August 2017 – Global Power Law & Policy

Puget Sound Energy Solicits Proposals for Green-Powered Electricity Resources

Aug 30 2017

By David L. Benson, William H. Holmes, David P. Hattery, and Kristen A. Berry

On August 18, 2017, Puget Sound Energy (PSE) issued a Request for Proposals for the supply of renewable energy. Washington law requires that all electric utilities provide to their retail customers the option to purchase “qualified alternative energy resources” (RCW 19.29A.090). “Qualified alternative energy resources” range from wind and solar to hydropower and biomass.

PSE offers the three programs under which its customers may purchase renewable energy: Green Power, Solar Choice, and Green Direct. While the first two programs involve purchases of renewable energy credits (RECs) by residential, small commercial, and municipal customers, the Green Direct program encompasses long-term partnerships for renewable energy between PSE and large, commercial customers. The resources that PSE procures under this RFP may also be used to support a community solar program, if PSE chooses to develop one. PSE’s customers have provided input on what they wish to purchase, identifying wind and solar as the primary resources of interest. However, in this RFP PSE is willing to consider other offerings, including certified low-impact hydropower and biogas/anaerobic methane projects, as provided for in RCW 19.29A.090. Resources procured under this RFP will be in addition to resources to be acquired under Washington’s Energy Independence Act, RCW 19.285.

RFP respondents should be prepared to offer generation options that complement one of these three programs. Green Direct’s project capacity is limited to an expected annual production of 33 aMW. Alternatively, resources devoted to the Green Power and Solar Choice programs must be both under 5MW and located in the states of Washington or Oregon.

PSE will also consider selecting solar projects of different scales to support a community solar program. With respect to community solar, projects that meet the definition provided for in SB 5939 are preferred, including that the project be located in PSE’s service territory and retain eligibility for state incentives both by maintaining a maximum metering increment of 1000 kW and by connecting directly to the PSE system. The individual project size is flexible as long as it does not exceed 10 MW. For these solar projects, PSE prefers an online date of June 30, 2018 or earlier.

PSE will acquire energy generation from respondents through either (1) ownership arrangements or (2) a power purchase agreement with a term of at least four years (including power bridging agreements). PSE will consider several approaches to acquiring ownership or ownership interests in renewable energy projects, such as:

Implementing co-ownership arrangements with respondent while retaining dispatchability and control rights;
Purchasing development rights from respondent;
Entering into joint development agreements;
Transferring the interests to itself while respondent remains in charge of the development; or
Dividing the process into steps, with PSE’s purchase of power preceding its eventual receipt of ownership interests.

For power purchase agreements, respondents may only propose power purchase agreements of four or more years that both specify the type of generation assets utilized and provide assurances of those assets’ commercial availability on or before a specified date.

Responses to PSE’s RFP are due to PSE by October 12, 2017, with intent to bid due on August 30.

Renewable Fuel Standard – RIN Roundup

Aug 28 2017

By Buck B. Endemann and Jeff M. Cohen

The federal Renewable Fuel Standard (RFS) requires refiners and importers of gasoline and diesel to blend a minimum volume of renewable fuel into their transportation fuel products. Refiners and importers subject to the RFS must purchase Renewable Identification Numbers (RINs), which are compliance credits traded on a secondary market, to prove that their fuel contains U.S. Environmental Protection Agency (EPA)-required volumes of cellulosic biofuels, biomass-based diesel, advanced biofuels, and total renewable fuel. While the RFS has generated controversy from the moment its first iteration was passed in the Energy Policy Act of 2005, volatile RIN prices and lower fuel demand have more recently prompted refiners to become increasingly vocal in their opposition to the program.

Two recent court rulings and a rulemaking proceeding could contribute to additional uncertainty, at least in the short term. On August 15, 2017, the U.S. Tenth Circuit Court of Appeals potentially expanded the RFS exemptions available to small refineries, a ruling that was followed by lower RIN prices in the secondary market. The RFS has a case-by-case exemption for small refineries that face “disproportionate economic hardship” in achieving compliance. EPA had previously interpreted the exemption to apply only where there existed an existential threat to a refinery’s survival. In Sinclair Wyoming Refinery Company v. EPA, the 10th Circuit rejected EPA’s interpretation, finding that a small refinery could qualify for an exemption if it suffered hardship that was merely out-of-line with that suffered by other small refineries. While the longer term implications of the case are unclear, if EPA grants more small refinery exemptions, fewer entities will be required to purchase RINs, which could potentially depress the market. It is worth noting that the Tenth Circuit broke with other circuits on the standard used to review EPA’s decision, and this case could be taken up by the U.S. Supreme Court.

While Sinclair may reduce the pool of regulated entities required to buy RINs, there is also reason to believe that EPA may require the remaining refiners and importers to blend an increased volume of biofuels into their gasoline and diesel. On July 28, 2017, the D.C. Circuit Court of Appeals struck down an Obama-era reduction in the amount of ethanol required to be blended in the nation’s fuel supply. In Americans for Clean Energy v. EPA, the D.C. Circuit concluded that the EPA had improperly used its “inadequate domestic supply” waiver to reduce blending targets below Congressionally-approved levels. Going forward, EPA will not be able to consider the “inadequate domestic supply” waiver by considering the retail demand for biofuels—the biofuel supply available to refiners, blenders, and importers should instead be the focus of the analysis. Pro-biofuel stakeholders praised the decision, which could result in more biofuels being sold into the marketplace.

These two cases were decided against the backdrop of EPA’s Renewable Fuel Standard Program rulemaking for its 2018 standards and 2019 biomass-based diesel volume. While the annual rulemaking process is used to set volumetric requirements and to consider various waivers, EPA is also presently seeking comment on whether the proposed 2018 biofuel volumes would cause “severe harm” to the economy. EPA is accepting public comments on the rulemaking through August 31, 2017.

Given recent developments, those in favor and those opposed to the RFS should have plenty to say in the rulemaking proceeding. K&L Gates attorneys are continuing to monitor the situation as we guide our clients through important RIN and RFS issues that affect their businesses.

K&L Gates Blockchain Energizer – Volume 11

Aug 24 2017

By Molly Suda, Buck B. Endemann, and Ben Tejblum

There is a lot of buzz around blockchain technology and its potential to revolutionize a wide range of industries from finance and healthcare to real estate and supply chain management. Reports estimate that over $1.4 billion was invested in blockchain startups in 2016 alone, and many institutions and companies are forming partnerships to explore how blockchain ledgers and smart contracts can be deployed to manage and share data, create transactional efficiencies, and reduce costs.

While virtual currencies and blockchain technology in the financial services industry have been the subject of significant debate and discussion, blockchain applications that could transform the energy industry have received comparatively less attention. Every other week, the K&L Gates’ Blockchain Energizer will highlight emerging issues or stories relating to the use of blockchain technology in the energy space. To subscribe to the Blockchain Energizer newsletter, please click here.

IN THIS ISSUE

Bank Consortium Moves Forward with “Know Your Customer” Distributed Ledger Technology
Solar Technology Company Announces ICO to Fund Development of Local, Decentralized Energy Trading Platform
UK Startup Testing Blockchain Platform to Cut Time for Switching Energy Suppliers

To view more information on theses topics in Volume 11 of the Blockchain Energizer, click here.

FERC Seeks Additional Comments on Proposed Primary Frequency Response Requirements for Electric Storage and Small Generating Facilities

Aug 24 2017

By Molly Suda, William M. Keyser, and Elizabeth P. Trinkle

In one of its first orders since regaining a quorum, the Federal Energy Regulatory Commission (“FERC”) issued a Notice of Request for Supplemental Comments (“Notice”) on August 18, 2017, seeking comments related to circumstances where electric storage resources should be required to provide primary frequency response and the costs associated with primary frequency response capabilities for small generating facilities.

The Notice builds off of comments received in response to FERC’s November 17, 2016 Notice of Proposed Rulemaking (“NOPR”). Along with a number of other proposals, the NOPR proposed to modify the pro forma Large Generator Interconnection Agreement and the pro forma Small Generator Interconnection Agreement to require all new large and small generating facilities, both synchronous and non-synchronous, to install, maintain, and operate equipment capable of providing primary frequency response as a condition of interconnection. The NOPR also proposed including minimum operating requirements for droop and deadband parameters and requirements to ensure timely and sustained responses to frequency deviations.

The NOPR did not include provisions specific to electric storage resources, and several commenters noted that by failing to address electric storage resources’ unique technical attributes, the NOPR requirements could pose an unduly discriminatory burden on such resources. In response to these concerns, FERC seeks additional information to better understand (1) the performance characteristics and limitations of electric storage resources; (2) potential ramifications to electric storage resources from the proposed primary frequency response requirements; and (3) what changes are needed to address the issues raised by stakeholders. While the Notice sets forth a number of specific questions for commenters to address, in general, the Notice seeks comments on operational limitations or challenges and potential adverse effects if electric storage resources are required to provide primary frequency response. The Notice also seeks comments on whether there are reasonable parameters or requirements that could apply to electric storage resources’ provision of primary frequency response.

In response to the NOPR, commenters also suggested a need to further investigate the costs for small generating facilities to install frequency response capability and argued that the proposed requirement would impose disproportionate costs on small generating facilities. Accordingly, to further assess small generating facilities’ ability and cost to comply with the proposed primary frequency response requirement, the Notice seeks comment on:

The differences in costs to install, maintain and operate governor or equivalent controls for small generating facilities versus large generating facilities;
Whether recent technological advances in primary frequency response capability minimize or eliminate barriers to entry for small generating facilities; and
Whether an exemption is appropriate for all or a subset of small generating facilities based on disproportionate cost impacts.

Developers, owners, and operators of electric storage resources and small generating facilities should consider whether the proposed primary frequency response requirements materially affect the cost, operation, and/or feasibility of projects to be developed. The Notice offers interested stakeholders an additional opportunity to shape FERC’s interconnection policy to avoid barriers to the integration of electric storage resources and small generating facilities and ensure any unique features of these technologies are addressed in future rules. The invitation for additional comments suggests that FERC may be interested in building a record to support different treatment or rules for energy storage resources and smaller distributed energy resources compared to traditional generation. Comments are due 21 days after publication of the Notice in the Federal Register.

K&L Gates Blockchain Energizer – Volume 10

Aug 10 2017

By Molly Suda, Buck B. Endemann, and Ben Tejblum

A bi-weekly update on applications of blockchain technology in the energy industry

IN THIS ISSUE

Blockchain-Powered Utility-Scale Solar Investment Fund Launches ICO
ISDA Issues Whitepaper on Smart Contracts and Distributed Ledger Technology
Bank in Thailand to Use Blockchain to Digitize Letters of Guarantee

To view more information on theses topics in Volume 10 of the Blockchain Energizer, click here.

FERC Welcomes New Commissioners, Quorum Restored

Aug 04 2017

By David L. Wochner, Sandra E. Safro, William M. Keyser, Molly Suda, Michael L. O’Neill, Jennifer L. Bruneau, Benjamin L. Tejblum, Elizabeth P. Trinkle and Gillian R. Giannetti

On August 3, 2017, the U.S. Senate confirmed President Trump’s nominations of Neil Chatterjee and Robert Powelson as Federal Energy Regulatory Commission (FERC) Commissioners and restored FERC’s quorum for the first time in nearly 180 days. The next step is for Mr. Chatterjee and Mr. Powelson to be sworn into their positions.

FERC has not had a quorum since February 3, 2017. In the interim, the Commission has accumulated a backlog of filings that will require formal Commission action, including

Applications under Section 4 of the Natural Gas Act (NGA) related to the rates and terms and conditions of service;
Applications related to interstate natural gas pipeline infrastructure under Section 7 of the NGA;
Applications related to the rates and terms and conditions of service for interstate oil and products pipelines under the Interstate Commerce Act;
Applications related to rates, rules, or charges for the transmission or wholesale sale of electric energy under the Federal Power Act;
Complaints challenging rates, rules, or charges for the transmission or wholesale sale of electric energy under the Federal Power Act; and
Petitions for declaratory orders seeking clarification from the Commission.

With FERC’s quorum restored, it also can move forward with rulemaking proceedings, including notices of proposed rulemaking that were issued before February 2017, as well as formal investigations and enforcement actions that require Commission authorization. It is unclear at this point how FERC will process and prioritize this backlog and how long it will take before the Commission is able to process filings on more traditional timeframes.

FERC does not hold a formal Commission meeting in August, but the Commissioners can vote notationally and therefore could begin issuing orders in the near term.

Below is a brief biography of FERC’s newest members.

Neil Chatterjee

Mr. Chatterjee most recently served as Senate Majority Leader Mitch McConnell (R-KY)’s senior energy policy analyst. While in this position, Mr. Chatterjee advised Senator McConnell on energy and infrastructure initiatives, including President Obama’s Clean Power Plan. Mr. Chatterjee worked previously as a Principal in Government Relations for the National Rural Cooperative Association and as an aide to House Republican Conference chairman Deborah Pryce (R-OH). Mr. Chatterjee grew up in Lexington, Kentucky near the heart of the coal industry. He earned his bachelor’s degree from St. Lawrence University in New York and a law degree from the University of Cincinnati. Mr. Chatterjee’s term expires on June 30, 2021.

Robert Powelson

Mr. Powelson has extensive regulatory experience, having served as a Commissioner at the Pennsylvania Public Utility Commission (PUC) and as President of the National Association of Regulatory Utility Commissioners. Mr. Powelson has served on numerous academic boards, including Drexel University’s Board of Trustees and Lincoln University’s Board of Directors. Prior to his position on the Pennsylvania PUC, Mr. Powelson worked as Chief Executive Officer and President of the Chester County, Pennsylvania Chamber of Business and Industry. He earned his bachelor’s degree from St. Joseph’s University and a master’s in government administration from the University of Pennsylvania. Mr. Powelson’s term expires on June 30, 2020.

In addition, the U.S. Senate Energy and Natural Resources Committee has scheduled a hearing for President Trump’s two other nominees, Richard Glick and Kevin McIntyre, for September 7, 2017, at 10 a.m. If approved by the Committee, Mr. Glick and Mr. McIntyre will then be ready to be scheduled for full Senate confirmation. Below is a brief biography for both nominees.

Richard Glick

Before President Trump nominated him for FERC, Mr. Glick served as General Counsel for the Democrats on the Senate Energy and Natural Resources Committee. Previously, Mr. Glick served as an energy and wind power lobbyist and advised U.S. Department of Energy Secretary Bill Richardson during the Clinton Administration. Mr. Glick earned his bachelor’s degree from The George Washington University and his law degree from the Georgetown University Law Center. If confirmed, Mr. Glick’s term would expire on June 30, 2022.

Kevin McIntyre

Mr. McIntyre is well-known among industry professionals, having served as co-head of Jones Day’s energy practice. While in private practice, Mr. McIntyre focused on government regulation of energy markets, electric and natural gas utilities, oil and natural gas pipelines, and co-authored several treatises on energy practice. Mr. McIntyre is actively involved in the Energy Bar Association, having served as on its Charitable Foundation’s Board of Directors. He also has served on the advisory board of Georgetown University Law Center’s Corporate Counsel Institute. Mr. McIntyre earned his bachelor’s degree from San Diego State University and his law degree from the Georgetown University Law Center. If confirmed, Mr. McIntyre’s term would expire on June 30, 2018. The White House press release announcing Mr. McIntyre’s nomination also states the White House’s intention to seek an additional term for Mr. McIntyre, to expire on June 30, 2023.

Archive:August 2017