Renewable Energy Law News from week of 9/26/11

Udall Renewable Fuel Parity Bill Introduced in Senate

U.S. Sens. Tom Udall, D-N.M., and Mike Crapo, R-Idaho, introduced a bill on Sept. 15 that aims to level the playing field for advanced biofuels by altering certain elements of the renewable fuel standard to make it more “technology neutral.” The bill, known as the Renewable Fuel Parity Act of 2011, or S.1564, ultimately makes several changes to the language included in the Section 211 of the Clean Air Act.

According to a copy of the legislation provided by Udall’s office, the act could “improve the [RFS] program by combining the categories of ‘cellulosic biofuel’ and ‘advanced biofuel’ into one technology- and feedstock-neutral category of ‘advanced biofuel.’” The legislation would change the definition of advanced biofuel to mean both renewable fuel, other than corn ethanol, that has greenhouse gas (GHG) emissions 50 percent less than the baseline, and cellulosic fuel. It would also add the term “other fuel derived from algae” to the definition. The bill would also remove the term “cellulosic biofuel” from several places within the section.

Read more here.

University Teams to Showcase Affordable, Energy Efficient Living in U. S. Department of Energy Solar Decathlon 2011

Collegiate teams featuring over 4,000 students from around the world have descended on the National Mall’s West Potomac Park to showcase the highly energy efficient solar-powered houses they created for the U.S. Department of Energy Solar Decathlon 2011. Today’s opening ceremony kicks off the biennial competition that challenges collegiate teams to design, build, and operate houses powered by the sun that are affordable, energy efficient, attractive, and easy to live in.

“The Solar Decathlon collegiate teams are showing how clean energy products and efficient building design can help families and businesses reduce energy use and save money,” said Energy Secretary Steven Chu. “The event challenges talented students to become pioneers of clean energy technology and helps ensure that our nation remains competitive in the workforce of tomorrow.”

In addition to educating the public about how to save energy and save money, the Solar Decathlon also provides unique training to the next generation of engineers and architects. Over the last decade, the competition has prepared approximately 15,000 students to become future innovators and entrepreneurs in clean energy technology and efficient building design.

Read more here.

Rhode Island Rapidly Implementing Feed-In Tariffs for Distributed Generation

In a move that took North American renewable energy advocates by surprise, tiny Rhode Island has passed a law implementing a limited feed-in tariff and set it on a fast track to implementation.

The law passed the legislature and was signed by Governor Lincoln Chafee on 29 June, 2011. Chafee is a former Republican Senator representing Rhode Island in the US Congress. He joins former Governor of Hawaii, Linda Lingle, as a GOP or former GOP office holder signing feed-in tariff legislation.

Rhode Island becomes only the second state in the Northeast to implement a feed-in tariff program and one of the few states in the U.S. to do so.

While not the first with a feed-in tariff, Rhode Island may set a record for the rate of implementation. Specific differentiated tariffs must be set by the end of September and the program launched in mid-October.

Read more here.

Photo courtesy of http://www.flickr.com/photos/53225371@N05/5948747438/#/

DPS releases Vermont Draft Energy Plan

The Vermont Department of Public Service (DPS) released a draft of the new 2011 Comprehensive Energy Plan (CEP) earlier this week.  By statute, the Comprehensive Energy Plan must be updated every five years, and the plan is intended to provide a policy road map for Vermont’s energy future, touching on electricity, thermal heating sources, transportation and land use issues.


This draft follows several months of public comment sessions held by the DPS around the state and provides a valuable perspective into the Shumlin Administration’s top energy policy goals.  Governor Peter Shumlin has been a strong supporter of renewable energy for many years and has also been outspoken both on climate change and on closing Vermont’s only nuclear plant, Vermont Yankee.  Renewable energy advocates have been anxious to see how the administration will translate those general positions into specific policies, and this draft plan gives some clear perspective on the direction the Shumlin administration is headed.
We are still reviewing the details of the 420-page draft plan, but several highlights are worth noting quickly.  Among other things the draft plan:

• Sets a goal of attaining 90% of energy from renewables.  Where nonrenewables are necessary, the plan recommends using natural gas and biofuel blends ”to virtually eliminate” reliance on oil.
• Broadens efficiency focus beyond electricity by increasing investment in heating efficiency and developing a “whole-building approach to all-fuels efficiency.”
• Directs renewable energy generation to serve transportation and heating needs, not just electricity needs.  (Renewable generation currently provides over half of Vermont electricity needs but only 23% of Vermont’s total energy usage.)
• Recommends adoption of a streamlined Renewable Portfolio Standard (RPS) for electricity load, with an aggressive total electricity goal, and a next-generation Standard Offer program for small-scale distributed generation.
• Seeks mandatory mediation for Section 248 siting projects so that developers and opponents can seek solutions and avoid litigation.
• Plans for expansion of natural gas infrastructure to Middlebury and eventually Rutland.

Public comment sessions on the draft plan are scheduled around the state on the following dates:

• September 27^th (7-9 p.m.) – Middlebury High School (73 Charles Avenue)
• September 28^th  (7-9 p.m.) – Brattleboro High School (131 Fairground Road)
• September 29^th (7-9 p.m.) – Rutland High School (22 Stratton Road)
• October 3^rd (7-9 p.m.) – Colchester High School (131 Laker Lane)
• October 6^th (7-9 p.m.) – Danville School (148 Peacham Road)

Public comments may also be submitted in writing until 5:00 pm, Monday, October 10, 2011.  Filing instructions are at http://www.vtenergyplan.vermont.gov/comment.

For more coverage on the new draft energy plan, please see these recent articles:

• http://www.greenenergytimes.org/2011/09/16/state-energy-plan-signals-vermont-is-open-for-business/, Green Energy Times
• Public Input is Crucial to Crafting Vermont’s Comprehensive Energy Plan, VNRC

“Beginning Construction” Requirements for Section 1603 Cash Grants for Renewable Energy Projects

The federal Section 1603 Treasury Grant Program has provided a major incentive for the development of renewable energy projects in recent years by allowing owners of such projects to receive a cash grant in lieu of federal tax credits for specified energy property. The U.S. Department of the Treasury reports that it has paid out $8.5 billion to approximately 18,000 Section 1603 grant applicants to date.

The program was originally set to expire last year, but it was extended so that projects that will be placed in service by the end of 2011 are eligible for the grant. Additionally, projects that have begun construction by the end of 2011 and will be placed in service by 2012 (wind), 2013 (most other renewables), or 2016 (solar), can take advantage of the program. With the “begin construction” date fast approaching, it is important for renewable energy developers to understand how to ensure that they will be eligible for Section 1603 grants. Some of the important factors needed to meet the Treasury Department’s requirements for beginning construction are summarized here.

There are two separate and independent ways that an applicant for a Section 1603 grant can establish the beginning of construction:

1. Physical work of a significant nature, or
2. 5% “safe harbor” of costs paid or incurred

The physical work of a significant nature method of establishing that construction has begun has the following constraints/limitations:

• The physical work must take place on “energy property”—this means the property that is integral to the production of energy.

• Transmission equipment does NOT count as energy property.
• Generally, the Treasury Department will include all interconnection equipment, including the step-up transformer, as energy property
• Everything on the transmission side of the step-up transformer will be considered transmission equipment, not specified energy property.
• Most road building will not count as “energy property,” but each project is scrutinized on an individual basis and some roads could qualify as energy property.
  
  
• The physical work must be part of a “continuous program of construction” and Treasury puts particular emphasis on continuity.
  
• Unplanned work stoppage that is out of the control of the owner/contractor is acceptable.
• The Treasury Department’s examination will be on what kind of work continuity is expected for a project of its type, in the location where the project is being built—winter or other weather-related work stoppages can be acceptable.

• The work includes work done by a contractor, as long as it is done pursuant to a binding written contract, legally enforceable under state law, with damages not less than 5% of the total contract.

• It is important that the contract is in place before work is commenced.

The physical work of a significant nature method also has the following flexibility:

• There is no minimum amount of work that must be complete by the end of 2012; the work can be very minimal because the emphasis is on the continuity of the work.
  
• The work need not take place at the project site; indeed, no site need even be identified for the project under this approach.

The 5% Safe Harbor method of establishing the beginning of construction focuses on the actual expenditures made by the applicant, and it requires that the applicant:

• has paid or incurred 5% of the total actual costs of specified energy property.

• meets the “economic performance rule” from Section 461(h) of the tax code – this means that the applicant has to actually make the payment and reasonably expect to receive the property within 3½ months.
  
• “Receiving” or being “provided” the property can mean delivery, acceptance, or the passage of title of the property, but the applicant must use the same method throughout the term. 
• Making a deposit on the property is NOT sufficient to count toward the 5% safe harbor.

• incurs any contract-based costs pursuant to a binding written contract, legally enforceable, with damages not less than 5% of the total contract.
• possibly needs to have a project site identified (this issue is not entirely clear under current U.S. Treasury guidance).

The 5% safe harbor method also has the following flexibility:

•  Costs/contracts may be for services, not just goods.
• There is no need to build/construct anything.
• There is no continuity requirement.
• “Off-the-shelf” items qualify towards the 5% of costs (but note that purchases of extended warranties do NOT count toward the 5%).
• There is a special “look through” rule that can be used to meet the economic performance rule for the applicant:
• if the applicant’s supplier meets the economic performance rule, then this can be attributed to the applicant.

Potential Section 1603 applicants should also be aware that the date for beginning construction is December 31, 2011, and applications for projects that will begin construction but will NOT be placed in service by the end of 2011 must be submitted by September 30, 2012.

Developers should also keep in mind that Section 1603 grants are available for expansion of existing projects, as long as there is additional capacity being provided at the facility. Even if a Section 1603 grant was used for the original facility, the developer can still be eligible for an additional grant if additional capacity is being created.

The Treasury Department emphasizes that the completeness of an application by the final date is of paramount importance, and applicants should make use of the Section 1603 website and associated checklists and other guidance to ensure that they understand all application requirements.

Disclaimer: As with all of our blog posts, this is not legal advice. Every situation regarding Section 1603 eligibility is fact-specific and would need to be treated on a case-by-case basis. No decisions should be made based on the information contained in this blog post alone. Readers are encouraged to make sure they have gathered all relevant information and to contact an attorney to discuss their specific situations.

Comments on PSB Staff Proposal for New Vermont Renewable Energy Portfolio Standard Due Sept 14, 2011

The Vermont Public Service Board (PSB) is in the process of preparing a report concerning the development of a renewable portfolio standard (RPS) in Vermont to revise or replace the current RPS and Sustainably Priced Energy Enterprise Development (SPEED) program passed by the Legislature in 2005.

Board staff have prepared recommendations for a potential new RPS program, which will be presented to the PSB later this month. Comments on staff recommendations are due September 14, 2011. The Board is then required to prepare and deliver its final report to the legislature no later than October 1, 2011.

Unlike other New England states, Vermont has not yet implemented a mandatory RPS program. The current SPEED program was passed in 2005 and is designed to encourage the development of renewable energy. It provides an incentive for the state’s retail electric utility providers to enter into long-term contracts with in-state renewable energy generators but does not set mandatory purchasing requirements for utilities. Instead, the program, as amended in 2008, sets a statewide goal that 20% of the state’s retail electric sales come from new in-state renewable energy facilities (often referred to as SPEED projects) by 2017. The legislation also included the general design for a potential mandatory RPS program (codified at 30 V.S.A 8004) and included a trigger requiring implementation of the mandatory RPS program if the PSB determines that the SPEED program has not been successful. The RPS requirement is triggered unless Vermont utilities, collectively, meet at least 5% of 2005 load, and incremental load growth from January 1, 2005, to December 31, 2012, up to ten percent of 2005 load, through contracts with renewable resources that come on-line after January 1, 2005.

In 2010, the Vermont Legislature passed Act 159, directing the PSB to evaluate and provide recommendations on potential revisions to the SPEED program (including potentially replacing the program with a more traditional RPS mechanism). The report is required to include, among other things:

1. An evaluation of whether or not Vermont should adopt an RPS to amend or replace the RPS adopted in 2005 or, in lieu of adopting such an RPS, should adopt revised goals and requirements for the SPEED program.
2. An evaluation of whether the voluntary goals and aspects of the SPEED program should be made mandatory.
3. An evaluation of the economic and environmental benefits and costs of adopting an RPS at each of the following percentages of Vermont’s electricity supply portfolio: 25, 50, 75, and 100 percent. The board shall also perform the same evaluation with respect to the imposition of mandatory SPEED goals at the same portfolio percentages.
4. An evaluation of the effect on the development of in-state renewable energy resources that may occur if an RPS is adopted and, under such an RPS, out-of-state resources with capacities in excess of 200 MW are considered renewable. The board shall also perform the same evaluation with respect to the imposition of mandatory SPEED goals. Such evaluations shall take into account each of the percentages discussed under subdivision (2)(C) of this subsection.
5. Analysis of RPS statutes and rules that have been adopted in other jurisdictions and their strengths and weaknesses and a discussion of how a Vermont RPS and, in lieu of an RPS, revised SPEED goals and requirements might integrate with such statutes and rules.
6. Consideration of whether or not Vermont should adopt a definition of renewable resources that includes tiers or classes and a recommended proposal for such a definition.
7. Consideration of the manner in which Vermont would require third party certification that an energy resource is renewable.
8. Consideration of the manner in which Vermont would require third party certification that a renewable resource has low environmental impact.
9. Consideration of the extent to which a Vermont RPS and, in lieu of such an RPS, revised SPEED goals and requirements would include the purchase of electric energy efficiency resources and the appropriate means of verification that the associated energy savings are achieved.

PSB staff have held several public meetings over the past year to meet the October 1, 2011 deadline for the report. Prior meetings have included discussions on the effectiveness of the SPEED program, performance RPS programs in other states, and potential designs for a new RPS program in Vermont. The Board has also retained the Clean Energy States Alliance and Sustainable Energy Advantage (CESA/SEA) as consultants to analyze different potential policy mechanisms.

A draft of the CESA/SEA report – entitled An Analysis of Renewable Energy Policy Options in Vermont – was recently released and is available on the Board’s RPS Study website. The report sets forth various renewable policy design options and evaluates the advantages and disadvantages of each different design option; it also includes economic modeling of various policy scenarios. The CESA/SEA report, and the Board Staff’s recommendations for a potential RPS program were presented during a public meeting at the state house on September 1, 2011.

Based on the analysis and economic modeling contained in the CESA/SEA report, the Board Staff is currently recommending that Vermont adopt an RPS which would require Vermont utilities to obtain 75% of their retail electric power from renewable sources by 2032, with 40% of this requirement derived from maintenance of the state’s existing percentage of renewable resources, 30% of the requirement derived from new renewable resources constructed after 2005, and 5% of the requirement derived from in-state renewable distributed generation. Details on the RPS proposal are included in the staff report.

Comments on the Board Staff proposal are due this week, on Wednesday September 14, 2011 and may be submitted directly via e-mail to Ed McNamara