FERC 2-year licensing pilot workshop

The regulatory process for Federal Energy Regulatory Commission licensing of hydropower projects can take many years and significant expense -- but can it be improved following a two-year pilot process ordered by Congress?  After running a pilot process for one license application, the Commission has scheduled a workshop to discuss lessons learned from its pilot licensing process.

Under the Federal Power Act, the Commission is responsible for licensing most non-federal hydropower development in the U.S.  Concerned over the duration and expense of the regulatory process, Congress enacted the Hydropower Regulatory Efficiency Act of 2013, section 6 of which directed the Commission to investigate the feasibility of a two-year licensing process, develop criteria for identifying projects that may be appropriate for the process, and develop and implement pilot projects to test the process.

After a January 6, 2014 solicitation for pilot projects, the Commission selected Free Flow Power Project 92, LLC's (FFP) proposed 5-megawatt project at the Kentucky River Authority's existing Lock & Dam No. 11 on the Kentucky River.  The January notice set minimum criteria and a process plan for projects that may be appropriate for licensing within a two-year process, including:

• The project must cause little to no change to existing surface and groundwater flows and uses;
• The project must not adversely affect federally listed threatened and endangered species;
• If the project is proposed to be located at or use a federal dam, the request to use the two-year process must include a letter from the dam owner saying the plan is feasible;
• If the project would use any public park, recreation area, or wildlife refuge, the request to use the two-year process must include a letter from the managing entity giving its approval to use the site; and
• For a closed-loop pumped storage project, the project must not be continuously connected to a naturally flowing water feature.

After trying a two-year pilot to abbreviate its hydropower project licensing process, the Commission has scheduled a workshop to discuss the pilot's effectiveness.

Kitty Hawk NC offshore wind auction set

U.S. plans to auction ocean sites off North Carolina for commercial offshore wind energy development advanced last week, as the federal Bureau of Ocean Energy Management scheduled a commercial lease sale for the sites for March 16, 2017.  But will the Trump administration continue the Obama administration's offshore wind leasing program?

Under federal law, the Bureau of Ocean Energy Management is charged with leasing sites on the Outer Continental Shelf for fossil fuel or renewable energy development.  To date, BOEM has held six competitive lease sales and has also awarded several leases on a non-competitive basis.

Up for auction on March 16 will be the rights to about 122,405 acres offshore Kitty Hawk, North Carolina.  The Kitty Hawk Wind Energy Area was first identified by BOEM in 2014, and was the subject of a Proposed Sale Notice last year.  As described in the Final Sale Notice for the Kitty Hawk offshore wind auction, the lease area is located about 24 nautical miles offshore. 

The Final Sale Notice for the Kitty Hawk lease area also identifies nine companies that BOEM has deemed legally, technically and financially qualified to participate in the upcoming lease sale:

• Avangrid Renewables, LLC
• Enbridge Holdings (Green Energy) LLC
• Shell WindEnergy Inc.
• Northland Power America Inc.
• Wind Future LLC
• Outer Banks Ocean Energy, LLC
• PNE Wind USA, Inc.
• Statoil Wind US LLC
• wpd offshore Alpha LLC

The Kitty Hawk offshore wind site lease auction is scheduled to be held on March 16.  According to the National Renewable Energy Laboratory, the U.S. is home to an estimated 4,200 gigawatts of potential offshore wind capacity, with most potential located in federal waters.  Competitive lease sales by BOEM to date have yielded over $58 million in winning bids.  But it may be possible for the Trump administration to change direction with respect to policies affecting federal leasing of sites for commercial offshore wind development.  President Trump's "America First Energy Plan" does include a focus on increased production of domestic energy resources, although it singles out shale oil, gas, and coal (and does not mention offshore wind).  How will U.S. offshore wind fit into America's domestic energy strategy?

President Trump's America First Energy Plan

With U.S. President Trump now in office, a look at his "America First Energy Plan" suggests potential directions for his administration.

President Trump's energy strategy as posted on the White House website shortly after the inauguration describes energy as "an essential part of American life and a staple of the world economy."  The 7-paragraph document expresses the administration's commitment to policies that reduce consumer costs and "maximize the use of American resources."

Some elements of the Trump plan aim to reverse policies developed by the former Obama administration.  For example, the plan repeats campaign commitments to eliminate federal regulations and policies like the Climate Action Plan and Waters of the U.S. rule.

Other elements focus on domestic energy resources, including "shale oil and gas" and "clean coal technology."  The plan touts both U.S. economic development and national security benefits from increased domestic energy production.

The plan also addresses the nexus of energy and the environment, acknowledging that "our need for energy must go hand-in-hand with responsible stewardship of the environment."  It notes that "President Trump will refocus the EPA on its essential mission of protecting our air and water."

FERC electric storage policy statement

U.S. energy regulators have issued a policy statement addressing how electric storage resources may provide services at a mix of cost-based and market-based rates.  The Federal Energy Regulatory Commission's January 19, 2017 policy statement on storage provides insight into how the Commission views its role in regulating the rates at which energy storage would be compensated -- but was accompanied by a dissenting view expressed by Commissioner LaFleur.   The result is a mix of both greater certainty and continued debate.

Electricity storage is a growing industry, both in terms of installed capacity and its capability to flexibly support the grid.  Today's electric storage resources can both charge and discharge electricity to and from the grid.  Moreover they can provide various services to multiple entities -- for example, consumers, grid operators, or transmission and distribution utilities -- and can switch nearly instantaneously between modes of operation or services provided.  In these ways, electric storage resources share some functions of consumer load, generation, transmission, and distribution. 

Some of these functions -- e.g. sales of electric energy at wholesale in an organized market -- may be compensated at market-based rates.  But other functions of energy storage could be compensated at cost-based rates under federal law -- perhaps functioning as a transmission asset, compensated through transmission rates.  Thus it's possible that a particular energy storage resource -- think a battery attached to the electric grid, perhaps sited at a factory or other consumer's location -- might be compensated for its operations under both cost-based and market-based rates.

This is a good thing, according to the Federal Energy Regulatory Commission.  According to the January 19, 2017 policy statement, "Enabling electric storage resources to provide multiple services (including both cost-based and market-based services) ensures that the full capabilities of these resources can be realized, thereby maximizing their efficiency and value for the system and to consumers."

But previous proceedings before the Federal Energy Regulatory Commission have exposed some concerns about allowing electric storage resources to recover costs through both cost-based and market-based rates concurrently.  As described by the Commission, these include "double recovery of costs to the detriment of cost-based ratepayers, potential for adverse competitive impacts in wholesale electric markets to the detriment of other competitors, and the need for independence of regional grid operators from market participants."

With respect to utilities subject to its jurisdiction, the Commission's recent policy statement, "Utilitzation of Electric Storage Resources for Multiple Services When Receiving Cost-Based Rate Recovery," provides guidance regarding these issues.  It details possible approaches for avoiding double recovery of costs.  The Commission notes that with regard to adverse market impacts, it "is not convinced there will be a detriment to other market competitors."  The policy statement also offers guidance on how grid operators and electric storage owners or operators should interact, to ensure independence as required by Commission policy.

Commissioner LaFleur issued a dissenting opinion, while nevertheless calling storage "an important and promising resource that warrants Commission attention to ensure that our markets are appropriately adapted to recognize storage’s unique characteristics and contributions."  While expressing an openness "to potential structures that compensate storage providing transmission service at a cost-based rate while participating in the wholesale markets", she expressed concern "about the broad rationale for this approach put forth in the Policy Statement," which she called "both flawed in its conclusions and premature in its timing."  In particular her dissent focused on what she described as "the Policy Statement’s sweeping conclusions about the potential impacts of multiple payment streams on pricing in wholesale electric markets" -- and whether it might have implications for resources other than storage that receive multiple payment streams.  She also disagreed with the Commission's decision to issue the policy statement separate from its pending Notice of Proposed Rulemaking on the participation of electric storage in wholesale markets.

Both the majority policy statement and Commissioner LaFleur's dissent shed light on how the Commission approaches energy storage rate issues.  Storage seems universally considered worth investigating or supporting, but disagreement remains within the Commission with respect to some aspects of how storage resources should be compensated (as well as procedural issues related to the Commission's consideration of these questions).  Nevertheless the policy statement does provide guidance and clarification into how a majority of the Commission views the compensation of storage resources under both cost- and market-based rate structures -- while also framing future discussions over how storage resources will be integrated into markets.

EPA FAQ on dam removal projects

The U.S. Environmental Protection Agency has released a document answering "Frequently Asked Questions" about the removal of obsolete dams. 

As noted by EPA, dams "provide important societal functions for drinking water supply, flood control, hydropower generation, and recreation."  EPA estimates that the U.S. is home to between 2,000,000 and 2,500,000 dams -- but that between 75% and 90% of these dams "no longer serve a functional purpose."  Given the expense of maintaining dams and their safety, and some negative social and environmental impacts of dams, there is some pressure to remove obsolete dams.  According to EPA, over 1,300 dams have been removed in the U.S. since the early 1900s, with over 60 removals in 2015 alone.

EPA framed its dam removal FAQ in this context, noting that its answers to these questions would support dam removal efforts.  The FAQ addresses 20 distinct topics, ranging from dams' impacts on water quality, permitting issues related to dam removal, and EPA-related funding that could be used to support dam removal.

For example, the FAQ discusses permitting under Section 404 of the Clean Water Act, including the use of individual permits or general permits, including Nationwide Permits.  The FAQ encourages project proponents to work closely with the Army Corps of Engineers regarding Section 404 permitting.  It describes how EPA would evaluate specific requirements for monitoring or testing, such as in the case of contaminated sediments behind the dam.  The FAQ also discusses other permitting requirements, such as state-issued water quality certifications pursuant to Section 401 of the Clean Water Act, and evaluations of consistency with coastal zone management plans under the Coastal Zone Management Act.

The FAQ also notes that various grants may be available for dam removal projects.  For example, grants under Section 319 of the Clean Water Act can be issued to states, territories, and tribes for dam removals.  EPA's Five Star Wetland and Urban Water Restoration Grant Program could also provide funding for river, wetlands, riparian, forest and coastal restoration, and wildlife conservation.  Other funding, such as under the Wetland Program Development Grant program, is available to build technical and programmatic capacity of state and tribal water agencies.  Finally, the FAQ notes that dam removals could be part of a Supplemental Environmental Project proposed in settlement of an environmental enforcement action.

As noted by EPA, the FAQs released in December 2016 do not impose legally binding requirements on anyone, and EPA retains the discretion to adopt approaches on a case-by-case basis that differ from those described in these FAQs where appropriate.  Nevertheless the document provides dam owners, regulators, and communities guidance on how EPA views dam removal proposals.