Category: Uncategorized

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Nine States to Collaborate to Release a New Action Plan to Accelerate the Adoption of Electric Vehicles
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ESA News Desk with K&L Gates
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California Energy Storage Update – What’s In the Latest Procurement Plans?
4
GOP’s “Tax Cuts and Jobs Act” Trims Renewable Energy and Other Tax Credits
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K&L Gates Blockchain Energizer – Volume 13
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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.

ESA News Desk with K&L Gates

K&L Gates was recently the News Desk Host #ESACon18. The Energy Storage Association’s Annual Convention was held April 18-20 in Boston, MA.  As News Desk Host, we had the opportunity to interview representatives from the organizations that are making an impact on the energy storage industry.

K&L Gates interviewers included Portland partner Bill Holmes, Boston associate Mike O’Neill, Washington D.C. partner Will Keyser and counsel Jim Wrathall. Organizations represented included Sungrow Samsung SDI, Dynapower Company, Ingersoll Rand, WRISE, ESA, Fluence, GE Power, National Grid, NEC Energy Solutions, NEXTracker, and Powin Energy.

To view the interviews, click here.

 

 

 

California Energy Storage Update – What’s In the Latest Procurement Plans?

By Buck B. Endemann and  Kristen A. Berry

Just as Prometheus hid fire in a fennel stalk to gift it to the unaware ancients, the pioneers of energy storage technology seek to harness and store energy in increasingly novel ways. Transforming captured energy into storable and consumable power stands at the forefront of this century’s revolution in green energy technology. In 2017, the United States deployed 431 MWh of energy storage capability, largely spurred by state-specific energy storage mandates.[1] California’s state legislature has continued to lead the nation and spread Prometheus’s “secret spring of fire.”

While the concept of storing energy is centuries-old, new battery technologies promise to mitigate California’s infamous duck curve and provide the low carbon, flexible ramping resources necessary to accommodate the state’s increasing penetration of solar power. The Union of Concerned Scientists estimates the United States’ total current storage capacity at 23 gigawatts (GW), which approximates the capacity of 28 coal plants.[2] Ninety-six percent of this capacity, however, derives from pumped hydroelectric storage, most of which was built in the 1960s and 1970s and is increasingly vulnerable to drought and other environmental risks. More recently, energy storage developers have focused their efforts on battery technologies, with lithium-ion batteries in particular making great strides in terms of duration and cost-effectiveness. Market watchers have projected that by 2020 the price of battery storage could decline to $200 kWh, compared to today’s market price of approximately $340/kWh.[3]

As detailed in the K&L Gates Energy Storage Handbook (Version 2.0), California’s two landmark energy storage bills require California’s Investor-Owned Utilities (IOUs) to procure and install nearly 2 GW of storage by 2024.[4]  Under AB 2514, the California Public Utility Commission (CPUC) required California’s IOUs to procure by 2020 1,325 MW of storage capacity split among the transmission, distribution, and customer domains.  In AB 2868, the legislature set an additional procurement target of 500 MW for distributed-connected energy storage systems, with individual 166 MW goals established for Southern California Edison (SCE), Pacific Gas & Electric (PG&E), and San Diego Gas & Electric (SD&E). Under both laws, California’s IOUs must submit periodic procurement plans to show progress toward each law’s targets.  In February and March 2018, SCE, PG&E, and SDG&E submitted their 2018 energy storage procurement plans, which lay out each IOU’s strategy to meet its energy storage goals in its respective service territory.

SCE proposes to procure a total of 60 MW of energy storage by 2018 in two separate procurements of 20 MW and 40 MW.  The 20 MW of procurement would respond to an additional legislative directive, SB 801, under which SCE is required to deploy energy storage in response to the natural gas shortages caused by the Aliso Canyon gas storage facility’s well failure.  For the remaining 40 MW, SCE plans to launch programs and investments to solicit utility-owned storage, as mandated under AB 2868. SCE’s procurement plan also seeks CPUC approval to allocate $9.8 million to install energy storage at low-income, multi-family dwellings.

PG&E’s procurement plan focuses on the 166 MW of energy storage under AB 2514 that it is required to procure in the 2018-2019 procurement period.  To meet that target, PG&E proposes an energy storage request-for-offers framework. To achieve its AB 2868 target, PG&E outlined its four categories of distribution-connected storage investments: (1) researching the role of distributed energy storage in wildfire safety, particularly within the context of the North Bay Wildfire rebuilding efforts, (2) launching a behind-the-meter storage program for up to 5 MW of thermal storage, (3) identifying and seeking immediate CPUC approval (via a Tier 3 advice letter) for storage investments up to 166 MW, and (4) requesting authorization for additional investments beyond the categories identified in the 2018 application.

SDG&E’s filing proposes seven utility-owned micro-grid projects, all of which would exist at the distribution circuit level. These projects would provide services to entities that contribute to public safety, like police stations and firehouses, by providing storage capabilities separate from the main grid.  SDG&E argues that these distributed storage systems will provide a wide-range of benefits, including grid resiliency, wholesale market revenues, and reduced dependency on non-renewable energy sources by minimizing the need for back-up generators.  SDG&E also plans to contribute $2 million toward a pilot energy storage incentive program for non-profit facilities, such as nursing homes.

Each of these utilities will roll out its initiatives over the remainder of 2018 and beyond.  K&L Gates will continue to monitor energy storage developments and provide updates.

[1] GTM Research / ESA, U.S. Energy Storage Monitor, https://www.greentechmedia.com/research/subscription/u-s-energy-storage-monitor#gs.KZIlnzQ (2017).

[2] Union of Concerned Scientists, How Energy Storage Works, https://www.ucsusa.org/clean-energy/how-energy-storage-works#.WtAsTq2otD8 (2013).

[3] McKinsey & Company, The New Economics of Energy Storage, https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/the-new-economics-of-energy-storage (August 2016). Energy Storage Report, Study: Flow Batteries Beat Lithium Ion, http://energystoragereport.info/study-flow-batteries-beat-lithium-ion/#sthash.c07jCAVv.gXdjY17t.dpbs (July 2017).

[4] K&L Gates, Energy Storage Handbook, http://www.klgates.com/epubs/Energy-Storage-Handbook-Vol2/ (April 2018).

GOP’s “Tax Cuts and Jobs Act” Trims Renewable Energy and Other Tax Credits

By Mary Burke Baker, Elizabeth C. Crouse, Rachel D. Trickett, Charles H. Purcell

On November 2, 2017, the House Ways and Means Committee unveiled its much anticipated tax reform bill titled the “Tax Cuts and Jobs Act” (the “House Plan”). The House Plan is a significant step by Republican lawmakers to fulfill a campaign promise to reform the United States tax code. Significantly, for solar, wind, and other renewable energy companies that have been scrambling to predict how proposed tax reform might affect their industries, the House Plan includes substantial modifications to existing renewable energy tax credits including the production tax credit (“PTC”) and the investment tax credit (“ITC”). Many other energy-related tax incentives were also cut, including the Code Section 199 Domestic Production Activities Deduction and credits for Enhanced Oil Recovery and Producing Oil and Gas from Marginal Wells. Two other credits that are often used in conjunction with the ITC on small solar developments, the New Markets and Historic Rehabilitation Tax Credits, were also cut.

THE PTC

The House Plan would permanently reduce the maximum PTC rate from 2.4 to 1.5 cents per kilowatt-hour–with no inflation adjustments going forward–for all projects that did not begin construction prior to the date the House Plan is enacted. It is possible that this reduction may be retroactive for projects that commence construction on or after November 2, 2017, the day on which the House Plan was released. Under current law, the PTC is scheduled to sunset in 2020; this schedule would remain unchanged in the House Plan.

Effective for all tax years–including years beginning prior to, on or after enactment of the House Plan–the House Plan would require a “continuous program of construction” from the date a facility begins construction to the date it is placed in service. The “continuous program of construction” requirement exists under current law and has been interpreted by the Department of the Treasury (the “Department”) to permit several “safe harbor” time periods. At present, it is unclear whether the House Plan, if enacted, would effectively eliminate those safe harbors or whether the Department may issue them unchanged or substantially unchanged.

THE ITC

The House Plan would align the expiration dates and phase-out schedules for different qualified energy properties and extend the ITC to certain other technologies. Solar energy, fiber-optic solar energy, qualified fuel cell, and qualified small wind energy property would be eligible for a 30% ITC if construction begins before 2020 and would be phased out for construction that begins before 2022 using the same schedule currently applicable to solar energy property. Qualified microturbine, combined heat and power systems, and thermal energy property would be eligible for a 10% ITC if construction begins before 2022. The permanent 10% ITC available for solar energy and geothermal property would be eliminated for all facilities if construction of such facility begins after 2027.

Similar to the PTC, the House Plan would also require a “continuous program of construction” until a facility is placed in service to meet the “beginning of construction” requirement to qualify for the ITC. Existing Department guidance regarding the continuous program of construction is currently applicable only to wind facilities intended to qualify for the PTC. As with regard to the PTC, it is not clear whether the Department will apply the same standard to projects intended to qualify for the ITC if the House Plan is enacted.

The good news for the renewable power industry is that the PTC and ITC survive under the House Plan, albeit with changes that may have a significant impact on the industry. Other tax incentives did not fare as well. For example:

Section 199 Domestic Production Activities Deduction

The Code Section 199 domestic production activities deduction or “DPAD” would be repealed effective for tax years beginning after 2017. This affects a variety of domestic manufacturers of a number of items, including solar panels, construction equipment, and software, as well as oil and gas producers.

Enhanced Oil Recovery Credit

The enhanced oil recovery credit would be repealed effective for tax years after 2017.

Credit for Producing Oil and Gas from Marginal Wells

The credit for producing oil and gas from marginal wells would be repealed effective for tax years after 2017.

New Market and Historic Rehabilitation Tax Credits

Two other credits that are often seen in conjunction with small solar installations were also cut. The New Market Tax Credit for development in designated low-income areas of the country would be eliminated effective for tax years after 2017, but credits that would have already been allocated may be used over the course of up to seven years as contemplated under current law. Similarly, the Historic Rehabilitation Tax Credit for expenses incurred to rehabilitate old and/or historic buildings would be repealed. Under a transition rule, the credit would continue to apply to expenditures incurred through the end of a 24-month period of qualified expenditures that would have to begin within 180 days after January 1, 2018.

CONCLUSION

The House Plan is far from final, but it is moving very quickly. The House Ways and Means Committee Chair, Kevin Brady, has indicated that the House Republicans plan to pass the House Plan by Thanksgiving. Taxpayers impacted by these proposed changes must engage immediately in order to have any impact on the final legislation. For any questions on these issues, please contact one of the following members of our Tax and Federal Tax Policy Teams.

K&L Gates Blockchain Energizer – Volume 13

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

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

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

IN THIS ISSUE

  • Trusted IoT Alliance Launches to Foster Interoperability Across Blockchain Platforms
  • New York Energy Service Company Using Blockchain Technology to Lower Customer Bills
  • HyperLedger Composer Demo Explores Creation of Decentralized Energy Networks

To view more information on theses topics in Volume 13 of the Blockchain Energizer, click here.

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