The production tax credit for wind projects is scheduled to expire at the end of the year, and the credit for geothermal, hydropower, and biomass expires at the end of 2013. Industry executives are vigorously lobbying Congress to extend the credits. The best vehicle for an extension is the payroll tax cut bill currently being negotiated by a House-Senate conference committee (H.R. 3630).
At a recent press briefing, Peter Kelley, vice president for public affairs at the American Wind Energy Association, said that “the urgency of this issue calls for extending it in the first quarter of this year because later will be too late.” The next opportunity for an extension would likely be in the lame-duck session at the end of the year, but executives say that by then the industry will have abandoned projects and manufacturers will be out of business. Wind industry executives visited Congress on February 8 to ask for a one-year extension of the credit.
Executives from the National Hydropower Association, the Biomass Power Association, and the Geothermal Energy Association echo the argument as to their respective industries. Utility-scale hydropower, biomass, and geothermal projects starting today would find it nearly impossible to be completed by the end of 2013 because of the lengthy licensing and build times required. For that reason, progress on new projects beyond 2013 has largely stalled. Industry representatives are seeking an extension through 2016 (currently solar is the only resource extended through 2016). Read the February 8 letter to Congress from the hydropower, biomass, and geothermal representatives here.
Join us on Thursday, February 16, for Pierce Atwood's next Inside Policy Series which will feature a panel discussion with Kenneth Fletcher, Director of the Governor’s Office of Energy Independence & Security. Mr. Fletcher will be joined by Pierce Atwood attorneys Jared des Rosiers and William Hewitt for a lively discussion about Maine's energy challenges. A question and answer period will follow.
The event will be held from 12:00 p.m. to 1:15 p.m. at Pierce Atwood’s Portland office. Space is limited and seats will be filled on a first come, first serve basis. Click here for more details and to RSVP.
You can also join the discussion on Twitter. Follow us at @PierceAtwoodLLP and @RenewNewEngland as we live-tweet the event. Use hashtag #MEenergy.
The new markets tax credit program has been around since 2001, but only recently has it received much attention as a means of financing renewable energy projects. A full description of how new markets tax credit financing works is way beyond the scope of a typical blog post. Suffice it to say that tax credits are awarded to investors who make investments in certain “community development entities” that in turn take the cash and invest it in businesses located in low-income communities (as determined by census data).
The investor receives a federal tax credit equal to 39 percent of the investment spread over seven years. The business benefits through very-low-interest financing, and/or a measure of debt relief after the seven-year period. For projects that qualify and line up all the necessary parties the benefit is substantial.
A few years ago, Congress mandated that a larger percentage of new markets tax credits be employed in rural, rather than urban, areas. This meant that renewable energy projects, such as large-scale solar, wind, and biomass projects became attractive candidates for new markets tax credit financing.
One such project is Burgess BioPower located in Berlin, New Hampshire, and developed by Cate Street Capital. The 75-megawatt biomass production plant is expected to be the Northeast’s largest when completed and will play a large role in revitalizing an area of New Hampshire that has been struggling to stay afloat.
The project will benefit from new markets tax credit financing as well as a section 1603 grant roughly equal to 30 percent of the project cost. It stands as a model for pairing new markets tax credits and renewable energy tax credits to finance a worthwhile and important project. In total, the project was financed by:
For the right project there are intriguing, and creative, ways to leverage a section 1603 grant (or tax credit) to increase the amount of new markets tax credits available. Also increasing the potential benefit for projects located in Maine is the brand new Maine New Markets Capital Investment Program, which provides a 39 percent Maine tax credit for qualifying investments, thus creating an aggregate new markets tax credit equal to 78 percent of the investment.
On Tuesday of this week the Massachusetts Department of Environmental Protection (MassDEP) and Department of Public Health (MDPH) released the Wind Turbine Health Impact Study: Report of Independent Expert Panel (January 2012). Among other things, the expert panel was charged by the two agencies with identifying and characterizing the attributes of concern most commonly reported by individuals residing near wind power projects (e.g., noise, infrasound, vibration, and shadow flicker) and then – based on a evaluation of peer-reviewed scientific studies – assessing the magnitude and frequency of any potential impacts and risks to human health associated with the operation of these projects. Findings by the expert panel include:
MassDEP and MDPH will be holding three public meetings on the Report in February and will receive public comment until Monday, March 19 at 5 p.m. Electronic comments may be submitted to: WindTurbineDocket.MassDEP@MassMail.State.MA.US How the Report will be used both in Massachusetts and elsewhere in the northeast will be interesting to follow.
Additionally, although not part of the expert panel’s original charge, two members of the panel also provided MassDEP and MDPH an addendum, A Brief Review of Wind Power in Denmark, Germany, Sweden, Vermont, and Maine (January 2012). The addendum looks at wind power development in the two New England states and three countries with the goal of identifying whether there are best practices or lessons learned that could benefit Massachusetts. The authors identify three factors they believe contribute to greater project success:
The addendum identifies the Fox Islands Wind project on Vinalhaven Island in Maine as the one project in Maine or Vermont that is “especially noteworthy” because of its success and community involvement.
2011 finished with a flurry of New England renewable energy news. Here's what we've been following in the new year:
Cape Wind bouyed as SJC allows utility deal
The Supreme Judicial Court of Massachusetts has upheld the Department of Public Utilities' approval of the power purchase agreement between Cape Wind and National Grid. Cape Wind is still seeking long term agreements for the remainder of the energy produced by the facility.
New Hampshire biomass plants score PPAs while RPS undergoes revisions
In a deal apparently intended to head off appeal of the New Hampshire Public Utilities Commission's approval of long term contract with the developer of a 75-MW biomass in Berlin, NH, five independent biomass power producers have obtained approval of power purchase agreements with PSNH that will allow them to remain in operation.
Connecticut announces 20-year deals with two solar projects
The Connecticut Department of Energy & Environmental Protection announced that it has selected two 5 MW solar projects that will receive 20-year PPAs to purchase power at 22.2 cents per kWh.
Balsams conservation bid buoyed by online gift-giving
The Society for the Protection of New Hampshire Forest reports that it has raised over $315,000 for purchase of a conservation easement on a key parcel of land in Dixville Notch needed for the Northern Pass. The Society has until January 15th to raise the $850,000 needed for the easement; Northern Pass has offered $3 million for the property.
On December 15, Maine Public Utilities Commission Chairman Tom Welch addressed attendees of the Maine Renewable Energy Association’s 17th Annual Gathering. In his thoughtful and thought provoking presentation (pdf), Mr. Welch questioned the role of renewable energy in addressing climate change in the near- and medium-term, as well as the difficulty in achieving any politically palatable policy changes that could alter trends over the next century or two. What might this mean for the renewable energy industry, he asked? He suggested that in explaining the need for renewable energy to the public and to policy-makers, proponents of these sources of energy might need to change their focus. Instead of highlighting the reduction in carbon emissions achievable through a shift to renewable energy, proponents may find it more helpful, and even necessary, to highlight the other benefits of renewable energy projects. Mr. Welch summarized what he sees as the other key benefits in his presentation. His insightful remarks are well worth the read.
The details of the 2012 legislative session are now coming into focus as the Legislature prepares for the start of the new session on January 4, 2012. Among the proposals that will confront the Legislature are two hydropower-related bills that will be considered by the Energy, Utilities and Technology Committee.
The first bill, LD 1686, An Act To Amend the Process for Issuing State Water Quality Certificates to Hydropower Projects That Withdraw Water from Great Ponds, is sponsored by Representative Ralph Sarty (R – Denmark). This bill would require the Department of Environmental Protection to consult with the Department of Inland Fisheries and Wildlife and the Department of Conservation before issuing a water quality certificate for hydropower projects that withdraw water from impoundments managed as great ponds. Significantly, in order for the DEP to issue a water quality certificate, DIFW and DOC would have to agree that the hydropower project does not violate water quality standards as they relate to fishing, recreation, and habitat for aquatic life.
Attorneys from Pierce Atwood have met with Representative Sarty regarding this proposal as it was being developed. Representative Sarty, who formerly worked for the Maine Warden Service, is very strong in his support for this bill and will certainly be a strong advocate for his proposal.
The second bill, An Act To Improve Maine’s Capacity To Produce Low-cost Renewable Energy, is sponsored by Representative Johnson (R – Greenville). This proposal, which has not yet been printed, has been summarized by the Legislative Information Office as follows: “This bill would prohibit the issuance of a permit to remove a dam from hydroelectric generating capacity unless there is a demonstrated replacement for the energy.”
As the Governor’s and the Legislature’s agendas come together for 2012, it is clear that energy will be one of the most discussed issues this legislative session. Obviously, hydropower will be an integral part of this discussion. If you have any questions or would like further information, or are interested in assisting us as we work to shape these bills, please contact Matt Manahan, John Delahanty, or Avery Day.
Here's what we're following this week:
Massachusetts wind energy siting bill dies
The chairman of the Senate committee considering the bill has asked to table the bill, though the bill has been declared dead before, and may yet return.
Vermont releases final Comprehensive Energy Plan
The report, issued by the Vermont Department of Public Service, continues the state's support for renewable energy, including a recommendation that the legislature consider adopting a renewable portfolio standard with a target of 75% renewables by 2031.
Pro-renewables NGO takes swing at DOE renewables loans
Californians for Renewable Energy (CARE) filed a lawsuit last week challenging the loan guarantees made to utility-scale renewable energy projects, alleging that DOE issued the guarantees prior to issuing regulations as required by statute.
Northern Pass buys Franklin parcel
Northern Pass has purchased land for the site of the HVDC converter station in Franklin, New Hampshire for $2.35 million. The final route for the line remains unknown as the company negotiates with landowners elsewhere in the state.
The U.S. Department of Interior Bureau of Ocean Energy Management (BOEM) convened the Maine Renewable Energy Task Force yesterday in South Portland, Maine to consider a lease application submitted by Statoil North America, Inc. for an offshore wind power project on a site approximately 12 miles offshore, south of Boothbay Harbor, Maine. The Statoil application is posted at http://www.boem.gov/Renewable-Energy-Program/State-Activities/Maine.aspx. Statoil’s application covers a twenty-two square mile area, with the expectation that the final lease request may be reduced to less than four square miles following completion of environmental and wind resource assessments. On November 30, BOEM determinedthat the application is complete. The Task Force, comprised of federal, state, local and tribal representatives, was originally convened in 2010 as part of a federal-state effort to coordinate to make offshore marine renewable energy leasing process more efficient.
Statoil submitted the lease application in connection with its response to the Maine Public Utilities Commission's September 1, 2010 Request for Proposals for Long-term Contracts for Deep-Water Offshore Wind Energy Pilot Projects. Statoil proposes to construct a 12 MW project with three turbines, and to sell the electricity generated under a long term power purchase agreements under the framework of the Maine PUC pilot project program. Statoil plans to begin construction in 2016. If the pilot project is successful, Statoil would build upon the project to construct a much larger wind power project, likely in the same general vicinity.
At the December 8 meeting, the Task Force first convened in an intergovernmental session, comprised of a series of presentations on the OCS leasing process for offshore wind sites and role of various federal agencies, followed by a general public Q&A session with BOEM representatives. BOEM’s Project Coordinator for the Statoil application, Aditi Mirani, served as the meeting coordinator, and Ned Farquhar, Deputy Assistant Secretary for Lands and Minerals Management in DOI, Brian Hooker, Marine Biologist, and Tim Redding, Program Analyst at BOEM, also participated. Other Task Force presentations included a presentation by George Detwiler of the US Coast Guard indicating that the Coast Guard’s preliminary assessment is that the lease would not pose impermissible navigational hazards (subject to further information and analysis). Department of Defense personnel made a presentation indicating that DOD’s preliminary assessment that the proposed project would not interfere with DOD uses of the lease areas. NOAA’s Susan Tuxbury, Fishery biologist, and USFW’s Linda Welch, also presented on the NOAA and USFW roles and data requirements in the BOEM leasing process. Both NOAA and USFW emphasized the very limited data available concerning wildlife at the proposed site, and Linda Welch emphasized the strong potential for interaction between OSW projects and birds and bats. Ms. Welch emphasized that recently collected data confirm that birds and bats are year-round users of the Gulf of Maine, and are present more than twenty miles offshore. USFW emphasized that at least two years of baseline data would be required, followed by at least three years post-construction monitoring.
During the public session, representatives of several fishing organizations criticized the proposed lease site as posing an unacceptable conflict with existing fisheries in the area. Representatives of the Maine Lobsterman’s Association, the Maine Fisherman’s Association, and the American Blue Fin Tuna Association appeared to express concern, and characterized the proposed lease location as a fishing “hot spot” for groundfish, herring, shrimp and lobster fishing.
At the conclusion of the Task Force meeting, BOEM representatives indicated that BOEM’s next steps would be to complete a review of the technical and financial qualifications of Statoil, and then to publish a Request for Competitive Interest, in order to determine whether there are other competitor companies interested in leasing these lease blocs. BOEM will then determine whether to process the Statoil lease as a competitive or non-competitive lease application. BOEM promised to keep TASK Force Members informed, invited Task Force members to seek out information from stakeholders in Maine and to provide that information to BOEM, and also promised to reconvene the Task Force following future substantive filings on the project and environmental impacts by Statoil.
The price of energy was a top issue in Maine’s 2010 gubernatorial election, and earlier this week the Maine legislature’s Committee on Energy, Utilities and Technology took up Governor LePage’s energy bill, LD 1570 “An Act to Reduce Energy Prices for Maine Consumers.” The bill would cap the state’s renewable portfolio standard (RPS) at 4% of sales in 2010: as currently enacted, the RPS is set to climb to 10% from new renewable resources by 2017. The bill also would cap the alternative compliance mechanism to 110% of the cost of RECs from the previous year.
LD 1570 also revises 35-A M.R.S. § 3210-C, the Maine Public Utilities Commission’s (MPUC) long term contracting authority, preventing the MPUC from approving any long term contract whose price is greater than 90% of the average market price for capacity resources, and requiring the MPUC to obtain approval of the legislature before entering into any long term contracts. The existing law does not include a hard cap on price.
The bill appears likely to move to the full legislature for a vote, where its future is uncertain: support for the bill from the Maine business community was somewhat tepid, and Maine’s renewable energy companies have been vocal in their opposition.
If anything, the bill serves to highlight the limits on a state governor’s ability to lower energy prices in a regional market for electricity. Though the costs of compliance with Maine’s RPS will likely rise as the target percentages increase, to date the costs to individual ratepayers have been minimal. Earlier this year, the MPUC released its annual report to the Legislature on the RPS for the 2009 compliance year, which described the cost of complying with the new renewables target:
During 2009, the cost of [Class I] RECs used for compliance ranged from approximately $6.50 per MWh to $44 per MWh, with an average cost of $26.28 per MWh and a total cost of $4,587,052. A minority of suppliers (4 out of 47) choose to satisfy the portfolio requirement through the ACM at the rate of $60.92 per MWh for a total cost of $319,233. Thus, the total cost to ratepayers during 2009 was $4,906,285, which translates into a rate impact of .06 cents per kWh (or about 35 cents monthly increase to a typical residential bill).
More than 85% of those Class I RECs came from facilities in Maine, the vast majority of which were biomass. Many of these facilities are on-site at mills and pulp and paper facilities, where revenue from RECs and the use of biomass boilers (including the sale of excess energy) have helped to provide an additional income stream and some level of insulation from high energy prices. The story with long term contracts is similar: the MPUC has approved just two long-term contracts under § 3210-C, the most recent of which was intended to enable Verso’s Bucksport mill to convert from fossil fuels to biomass.