Global Power Law & Policy – Page 35 – Legal and policy developments affecting the global power industry.

MassCEC Solicits Proposals for Innovative Energy Storage Uses Cases and Business Models

Mar 27 2017

By William H. Holmes, Molly Suda, and Michael L. O’Neill

On March 9, 2017, the Massachusetts Clean Energy Center (MassCEC) issued a Request for Proposals for the “Advancing Clean Energy Storage” (ACES) Program. MassCEC is offering up to $10 million in funding for energy storage demonstration projects that “pilot innovative, broadly replicable energy storage use cases/business models with multiple value streams in order to prime Massachusetts for increased commercialization and deployment of storage technologies.” The organization expects to make 10-15 awards of between $100,000 and $1,250,000 each. Applications are due to MassCEC by 4 pm Eastern Time on June 9, 2017.

Avangrid Wins Latest BOEM Auction for Offshore North Carolina Lease and Moves Towards Full Commercial Lease

Mar 23 2017

By Stanford D. Baird, Joseph D. Condo, Ankur K. Tohan, David L. Wochner, Michael L. O’Neill

Following an auction on March 16, 2017, the U.S. Department of the Interior’s Bureau of Ocean Energy Management (BOEM) named Avangrid Renewables, LLC (Avangrid) the provisional winner of the auction. Avangrid, majority owned by global energy firm Iberdrola, S.A., outbid three other auction participants to secure rights to a 122,405-acre area off the coast of Kitty Hawk, North Carolina. Avangrid and BOEM will now work to finalize the provisional lease and continue to develop the project.

BOEM has not scheduled any other lease auctions for offshore wind projects on the Outer Continental Shelf. However, as this month’s unsolicited bids for offshore Massachusetts and New York demonstrate, businesses remain interested in developing offshore wind projects with or without an open lease application solicitation. Therefore, in addition to submitting unsolicited lease applications, there is an opportunity to advocate at the federal level with the Trump Administration and BOEM to continue the leasing program on the Outer Continental Shelf and to continue advocating for state-level incentives for offshore wind projects.

The Auction Process and the Winning Bid
Following years of preparation, BOEM announced its plans to hold the North Carolina Outer Continental Shelf lease in January 2017. Nine bidders pre-qualified as “eligible bidders” under BOEM’s auction rules. Four companies participated in the March 16 auction:

Avangrid
Statoil Wind US LLC
Wind Future LLC
wpd offshore Alpha LLC (wpd offshore)

The bidding lasted 17 rounds, with Avangrid and wpd offshore both bidding more than $8 million in the 16th round. Avangrid’s 17th round bid of $9,066,650 successfully secured the provisional win for Avangrid.

Next Steps for the North Carolina Lease and Beyond
Part 585 of the Code of Federal Regulations lays out the next steps for finalizing the lease for the offshore North Carolina block. First, the U.S. Department of Justice and the Federal Trade Commission will review BOEM’s auction process. Then Avangrid must execute the lease, file financial assurance, and pay the balance of the “bonus bid” (the difference between the winning bid and the applicable bid deposit) within 10 days of receiving the lease documents.

Once the lease is finalized, Avangrid will have one year to submit its Site Assessment Plan (SAP) to BOEM. The SAP describes the initial activities the leaseholder will undertake to evaluate the lease site (federal guidance available here). If approved, BOEM’s regulations allow Avangrid five years to develop and submit a Construction and Operations Plan for BOEM’s approval, although the plan must be filed at least six months prior to the end of this five-year period. A Construction and Operations Plan outlines the facilities that the leaseholder plans to construct and use for its project, as well as construction activities, commercial operations, and decommissioning plans (additional federal guidance here). Once the Construction and Operations Plan is filed, BOEM will evaluate the potential environmental impacts of the proposed project and reasonable alternatives, as well as solicit public comment. If BOEM approves the Construction and Operations Plan, Avangrid would have a 25-year commercial lease term with the possibility of renewal.

More broadly, the North Carolina offshore wind lease auction was the last pending open auction. BOEM has evaluated potential commercial leasing and received indications of commercial interest in other Outer Continental Shelf areas, such as offshore California, Hawaii, and South Carolina, but the agency has not set a timetable for announcing any further competitive lease auctions. In the absence of an open auction, interested parties may submit unsolicited lease applications in accordance with 30 C.F.R. § 585.230.

There is also an opportunity to advocate for additional competitive Outer Continental Shelf lease auctions with the Trump Administration. President Donald Trump’s “America First: A Budget Blueprint to Make America Great Again” proposes a 12 percent cut to the Department of the Interior’s budget, suggesting that agencies like BOEM within the Department may be de-emphasized under the new Trump Administration. In contrast, Secretary of the Interior Ryan Zinke called the results of last week’s North Carolina auction a “big win for collaborative efforts with state, local, and private sector partners,” so the Trump Administration, as well as legislators in Congress, may be disposed to support continued offshore wind development as this year’s federal budget debate unfolds.

Developers Submit Unsolicited Requests for Wind Leases Offshore Massachusetts and New York

Mar 16 2017

By Stanford D. Baird, Joseph D. Condo, Ankur K. Tohan, David L. Wochner, and Michael L. O’Neill

On March 10, 2017, the U.S. Department of Interior’s Bureau of Ocean Energy Management (BOEM) posted four unsolicited applications for wind project leases on the Outer Continental Shelf. PNE Wind U.S.A., Inc. has filed three lease applications, two for offshore Massachusetts and one for offshore New York. Separately, Statoil Wind US LLC filed a lease application for offshore Massachusetts.

The developers’ lease requests, particularly the overlapping requests for offshore Massachusetts, indicate continued interest and growing competition in the U.S. offshore wind sector. The quickening pace of activity in the U.S. offshore wind market, including completion of Deepwater Wind’s Block Island offshore wind farm and today’s auction process for offshore North Carolina, suggests that offshore wind projects may become a more important part of the U.S. power generation portfolio in the coming years. In addition, the unsolicited application for offshore New York and the federal government’s response may provide an early indication as to the Trump Administration’s position on offshore wind development going forward. Increased activity and a new administration in the White House present opportunities to engage on this issue and shape the policies that will govern the federal offshore leasing program for the next four or eight years, or beyond. Read More

FERC to Discuss Interaction Between Competitive Wholesale Energy Markets and State Energy Policies

Mar 09 2017

By Molly Suda and William M. Keyser

The Federal Energy Regulatory Commission (“FERC”) has scheduled a technical conference on May 1 and 2 to discuss and obtain input on the interaction between competitive wholesale markets and state energy policies. In recent years, several states that are part of organized wholesale energy markets have adopted legislation or policies to support or promote certain generation resources or resource types. As a result of these state policy initiatives, FERC has been forced to grapple with questions about state versus federal jurisdiction and the effect of the state policies on competition and prices in the organized wholesale energy markets. The technical conference offers an open forum to discuss potential solutions and find ways to reconcile states’ interests with interests in preserving the benefits of regional competitive wholesale markets. Read More

Cyber-physical Attacks on Critical Infrastructure: What’s Keeping Your Insurer Awake at Night?

Mar 06 2017

By James E. Scheuermann

Cyber-physical attacks on critical infrastructure that have the potential to damage those physical assets and to cause widespread losses to third parties are keeping your insurer awake at night. A cyber-physical attack on critical infrastructure occurs when a hacker gains access to a computer system that operates equipment in a manufacturing plant, oil pipeline, a refinery, an electric generating plant, or the like and is able to control the operations of that equipment to damage those assets or other property. A major cyber-physical attack on critical infrastructure is a risk not only for the owners and operators of those assets, but also for their suppliers, customers, businesses and persons in the vicinity of the attacked asset, and any person or entity that may be adversely affected by it (e.g., hospital patients and shareholders).

Because damages caused by a cyber-physical attack can be widespread, massive, and highly correlated, affecting multiple sectors of the economy and many lines of insurance, the insurance industry is giving this risk heightened attention. The U.K. insurance marketplace Lloyd’s, London and the University of Cambridge, for example, conducted a major study of the losses resulting from a hypothetical cyber-physical attack on 50 electrical generators in the Northeast U.S. Other insurance market participants have also published reports addressing cyber-physical risks to critical infrastructure. The insurance industry’s focus on cyber-physical risks perhaps should be action-guiding for corporate policyholders as well.

To read the full alert on K&L Gates HUB, click here.

CAISO Urges Flexibility and Coordination to Advance Distributed Energy Resource Aggregations at FERC

Feb 20 2017

By Buck B. Endemann, William M. Keyser, and Molly Suda

Introduction

As previously covered by this blog, on November 17, 2016, the Federal Energy Regulatory Commission (“FERC”) issued a Notice of Proposed Rulemaking (“NOPR”) to remove barriers so that electric storage resources and distributed energy resource aggregations can better participate in the capacity, energy, and ancillary services markets operated by Regional Transmission organizations (“RTOs”) and independent system operators (“ISOs”). This post will focus on the response to those proposals submitted by the California Independent System Operator (“CAISO”), particularly as they relate to distributed energy resource aggregations.

FERC defines distributed energy resource aggregators as entities that aggregate one or more distributed energy resources, such as electric storage resources, distributed generation, thermal storage, and electric vehicles (collectively, “DERs”), and offer those resources into wholesale markets. The NOPR called for comments on what types of market rules should be established to provide DERs with more certainty and to remove barriers to entry.

The California Independent System Operator (“CAISO”) is one of the largest ISOs in the nation, responsible for managing about 80 percent of California’s electricity flow. Having recently received FERC approval of its own DER aggregation participation model, CAISO has a head start on incorporating DER aggregations into its energy and ancillary services markets.[1] In fact, in a statement issued concurrently with the NOPR, Acting FERC Chairman Cheryl LaFleur specifically identified CAISO’s DER aggregation rules as a model to study and evaluate any lessons learned from CAISO’s implementation of those rules.

CAISO submitted its comments on FERC’s proposal on February 13, 2017. With its recent experience in developing a DER program, CAISO’s comments offer insights that may guide FERC as it works toward a final rule.[2] Overall, CAISO’s comments strongly support incorporating DER aggregations into the nation’s energy and ancillary services markets, so long as each RTO/ISO is given the flexibility to develop participation models that reflect regional and regulatory preferences in generation, transmission, and distribution assets. CAISO also predicts that the roles and responsibilities of transmission and distribution operators will experience significant change in the coming years, and that FERC, electric grid operators, and market participants can best encourage innovation and resiliency by avoiding any overly-prescriptive models that stifle DER participation.[3]

FERC Issues Order to Delegate Further Authority to Staff in Absence of Quorum

Feb 06 2017

By Sandra Safro, William Keyser, and Molly Suda

On February 3, 2017, FERC issued an Order Delegating Further Authority to Staff in Absence of Quorum, which provides for further delegations to enable FERC to continue to carry out various obligations under the Natural Gas Act (NGA), Federal Power Act (FPA), and Interstate Commerce Act (ICA). In pertinent part, the delegation order states the following:

Delegations Generally.
- The delegations of authority are effective during the Delegation Period, which starts on February 4, 2017, and continues until 14 days after the date on which a quorum is reestablished.
- Delegations are made to the relevant office director, who may further delegate to his or her designee.
Pre-Existing Delegations. All pre-existing delegations of authority by the Commission to its staff remain effective, including the Secretary’s authority to toll the time for action on rehearing requests (also referred to as tolling orders)and the authority of the Director of Office of Energy Market Regulation (OEMR) authority to accept uncontested tariff or rate schedules that would result in rate increases.
Continuation of Activities Related to Safety. Limited Commission operations can continue, including inspecting and responding to incidents at LNG facilities and jurisdictional hydropower projects, and other activities involving the safety of human life or protection of property.
Further Delegations Regarding Rate Proceedings.
- With respect to contested rate and other filings under Section 4 of the NGA, Section 205 of the FPA, and Section 6(3) of the ICA, the Director of OEMR shall have authority to:
  - Accept and suspend filings and make them effective, subject to refund and further Commission order; or
  - Accept and suspend filings and make them effective, subject to refund, and to set them for hearing or settlement judge procedures.
- With respect to initial rates or rate decreases under Section 205 of the FPA where suspension and refund protection is not available, Commission Staff may institute a proceeding to protect customer interests pursuant to Section 206 of the FPA.
- The Director of OEMR may accept uncontested settlements.
Further Delegation Regarding Uncontested Requests for Waivers. The Director of OEMR may take appropriate action on uncontested filings seeking waivers of the terms and conditions of tariffs, rate schedules, and service agreements (including requests for waiver of capacity release and capacity market rules) made under Section 4 of the NGA, Section 205 of the FPA, and Section 6(3) of the ICA.
Further Delegation Regarding Extensions of Time. Commission Staff may extend the time for action on matters where extension is permitted by statute, including extensions of a 180-day period for applications for prior approval under Section 203 of the FPA.

FERC’s order is intended to prevent filings made to the Commission from going into effect by operation of law after a certain period of time as defined by statute. However, it also creates uncertainty, because any contested rate filings approved by Staff and allowed to go into effect will be subject to refund and further review by a Commission having up to three new members once a quorum is reached. It also may result in more filings being set for hearing and settlement judge proceedings, including potentially all initial rate filings that are contested.

FERC Issues Policy Statement on Cost Recovery for Electric Storage Resources, But the Devil Will Be in the “Implementation Details”

Jan 24 2017

By Molly K. Suda, William H. Holmes, and Buck B. Endemann

Last week, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) issued a Policy Statement to provide guidance for electric storage resource owners and operators that may seek to receive cost-based rate recovery for certain services, as well as market-based revenues for other services.[1] The Policy Statement explains that an electric storage resource may provide transmission or grid support services at a cost-based rate, while also participating in the wholesale energy markets administered by a regional transmission organization (“RTO”) or independent system operator (“ISO”) and earning market-based revenues. As described below, the Policy Statement eliminates some uncertainty created by prior FERC precedent, which limited electric storage resources’ ability simultaneously to provide transmission or grid support services at cost-based rates and also participate in the wholesale markets.

However, the path forward for electric storage resources to “stack” payment streams and recover costs through both cost-based and market-based rates will not be without obstacles. The Policy Statement acknowledges that “implementation details” will need to be addressed. Additionally, FERC Commissioner Cheryl LaFleur dissented, disagreeing with the Policy Statement’s broad statements that electric storage resources’ ability to recovery costs through both cost-based and market-based rates will not adversely impact other market competitors. Commissioner LaFleur also disagreed with the decision to address the issue of electric storage resources’ ability to recover costs through both cost-based and market-based rates in a proceeding separate from the pending Notice of Proposed Rulemaking on electric storage’s participation in RTO/ISO markets (“Electric Storage NOPR”).[2] Thus, while the Policy Statement removes some uncertainty, electric storage resources will likely still have to grapple with cost recovery, competition, and other issues on a case-by-case basis.

This alert provides background on the Commission’s prior precedent related to electric storage resources and cost-based recovery, as well as the Commission’s recent efforts in several open proceedings to address potential barriers to the further development of electric storage resources. Provided below is a summary of the Commission’s Policy Statement, as well as an overview of open questions and unresolved issues that are intertwined with issues presented in the Commission’s Electric Storage NOPR and other recent orders.

Military Urges Renewed Commitment to Renewable Energy

Jan 17 2017

By Scott Aliferis and Elana Reman

On January 12, 2017, Noblis, in partnership with the Pew Charitable Trusts, released a report on energy assurance on U.S. military bases. Cost-effective and reliable energy is crucial to the success of U.S. military missions, and the Department of Defense’s (DoD) fixed military installations account for 1 percent of the total electrical energy consumed by the United States, costing almost $4 billion. The military has long relied on the commercial grid, with standalone generators during peak use, but these sources are vulnerable to disruption due to aging infrastructure, severe weather, and both physical attacks and cyberattacks. Instead, the report proposes shifting to a strategy of large-scale microgrids. It conducts a cost comparison, addresses implementation issues, and analyzes the efficiency and security of microgrids, concluding that they would be superior to the military’s current system for supplying energy.

The Pew Charitable Trusts recently held a panel discussion, which supplements the report’s findings, focused on the intersection of national security, energy, and climate change. Three military secretaries examined past successes, and Dr. Jeff Marqusee, the Chief Scientist of Noblis and author of the report, discussed how the military could enhance its energy security going forward. The panelists argued that investment in renewable energy should continue to be a priority for the U.S. military because its goal is increasing mission assurance. The testimony was followed by a roundtable discussion and Q&A session.

Treasury Guidance Clarifies and (Again) Expands Field of Renewable Energy Projects That May Qualify for the PTC or ITC

Dec 22 2016

By Elizabeth C. Crouse, Charles H. Purcell, Won-Han Cheng, and Alex Weber

Notice 2017-04, issued on December 15, 2016, clarifies and expands the beginning of construction and continuity safe harbors applicable to certain alternative energy projects, including wind installations. Like Notice 2016-31, released on May 5, 2016, Notice 2017-04 concerns only projects that qualify for the Production Tax Credit (“PTC”) under Code Section 45 and, by extension, many projects that qualify for the Investment Tax Credit (“ITC”) through Code Section 48(a)(5). You may read more about the provisions and consequences of Notice 2016-31 in our previous e-alert.

To read the full alert, click here.