On Wednesday, December 6, 2017, the United States District Court for the Northern District of California (“the Court”) issued a decision in Winding Creek Solar LLC v. Peevey (“Winding Creek decision”), finding that the California Public Utilities Commission’s (“CPUC”) Renewable Market-Adjusting Tariff (“Re-MAT”) program violated the federal Public Utility Regulatory Policies Act (“PURPA”). The Court also found that the CPUC’s “Standard Contract” for generators less than 20 MW failed to comply with PURPA, throwing into question the effectiveness and pricing associated with a significant amount of renewable energy generation currently under contract.
Late on November 16, 2017, Senate Finance Committee (“SFC”) Chair Orrin Hatch released amendments to the Senate Republicans’ tax reform proposal. Similar to the original version and the first amendment (released late on November 14, 2017), the amended proposal does not include provisions concerning the PTC or the ITC. In addition, the Enhanced Oil Recovery Credit, the Credit for Producing Oil and Gas from Marginal Wells, and the New Markets Tax Credit would all remain intact. Also similar to the prior version, the SFC proposal does not address expired energy credits for qualified fuel cell and small wind energy property, qualified microturbine property, or production from advanced nuclear power facilities. Recently, however, Senator Chuck Grassley announced publicly that Senate Republicans would address certain of those expired energy credits in a separate “extenders bill” apart from the “Tax Cuts and Jobs Act” at the end of the year.
Earlier today, the U.S. House of Representatives voted in favor of H.R. 1, the Tax Cuts and Jobs Act. As expected, the limitations on the Production Tax Credit and Incentive Tax Credit that we discussed in our post on November 3 remain in the House bill: the House Republicans would dramatically curtail the PTC, leave the ITC in respect of solar energy installations largely intact, and renew the ITC in respect of several “orphan” renewable energy technologies. However, as discussed in our post on November 15, the Senate Republicans would not change the existing PTC or ITC provisions in the Senate tax reform package. (According to recent news reports, the Senate Republicans intend to renew the ITC in respect of the “orphan” technologies in an extenders bill later this year.) The Senate has not yet voted on its separate tax reform proposal and, at this point, it is not clear whether a conference committee bill will include any provisions regarding the PTC or ITC.
The Maryland Department of Transportation (“MDOT”) has issued a request for proposals (“RFP”) to create a Master Services Agreement (“MSA”) to select contracts to design, construct, finance, and operate renewable energy facilities and energy storage projects at MDOT locations throughout the State of Maryland. The terms of the MSA will be five years, with an optional two year extension.
The scope of the RFP encompasses solar, geothermal and microhydropower renewable energy systems. In addition to traditional renewable energy facilities, bidders may also propose energy storage systems and microgrid development. Bidders are encouraged to find cost-effective project financing, and the contractor will be responsible for applying for and obtaining incentives offered by the State of Maryland. Proposals are to be submitted in two parts: Part I should include the technical aspects of the project, and Part II should contain the pricing information required by the RFP. Read More
On January 12, 2017, Noblis, in partnership with the Pew Charitable Trusts, released a report on energy assurance on U.S. military bases. Cost-effective and reliable energy is crucial to the success of U.S. military missions, and the Department of Defense’s (DoD) fixed military installations account for 1 percent of the total electrical energy consumed by the United States, costing almost $4 billion. The military has long relied on the commercial grid, with standalone generators during peak use, but these sources are vulnerable to disruption due to aging infrastructure, severe weather, and both physical attacks and cyberattacks. Instead, the report proposes shifting to a strategy of large-scale microgrids. It conducts a cost comparison, addresses implementation issues, and analyzes the efficiency and security of microgrids, concluding that they would be superior to the military’s current system for supplying energy.
The Pew Charitable Trusts recently held a panel discussion, which supplements the report’s findings, focused on the intersection of national security, energy, and climate change. Three military secretaries examined past successes, and Dr. Jeff Marqusee, the Chief Scientist of Noblis and author of the report, discussed how the military could enhance its energy security going forward. The panelists argued that investment in renewable energy should continue to be a priority for the U.S. military because its goal is increasing mission assurance. The testimony was followed by a roundtable discussion and Q&A session.
Notice 2017-04, issued on December 15, 2016, clarifies and expands the beginning of construction and continuity safe harbors applicable to certain alternative energy projects, including wind installations. Like Notice 2016-31, released on May 5, 2016, Notice 2017-04 concerns only projects that qualify for the Production Tax Credit (“PTC”) under Code Section 45 and, by extension, many projects that qualify for the Investment Tax Credit (“ITC”) through Code Section 48(a)(5). You may read more about the provisions and consequences of Notice 2016-31 in our previous e-alert.
To read the full alert, click here.
On May 5, the U.S. Treasury Department released Notice 2016-31 to address certain changes made to the Production Tax Credit (“PTC”) and Investment Tax Credit (“ITC”) in the Protecting Americans from Tax Hikes (“PATH”) Act of 2015, Pub. L. No. 114-113, Div. Q. The Notice generally extends the application of the “beginning of construction” and “continuous construction” requirements set forth in Notices 2013-29, 2013-60, 2014-46, and 2015-25, and also favorably modifies several key factors of both requirements. In addition, on May 18, the U.S. Treasury Department released a revised version of Notice 2016-31, which states that the provisions of Notice 2016-31 apply to any project for which a taxpayer claims the PTC or, via Code Section 48(a)(5), the ITC, that is placed in service after January 2, 2013.
As an update to our earlier post on FERC’s latest proceeding related to electric storage resources, on April 27, 2016, FERC issued an order extending the deadline for RTOs and ISOs to submit their responses to FERC’s data requests. The RTOs’ and ISOs’ responses are now due on May 16, 2016. FERC also granted an extension to June 6, 2016 for other comments.
Last week, the Federal Energy Regulatory Commission (“FERC”) opened a proceeding in Docket No. AD16-20 for FERC Staff to consider a wide range of issues related to electric storage resources, including whether barriers exist in the United States’ organized wholesale energy markets that are frustrating the participation of electric storage resources in those markets and leading to unjust and unreasonable wholesale electricity prices. The new proceeding was also a topic of discussion during FERC’s monthly meeting on Thursday, April 21, 2016, with each Commissioner expressing significant interest in the energy storage issues to be considered and studied by FERC Staff. For purposes of the proceeding, FERC Staff has taken a broad view of electric storage resources, defining such resources to include all facilities “that can receive electric energy from the grid and store it for later injection of electricity back to the grid . . . regardless of their size and storage medium, or whether they are interconnected to the transmission system, distribution system, or behind a customer meter.”
To kick-off the proceeding, FERC Staff sent letters to California Independent System Operator Corp., ISO New England, Inc., Midcontinent Independent System Operator, Inc., New York Independent System Operator , PJM Interconnection L.L.C., and Southwest Power Pool, Inc. (collectively, the “RTOs and ISOs”), requesting that by May 2, 2016, they submit information about current market rules and procedures applicable to electric storage resources’ participation in each respective market. In a concurrent notice issued in the same docket, FERC Staff also invited other comments on whether current market rules are blocking the participation of electric storage resources in the organized markets and whether there are specific rule changes that could facilitate the participation of such resources. FERC Staff is asking other commenters to specifically address the RTOs’ and ISOs’ May 2, 2016 responses, and set May 23, 2016 as the deadline for such other comments. The types of data requested from the RTOs and ISOs and the related topics on which FERC Staff is seeking comment are outlined below.
- Eligibility to participate in the organized wholesale electric markets. FERC Staff has asked each of the RTOs and ISOs to explain whether electric storage resources are currently eligible to participate in capacity, energy, and/or ancillary services markets, and if not, what justifies their ineligibility. FERC Staff is also seeking comments on whether clarification of particular market rules or tariff provisions would remove undue barriers to the participation of electric storage resources.
- Minimum technical criteria and performance requirements to participate in the organized wholesale electric markets. In addition to requesting information from the RTOs and ISOs on the current technical criteria and performance requirements (e.g., minimum capacity sizes, bid sizes, or run times) that must be met to participate in the wholesale markets, FERC Staff is seeking input on whether certain technical criteria or performance requirements are unjustified and unfairly prevent market participation by electric storage resources. FERC Staff has also requested input on alternative minimum criteria or eligibility requirements and the potential effect of such alternatives on system reliability and market operations.
- Bid parameters applicable to electric storage resources. The operational capabilities of electric storage resources to receive, store, and later sell electricity distinguish electric storage resources from conventional generation. Thus, FERC Staff is seeking input on whether current market rules for bid parameters could and should be revised to better reflect electric storage resources’ operational capabilities, and whether making such revisions would improve RTOs’ and ISOs’ ability to model and dispatch electric storage resources. Given the broad array of technologies encompassed by FERC Staff’s definition of electric storage resources, FERC Staff also asks that commenters address whether specific technologies warrant different bid parameters or whether a general set of rules could apply to all types of electric storage resources.
- Electric storage resources interconnected at the distribution level and aggregation of electric storage resources. FERC Staff recognized that electric storage resources may be able to participate in the wholesale markets despite being interconnected at the distribution level. Therefore, FERC Staff is seeking input on what market opportunities are or should be available for distribution-connected electric storage resources and the impact of electric storage resources participating in the wholesale markets while simultaneously providing distribution-level services. FERC Staff has also asked the RTOs, ISOs, and other commenters to address opportunities and means to aggregate multiple electric storage resources into a single resource that serves as the wholesale market participant.
- Energy purchases by electric storage resources and pricing of energy purchases by electric storage resources. FERC Staff asked the RTOs and ISOs to explain the current bid requirements for electric storage resources that are purchasing energy and whether they must pay the locational marginal price for their energy purchases or instead pay a different rate for their receipt of energy from the grid. FERC Staff is also interested in understanding whether the appropriate pricing of energy purchases may be affected by what services the electric storage resources are providing or whether the electric storage resources is interconnected to the transmission system, distribution system, or behind the meter.
This proceeding is yet another signal that energy storage issues are at the forefront of FERC’s regulatory initiatives. As noted in a prior blog post, FERC is already scheduled, in a technical conference on May 13, 2016, to address issues and potential impediments to the interconnection of electric storage resources. Parties interested in the development and deployment of electric storage resources will want to be involved in these proceedings and keep a close eye on the issues raised by commenters. These proceedings and the issues spotlighted for FERC could be precursors to new rulemakings and regulatory changes with the potential to affect the development and direction of new or expanded markets and revenues streams for electric storage resources. We will certainly be monitoring these proceedings and will keep you posted.