solar program, with the goal of having the project completed by Memorial Day.

A community solar program gives 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. To enroll in Wright-Hennepin’s program, located in Rockford, Minnesota, participants purchased panels priced at $869 each. The 171 panels in the array sold out in four months.

Wright-Hennepin will use panels built by Bloomington, Minnesota-based TenKSolar that provide a total of 53,000 kW of power - enough to power four homes. In addition, the Wright-Hennepin project will be the first in the nation to incorporate battery storage. The batteries, from Silent Power of Baxter, Minnesota, will enable the utility to use the stored power for load shifting when the sunshine is weak but customer demand is high.

While community solar projects are just getting started in Minnesota, they are already popular in states like Colorado, where two years ago the state legislature passed a law encouraging the development of such projects. Were the Minnesota Legislature to create a solar electricity standard, community solar projects could become a popular way for the utilities’ to fulfill their obligations.

Army Seeks Feedback on Standardized Performance Work Statement for Renewable Energy Projects

Chad Marriott — Tue, 02 Apr 2013 09:45:43 -0800

On April 1, 2013, the Army Energy Initiatives Task Force (“EITF”) and the U.S. Army Mission and Installation Contracting Command at Fort Sam Houston in Texas published a template Renewable Energy Service Agreement Performance Work Statement (the “PWS”) for comment by interested stakeholders.

The proposed scope of the PWS is broad, covering everything from insurance and OSHA requirements to interconnection responsibilities and power prices. Thus, the PWS purports to be part power purchase agreement, part EPC agreement, and part operations and maintenance agreement. As discussed in my previous entry, this comment opportunity is important to all renewable energy developers that intend to contract with the Army. However, it should be of particular interest to teams that responded to the Army’s Multi-Award Task Order Contract (“MATOC”) last fall because the final PWS will likely be incorporated into each base-level RFP issued under the MATOC.

It is important to note that the template is not a “one-size-fits-all” document and contemplates quite a bit of input from individual bases at the time RFPs are issued. Thus, the PWS is malleable and the comments the Army receives through this request for information will not result in a final form of PWS that will be incorporated into every contract issued. Rather, the Army is looking for input to create a “clear, concise and understandable” PWS template that will reduce the need for discussion and clarification of provisions common to all contracts down the line.

For more information, attend the EITF webinar on April 11, 2013 from 1:00-2:00 p.m. EST. see Solicitation No. W9124J13EITF1, which can be found on the FedBizOpps website. To register for the webinar, go to https://www4.gotomeeting.com/register/518667447. Registration is limited to the first 500 participants.

As was the case with the MATOC, comments and questions must be submitted via Bidder Inquiry on the ProjNet website (https://www.projnet.org). Comments must be submitted no later than 5:00 p.m. EST on May 29, 2013.

Minnesota RES Expansion Moves Forward

Thomas Braun — Tue, 02 Apr 2013 09:12:18 -0800

The Minnesota State Legislature’s attempt to expand the amount of electricity that utility companies secure from renewable energy sources cleared a major hurdle recently, as H.F. 956 was included in the House omnibus energy bill. H.F. 956 proposes to increase Minnesota’s renewable energy standard (“RES”) to 40% by 2030. The current standard requires that Minnesota’s utilities secure 25% of their power from renewable sources by 2025 (30% for Xcel Energy in exchange for nuclear waste storage at Prairie Island).

Although the Senate companion bill, S.F. 901, does not include the same language, the bill includes a 40% by 2030 renewable energy transmission and integration study. Such a study lays the foundation for an expanded RES, possibly as soon as the conference committee.

In addition to the RES expansion, the bills set forth requirements for the creation of a solar electricity standard and an expansion of the use of distributed generation. The solar electricity standard contained in S.F. 901 would require utilities to generate or procure solar electric generation capacity at a minimum percentage (not yet specified) by 2016, 2020, and 2025. Like the current RES, the solar electricity standard would set different values for Xcel Energy. Notably, the solar energy procured for the solar electricity standard could not be used to satisfy the utilities’ obligations under the RES. H.F. 956 seeks to expand the use of distributed generation throughout Minnesota by requiring the Minnesota Public Utilities Commission to initiate a proceeding to establish a generic standard for utility tariffs for interconnection and parallel operation of distributed generation projects. Among other things, the tariff standards must encourage maximum penetration of distributed generation.

Despite the recent success, more hurdles remain for these bills. The bills must pass additional legislative committees, the House and Senate floors, a conference committee, and secure the Governor’s signature. The remaining seven weeks of the 2013 legislative session should provide some interesting developments.

Comment Period Coming to a Close for EPA's Proposed Rule Creating New Quality Assurance Program for Renewable Identification Numbers

Thomas Braun — Tue, 26 Mar 2013 09:12:04 -0800

On February 21, 2013, the U.S. Environmental Protection Agency (“EPA”) opened the comment period on a proposed rule that would create a Quality Assurance Program (“QAP”) to combat fraudulently-created Renewable Identification Numbers (“RINs”) – a serial number assigned to a volume of biofuel for the purpose of tracking its production, use and, trade. A public hearing on the proposal was held in Washington, D.C. on March 19, 2013. Interested parties must submit their comments no later than 30 days thereafter, or by April 18, 2013, if they hope to influence the rulemaking process.

The QAP is intended to respond to the growing problem of fraudulently-created RINs, a practice wherein RINs are created and sold without the manufacture of the corresponding volume of biofuel. It aims to establish a set of options, or quality assurance procedures, to verify RIN validity and then also creates an affirmative defense against civil liability for obligated parties who purchase RINs under a QAP program that are later found to be invalid. This proposed change amends the EPA’s original “buyer beware” approach, which imposed strict liability on all obligated parties that transferred or used invalid RINs, no matter the RIN’s origin. The “buyer beware” approach failed to stem the tide of invalid RINs from entering the marketplace, as more than $100 million in fraudulent RINs were identified in the three years after the creation of the standard. Indeed, the “buyer beware” approach led to unintended consequences for smaller, less established biofuels producers, as the increased risk of EPA enforcement actions led obligated parties to favor more established producers.

For more information on the proposed regulatory changes to the Renewable Fuel Standard program, specifically the QAP’s effect on the RIN market, download the recently published white paper by Stoel Rives lawyers Graham Noyes and Sara Bergan.

South Dakota Aims to Increase Development of Wind Power

Thomas Braun — Mon, 25 Mar 2013 05:27:02 -0800

South Dakota’s gusty plains are well known for their pheasant hunting potential. Indeed, one is much more likely to see a pheasant utilizing the breeze to sail out of harm’s way than a turbine harnessing the wind to power a home or business. Despite ranking in the top five states for best wind resources, South Dakota ranked 16th in 2011 for installed wind capacity as a result of a prohibitive tax on wind farm construction that is up to ten times higher than the rate in Iowa, Minnesota, or North Dakota. This problem finally caught the attention of the South Dakota Legislature, as lawmakers recently agreed on a proposal that potentially opens the door to a new era of increased investment in wind power.

Senate Bill 235, which was signed by Governor Daugaard on March 20, allows developers to apply to the Governor’s Office of Economic Development (“GOED”) for a reinvestment payment on (1) projects costs for a new or expanded facility that exceed $20 million or (2) project costs for equipment upgrades that exceed $2 million. Once the GOED has determined that the application is complete, the State Board of Economic Development will review the application and make a determination of whether the project should be approved or disapproved, based on, among other things, the likelihood that the project would have occurred without the reinvestment payment. The board may approve a reinvestment payment that is equal to or less than the South Dakota sales and use tax paid on project costs, which equates to up to a full refund of the state’s four percent sales tax.

Iberdrola Renewables’ recent analysis estimates that a $200 million wind project in South Dakota would be liable for $11.4 million in upfront taxes, compared to less than $1.5 million in North Dakota, Iowa, and Minnesota. This disincentive for construction in South Dakota is so heavy that the superior wind resources cannot make up the difference. Moving forward, the upfront costs of a typical $200 million project would be reduced to less than $1 million – on par with other Midwestern states. South Dakota lawmakers hope this benefit, in conjunction with the recently extended federal production tax credit, will be the tailwind investors and renewable energy advocates have been looking for to improve the industry’s outlook in the state.

Army to Seek Comments on Standardized Performance Work Statement for Renewable Energy Projects

Chad Marriott — Mon, 04 Mar 2013 12:53:17 -0800

On February 12, 2013, the U.S. Army Contracting Command announced that the Army Energy Initiatives Task Force ("EITF") is developing a standardized Utility Service Contract Performance Work Statement ("PWS") to be used for contracts executed under its long-term power procurement authority (10 U.S.C. 2922a). The intent is to have a PWS that is clear and understandable to both the renewable energy industry and the government. The EITF intends to publish a draft utility service contract solicitation at the end of this month-i.e., on or about March 29. Once published, they will accept comments for 60 days.

This comment opportunity will be important to all renewable energy developers that intend to contract with the Army, but it will be especially important for teams that responded to the Army's Multi-Award Task Order Contract ("MATOC") last fall. The comments received through this solicitation will likely be incorporated into the PWS that is included in base-level RFPs issued under the MATOC. And interestingly, the timing lines up pretty well. Assuming that the draft PWS is issued at the end of March (like the EITF anticipates), then comments will be due at the end of May. Last year, the Army was saying that it would announce awardees under the MATOC at (or near) the end of Q2 2013. If that goal becomes a reality, then the comment period on the draft PWS will close one month prior to awards under the MATOC, which would ostensibly give the Army enough time to incorporate the revised language into any base-level RFPs that would follow quickly on the heels of the MATOC awards.

For more information, see Solicitation No. W9124J13EITF1, which can be found on the FedBizOpps website.

U.S. District Judge Rules on Ralls Corp Challenge to President Obama's Divestiture Order

Alexandra Mertens — Mon, 25 Feb 2013 13:19:22 -0800

There has been a new development in the effort by Ralls Corporation, a company owned by two Chinese nationals, to challenge President Obama’s September 2012 order requiring it to divest its interests in four wind projects in Oregon and to remove any equipment and infrastructure it had placed on the sites of the proposed projects. The President’s order, issued pursuant to section 721 of the Defense Production Act of 1950 (“Section 721”), had cited unspecified national security risks as the reason for blocking Ralls Corporation’s acquisition of the wind projects, but the sites of the four proposed projects are near or within restricted airspace of U.S. Naval Weapons System Training Facility Boardman.

On Friday, U.S. District Judge Amy Berman Jackson ruled that she could not overturn President Obama’s order. In her opinion, Judge Jackson said that the law "is not the least bit ambiguous about the role of the courts: 'The actions of the president . . . and the findings of the president . . . shall not be subject to judicial review.'" Therefore, the judge declined to review the President’s findings on the merits. However, she did determine that the court has jurisdiction to determine whether the President followed proper procedures in implementing Section 721. The judge will rule on that due process issue following further briefing by the parties. If Ralls Corporation wins on the merits of the due process claim, it may be entitled to hear the reasons for the President’s decision to block the acquisition of the wind projects.

*Update: Ralls Corp reacted to Judge Jackson's ruling by insisting they would "persist in the lawsuit to the end and will appeal to the circuit court or the supreme court [sic] of the United States if necessary." See here for more of the company's reaction.

Download a full copy of the opinion here (PDF). See our prior posts for more background on the case.