Category: Public Policy

1
Invigorated Federal Interest in Fusion Energy Presents Opportunities and Questions for Growing Private Fusion Energy Sector
2
FirstEnergy: Bankruptcy Court Asserts Primacy Over FERC; Approves Rejection of Power Purchase Agreements
3
Trump Administration Releases Clean Power Plan Replacement Proposal
4
Nine States to Collaborate to Release a New Action Plan to Accelerate the Adoption of Electric Vehicles
5
Tax Credits for Storage After Solar or Wind?
6
FERC Rule Seeks to Expand Energy Storage Participation in Wholesale Electricity Markets
7
Tax Credits for Energy Facilities Extended in New Budget Bill
8
President Trump Imposes Tariffs on Imported Solar Modules and Cells
9
ACORE and Bloomberg New Energy Finance – State of the Industry Webinar: Financing Renewables Post-Tax Reform
10
Tax Reform Goes to the President: How Did Renewables Fare?

Invigorated Federal Interest in Fusion Energy Presents Opportunities and Questions for Growing Private Fusion Energy Sector

By Tim L. Peckinpaugh, Michael L. O’Neill, R. Paul Stimers                     

Significant investment is flowing into private companies seeking long-sought-after breakthroughs to develop practical power generation solutions based on nuclear fusion reactions. [1] Fusion reactions have become relatively commonplace in the laboratory setting, but no one has developed a nuclear fusion reactor yet that produces more energy than the device uses to operate and maintain the reaction. Numerous private companies, in the United States and around the world, are attacking this challenge with a variety of approaches, with the goal of making the technology sustainable, practical, and commercial. These companies are receiving significant investment from backers who believe a solution is within reach.

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FirstEnergy: Bankruptcy Court Asserts Primacy Over FERC; Approves Rejection of Power Purchase Agreements

By Charles A. Dale III, William M. Keyser, David A. Mawhinney, and Michael L. O’Neill                      

In a closely watched battle between FirstEnergy Solutions (“FirstEnergy”) and the Ohio Valley Energy Corporation (“OVEC”) that could have significant implications for the U.S. power sector, the U.S. Bankruptcy Court for the Northern District of Ohio asserted its primacy over the Federal Energy Regulatory Commission (“FERC”) in deciding whether to allow FirstEnergy to repudiate certain FERC-regulated power purchase agreements (“PPAs”). In a decision with significant implications for all participants in rapidly evolving wholesale power markets, the bankruptcy court applied the highly deferential business judgment standard instead of the more stringent standard applied by FERC when evaluating proposed changes to PPAs featuring mutually agreed-upon filed rates. The court’s decision is now the subject of a direct appeal to the U.S. Court of Appeals for the Sixth Circuit, and the outcome may inspire additional action by Congress and the president.

To read the full alert, click here.

 

Trump Administration Releases Clean Power Plan Replacement Proposal

Advancing President Trump’s campaign promise to end the “war on coal,” on August 21, 2018, the U.S. Environmental Protection Agency (“EPA”) proposed a new rule to replace the Obama administration’s Clean Power Plan (“CPP”). Unlike the CPP, the proposed Affordable Clean Energy Rule (the “ACE Rule”) does not set numerical standards or targets for greenhouse gas (“GHG”) emissions. Instead, the ACE Rule would give states flexibility to set their own standards of performance for existing coal-fired power plants. EPA asserts that the ACE Rule will eventually reduce GHG emissions to a similar extent as the CPP would have; however, according to EPA, the ACE Rule would reduce GHG emissions by 1.5% by 2030, compared to 32% by 2030 under the CPP. Interested parties will have 60 days from the date of publication in the Federal Register to comment on the ACE Rule.

To read the full alert, click here.

Nine States to Collaborate to Release a New Action Plan to Accelerate the Adoption of Electric Vehicles

By William M. Keyser and Toks A. Arowojolu

On June 20, 2018, the Multi-State Zero Emission Vehicle (ZEV) Task Force released an Action Plan designed to accelerate the adoption of electric vehicles in the United States. The Action Plan presents 80 strategies and recommendations for states, automakers, charging and fueling infrastructure companies, utilities, and other partners to achieve rapid ZEV market growth in five core areas:

  • consumer education and outreach;
  • charging and hydrogen fueling infrastructure;
  • consumer purchase incentives;
  • light-duty fleets; and
  • dealerships

The Action Plan’s recommendations reflect transportation-focused efforts to combat climate change for the future. By promoting the adoption by mainstream consumers of ZEVs, which include plug-in hybrid, battery electric, and hydrogen fuel cell vehicles, the goal is to achieve “near-and long-term” greenhouse gas (GHG) reduction targets that have been implemented in various states.

I. Background

The Multi-State ZEV Task Force includes nine states—California, Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island, Vermont, and New Jersey that collectively comprise one-third of the U.S. vehicle market. The Task Force was formed in 2013 under a Memorandum of Understanding (MOU) signed by the Governors of California and the initial seven states that adopted California’s ZEV regulations, which are more stringent than the federal vehicle emission standards. New Jersey joined the Task Force in 2018.

The Multi-state ZEV Task Force released its first Action Plan in May 2014 to support the implementation of the states’ new ZEV regulations. The 2014 Action Plan focused on eleven key initiatives, including adopting financial incentives and education programs that have been implemented by various states.

II. The New Action Plan

The new Action Plan builds on the early successes of the 2014 Action Plan by “redoubling state efforts” and “establishing clear priorities for action for the next critical period in the evolution of the market.” Promoting transportation electrification promises to deliver “substantial energy security and economic benefits as cleaner electricity derived from renewable energy and other low-carbon sources replaces imported gasoline and diesel as transportation fuels.”

Among the 80 ideas, key recommendations from the five priority areas include the following:

Consumer Education and Outreach

  • States should support local grass roots efforts to increase consumer experience with ZEVs, such as ride and drives, rental programs, and pop-up ZEV show rooms.
  • Automakers and dealers should increase brand-specific advertising as new ZEV models become available and fund brand-neutral consumer awareness campaigns, such as Drive Change. Drive Electric.
  • Utilities should include funding for consumer education in transportation electrification program proposals submitted to public utility commissions (PUCs).

Charging and Hydrogen Fueling Infrastructure

  • States should develop plans to guide the deployment of electric vehicle supply equipment (EVSE) to support the broad portfolio of charging needs at home, work, around town, at destination locations, and on the road.
  • States should open PUC proceedings to consider alternative demand charge rate designs, waivers or other options for public charging to provide the least burdensome price signals to EVSE hosts.

Consumer Purchase Incentives

  • States should collaborate with automobile manufacturers, dealers, utilities, other parties to advocate for the continued availability of federal tax credits.
  • States should continue to offer and promote existing state rebates, income tax credits, and sales and excise tax exemptions.
  • Automakers and dealers should continue to engage with state and local ZEV and EVSE incentive programs regarding monetary and non monetary incentives such as preferential parking, discounted tolls, and High Occupancy Vehicle lane access.

Light-Duty Fleets

  • States should advance the electrification of public fleets by offering financial incentives to state and local government fleets for acquisition of ZEVs and EVSE.
  • Fleet Manager Associations should provide information and guidance to members about the benefits of ZEVs and charging/fueling technologies and costs through ZEV-focused information sessions and trainings.

Dealerships

  • States should highlight dealerships with successful ZEV practices and engage with dealers through the Task Force Dealership Workgroup to identify collaboration opportunities that could support sales.
  • Dealerships and dealership associations should commit to increasing ZEV sales by identifying and adopting best practices to overcome the challenges of selling ZEVs to new consumers.

The full Multi-State Zev Action Plan is provided here. K&L Gates lawyers will continue to monitor these developments as the United States rolls to a cleaner transportation future.

Tax Credits for Storage After Solar or Wind?

By Elizabeth Crouse, Elias Hinckley and William Holmes

On Friday, March 2, the Internal Revenue Service released Private Letter Ruling (“PLR”) 201809003. The PLR is not binding precedent, but it indicates that the IRS will permit a taxpayer to claim a Code Section 25D credit in respect of a residential battery installed after the solar panels to which it will be attached was installed. In the PLR, the IRS expressly states that it will treat the battery as property that “uses solar energy to generate electricity,” provided only solar energy is used to charge it.

The PLR concerns individuals claiming a credit for a residential system, but don’t stop reading. This outcome matters for C&I and utility scale projects also.

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FERC Rule Seeks to Expand Energy Storage Participation in Wholesale Electricity Markets

By William Keyser, Buck Endemann, Mike O’Neill and Jim Wrathall

On February 15, 2018 the Federal Energy Regulatory Commission (“FERC”) issued a Final Rule addressing participation of energy storage resources in electricity markets operated by Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”).  Largely adopting the proposal issued in November 2016, the Final Rule seeks to remove barriers for energy storage participation in wholesale capacity, energy, and ancillary services markets.  The ultimate impact of FERC’s directive will be determined over the next few years as RTOs and ISOs implement the standards through their respective stakeholder processes, compliance filings, and (potentially) litigation.    FERC deferred ruling on a companion proposal addressing participation of distributed energy resources (“DERs”) in wholesale markets.  In the coming months, stakeholders should carefully consider these measures as there will continue to be opportunities to shape the final outcomes. Read More

Tax Credits for Energy Facilities Extended in New Budget Bill

By Charles Purcell,  Won-Han Cheng, Elizabeth Crouse, and Andrea Templeton

Congress recently enacted the Bipartisan Budget Act of 2018, which contained a number of extenders applicable to tax credits for energy facilities.  In the case of PTC-eligible energy facilities that were not covered by the earlier extension applicable to wind and solar, the credit was extended to facilities where construction was commenced before January 1, 2018.  This new rule applies to closed and open loop biomass, geothermal, landfill gas, trash, qualified hydropower, and marine and hydrokinetic facilities.  In addition, the election to claim the ITC in lieu of the PTC on these facilities was also extended to facilities where construction was commenced before January 1, 2018.

The ITC provisions were amended to extend the “commence construction” dates for 30% credits for fiber optic solar, qualified fuel cell, ground based thermal heating and cooling systems, and qualified small wind energy property to be consistent with solar facilities (terminating at the end of 2021). The Act also extended the “commence construction” dates for 10% credits relating to qualified microturbine and combined heat and power system property (also terminating at the end of 2021).  To be eligible for the extension, combined heat and power system property must be placed into service after December 31, 2016.

In addition, the credits for fiber optic solar, qualified fuel cell and qualified small wind project will step down over the next 5 years.  It also appears that any such property not placed in service by the end of 2023 will not be eligible for any ITC.

President Trump Imposes Tariffs on Imported Solar Modules and Cells

By Stacy Ettinger and James Wrathall

President Trump announced the imposition of tariffs on imported crystalline silicon photovoltaic (“CSPV”) modules and cells, as previously recommended by the U.S. International Trade Commission.  The tariffs will be effective February 7, 2018.

Importers will be required to pay a tariff in the amount of 30 percent of the entered value in the first year, declining by 5 percent a year in each of the second, third, and fourth years.  With respect to CSPV solar cells, the first 2.5 gigawatts imported in each year will be exempted from the tariff.  These tariffs are in addition to the antidumping and countervailing duties relief previously imposed by the U.S. Department of Commerce on Chinese solar imports.

For U.S. solar developers and installers, the initial 30 percent tariff is expected to add 10 to 15 cents per watt to the final installed price.  Green Tech Media Research (“GTM”) has predicted this will cause a reduction of approximately 10 percent in U.S. installed solar capacity.  The tariffs do not apply to technologies other than CSPV, specifically thin film modules.  Therefore manufacturers of thin film products such as Solar Frontier and First Solar may see increased relative market share.

The biggest impacts on projects are expected in the utility-scale solar sector, which is largely dependent on being competitive with other generation sources.  Residential solar is viewed as more resilient and less sensitive to price changes.

Some CSPV manufacturing might shift to free trade agreement countries not included in the injury finding.  In particular, manufacturers based in Singapore or Canada may benefit, if the President’s proclamation reflects the approach taken by a majority of the ITC Commissioners to exclude these countries from the tariff program.

China, South Korea, and other countries with exports subject to the tariffs will likely file complaints before the World Trade Organization (“WTO”).  It is unclear what position the current Administration would take in response to an adverse WTO decision, if any. In any case, the WTO dispute settlement process itself could take anywhere from two to four years to complete.

Companies should consider steps to mitigate impacts of these tariffs.  Reportedly over two gigawatts of modules have already been procured for 2018 projects in the United States.  Accessing stockpiles of solar equipment may aid in reducing economic impacts.

The formal proclamation signed today by President Trump provides for exclusion of particular products from the safeguard measure. Procedures for requests for exclusion will be published in the Federal Register within 30 days.  Companies may want to review the product exclusion process and consider whether an exclusion request is warranted.

 

ACORE and Bloomberg New Energy Finance – State of the Industry Webinar: Financing Renewables Post-Tax Reform

On Wednesday, January 24, 2018 from 12:00-1:30pm ET, K&L Gates Seattle associate Elizabeth Crouse will be moderating the ACORE and Bloomberg New Energy Finance sponsored webinar “Financing Renewables Post-Tax Reform.”

The State of the Industry Webinar, a quarterly series produced in partnership between ACORE and Bloomberg New Energy Finance, offers the latest intelligence and analysis on renewable energy markets, finance and policy.

Provisions included in the tax reform package will affect how leading financiers of renewable energy projects are taxed on their investments. These changes could impact the availability of tax equity – a critical source of financing that is a significant catalyst for market growth and responsible for roughly 20% of annual U.S. renewable energy investment. On this webinar, experts will consider how changes to the tax code might shake out in the renewable energy market, alternate sources of project financing and other factors developers should expect in 2018 and beyond.

Policy Update:

Greg Wetstone, President & CEO, ACORE

Todd Foley, Senior Vice President of Policy and Government Affairs, ACORE

Markets Update:

Ethan Zindler, Head of Americas, Bloomberg New Energy Finance

Moderator:

Elizabeth Crouse, Associate, K&L Gates LLP

Speakers:

Marshal Salant, Managing Director, Head of Alternative Energy Finance, Citi

Meghan Schultz, Senior Vice President, Structured FinanceInvenergy LLC

Kevin Walsh, Managing Director, Renewable Energy, GE Energy Financial Services

To register for this webinar, please click here.

Tax Reform Goes to the President: How Did Renewables Fare?

By Charles H. Purcell, Rachel D. Trickett, and Elizabeth C. Crouse

On December 20, 2017, the U.S. House of Representatives voted to send the Tax Cuts and Jobs Act (the “Act”) to the president for his signature, which is the final step required to make the Act effective. What does the final bill mean for the renewable energy industry? The Investment Tax Credit (“ITC”) and the Production Tax Credit (“PTC”) appear to remain unchanged (for now) and the Base Erosion and Anti-Abuse Tax (aka, the BEAT or International AMT) in the final version of the Act is better for the renewables industry than in previous iterations. Nevertheless, a handful of other provisions may significantly impact the renewable energy industry.

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