Navy signs solar energy deal

Thursday, August 27, 2015

The U.S. Department of the Navy has announced an agreement for the development of a 210 megawatt (DC) solar project to supply electricity to Navy and Marine Corps facilities in California.  The Navy described the deal as the largest purchase of renewable energy by a federal entity to date.

Solar photovoltaic panels in Utah - much smaller project than the Navy project.
The Navy has expressed interest in renewable and alternative energy for some time, buying biofuels and renewable electricity.  According to the website for Deputy Assistant Secretary of the Navy - Energy, Joseph Bryan:
The Navy's energy strategy takes the "long view" necessary to keep our Navy and our nation strong. Bottom line: incorporating energy initiatives now will allow us to more effectively carry out our mission in the future.
In 2009, Congress mandated that 25 percent of the energy used in Department of Defense facilities come from renewable sources by 2025.  Secretary of the Navy Ray Mabus then set an accelerated goal for his branch of the military: 1 gigawatt of renewable energy procurement by the end of 2015.  In the Navy's view, resources like solar power can help diversify its shore energy portfolio and provide long-term cost stability, which ultimately contributes to the Navy's overall energy security priorities.

In furtherance of this goal, last year the Western Area Power Administration issued a request for proposals for renewable energy projects to supply power to Navy facilities in California.  Through a competitive process, Sempra U.S. Gas & Power LLC was selected to develop the Mesquite 3 Solar project.  Sempra is a subsidiary of San Diego-based Sempra Energy, a major energy services holding company. It has developed a variety of solar and wind energy generation projects, including the existing Mesquite 1 Solar project about 60 miles west of Phoenix, Arizona.

The Navy announced that it had signed the agreement on August 20, at a ceremony co-hosted by Western Area Power Administration and Sempra.  Under the Navy deal, Sempra will develop the Mesquite 3 project as an expansion of the existing Mesquite site.  Mesquite 3 will feature over 650,000 photovoltaic panels on ground-mounted, horizontal single-axis trackers.  Construction is scheduled to begin in August, with completion expected by the end of 2016.  While pricing terms have not been disclosed, the Navy reports that it will save at least $90 million over the life of the project.

Will other units of federal government follow the Navy's model in contracting for renewable energy in this manner?  How will solar project business structures change if federal entities start playing a larger role as buyers?

Cross-border infrastructure and presidential permits

Wednesday, August 26, 2015

A recent report casts doubt on whether proposed federal legislation would actually accelerate decisions on the siting of cross-border energy infrastructure.

Cross-border pipelines and electric transmission lines play an important role in the North American energy industry.  Under U.S. law, cross-border energy infrastructure projects require a presidential permit and a finding of consistency with the national interest.  Executive orders give the State Department jurisdiction over cross-border oil pipelines, the Department of Energy jurisdiction over electric transmission lines, and the Federal Energy Regulatory Commission jurisdiction over natural gas pipelines. 

Recent projects like the Keystone XL pipeline have focused attention on the presidential permit process, as that project's presidential permit application has remained pending for years.  Some have raised questions about the scope of agency review and perceived differences in the approaches taken by the State Department, Energy Department, and FERC.

As a result, several members of Congress have proposed legislation designed to accelerate the permitting process.  These bills include:

These bills take various approaches, including limiting agency jurisdiction over cross-border energy infrastructure or the scope of agency review, or setting strict deadlines for agency action following completion of environmental review.

Could federal legislation like this speed up the process for reviewing proposed cross-border pipeline and electric transmission projects?  A recent report by the Congressional Research Service suggests that overall timelines for project review are driven by the scope of the environmental review process, not by delays following that environmental review or agency idiosyncrasies.

In particular, the report found that agency review is "driven largely by the National Environmental Policy Act (NEPA)", which requires federal agencies to consider the environmental impacts before acting.  Moreover, the report notes that the same NEPA requirements apply to all three:
Faced with Presidential Permit applications for energy projects of similar physical scope, the agencies appear to perform NEPA reviews of similar proportion. Very short, smaller projects are generally reviewed more narrowly and quickly, whereas multi-state projects of large capacity are subject to more expansive environmental review and tend to face much greater public scrutiny and comment—regardless of which agency has jurisdiction. 
The report also found that NEPA review is the key driver of overall permitting decision timelines:
As long as agencies apply NEPA to Presidential Permitting decisions, changes to the delineation of, or jurisdiction over, the border-crossing portion of large projects for permitting purposes may not change the scope of project environmental review. The imposition of decision deadlines on the permitting agencies after NEPA review is complete, either for national interest or public interest determination, could provide greater process certainty to stakeholders. However, the overall project review would still be contingent on the completion of NEPA review. Thus, the effects of legislative proposals to change cross-border infrastructure permitting on the review or approval of future border crossing energy infrastructure projects are open to debate. 
It's unclear how the Congressional Research Service report will affect pending legislation.  Likely more influential may be any final action by the State Department on the Keystone XL project's application for a presidential permit.  Nevertheless, interest in cross-border energy trade will likely continue to grow.

Northern Pass proposes new transmission plan

Monday, August 24, 2015

The developer of a proposed $1.4 billion electric transmission line connecting Quebec to New Hampshire has released a revised route for the project, following public opposition to earlier plans.  The new vision for the Northern Pass project would bury more of the line underground and reduce the project's overall capacity to haul power.  Will this version of the Northern Pass gain more traction?

First proposed in 2009, the Northern Pass would be a 192-mile high-voltage direct current (HVDC) transmission line.  It would bring up to 1,000 megawatts of power from Canadian power plants into New England, running from the Canadian border to a proposed converter terminal in Franklin, New Hampshire.  From there, a new alternating current (AC) transmission line would deliver the energy to New England’s electric grid at an existing substation in Deerfield, New Hampshire. 

Since it was first proposed, the Northern Pass route has drawn criticism; the project was delayed, and despite revisions to the route public opposition remained.  Throughout the process, many comments have focused on local siting impacts, like the effect of above-ground transmission lines and poles through Franconia Notch State Park, the White Mountain National Forest, and the Appalachian Trail.  Eversource proposed running 8 miles of cable underground to reduce these impacts, but argued that undergrounding more would make the project too expensive.

But the forces motivating the Northern Pass project and other proposed HVDC lines from Canada remain strong: demand in New England and New York for electricity, and in particular for hydropower and other renewable electricity imported from Canada.

On August 18, project lead Eversource Energy announced changes to the route and scope of the project.  While the previous vision included 8 miles of underground cable to avoid visual impacts, the so-called "Forward New Hampshire Plan" now includes 60 miles of underground cable. Eversource described its revised route as striking "a balance between New Hampshire and our region’s need for a reliable new energy source and avoiding potential impacts to the state’s scenic landscapes."  At the same time, the revised proposal reduces the line's capacity from 1,200 megawatts to 1,000 megawatts, ostensibly to hold total costs at the previously estimated $1.4 billion.  The plan now includes $200 million to establish the "Forward NH Fund", a pool of money designed to support clean energy innovations, economic development, community investment, and tourism.

The Northern Pass project now faces public hearings.  Eversource is expected to file an application for site review with the New Hampshire Site Evaluation Committee in mid-October.

Block Island offshore wind celebrated, challenged

Thursday, August 20, 2015

U.S. and Rhode Island officials recently celebrated the start of construction on the Block Island Wind Farm, which is on track to be the first commercial offshore wind farm in the U.S.  The five-turbine, 30-megawatt project under development by Deepwater Wind is scheduled to come online in 2016; turbine foundation construction and other "steel in the water" activities are underway.  As a pioneer in U.S. offshore wind development, the Block Island project has survived years of permitting uncertainty and repeated legal challenges by project opponents.  But another such lawsuit was filed this week in federal court.  What does the future hold for the Block Island Wind Farm?

Project developer Deepwater Wind is owned principally by an entity of the D.E. Shaw group.  Its Block Island project is currently under construction in Rhode Island state waters about three nautical miles southeast of Block Island.  The project will feed power directly to consumers on Block Island, but also includes a 25-mile bi-directional submerged transmission cable between Block Island and the mainland. The project's finances rest in part on a power purchase agreement through which Deepwater Wind will sell power to utility National Grid.

That power purchase agreement, or PPA, has been the subject of several legal challenges.  Those challenges often cite the deal's cost: pricing for the Block Island power starts as high as 24.4 cents per kilowatt-hour, and escalates 3.5 percent annually.  These prices are more than double the typical Rhode Island energy price, for an estimated $497 million in above-market costs over the 20-year deal.

In 2009 and early 2010, the Rhode Island Public Utilities Commission rejected proposals by Deepwater Wind and National Grid, largely over cost.  The parties then returned with a revised proposal.  In 2010, TransCanada Power Marketing Ltd. unsuccessfully argued that the Rhode Island commission shouldn't consider that proposal due to constitutional infirmities in the Rhode Island law favoring renewable power contracts with in-state projects.  On August 16, 2010, the Commission issued its order approving the PPA.  After that order was appealed to the state Supreme Court, the Supreme Court issued a written opinion upholding the Commission's Order on July 1, 2011.  In 2012 and in 2015, project opponents petitioned the Federal Energy Regulatory Commission to invalidate the Rhode Island commission's action, which FERC declined to do.  Through all this, the project moved forward and ultimately began local construction earlier this year.

But the project is not yet completely out of stormy seas.  On August 14, 2015, plaintiffs with a history of engagement in some of these earlier challenges filed a lawsuit in U.S. District Court in Rhode Island.  As in previous challenges, this complaint argues that the Rhode Island Public Utilities Commission violated federal laws in approving the Block Island deal because only the Federal Energy Regulatory Commission may regulate wholesale electricity sales.  While it is possible that this case could be swiftly dismissed, if it lingers it could add uncertainty to the project until its resolution.  Last year a federal court invalidated a FERC ruling on the grounds that it impermissibly tread on state rights to set retail electricity rates.  That case, Electric Power Supply Association v. Federal Energy Regulatory Commission, has been appealed to the U.S. Supreme Court.

With construction underway, the Block Island project now has significant inertia behind it.  What impact will the recently filed lawsuit have?  Will it affect Deepwater Wind's position as "first in the water" in the race for U.S. commercial offshore wind development?

EPA proposes methane rules for oil and gas

Wednesday, August 19, 2015

The U.S. Environmental Protection Agency has proposed a suite of new and modified rules affecting the oil and natural gas industry.  Collectively, the proposed rules released on August 18 are designed to reduce methane emissions from oil and natural-gas drilling activities.

As the world tackles climate change and greenhouse gas emissions, methane plays a dual role.  As the key constituent of natural gas, methane offers society an abundant and efficient fuel that can displace reliance on costlier and more carbon-polluting fuels like coal and oil.  At the same time, methane in the atmosphere can act as a greenhouse gas itself, with a global warming potential more than 25 times greater than that of carbon dioxide.  According to EPA, methane is the second most prevalent greenhouse gas emitted in the United States from human activities, and nearly 30 percent of those emissions come from oil production and the production, transmission and distribution of natural gas.  At the same time, U.S. production of oil and natural gas has increased, giving the sector important economic and domestic security impacts.

To address this dynamic, yesterday EPA proposed a series of rules affecting the oil and natural gas sector.  EPA has described the new rules as a "key component" of the Obama administration's Climate Action Plan.  They follow a January announcement of a new goal to cut methane emissions from the oil and gas sector by 40 to 45 percent of 2012 levels by 2025.  Under the administration's view, a key tool supporting that goal is the implementation of standards for methane and volatile organic compound (VOC) emissions from new and modified oil and gas production sources, and natural gas processing and transmission sources.

The rules EPA proposed yesterday include such standards, along with supporting materials.  EPA has described its collective proposal as "a suite of commonsense requirements that together will help combat climate change, reduce air pollution that harms public health, and provide greater certainty about Clean Air Act permitting requirements for the oil and natural gas industry."

EPA's proposed package of rules includes:

According to EPA, the proposed rule will reduce methane emissions by between 340,000 and 400,000 short tons in 2025,  on top of reductions of 170,000 to 180,000 tons of other VOCs and 1,900 to 2,500 tons of hazardous air pollutants.  But industry trade group American Petroleum Institute has called additional regulation "unnecessary for reducing emissions."  Debate over EPA's proposal is likely to be vigorous, before EPA as it considers its proposed rulemaking, as well as before Congress and possibly even federal courts, before the dust settles.

EPA will take public comment on the proposals for 60 days after they are published in the Federal Register.  According to the January announcement, the administration expects the final rule will follow in 2016.  This action on oil and natural gas production follows closely on the heels of EPA's adoption of the Clean Power Plan rules, regulating carbon emissions associated with the electric power industry.

Resources on Clean Power Plan

Tuesday, August 4, 2015

Yesterday President Obama announced his administration's "Clean Power Plan," the U.S. Environmental Protection Agency's new regulations limiting power plant carbon emissions under Section 111(d) of the Clean Air Act.

EPA's final Clean Power Plan rule establishes emission guidelines for states to follow in developing plans to reduce greenhouse gas  emissions from existing fossil fuel-fired electric generating units. 

Here are some quick resources I've compiled as a guide to the Clean Power Plan and its release:

US Clean Power Plan adopted

Monday, August 3, 2015

President Obama will formally unveil the Clean Power Plan today, a set of regulations by the U.S. Environmental Protection Agency (EPA) to reduce carbon emissions associated with the electric power industry.  A blog post by EPA Administrator Gina McCarthy emphasizes the Clean Power Plan's protection of health and the environment, states' rights to choose their own implementation paths, reduction of future energy costs, and leadership on climate issues.  But some politicians, utilities and states have expressed concern about the regulations' impact, and could launch legal challenges -- or states might refuse to comply.  What's in store for the Clean Power Plan?

It has been just over a year since EPA first released its draft Clean Power Plan in June 2014.  These regulations under Section 111(d) of the Clean Air Act are designed to reduce the carbon intensity of the U.S. electric power sector -- essentially, how many pounds of carbon are emitted per megawatt-hour of electric energy produced.  Under the draft Clean Power Plan, EPA sets carbon intensity limits for each state, collectively designed to reduce carbon emissions by 30% below 2005 levels.  Each state then designs its own compliance plan using any combination of "building blocks": types of measures like improving the efficiency of fossil fuel power plants, switching out coal- and oil-fired power plants in favor of natural gas, and increasing low- and zero-carbon generation.

While the final Clean Power Plan's basic structure remains much the same, EPA has made some modifications in reaction to concerns about the greenhouse gas regulations' costs and impacts to grid reliability.

Changes from the 2014 draft include:
  • Two extra years (until 2022) for states to meet their targets, and greater flexibility for states to form regional pacts to facilitate emissions-cutting projects across state lines, such as the Regional Greenhouse Gas Initiative.
  • A new “safety valve” feature, to let states appeal for extensions and other relief if complying with the regulations causes disruptions to power supply.
  • Increased social justice incentives for utilities to construct renewable energy projects in poorer neighborhoods, reducing pollution-related illness and eventually lowering electricity rates.
  • Energy efficiency is still encouraged, but has been eliminated as one of the rule’s "building blocks” for states to use in building their own carbon-reduction plans.
How will the Clean Power Plan story continue to play out?  Will it be challenged in court?  Will states comply?  What impacts will it have on the U.S. electric power industry?