K&L Gates reports on the latest renewable energy policies and activities in the southeastern United States
K&L Gates’ ReNEWS Southeast is a periodic bulletin that will track key developments in renewable energy policy, activities, and technologies that are driving the industry forward.
IN THIS ISSUE:
- Dominion Energy Breaks Ground on Virginia’s First Offshore Wind Installation
- Duke Energy Hits Milestone of 1GW of Owned Solar Energy
- Offshore Wind Areas Examined Off East Coast from Virginia to South Carolina
- North Carolina Legislature Drops Ban on Wind Projects
View more details of Volume 4 by clicking here.
By Eric Niller of Wired
On June 1, 2019 the Pilgrim nuclear plant in Massachusetts will shut down, a victim of rising costs and a technology that is struggling to remain economically viable in the United States. But the electricity generated by the aging nuclear station soon will be replaced by another carbon-free source: a fleet of 84 offshore wind turbines rising nearly 650 feet above the ocean’s surface.
In this article from Wired, K&L Gates partner and Practice Group Coordinator for power David Hattery discusses how in recent years, wind turbines and their technologies have become more palatable, and therefore are more accessible, to communities. Because of this, turbines are able to generate more power than ever.
Click here to read the full article.
On March 27, 2019, Massachusetts’s three electric utilities submitted a draft of their second offshore wind request for proposals (“RFP”) to the state’s Department of Public Utilities (“DPU”) for review and comment. This second solicitation is a follow-up to the initial RFP under Section 83C of Massachusetts’s 2016 renewable energy mandate that directs its utilities to procure 1,600 megawatts (“MW”) of offshore wind nameplate capacity by June 2027.
The initial solicitation in 2017 resulted in the selection of the Vineyard Wind project to enter negotiations with the utilities. The utilities executed power purchase agreements (“PPAs”) totaling 800 MW of offshore wind capacity with Vineyard Wind. DPU is reviewing those PPAs currently. 
Even though DPU has not approved the PPAs for the initial solicitation yet, the utilities have moved forward with the second solicitation because Massachusetts law requires that the second solicitation be issued within 24 months of the first solicitation. The second solicitation contemplates procurement of at least 400 MW of offshore wind capacity, although the utilities will consider proposals ranging between 200-800 MW of capacity. According to this draft RFP, the utilities will consider a larger project proposal if it is “likely to produce more economic net benefits to customers based on the evaluation criteria in the RFP.”
Some of the key bidding requirements and evaluation criteria include:
- Each bidder must be in possession of development rights for offshore wind generation in a designated federal wind energy area (not closer than 10 miles from an inhabited area) as leased after January 1, 2012;
- Each bidder must submit at least one bid of a 400 MW project, or explain why it cannot, and can submit its projects in up to two phases;
- Each bidder must propose a generator lead transmission line;
- Each proposal for the energy generation and/or associated renewable energy certificates must be less than $84.23 per MW-hour on a nominal levelized basis as calculated based on the first solicitation; and
- Proposals will be evaluated on direct contract prices and other costs and benefits, including:
- Direct benefits of any applicable energy storage systems,
- Impacts on Massachusetts’s greenhouse gas emission rates,
- Specific investments in supply chain infrastructure, port facilities, workforce and the Offshore Wind Accelerator Fund, and
- Demonstrated direct benefits to low-income ratepayers.
As proposed, the utilities plan to issue the RFP on May 17, 2019, and expect to receive confidential proposals by August 9, 2019 (with public redacted versions due by August 16, 2019). The utilities plan to select the winner(s) by November 8, 2019, and finalize the PPAs for DPU approval by January 10, 2020.
In comments on the second Section 83C solicitation, several wind developers raised concerns that a timeline that does not permit developers to demonstrate a construction start by the end of 2019 imperils the developers’ ability to qualify for the 12% federal investment tax credit (“ITC”). The production and investment tax credits are currently phasing out for wind, but wind projects that begin construction in accordance with IRS guidance in 2019 may still qualify for the credits at a reduced rate, specifically a 12% ITC or 40% of the maximum production tax credit rate applicable to electricity produced in a relevant year. Many of the commenters indicate that the 12% ITC is more valuable to their projects.
Although the utilities propose to select the winning bidder(s) before the end of 2019, the timeline in the solicitation does not suggest that the utilities and the winners will execute their PPAs and submit them for DPU approval by 2020. Any activity that the developers undertake to begin construction in 2019 based on the unapproved PPA may expose them to the risk that DPU will reject or modify the PPA after a developer has made some expenditures towards the project. See Offshore Wind Handbook, K&L GATES LLP AND SNC LAVALIN at 19 (2018), http://www.klgates.com/files/Upload/2018-08_OG_Offshore-Wind-brochure.pdf.
K&L Gates welcomes you to join us at the Infocast Wind Power Finance & Investment Summit. As a Gold Sponsor for the Summit, we are excited to have the opportunity to meet with you! The conference will be held on February 5-7 at the Omni La Costa Resort and Spa in San Diego, CA.
K&L Gates Highlights
- Portland partner Bill Holmes will serve as the Master of Ceremonies for the Summit.
- Stop by table 21 at the Exhibit Hall to meet our team and pick up a hard copy of our Offshore Wind Handbook.
- We will also have copies of the third edition of our very popular K&L Gates Energy Storage Handbook.
We look forward to seeing you!
Federal Auction for Offshore Wind Leases in Northeast Set Record High
On December 13 and 14, 2018, the U.S. Department of the Interior’s Bureau of Ocean Energy Management (BOEM) conducted an auction for three offshore wind power parcels in Massachusetts. The auction not only broke the record  for number of companies bidding, but also for being the highest grossing offshore wind lease sale. The promotion of federal offshore land auctions and positive statements  from both the Secretary of the Interior and the acting head of BOEM suggest that the Trump Administration remains committed to developing U.S. offshore wind resources.Read More
K&L Gates LLP, and Atkins, a member of the SNC-Lavalin Group recently released an Offshore Wind Market Handbook to help guide investors through technical- and regulatory issues in the emerging US offshore wind market.
“Many large companies and institutional investors who have been successful with offshore wind projects in Europe are now poised to invest in the US,” said Andrew Thompson, Director, Offshore Wind at Atkins. “However, technical and regulatory issues unique to this market can be a barrier to developers for offshore wind energy projects. Our handbook provides practical information that addresses key matters.”
Regulatory issues include a discussion of the interplay between US federal jurisdiction and the various coastal states that have enacted laws and regulations encouraging offshore wind projects. Technical issues include turbine and foundation options and solutions, performance assurance strategies and a discussion of innovations in design and equipment that are particularly suited to US coastal waters.
“Essentially, technical and regulatory legal issues are intertwined such that project success requires a closely coordinated cross-discipline team,” said David Hattery, co-leader of K&L Gates’ power practice. “Together, K&L Gates and Atkins demonstrate a pool of knowledge and a depth of experience to draw on that gives us uniquely valuable insight into the legal and technical challenges facing the US offshore wind industry.”
The K&L Gates renewable energy practice combines European project experience with US regulatory and project development expertise. Atkins is a leading provider of full range technical and operational expertise in the energy industry, including engineering design and owner’s engineer services in the global offshore wind market. Together, K&L Gates and Atkins demonstrate market leadership on key issues and can help investors build a leading position in the US offshore wind market.
To read the full press release, click here.
On March 10, 2017, the U.S. Department of Interior’s Bureau of Ocean Energy Management (BOEM) posted four unsolicited applications for wind project leases on the Outer Continental Shelf. PNE Wind U.S.A., Inc. has filed three lease applications, two for offshore Massachusetts and one for offshore New York. Separately, Statoil Wind US LLC filed a lease application for offshore Massachusetts.
The developers’ lease requests, particularly the overlapping requests for offshore Massachusetts, indicate continued interest and growing competition in the U.S. offshore wind sector. The quickening pace of activity in the U.S. offshore wind market, including completion of Deepwater Wind’s Block Island offshore wind farm and today’s auction process for offshore North Carolina, suggests that offshore wind projects may become a more important part of the U.S. power generation portfolio in the coming years. In addition, the unsolicited application for offshore New York and the federal government’s response may provide an early indication as to the Trump Administration’s position on offshore wind development going forward. Increased activity and a new administration in the White House present opportunities to engage on this issue and shape the policies that will govern the federal offshore leasing program for the next four or eight years, or beyond. Read More
By Christoph Mank
An introduction of bidding processes for determining the amount of funding for the generation of electricity from onshore wind turbines, offshore wind turbines and large photovoltaic systems is planned with an amendment of the German Renewable Energy Act (Erneuerbare-Energien-Gesetz).
The German government sees the transition to bidding processes as being a central instrument for attaining the goals laid down by policy makers regarding the development of the share of renewable energies in the production of electricity. The political goal is to increase the share of renewables in the amount of electricity generated to between 40% and 45% by 2025, between 55% and 60% by 2035 and at least 80% by 2050. In real terms the increase in the contribution of renewable energy to the electricity production in Germany has gone from 25.3% in 2013 to 28% in 2014 and 32.6% in 2015. It is the political will of the current government not to fall below or exceed this established scope for expansion. For this purpose the aim is to fix the tendered quantities at a level that is as accurate as possible on the one hand; on the other hand, a high realisation rate needs to be achieved with regard to the projects awarded in the context of the bidding process.