GTH Energy & Natural Resources Law Blog

Northwesterners hardly need to be reminded of the value of the regional hydroelectric system, but statistics released earlier this month by the U.S. Energy Information Administration underscore yet again the value of the region's hydro resources. The EIA data show that renewable energy, including hydroelectric power, now accounts for about 12% of total U.S. electric generation. The State of Washington leads, by far, in the production of renewable energy, producing a total of more than 950,000 BTU, fully a third more than the next most productive state, California. Oregon is solidly in third place, producing nearly a half-million BTU.

Using the EIA data, Tim McDonnell of Slate Magazine recently published an excellent interactive map showing renewable energy production by state, with options to show total renewable production as well as production of solar, wind, hydro, and geothermal power. Keep in mind that the map shows total power production rather than power production on a per capita basis. If renewable power production were shown on a per capita basis, Washington (population less than 7 million) and Oregon (population less than 4 million) would appear as behemoths next to California (population more than 38 million).

Take that, California!

The Energy Trust of Oregon recently released an RFP for Renewable Energy Project Assistance Funding. The Energy Trust will provide $40,000 to $150,000 to selected projects to support early-stage development of non-solar renewable energy in Oregon. Funding will support such early-stage development activities as feasibility studies, permitting, interconnection studies, engineering and design, and financing. The response deadline is June 3, 2013.

The Energy Trust is a non-profit organization supported by public-purpose charges imposed on the customers of Portland General Electric, Pacific Power, Northwest Natural Gas, and Cascade Natural Gas.

Reflecting new Gov. Jay Inslee's strong interest in renewable energy and climate change, these issues were hot topics during this year's legislative session. With the conclusion of the regular session at the end of April, the fate of most energy-related bills has now been decided. Because Gov. Inslee has called an executive session to address unresolved tax and budget issues, the final story has not yet been written. But a number of bills important to electric utilities, renewable energy developers, and others in the energy industry have now become law.

As has become routine in recent years, Washington's Renewable Portfolio Standard, Initiative 937 ("I-937") continues to be a flashpoint for controversy. Although comprehensive reforms reflecting a "grand bargain" between environmental and industry interests once again eluded the legislature, three important changes to I-937 were enacted. These are:

SB 5400 (signed April 23): This legislation allows a utility subject to I-937 to count wind energy imported from states where the utility has retail customers toward the utility's I-937 compliance obligations. The bill provides a limited waiver from I-937's requirement that renewable power must come from the Pacific Northwest. For reasons we have previously discussed, this provision is, at best, constitutionally suspect. It is also probably counterproductive because California has used similar territorial restrictions to limit access to its renewables marketplace, causing havoc in the Pacific Northwest renewables industry. As a practical matter, the result of the bill is somewhat limited, allowing PacifiCorp to count otherwise-excluded Wyoming wind resources toward its I-937 compliance obligations.

HB 1154 (signed May 1): This bill amends I-937's prohibition against double-counting of the environmental benefits of renewable generators so that biomass and biogas producers can sell carbon offsets attributable to the destruction of methane (a powerful greenhouse gas), while still receiving credit for renewable energy production under I-937. This change will allow dairy digesters, landfill gas generators, and similar renewable generators to participate in emerging carbon-offset markets like those in California. These markets promise a potentially substantial revenue stream for operators of biomass and biogas facilities. This legislation may therefore kick-start construction of such facilities in Washington.

SB5297 (Governor's signature pending): This bill is follow-up legislation to the complex legislative package passed in 2011 to facilitate the transition of the Centralia Steam Plant from coal to natural gas. Part of the 2011 legislation allowed utilities to purchase long-term "coal transition power" contracts from Centralia to provide the financial assurances necessary for the refueling of the plant. This bill helps facilitate contracts for "coal transition power" by permitting utilities to purchase coal transition power without threatening their eligibility for I-937's "safe harbor" for no-growth utilities. The "safe harbor" provision allows utilities with no load growth to comply with I-937 by spending 1% of their retail revenues on eligible renewable resources, even if that spending does not achieve otherwise-applicable portfolio requirements for renewable resources.

Continue reading "New Washington Energy Legislation: Legislature Continues to Wrestle With Questions Raised by Renewables" »

PacifiCorp late yesterday issued a Request for Proposals ("RFP") for Oregon solar photovoltaic projects. The RFP is intended to help PacifiCorp comply with Oregon's Renewable Portfolio Standard, which includes a requirement for utilities to acquire solar power.

The RFP seeks bids from solar systems with a capacity of between 500 kW and 5 MW. PacifiCorp aims to acquire a total of up to 6.7 MW of solar capacity. Projects must interconnect directly with PacifiCorp's system or have firm transmission capacity to deliver power to the PacifiCorp system. Responses to the RFP are due on June 11, with final selection of winning bids scheduled for October 4, 2013. The project must achieve commercial operation by December 31, 2014.

If you have any questions about the RFP, PacifiCorp, the Oregon RPS statute, or other matters concerning renewable energy development, please contact a member of GTH's Renewable Energy practice group. We have decades of experience in all aspects of renewable energy development, including siting, permitting, contracting, financing, state and federal tax issues, transmission and interconnection.

While many of us were scrambling to finish our tax returns on April 15, the Internal Revenue Service ("IRS") was also busy, issuing long-anticipated guidance of critical importance for renewable energy developers. The new IRS guidance, Notice No. 2013-29, provides standards for determining whether the "beginning of construction" of a renewable energy facility has occurred by January 1, 2014, the deadline for the facility to be eligible for the Production Tax Credit ("PTC"). Eligible generation owners may opt to take the energy investment tax credit ("ITC") in lieu of the PTC. The new IRS guidance is of great importance to renewable energy developers because the availability of PTCs or ITCs is often critical to project economics.

Congress extended the deadlines for PTC eligibility as part of the 2012's American Taxpayer Relief Act. Before that law was enacted, a facility was required to be "placed in service" before January 1, 2014, to be eligible for the PTC. Wind facilities were required to be "placed in service" by January 1, 2013. The new legislation makes all types of eligible renewable energy facilities eligible for the PTC if they "begin construction" before January 1, 2014. The legislation left open the question of what it means to "begin construction." IRS's new Notice provides some specific parameters to answer than question.

Continue reading "IRS Provides Tax-Day Gift to Renewable Energy Producers, Providing Guidance on Production Tax Credit Eligibility" »

Current conventional wisdom in the energy industry holds that the natural gas "fracking" revolution will lead to an era of sustained supply gluts and low prices. Low natural gas prices, in turn, will allow for rapid expansion of gas-fired electric generation, leading to a period of sustained low prices in the electricity markets. According to the conventional wisdom, then, the fracking boom will create a sustained economic headwind for renewable generators forced to compete with low-priced gas generation. But several recent scientific and economic studies suggest that the conventional wisdom might be wrong.

By now, the tectonic changes in energy markets arising from the massive increase in natural gas production brought about by application of horizontal drilling and hydraulic fracturing techniques -- commonly known as "fracking" -- are well known. As usefully summarized in this recent primer by Harvard environmental policy professors Michael McElroy and Xi Lu, fracking reversed a long-term decline in domestic natural gas production, driving prices down as much as 86% from their 2008 highs. Among the many unanticipated results, coal-fired generation has declined precipitously, reaching a record-low of 34% of generation last year. Because gas-fired generation produces only about one-half the carbon dioxide of coal generation, the nation's carbon dioxide emissions have fallen to 1992 levels despite persistent political paralysis on climate issues.

Continue reading "Will The Fracking Revolution Bouy Renewables?" »

Fulfilling a promise made in a November order, the Federal Energy Regulatory Commission ("FERC") on March 22 filed suit against the Idaho Public Utilities Commission ("IPUC"), asserting that the IPUC violated FERC rules under the Public Utility Regulatory Policies Act ("PURPA"). The lawsuit follows on the heels of a March 15 FERC order (Grouse Creek Wind Park LLC, EL13-39-000), in which FERC found another IPUC PURPA violation, meriting a second enforcement action against the IPUC. FERC's actions are extraordinary, marking the first time FERC has exercised its PURPA enforcement authority directly against a state commission.

PURPA, passed in 1978, was the first blow struck against the traditional industry model of regulated, vertically-integrated utility monopolies. Passed in response to the energy crises of the 1970s, PURPA was intended to open the generation market to small, independent producers. Thus, PURPA mandates that utilities purchase power from "Qualifying Facilities" ("QFs") -- generally, smaller, independently-owned renewable generation facilities -- at "avoided cost" rates, equal to the cost of the marginal resource the utility would have to purchase if it did not buy from the QF. This purchase obligation lies at the heart of the FERC-IPUC controversy.

Continue reading "New Front In Western Wind War: FERC Files Suit Against Idaho PUC, Finds Second PURPA Violation " »

On Monday, the Washington House of Representatives passed ESSB 5802, which creates a "Climate Legislative and Executive Work Group" to study the state's options for achieving significant reductions in greenhouse gases. The bill, which is the first of Gov. Inslee's legislative requests to pass both houses of the legislature, will set the stage for more substantive legislative action on climate change in next year's legislative session.

ESSB 5802 is intended to jump-start the debate on greenhouse gas reduction in the 2014 legislative session by delivering a set of recommended policies to the legislature by the end of 2013. The first step in this process calls for the Climate Legislative and Executive Work Group to retain a politically neutral consultant to carry out a comprehensive study of the policy options for reducing Washington's greenhouse gas emissions, including a baseline assessment of current GHG emissions by sector, a review of programs adopted by the federal government and by other states and neighboring provinces of Canada, and an analysis of the costs and benefits of the various policy options. The study must also examine a range of specifically-designated policies, including, for example, a Renewable Fuels Standard, emissions performance standards, and policies to encourage greater energy efficiency. This initial evaluation will be delivered to Gov. Inslee by October 15, 2013.

Continue reading "Gov. Inslee's Climate Change Study Bill Is The First Energy Legislation to Clear the Washington Legislature" »

One of the most difficult questions in energy regulation is how best to encourage technological innovation in the an electric industry still dominated by comprehensively-regulated utility monopolies. Because new technologies carry with them significant risks and generally lack solid data upon which to establish ratepayer benefits, regulators are loath to approve investments in new technology and regulated utilities therefore tend to shy away from such technologies. But a range of new technologies now on the horizon promise to revolutionize the electric utility industry. How best to pave the regulatory path for technological innovation is therefore one of the most important questions facing the industry today.

The "Smart Grid" (best thought of as a range of new digital technologies that can provide benefits in all phases of generation and delivery of power) demonstrates the enormous stakes at issue in properly answering this question. The Smart Grid promises to revolutionize the electric system as completely as digitization, the internet, and cellular technology have revolutionized the telecommunications industry. But the state-federal system of utility regulation raises a variety of barriers to adoption of this new technology. In an article published in the most recent Harvard Environmental Law Review, Joel B. Eisen, Professor of Law at the University of Richmond, offers an important and intriguing solution to this regulatory puzzle.

Continue reading "The Smart Grid and "Cooperative Federalism": The Path Forward for Technological Innovation in the Electric Utility Industry?" »

Yesterday, the Federal Energy Regulatory Commission ("FERC") and the U.S. Coast Guard ("USCG") released a Memorandum of Understanding ("MOU") designed to simplify and expedite the process of licensing hydrokinetic projects. Hydrokinetic technology, described by FERC Chairman Jon Wellinghoff as an "up and coming resource," includes projects designed to capture the energy of waves, tides, currents, and the free-flow of rivers and streams. The MOU will help coordinate the FERC licensing authority for non-federal hydropower projects with the USCG's authority to over navigation safety, maritime security, and stewardship of marine environmental resources.

The MOU requires applicants for a preliminary FERC hydrokinetic permit to notify the USCG, among other agencies. The USCG will then become a participant in FERC's pre-filing process, and will provide comments to the FERC and the applicant setting forth any concerns it has with a proposed project and identifying any needed studies. If a NEPA process is undertaken, FERC will be the lead agency, with the USCG providing input on, for example, scoping, as well as identifying any USCG concerns a regarding the project that should be considered in the environmental analysis process. The MOU also provides that, by participating in the NEPA process, the USCG agrees not to become a party to the licensing process.

Yesterday's MOU, along with guidelines issued jointly by FERC and the Bureau of Ocean Energy Management, Regulation & Enforcement last year for hydrokinetic projects on the Outer Continental Shelf, demonstrate that FERC intends to encourage hydrokinetic resources by reducing regulatory barriers to new hydrokinetic technologies.

If you have any questions about the MOU, FERC licensing, hydrokinetic technology, or other matters involving the development of renewable energy projects, please contact a member of GTH's Energy, Telecommunications, and Utilities practice group or Environment & Natural Resources practice group. These practice groups are consistently recognized as among the best, both nationally and in the Pacific Northwest.

Bonneville Power Administration ("BPA") and the Pacific Northwest's wind producers have been frequent and intense antagonists in the region's ongoing wind wars. But a tariff filing last week by one of the primary antagonists, Iberdrola Renewables, LLC, provides one avenue for relieving the pressure on BPA to integrate the region's large and growing wind fleet. And, because the difficulties of integrating the wind fleet are the ultimate cause of the wind wars, the Iberdrola tariff suggests the problem may be soluble without pursing litigation to the bitter end.

Iberdrola's proposed tariff (FERC Docket No. ER13-1058) would allow it to supply wind balancing services to third parties. The proposed wind balancing service is based on a successful pilot program Iberdrola has used to balance its wind resources since 2011 using its own natural gas resources, in addition to contracted resources owned by TransAlta Corp. and Grant County PUD. Iberdrola now proposes to expand this service by offering wind balancing services to other wind producers. The new service is being encouraged by BPA, which is now allowing third parties to supply wind balancing services.

Continue reading "Iberdrola's Proposed Wind Balancing Tariff May Offer A Path Out of the Wind Integration Woods" »

Recognizing that continued reliance on fossil fuels creates severe threats to military security, the Department of Defense has launched an aggressive program to power military bases using renewable energy and to find non-fossil alternatives such as biofuels for the nation's naval and warplane fleets, as we have previously reported.. Two recently-announced opportunities demonstrate the potentially enormous stakes involved.

First, the U.S. Navy recently announced an RFP to build "smart grid" integrated electronic controls for energy, water, and maintenance systems at Naval Station Everett, Naval Base Kitsap Bangor, the Jim Creek Naval Station, and the Pacific Beach Naval Station, all located here in Western Washington. The Navy estimates it will spend $5 to $10 million on the contract. The contract is subject to a special set-aside for small businesses and is limited to companies from the Pacific Northwest Region. Initial responses to the RFP are due on March 13, 2013.

Continue reading "Major Smart Grid and Solar Opportunities From the Department of Defense" »

On February 22, Hawaii Electric issued an RFP for renewable energy projects with a nameplate capacity of 5 MW or more. As previously discussed here, Hawaii is a particularly attractive market for renewable energy developers because Hawaii has by far the highest cost for conventional energy of any state, well above the cost of solar installations even if tax credits and other incentives are not considered.

Apparently recognizing that renewable developers have become frustrated with the long delay in issuing a final version of its draft RFP for renewables and undersea cable development -- issued in draft form last September -- the new RFP seeks to expedite approval of projects that are in the pipeline. In particular, the new RFP promises to seek a waiver from the Hawaii PUC's Competitive Bidding Framework, which would otherwise apply to projects of this size, if power can be brought on line quickly. Specifically, the RFP seeks:

1) power from sources that qualifying under Hawaii's Renewable Portfolio Standard with a nameplate capacity of at least 5 MW;

2) located on Oahu;

3) at a price that will provide "an attractive reduction in costs" for Hawaiian ratepayers; and,

4) that can be brought on line no later than the end of 2015.

Winning bidders will be required to enter into RFPs for a term of 20-25 years. Response to the RFP are due on March 22, 2013.

Hawaii Electric also plans to move forward with a final version of the RFP for renewables and undersea cable. The company indicates it plans to issue that RFP in the second quarter of this year.

If you have any questions about the RFP or other matters discussed in this post, please contact a member of GTH's Energy, Telecommunications, and Utilities practice group.

At this time of year here in the Pacific Northwest, months of damp and dreary weather leave even the hardiest natives yearning for the brighter days of spring and summer. In February, Northwest gardeners can often be found digging, planting, composting, and weeding in the hope that this will somehow hasten the coming of more pleasant weather. Of course, spring cannot be rushed, but comes only in its own time. Yesterday, PacifiCorp and the California ISO ("CAISO") announced a Memorandum of Understanding ("MOU") committing the two entities to implementing a real-time Energy Imbalance Market ("EIM") by October of 2014. Like Northwest gardeners attempting to rush the spring, the MOU appears to be an attempt to jumpstart an EIM in the West. Because PacifiCorp and the CAISO are two of the largest transmission operators in the West, the effort must be taken seriously.

The EIM is one proposed solution to the problems of integrating increasing volumes of variable generation from renewable resources such as wind power. The core aim of EIM is to establish a market for regulating and balancing reserves that would allow system operators to draw on a wide range and diversity of resources to maintain electric system balance as renewable generation rises and falls, which theoretically will improve the efficiency of balancing operations. The EIM idea has been under consideration in the Northwest for the last couple of years, and has advanced to the point that detailed studies are being performed.

Continue reading "Rushing the Spring? PacifiCorp, California ISO Announce Energy Imbalance Market" »

With this week's announcement that David W. Danner has been appointed the new Chairman of the Washington Utilities & Transportation Commission ("UTC"), Washington Governor Jay Inslee has completed the slate of key positions influencing energy and natural resources policy in the state. The key appointments are a mixture of long-time Inslee confidants and individuals with long experience in state government.

Mr. Danner is typical of Inslee appointees who have worked for many years in Washington state government. Mr. Danner has served since 2005 as the Executive Director of the UTC. Prior to that, he served as Gov. Gary Locke's policy advisor on energy and environmental issues, and served on the State's Pollution Control Hearings Board and Shoreline Hearings Board. Mr. Danner will fill the seat recently vacated by Commissioner Patrick Oshie. He will replace Jeff Goltz as UTC Chair, although Commissioner Goltz will continue to serve on the UTC along with Commissioner Phil Jones.

Other key appointments include:

Continue reading "Gov. Inslee Fills Key Energy and Natural Resource Positions With A Mix of Insiders and Experienced Government Hands" »