Renewable Energy

Texas Changes the Goal(s)

April 28, 2015 12:09
by Tricia Caliguire
Some say you can't go back, but last week, I did go back -- to Austin, Texas, where I went to law school. Things changed -- the east side has been gentrified, the traffic is horrendous, and Molly Ivins is gone – and are much the same – including that having the legislature in session makes for some interesting headlines.

Climate Change | Renewable Energy | Solar Energy | solar finance

Florida’s Solar Conundrum

March 31, 2015 09:40
Despite ranking third in the nation for rooftop solar potential, the "Sunshine State" is 13th in cumulative solar capacity installed (dreary New Jersey is 3rd). This is the result of a state without a renewable energy portfolio standard (RPS) that does not permit power purchase agreements (PPAs) (Florida is one of only five states that explicitly prohibits anyone other than the big utilities from selling power). Depending on whom you ask, Florida's lack of solar infrastructure is either caused by the "monopoly" held by the State's big power companies, or the simple viewpoint that solar is a silly alternative when you compare cost to the comparatively cheap prices from more conventional generation sources. Well, the debate is scheduled to be settled soon... Environmentalists in Florida are pushing for a constitutional amendment initiative to place solar choice on the November 2016 ballot. The purpose of the ballot proposal is to expand solar choice by removing barriers that limit solar ownership models. If approved, the ballot measure would allow homes and businesses to install solar and sell excess energy they generate back into the grid. Curiously enough, much of the focus on this particular ballot proposal has been on the unlikely alliances that are now supporting the measure. Tea Party conservatives and aggressive libertarians (who advocate for free-market principles through energy choice) find themselves aligned with fundamental environmentalists and progressive liberals (who advocate for cleaner energy solutions). Opponents of course oppose taxpayer subsidies and consumer mandates. Regardless of one's viewpoint, an amendment permitting third-party sales in Florida will immediately result in a tremendous boom to the Sunshine State's solar industry. If that road is opened, expect a sea of solar developers to begin canvasing I-95 for opportunities from the Panhandle to the Keys.

Climate Change Effects | Renewable Energy | Solar Energy | Utilities | Florida | renewable portfolio standard | solar finance

The Clean Power Plan: A View from FERC, Part IV - Economic v. Environmental Dispatch, Please

March 16, 2015 09:31
by J. Wylie Donald
It’s been a long winter in my neck of the woods and not because Punxsutawney Phil saw his shadow.  Pipes froze.  Twice.  Furnace was out overnight.  Broke three shovels.  So I had a particular interest this past Wednesday, March 11, in FERC’s Eastern Regional Technical Conference on EPA’s Clean Power Plan (CPP) and FERC’s and EPA’s takes on reliability issues.   After the introductions EPA Assistant Administrator Janet McCabe led off with the same position she had delivered at the Opening Conference, which is something of a mantra for EPA:  EPA has enforced the Clean Air Act for over forty years and has not impacted reliability.  Commissioner Tony Clark,  however and politely, was not buying it.  To be sure, EPA’s Clean Air Act initiatives had not brought the Grid crashing down.  But he enumerated half-a-dozen facilities where EPA regulations had impacted reliability, including the Presque Isle Power Plant, the Potomac River Generating Station, and the E.D. Edwards Power Station.  Commissioner Clark laid it out plain and simple:  any time there is a “must run” requirement imposed on a plant, that is a reliability issue.  Where operators have made decisions to close because plants are no longer profitable as a result of the cost of environmental compliance, but reliability concerns have compelled the plants to keep operating, that is a case of environmental regulations impacting reliability. Commissioner Moeller asked Ms. McCabe for EPA guidance on how reliability could be ensured under the CPP, the so-called “reliability safety valve” (RSV).  She responded without specifics, saying merely that EPA is prepared to work with everyone.  To that Commissioner Moeller was very plain:  a reliability safety valve needs to be in the final rule. Period. What were the details driving Commissioners Moeller and Clark?  They are set out in great detail in the written comments of the affected generators. A few were stated at the technical conference: New England - RGGI, the Regional Greenhouse Gas Initiative, has put New England in excellent position to meet the CPP goals.  But even with the early mover advantage, New England has substantial concerns. As Commissioner Paul Roberti  of the Rhode Island Public Utilities Commission reported, the independent system operator, ISO-NE, forecasts 8300 MW are to be retired by 2020, to be replaced by 6300 MW, with an additional 1000 MW in efficiency improvements. Even assuming all of that can be built in time and the forecast efficiency is real, New England has gas transmission challenges (as demonstrated by skyrocketing prices and unavailability during the 2013 polar vortex) and electrical transmission challenges (the substantial wind resources identified in northern Maine are 100 miles from the nearest transmission).  As Steve Rourke, a VP of ISO-NE, commented:  even as New England's fuel mix starts to change, those current coal plants are needed on the coldest and hottest days. Duke Energy - Paul Newton, the State President for North Carolina for Duke, stated flatly that EPA's interim compliance deadlines leave no room to ensure compliance can be achieved without compromising reliability.  In February, North Carolina set records for demand at 7 a.m.  Why did he select 7 a.m. to report?  Because that is a time when non-dispatchable generation assets cannot provide power. The Southern Company - Jeff Burleson, System Planning Vice President for Southern, explained how Southern plans for the future.  It looks at each plant (as it must because regional capacity can only be based on individual plant capacity).  EPA predicts that Southern will need to retire 9 GW as a result of the CPP, in addition to 3 GW as a result of MATS (Mercury and Air Toxics Standards).  In response, Southern anticipates needing 5 GW of new gas-fired plants.  There is one small impediment:  current gas pipelines in the region are fully subscribed.  Mr. Burleson also commented that demand response is estimated to be able to shave peak demand by about 10% and that that is already included in Southern's planning. The environmental perspective is that reliability issues are manageable.  As John Wilson, the Director of Research for the Southern Alliance for Clean Energy, commented, "the sky is not falling" and there is plenty of solar and wind energy available.  Energy efficiency will help too.  In sum, the Alliance's studies show that "ensuring reliability can be business as usual."  Johnny Casana of EDP was a little more equivocal, if the suite of low carbon strategies can ensure reliability, then the RSV may not be needed.  Jonathan Peress with the Environmental Defense Fund advised that their studies showed that there is ample pipeline capacity in New England if it is used efficiently.  Some may remain unconvinced.  The solar and wind resources don't meet Mr. Newton's 7 a.m. need.  One might legitimately be skeptical that "business as usual" can possibly apply to something that (to paraphrase Commisioner Moeller) is the most comprehensive and profound rule ever to come out of the Clean Air Act.  EPA's own estimate of over 50 GWs in plant retirements belies that.  As for efficient use of gas pipelines, all are for that.  But theoretical efficiency worked out in an office is not much salve as the temperatures drop and the pipes burst because the gas has not gotten to where it efficiently should.  Mary Walker, representing the Georgia Environmental Protection Division, best summed it all up.  What is needed is “economic dispatch v. environmental dispatch.”  When a state's environmental regulator is talking the language of FERC, it is worth listening to.  As Ms. Walker noted, the environmental regulator in Georgia is being asked to implement energy policy, which it hasn't done before.   A bit of jocularity between Administrator McCabe and Chairman LaFleur puts the issue, we think, in perspective.  Ms. McCabe owned up to her lack of knowledge regarding the sources of unreliability – squirrels, she had been informed by her staff, affect reliability.  The Chairman referred to an apocryphal "throw-down squirrel" that linemen carry on their trucks.  But linemen don't need a throw-down squirrel, squirrel outages are very real.  So what do we have?  One regulator, “learning something new every day;” the other regulator dispensing the wisdom of the ages, so to speak.   As we move forward with what both regulator and regulatee have referred to as the most significant regulation of the Grid ever, we suspect that many will want the people that really know, rather than the people who are picking it up as they go, in charge of keeping the lights on.

Carbon Dioxide | Regulation | Renewable Energy | Utilities

A Provisional Winner of an Offshore Wind Lease is Announced and that Means the Goal Line is Still Far Off

August 24, 2014 20:23
by J. Wylie Donald
Offshore wind took another small step forward last week when US Wind was announced as the provisional winner of the US Bureau of Ocean Energy Management's August 19 auction of development rights to nearly 80,000 acres off of Maryland.  The price?  $8.7 million. According to the BOEM press release, and other reports the few million to be ponied up by US Wind (or by its Italian parents, Renexia and Toto S.p.A.) is more than was bid for offshore leases in Virginia and Massachusetts and apparently is justified by the substantial financial carrot established by the O'Malley administration: $1.7 billion in construction subsidies. So what does it mean to be a provisional winner? It means the Attorney General and the FTC have 30 days to complete an antitrust review, following which US Wind can sign the lease, file the required financial assurance and pay the balance of the lease bid.  And then it's all downhill, right?  Well, not so fast.  First, a lot has been done to get to this point: November 2010 – BOEM issued Request for Interest to gauge industry’s interest in obtaining offshore Maryland commercial wind leases.  Commercial interests, for example, showed no interest in offshore Maine.  February 2012 - BOEM published a Call for Information and Nominations to solicit lease nominations and request public comments.February 3, 2012 - BOEM published in the Federal Register a Notice of Availability of an Environmental Assessment, and a Finding of No Significant Impact (FONSI) for “commercial wind lease issuance and site assessment activities on the Atlantic OCS offshore New Jersey, Delaware, Maryland, and Virginia.” June 2012 - BOEM published a Finding of No Historic Properties Affected.December 18, 2013 - BOEM published a Proposed Sale Notice and took comments.July 3, 2014 –BOEM  published a Final Sale Notice scheduling the August 19, 2014 sale.  These steps have completed the first two phases of BOEM’s program for outer continental shelf leasing:  (1) planning and analysis, (2) lease issuance.  So in a little over 3 and a half years an entity interested in pursuing an offshore wind project, is poised, but poised for what?  It is poised for phases 3 and 4, site assessment, and construction and operations, as BOEM further explains in its fact sheet.  There is an ominous word in the fact sheet, however:  “BOEM conducts environmental and technical reviews of SAP [Site Assessment Plan], eventually deciding to approve, approve with modification, or disapprove” (emphasis added).  A Site Assessment Plan “describes the activities (installation of meteorological towers and buoys) a lessee plans to perform for the assessment of the wind resources and ocean conditions of its commercial lease area.”  That BOEM will eventually complete its review, does not suggest alacrity, or even timeliness.  Once the SAP is approved, another plan must be submitted, the COP, the construction and operations plan. The same ominous term, "eventually," shows up as well in the description of the approval process of the COP. And then, only after the COP is approved, can construction begin. What struck us as we reviewed all of this is that at least four sessions of Congress will have passed from when BOEM’s 2010 Request for Interest emerged before a single joule of energy will make its way from some mid-Atlantic zephyr into a Maryland household.  And it would not surprise us if it were six or eight sessions.  In other words, success in offshore wind may depend nearly as much on the political winds, as the meteorological ones. 

Regulation | Renewable Energy | Wind Energy

Executory Forward SREC Contracts - What Exactly Does This Mean?

March 3, 2014 20:25
by J. Wylie Donald
What happens to the payment for a solar renewable energy credit (SREC) when the payor closes its doors?  Maryland citizens are finding out the hard way.  The promises made to some of them are turning up empty. Here are the details.  Greenspring Energy was a promising solar installation company.  As it describes itself:  "Greenspring Energy offers a unique combination of high-quality solar energy systems and the best energy saving products and services in the marketplace today. Created to help people effectively and permanently reduce their utility bills, Greenspring Energy’s products and services will allow you to: Reduce your utility bills with innovative energy saving products, Produce your own energy with solar systems, Take advantage of federal, state, and local incentives to go solar, Increase the value of your property, Reduce your carbon footprint.”  It was a good business model. Following its founding in 2007, Inc. reports it had revenues of $10.5 million in 2010 and 40 employees the next year. Its website boasts 2011 Inc. 500.  Then something happened.   Jamie Smith Hopkins of the Baltimore Sun reports that Greenspring Energy closed its doors at the end of January this year.  Its employees received rubber checks.  And its customers, promised recurring payments for the SRECs associated with the electricity generated from their solar equipment, were likewise burned.  This is not a particularly unexpected outcome.  Entities regularly enter bankruptcy and their creditors take a beating.  The solar industry is no different.  In fact, one website compiled a list of dozens of “Deceased Solar Companies” through early 2013.   But what is not getting a lot of play (or even any) is the effect of a bankruptcy of the SREC provider.  It is probably safe to say that most SREC transfers are the subject of executory contracts, long-term contracts where the provider agrees to transfer the SRECs accompanying its future electricity generation for some future consideration.  In bankruptcy, such contracts may be assumed, or not, at the discretion of the bankruptcy trustee.  11 U.S.C. § 365.   Except, however, where such contracts are forward contracts.  E.g., Master Solar REC Agreement  (NJ BPU 2014) (“Buyer and Seller each acknowledge that it is a “forward contract merchant” and that all transactions pursuant to this Master Agreement constitute “forward contracts” within the meaning of the United States Bankruptcy Code.”).  In that case, the trustee’s right to reject or assume the executory contract does not exist.  11 U.S.C. § 556.  So there is some complexity here.  And it gets worse.  The SREC does not exist but for the generation of 1 MWh of electricity, even if the SREC is sold separately from that electricity.  It is not difficult to conceive of a situation where the value of the contract for the sale of electricity is going in the opposite direction of the value of the SREC contract.  Suppose the bankruptcy trustee has the right to suspend electricity generation, even if it does not have the right to walk away from the SREC contract.  Does an SREC contract have any value if there is no generation? To our knowledge, SRECs (and RECs as well) have not been tested in the furnace of bankruptcy.  We will be interested in seeing how that turns out. 

Renewable Energy | Solar Energy | Utilities

Act II at the Obama EPA: Gina McCarthy (is predicted) To Take the Helm

February 28, 2013 21:43
by J. Wylie Donald
The President gave an indication of his environmental focus in his inaugural address, and then again in his state of the union speech. The focus would be on climate change.  Central to that focus would be the EPA Adminstrator, but that would not be Lisa Jackson who tendered her resignation at the end of 2012.  If Washington gossip is any guide, Ms. Jackson's replacement will be Gina McCarthy, the current head of EPA's Office of Air and Radiation. We went looking to see if we could draw a bead on where Ms. McCarthy might lead EPA.  We found a recent speech and it was directly on point. On February 21, Ms. McCarthy addressed an audience at the Georgetown Law Center at a conference on Climate Change and Energy Policy. (The conference was videotaped. Ms. McCarthy has the podium from about 4:50 to 5:30 if you are interested.)   Ms. McCarthy has a reputation of being something of a pragmatist. Her talk was consistent with that. A brief summary might be:  Climate change is here and we have to deal with it, but in addressing carbon dioxide there can be great benefits from doing so in the form of reducing pollution, increasing efficiency and empowering communities. Pollution reductions will come in at least three forms. First, if more renewable energy sources are developed, there will be less emissions. Second, if production and use is made more efficient there will be less emissions. Third, if production is focused on fossil fuels that emit less pollutants when burned (that is, not coal), there will be less emissions.  We note that this strategy is already at work.  The growth of wind and solar power has been meteoric.  Ms. McCarthy promoted electric cars, which are far more efficient than gasoline-powered ones (although she ignored compressed natural gas vehicles, which are low emission and have some compelling advantages over electric cars).  And we have covered before  the catastrophe for coal signaled by the proposed Standards of Performance for Greenhouse Gas Emissions for New Stationary Sources: Electric Utility Generating Units, which forecasts not a single new coal plant through 2030. Significantly, or perhaps not, she did not mention fracking and the phenomenal recent growth in natural gas production.  That was surprising.  A recent Harvard Magazine article  summarized the pollution and greenhouse gas effects of the natural gas bonanza:  The shift from coal to gas in the electricity sector has also yielded an environmental bonus—a significant reduction in emissions of CO2, because CO2 emissions per unit of electricity generated using coal are more than double those produced using gas. … [T]he U.S. Energy Information Administration (EIA) reported that domestic emissions of CO2 during the first quarter of 2012 fell to the lowest level recorded since 1992. An ancillary benefit of the coal-to-gas switch has been a significant reduction in emissions of sulfur dioxide, the cause of acid rain, because many of the older coal-burning plants selectively idled by the price-induced fuel switch were not equipped to remove this pollutant from their stack gases. Efficiency pervaded her remarks. A striking number is the $1.7 trillion she stated automobile fuel efficiency standards had saved consumers at the pump. But that is just the tip of the iceberg. EPA will help Americans make buildings, processes and communities more efficient.  According to Ms. McCarthy the EPA Climate Showcase Communities saved $19 million per year based in large part on efficiency. We are somewhat troubled by the “eye of the beholder” syndrome exhibited here.  Certainly consumers saved money at the pump.  But they spent more at the car dealer.  How did they fare overall?  The answer depends on how long they owned their car and the price of gas.  According to research in 2012 by TrueCar.com for the New York Times, at $4/gallon “[e]xcept for two hybrids, the Prius and Lincoln MKZ, and the diesel-powered Volkswagen Jetta TDI, the added cost of the fuel-efficient technologies is so high that it would take the average driver many years — in some cases more than a decade — to save money over comparable new models with conventional internal-combustion engines.”   Ms. McCarthy’s vision of empowerment is through information.  If building owners get the knowledge of how to make their buildings more efficient, they will  because it makes sense to do so.  If communities are provided the relevant information, they will make enabling smart choices.  Indeed, she closed on the importance of information, referencing three sources.  First, EPA has now been collecting information on greenhouse gas emissions for two years.  That information is publicly available.  People should look at this because it identifies the sources of the climate change problem.  Electric utilities are far and away the biggest emitters of greenhouse gases (which is to say, all of us are because, with rare exceptions, all of us use electricity generated with fossil fuels).   Second,  she touted the EPA’s 2012 report, Climate Change Indicators in the United States (18MB).  This is a valuable resource. Twenty-six “indicators” are assessed as to what they show about a world beset by climate change.  All are familiar with reduced ice sheets, reduced snowpack and higher average temperatures.  Less familiar is the documented increase in ragweed pollen season and retained ocean heat.  And the report is honest about what is not known.  Although 7000 Americans were reported to have died of heat-related illnesses in the last 30 years, trends have not been determined.  Although one might think that a hotter world would lead to more hurricanes, the data have not proven that yet. Last, Ms. McCarthy praised government research into adaptation and the various reports issued and to be issued. Some view agency heads in Washington as essentially valueless; talking heads, here today and gone tomorrow.  The bureaucracy was there when the new head arrived and will be there when the now old head leaves.  What this view misses is that the agency head can muster the agency’s resources in support of one initiative, argue for it on Capitol Hill, at the White House and in the press, and give the extra boost when the going gets rough.  Gina McCarthy was instrumental in building the northeast’s cap-and-trade program (the Regional Greenhouse Gas Initiative) in her native Connecticut.  Certainly, that idea on a national basis is percolating again.

Carbon Emissions | Climate Change | Regulation | Renewable Energy | Solar Energy

Wind Projects: Bald Eagles Don't Surf

February 5, 2013 20:57
by J. Wylie Donald
One would think that preliminary estimates of bird fatalities at a proposed 78 MW wind farm in southeastern Minnesota were hardly news.  After all, there are over 60,000 MW of wind energy installed in the United States.  But last Friday the Wall Street Journal published an op-ed piece by Robert Bryce, Senior Fellow at the Manhattan Instittue, which used that preliminary estimate to rip into the project, New Era Wind, and wind energy in general, accusing the Fish & Wildlife Service of using a “double standard ... when it comes to renewable energy.”  The topic ostensibly ruffling Mr. Bryce's feathers is the “incidental take” of bald eagles.  The Journal doesn’t mince words; here is the leader:  “The federal government plans to allow wind turbines to kill bald eagles for 30 years.”  The permit that was being applied for was an “eagle take permit.”  Mr. Bryce refers to it as “an eagle-kill permit.”  One needn’t read any further.  Killing the national symbol simply must stop.  Wind energy is irrevocably bad.  According to the piece, “For years, the wind industry has had de facto permission to violate both the Migratory Bird Treaty Act (which protects 1,000 species) and the Bald and Golden Eagle Protection Act. Federal authorities have never brought a case under either law—despite the Fish and Wildlife Service's estimate that domestic turbines kill some 440,000 birds per year.” This vitriol prompted us to dig into this a little.  First, a little information on bald eagles.  The Fish and Wildlife Service estimates that there are nearly 10,000 nesting pairs of bald eagles in the contiguous United States.  When not nesting, bald eagles like to surf thermals, riding easy until unwary prey ventures forth.  The population is up from “barely 400” in 1963, when there were grave concerns that the national symbol might not make it into the twenty-first century.  Fortunately the bald eagle has made it, and in 2007 it was de-listed from the Federal List of Endangered and Threatened Wildlife and Plants maintained pursuant to the Endangered Species Act.  But delisting did not mean the bald eagle had to make its way in the world alone.  It had the Bald and Golden Eagle Protection Act (16 USC §§ 668-668d), which prohibited the “taking” of such eagles without a permit (where taking included killing, and disturbing).  Permitted takings were established under federal regulations; pertinent here is 50 CFR  § 22.26, which “authorizes take of bald eagles and golden eagles where the take is compatible with the preservation of the bald eagle and the golden eagle; necessary to protect an interest in a particular locality; associated with but not the purpose of the activity; and … (2) For programmatic take: the take is unavoidable even though advanced conservation practices are being implemented.”  Further, the FWS issued guidance, the Land-Based Wind Energy Guidelines, and a draft guidance specifically focused on eagles, wind turbines and permits. While it is true that New Era’s take permit will be the first for bald eagles, it is not the first take permit ever issued and the wind industry has hardly had the opportunity ever to get a permit, as the FWS did not issue its regulations until 2009.  From what we have read, New Era Wind is moving forward in accordance with the statute, the regulations and the guidance, and the FWS is responding similarly. Turning now to the editorial, it is useful to go back to the source.  Mr. Bryce has been a burr under the wind industry's saddle for the last few years with several opinion pieces in the Journal on birds and the wind industry.  The industry has responded directly to his claims.  A press release in 2011, Rhetoric v. Reality:  Wind Energy and Birds, offers these numbers based on a 2007 U.S. Forest Service report:  "Wind power causes far fewer losses of birds (approximately 108,000 a year) than buildings (550 million), power lines (130 million), cars (80 million), poisoning by pesticides (67 million), domestic cats (at least 10 million), and radio and cell towers (4.5 million)." It is also interesting to follow the media journey of the FWS preliminary estimate.  It came out on January 15.  Industrial Wind Action reported the story the next day.  Industrial Wind Action, according to its website, “was formed to counteract the misleading information promulgated by the wind energy industry and various environmental groups.”  The story made it into the mainstream on January 17, when it was reported by Minnesota Public Radio.  Two weeks later it was a national news story in the Journal. We started here considering an editorial about a preliminary estimate, which the FWS  acknowledges is a conservative "worst case" and the FWS's permission for New Era to move forward with its application "does not indicate that New Era will automatically be granted an eagle take permit."  In other contexts a preliminary estimate, without more, would hardly be worthy of comment; it simply isn't ripe.  Not so here, where there is an axe to be ground (or a turbine blade to fail), not only does reasonable rhetoric retreat leaving us with "kill permits," but a small installation out in the woods makes it into the national press.  Renewable energy developers should take note.  Notwithstanding strong support for green energy, it may get very dirty in the trenches, and everyone will know about it.     

Renewable Energy | Wind Energy

Sunrise, Sunset - The Parable of the Two Solar Companies

November 7, 2012 19:27
by J. Wylie Donald
"A Rare Solar Success Story" trumpets the American version of The Wall Street Journal today in an article about LDK Solar, a Chinese solar wafer manufacturer.  We agree with "Solar" and "Story" but the rest of the headline does not match reality.  (In fact, the Asian version is a little less over-the-top:  "Despite Troubles, China's LDK Solar to Keep Humming.")     First, let's consider whether LDK Solar is rare.  As described in the article it has a $500 million government loan guarantee. That sounds like something we remember about Solyndra LLC. Second, it is embroiled in allegations about dumping and production overcapacity, which are attributes that beset all of the solar panel and component producers whether their subsidies are coming from Washington, Brussels or Beijing. Third, while it soared early, it is now struggling, as have many American and European solar  "darlings." Which segues nicely into the question of success. According to the article LDK Solar had a $609 million loss last year (down from a net profit a year earlier of almost $300 million) and its depositary shares have dropped 77%. For those with a visual bent, Barron's does a nice graphical presentation.   To stay afloat LDK Solar is renewing its loans, selling real estate and other assets, and accepting investment from state-owned funds.  The article concludes, "Analysts said LDK could fall into the arms of a larger, healthier company."  These are certainly not the terms we would use to describe a successful company. But every cloud has a silver lining, and the travails of LDK Solar and its brethren are a large part of the reason for the success of solar panel installers:  their raw materials, panels, are available at bargain basement prices. The current darling (number 10 on Fast Company's list of the 50 most innovative companies in the world) in this group is Solar City, which is imminently making its initial public offering to raise $200 million, although Superstorm Sandy has delayed that some.  What does Solar City do?  First and foremost, its people think.  They have thought deeply about how to build a successful business and reached a few unsurprising conclusions.  Consumers want to be "green" but do not want to be bothered with having to contact building inspectors, general contractors, panel manufacturers, lenders, warranty companies, and state and federal tax authorities; they want their solar contractor to handle it all.  Leasing to stable and economically secure individuals (i.e., not subprime borrowers) will generate a steady stream of revenue over the long-haul (typically 20 years).  Long-term maintenance contracts can do the same, and can also provide opportunities for continued marketing and sales to the consumer.  Tax credits, state rebates and leasing and maintenance revenue streams can be bundled together to form the asset base supporting an investment fund, which large institutional investors will invest in.  The investment fund can then be used to finance growth. If this sounds like a successful business model, it is (so far). Second, Solar City executes.  The foregoing ideas are the basis for its rocketing success in the last few years.  As stated in its S-1, It has raised almost $300 million dollars from private equity. Its revenues have grown year on year.  It has come to dominate the residential solar market.  It has just entered the commercial utility space with a 12 MW installation in Hawaii.  To sum it up, it is seeking "world domination."   Our point? Take heed of these two darlings, one now struggling, the other feasting on the struggler and its fellows.  Together they form a parable, not just for the solar market, but for the entire renewable energy space. We counsel our clients where government money is  ubiquitous, innovative technology rampant, competition cut-throat, and winners and losers can change overnight. The sun may rise and shine for our clients, but it also sets.  Our counsel should reflect that.

Renewable Energy | Solar Energy | Utilities

A Wind Farm in Oregon Threatens National Security and President Obama Acts

September 30, 2012 20:41
by J. Wylie Donald
This past Friday, President Obama stopped a national security threat in its tracks:  We quote: There is credible evidence that leads me [the President] to believe that Ralls Corporation (Ralls), ..., and its subsidiaries, and the Sany Group (which includes Sany Electric and Sany Heavy Industries), a Chinese company affiliated with Ralls (together, the Companies); and, Mr. Dawei Duan (Mr. Duan) and Mr. Jialing Wu (Mr. Wu), citizens of the People's Republic of China and senior executives of the Sany Group, who together own Ralls; through exercising control of Lower Ridge Windfarm, LLC, High Plateau Windfarm, LLC, Mule Hollow Windfarm, LLC, and Pine City Windfarm, LLC (collectively, the Project Companies), ..., might take action that threatens to impair the national security of the United States; … Accordingly, under section 721 of the Defense Production Act, the President ordered Ralls to divest itself of all interest in the project and to remove all construction – including any foundations. We knew climate change and national security were tightly connected.  After all, the Department of Defense issued Trends and Implications of Climate Change for National and International Security in October of last year. There we learned that destabilization of less affluent countries as a result of the effects of climate change was a primary risk and a threat to national security.  We did not learn anything about the threat posed by domestic windfarms.  Then Defense Secretary Panetta accepted an award in May 2012 from the Environmental Defense Fund on behalf of the Department of Defense.  He noted: “The area of climate change has a dramatic impact on national security; rising sea levels, severe droughts, the melting of the polar caps, the more frequent and devastating natural disasters all raise demand for humanitarian assistance and disaster relief”.  His domestic focus was cybersecurity, not wind turbines on the Oregon plateau. So it was something of a surprise that the Obama Administration engaged on climate change and national security by tangling with China on a small wind farm project in northeastern Oregon.  But then again, who knew Naval Weapons Systems Training Facility Boardman was just a few miles down the road testing drones and the electronics on airplanes such as the EA-18G Growler? Who knew?  The folks at the Committee on Foreign Investments in the United States (CFIUS) knew. CFIUS is a little known government entity.  A useful and prescient summary of the role of CFIUS in windfarm projects was published by our colleague at Steptoe & Johnson, Richard Reinis, back in 2009.  In a nutshell,  “The CFIUS statute authorizes the President to investigate the impact on US national security of mergers, acquisitions, and takeovers by foreign persons. If a transaction would result in an impairment of national security that could not be mitigated by agreement with the parties, the President may block the transaction or order divestiture of an already completed deal.”  Mr. Reinis then demonstrates his forecasting skills and describes where CFIUS approval might be necessary: “a wind farm within observation distance of a sensitive, national security installation, or in proximity of any other significant national security site.”  Fast forward three years and he could have been writing the President's order. To return to Naval Weapons Systems Training Facility Boardman, drones and the Growler, when CFIUS knows something, it can shut things down.  And it did.  Back in July CFIUS issued a cease and desist order to Ralls.  Ralls responded with a lawsuit challenging CFIUS authority under the Constitution and the Administrative Procedure Act.  Following an agreement with the government to permit some limited preliminary construction, Ralls withdrew its suit.  Then came last Friday’s order.  Sany Group, Ralls’ Chinese affiliate, immediately vowed to sue. Sany Group’s and Ralls’s fight is certain to be an uphill battle;  the implementing legislation states that the President’s decisions are not subject to judicial review.  See 50 U.S. C. App. 2170(e).  Some have suggested that the path to success lies in a suit against CFIUS, not the President, under the holdng in the Supreme Court's recent decision in Sackett v. EPA, where final agency action entitles one to judicial review.  If that is the case, we expect a further obstacle.  Litigating national security is notoriously difficult.  The government refuses to disclose the details of the national security question and the courts are handcuffed.  We are intrigued here by the order's twice-repeated requirement to remove any foundations.  Are super-sensitive detectors suspected among the rebar and concrete?  We recall the multi-million dollar fiasco of the U.S. embassy in Moscow, where bugs were embedded throughout.  We do not expect ever to find out the details of the national security threat posed by Ralls, in contrast (we hope) to the threats posed by other facets of climate change. 

Climate Change | Renewable Energy | Wind Energy | Supreme Court

Rio+20 Disappoints But Does Renewable Energy Need an International Treaty to Move Forward?

June 23, 2012 14:34
by J. Wylie Donald
Rio+20 wrapped up yesterday.  The moniker derives from the twentieth anniversary of the Earth Summit, the 1992 United Nations Conference on Sustainable Development, which was held in Rio de Janeiro.  This reprise was billed as “an historic opportunity to define pathways to a safer, more equitable, cleaner, greener and more prosperous world for all.”  The conferees focused on two themes:  “How to build a green economy to achieve sustainable development and lift people out of poverty, ... and how to improve international coordination for sustainable development." The agenda was dense, ranging from jobs to  energy, sustainable cities to food security and sustainable agriculture, and water and oceans to disaster readiness.  Some criticized this “all things to all people” approach.  We take a more pragmatic view:  “whatever works.” Unfortunately, it does not appear that much is working.  All that was agreed was that there would be more discussion in the future.  Criticism of the conference was uniform.  NPR panned it as “one of the biggest duds.”  The New York Times captured the disappointment of CARE (a political charade), Greenpeace (a failure of epic proportions) and the Pew Environment Group (a far cry from success). Even Sha Zukang, Secretary-General of the conference, could muster little positive to say:  "This is an outcome that makes nobody happy. My job was to make everyone equally unhappy," If the goal was another international agreement filled with platitudes that would accomplish nothing, that was not achieved.  But we would like to suggest that something positive may be coming.  We would like to focus on just one of the initiatives, Sustainable Energy for All (SE4ALL).  Conducted under the auspices of the United Nations, SE4ALL has three objectives: 1. Universal access to electricity2. Increased use of renewable energy3. Increased energy efficiency Over 1.3 billion people in the world do not have access to electricity for their homes and work. Electricity is enabling.  Whether for studying after dark, pumping irrigation water, eliminating wood/charcoal/dung stoves, or refrigerating medicine, the benefits of electricity are immediate and life-changing.  The program calls for innovation and investment, and policy choices that enhance innovation and investment. Renewable energy is part of the program for many of the reasons raised in this country:  job creation, reduction of greenhouse gas and pollutant emissions, insulation from price volatility, and increased energy security.  A justification not common to the domestic debate about renewable energy is also put forth.  Renewable energy can cut balance-of-payment imbalances, The program’s goal is to double the share of renewable energy in the world energy use portfolio by 2030. “Of the three objectives of Sustainable Energy for All, improving energy efficiency has the clearest impact on saving money, improving business results, and delivering more services for consumers.”  Thus efficiency improvements are the easiest point of entry for lifting more people out of energy deprivation for less money.  The program’s goal is to double the current rate of efficiency improvement by 2030. Is this all pie in the sky? Two vantage points suggest it is not.  First, the investment community very much supports the renewable energy sector.  Michael Liebriech, the CEO of Bloomberg New Energy Finance gave an interview at Rio+20 and made the point that he’s seen $1 trillion pour into the sector globally since 2004.  “My clients really don’t necessarily care about what’s happening in the negotiations. They’re concerned about what’s right in front of them. What would you rather trust, a decades-long process that hasn’t resulted in a whole lot of progress, or a trillion dollars in investment?”  Diplomats and governments should listen. Second, UN Secretary-General Ban Ki-Moon, who grew up without electricity, has explained why SE4ALL is a program worth putting forward:  "Widespread energy poverty condemns billions of people to darkness, to ill health and to missed opportunities ....”   One can imagine him continuing:  “I had seen first-hand the grim drudgery and grind, which had been the common lot of … generations of … farm women. I had seen the tallow candle in my own home, followed by the coal-oil lamp. I knew what it was to take care of the farm chores by the flickering, undependable light of the lantern in the mud and cold rains of the fall and the snow and icy winds of winter. … I could close my eyes and recall the innumerable scenes of the harvest and the unending punishing tasks performed by hundreds of thousands of women, growing old prematurely, dying before their time, conscious of the great gap between their lives and the lives of those whom the accident of birth or choice placed in the towns and cities.”   Except that is not the Secretary General, it is Senator Frank Norris, the champion of the Rural Electrification Act of 1936, which literally turned the lights on across much of rural America.  Rural electrification was a good idea then, as millions can attest.  And it is a good idea now.  The trick today is how to wed the developing renewable energy sector, with the billions of dollars of investment being made, to an electrification program for 1.3 billion people.  A distinction here that will make electrification easier than it was in the 1930s, is that many renewable energy sources (solar, wind, tidal) by their nature can be utilized without investment in large power distribution networks.  If SE4ALL is about innovation and investment, it seems eminently achievable.

Climate Change | Legislation | Renewable Energy | Solar Energy | Sustainability

McCARTER & ENGLISH CLIMATE CHANGE AND RENEWABLE ENERGY PRACTICE GROUP

The business case for the development of renewable energy projects, from biodiesel and ethanol to wind, solar, and distributed generation, is more compelling than ever as tax and regulatory incentives combine to attract investments. Emerging issues in environmental law and increasingly recognized principles of corporate social responsibility are encouraging public companies to voluntarily reduce greenhouse gas emissions, install clean energy alternatives, and invest overseas in projects under the Kyoto Protocol to respond to climate change concerns.

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