MA second offshore wind procurement solicited

The electric distribution companies of Massachusetts, in coordination with state Department of Energy Resources, have issued a second request for proposals for long-term contracts for offshore wind energy projects as required by state law.

Under Section 83C of Chapter 169 of the Acts of 2008, as amended by chapter 188 of the Acts of 2016, An Act to Promote Energy Diversity, Massachusetts electric distribution companies are required to jointly procure significant amounts of energy from offshore wind projects. A first round of solicitations under Section 83C in 2017 yielded contracts with offshore wind developer Vineyard Wind LLC for 800 megawatts of generation. The law was subsequently amended to require another 800 megawatts of offshore wind by June 30, 2027.

On May 23, 2019, distribution companies Fitchburg Gas & Electric Light Company d/b/a Unitil, Massachusetts Electric Company and Nantucket Electric Company d/b/a National Grid, and NSTAR Electric Company d/b/a Eversource Energy issued their second request for proposals pursuant to Section 83C. The RFP seeks "reasonable proposals" to enter into cost-effective long-term contracts for offshore wind energy generation and associated renewable energy certificates or RECs. It expresses the utilities' intent to procure at least 400 megawatts of offshore wind energy generation, or up to 800 megawatts if the evaluation team determines that a larger-scaled proposal is both superior to other proposals and is likely to produce more economic net benefits to ratepayers.

As approved by the state Department of Public Utilities on May 23, 2019, the timeline for the second offshore wind procurement requires confidential proposals to be submitted by August 9, 2019, with projects selected for negotiation by November 8, contract execution by December 13, and submission of the contracts for DPU approval by January 10, 2020. The timeline also includes a bidders conference scheduled for June 4, and an opportunity for prospective bidders to submit written questions pertaining to the solicitation by June 11.

Beyond this second solicitation under Section 83C, further solicitations are expected: a subsequently enacted law requires the procurement of an additional 1,600 megawatts of offshore wind by December 31, 2035.

US approves more exports of LNG "freedom gas"

The U.S. Department of Energy has approved additional exports of domestically produced natural gas from a liquefied natural gas terminal in Texas, describing the increased export capacity as "critical to spreading freedom gas throughout the world," and praising "an efficient regulatory system that allows for molecules of U.S. freedom to be exported to the world."

In a May 28, 2019 press release, the Department of Energy announced its approval of increased exports from the Freeport LNG Terminal located on Quintana Island, Texas. Freeport LNG Expansion, L.P. and other Freeport entities had previously received approval to export LNG from the first three liquefaction trains at the Terminal, as well as to site, construct and operate a fourth liquefaction train (Train 4) to be built at the Freeport LNG Terminal.

By its Order No. 4374, the Department gave Freeport LNG Expansion, L.P. and FLNG Liquefaction 4, LLC (together, FLEX4) the authority to export up to 0.72 billion cubic feet per day of natural gas as LNG from Train 4. The order authorizes FLEX4 to export U.S.-sourced liquefied natural gas to any country with which the United States has not entered into a free trade agreement requiring national treatment for trade in natural gas, and with which trade is not prohibited by U.S. law or policy.

The Department's press release quotes U.S. Under Secretary of Energy Mark W. Menezes as saying, "Increasing export capacity from the Freeport LNG project is critical to spreading freedom gas throughout the world by giving America’s allies a diverse and affordable source of clean energy." The press release also quotes Assistant Secretary for Fossil Energy Steven Winberg as expressing his pleasure that "the Department of Energy is doing what it can to promote an efficient regulatory system that allows for molecules of U.S. freedom to be exported to the world."

Freeport's first liquefaction train is expected to start making commercial exports later in 2019. U.S. exports of natural gas are increasing and poised to rise further. The first exports from the Lower 48 came in February 2016, when the first cargo shipped from the Sabine Pass terminal in Louisiana. Since 2017, the U.S. has exported more natural gas than it imports. U.S. LNG export capacity is on track to double from 5 billion cubic feet per day to 10 Bcf/d by the end of 2020, with significantly more export capacity approved or pending. Meanwhile, domestic production of natural gas reached a new peak of 101.3 billion cubic feet per day in 2018.

MA approves second offshore wind procurement process

Massachusetts utility regulators have approved a proposed timetable and method for soliciting a second round of long-term contracts for offshore wind energy generation.

Section 83C of the Green Communities Act requires Massachusetts electric distribution companies to jointly propose a timetable and method for the solicitation and execution of long-term contracts, subject to review and approval by the Department of Public Utilities. As it has been amended, Section 83C calls for multiple procurement rounds, to result in cost effective long-term contracts for offshore wind energy generation equal to approximately 1,600 megawatts of aggregate nameplate capacity not later than June 30, 2027. A subsequent law requires the procurement of an additional 1,600 megawatts of offshore wind, by December 31, 2035.

In 2017, the state's electric utilities issued their first solicitation under Section 83C, which resulted in contracts with offshore wind developer Vineyard Wind LLC for 800 megawatts of generation. Section 83C requires that any long-term contracts resulting from this second solicitation must include a nominal levelized price per megawatt-hour that is less than the levelized price resulting from the first solicitation (which was $64.97 per megawatt-hour in 2017 real dollars).

In March 2019, the utilities proposed a timetable and process for soliciting a second round of offshore wind contracts. The utilities proposed a second RFP to seek at least 400 megawatts, but with consideration of proposals from 200 megawatts up to approximately 800 megawatts if a larger-scale proposal is both superior to other proposals and is likely to produce more economic net benefits to customers.

By order dated May 17, 2019, the Department of Public Utilities approved the utilities' proposed timetable and method. The Department accepted the utilities' assertion that a nominal levelized price of $84.23 per megawatt is equivalent to the first solicitation's result. The Department also accepted the utilities' timetable, which includes RFP issuance on May 17, 2019, confidential proposals due by August 9, project selection by November 8, contract execution by December 13, 2019, and submission of contracts for regulatory approval by January 10, 2020.

While approving the overall timetable and process proposed by the utilities, the Department did deny a request by National Grid USA for a "regulatory out", or a provision in any future power purchase agreement resulting from the solicitation which would allow the utility to terminate the agreement if the utility cannot pass the contract's costs onto its ratepayers. In denying National Grid's request for such a "regulatory out", the Department noted that such a clause has never been used in long-term renewable energy contract solicitation in Massachusetts, and that its inclusion would place "the full risk of regulatory disallowance on project developers," in turn making financing more difficult and more expensive. For these reasons, the Department directed National Grid not to include a "regulatory out" provision in its form power purchase agreement for this solicitation.

New England electricity carbon emissions decline

Carbon dioxide emissions from New England's electric power generators continued to decline in 2017, according to a recent report from the region's grid operator.

According to ISO New England Inc., regional emissions of sulfur dioxide, nitrogen oxides, and carbon dioxide all declined in 2017 compared to the previous year, due largely to a decline in the use of fossil fuels to generate electricity. For carbon dioxide, the report shows that the New England system emitted 34,969 short kilotons in 2017, a 6.7% decrease relative to 2016, with an average emission rate of 682 pounds per megawatt-hour.

The region's electricity-sector carbon emissions peaked in 2005, at 60,580 short kilotons. According to the report, carbon emissions in 2017 were 42% lower than in 2005. The report cites several key factors contributing to the year-over-year declines, including continuing declines in coal- and oil-fired generation, lower levels of demand for electricity, and significant increases in production from non-emitting hydro, solar and wind resources.

FERC Order 841-A affirms electric storage market participation

On May 16, 2019, the Federal Energy Regulatory Commission issued an order generally affirming an earlier order which established reforms to remove barriers to the participation of electric storage resources in certain organized wholesale markets. The Commission's Order No. 841-A denied various requests for rehearing of last year's Order No. 841.

In 2018's Order No. 841, the Commission found that existing rules for electricity markets operated by regional transmission organizations and independent system operators were unjust and unreasonable in light of barriers that they present to the participation of electric storage. Based on this finding, the Commission ordered wholesale market makers to revise their tariffs to "establish a participation model consisting of market rules that, recognizing the physical and operational characteristics of electric storage resources, facilitates their participation in the RTO/ISO markets." Order No. 841 required each regional organization's participation model to (1) ensure that a resource using the participation model for electric storage resources is eligible to provide all capacity, energy, and ancillary services that it is technically capable of providing in the RTO/ISO markets; (2) ensure that a resource using the participation model for electric storage resources can be dispatched and can set the wholesale market clearing price as both a wholesale seller and wholesale buyer consistent with existing market rules that govern when a resource can set the wholesale price; (3) account for the physical and operational characteristics of electric storage resources through bidding parameters or other means; and (4) establish a minimum size requirement for participation in the RTO/ISO markets that does not exceed 100 kW. Order No. 841 also required that the sale of electric energy from the RTO/ISO markets to an electric storage resource that the resource then resells back to those markets must be at the wholesale locational marginal price.

In Order No. 841-A, the Commission generally affirmed these findings, while clarifying a handful of relatively limited points. The ruling ends for now some of the uncertainty over the scope and applicability of Order No. 841.

As regional wholesale markets develop tariff revisions to integrate electric storage resources, there could be significant opportunities to develop and benefit from electric storage. Reports have suggested significant potential for electric storage deployment -- with one 2018 study suggesting the U.S. could be home to between 7 and 50 gigawatts of storage, if costs continue to decline and sufficient policy support is available.

FERC changes enforcement process, ends preliminary notices

Ending a decade-long practice of issuing Notices of Alleged Violations in early stages of enforcement investigations, this week the Federal Energy Regulatory rescinded its 2009 Order Authorizing Secretary to Issue Staff’s Preliminary Notice of Violations.

Historically, the Commission generally did not issue any public notice of its investigations or targets until an investigation was either resolved through settlement or escalated through a Commission order to show cause. In 2009, the Commission adopted a policy of issuing Notices of Alleged Violations at a relatively early stage in its process for investigating possible violations of federal energy law. Under that policy, Commission enforcement staff would issue a public notice after giving an investigative subject an opportunity to respond to staff's preliminary findings, but before staff finalized its conclusions or the Commission issued an order. At the time, the Commission said this policy balanced investigative subjects' confidentiality against the benefits of enhanced transparency, but some commenters criticized the policy for its publication of alleged violations before a full investigation had been completed.

In 2011, the Commission upheld its policy in an order on requests for rehearing and clarification of its 2009 order. At the same time, the Commission committed to monitoring and evaluating the effectiveness of the policy. Shortly thereafter, the Commission issued its first Notices of Alleged Violations. Over the years, Commission staff continued to issue notices of alleged violation.

But in an order issued on May 16, 2019, the Commission rescinded this policy based on a finding that "the balance has shifted." Specifically, the Commission found that "the potential adverse consequences that NAVs pose for investigative subjects are no longer justified in light of the limited transparency NAVs have generated and the more effective, alternative means of adding transparency that the Commission has developed since the NAV Order."

At the same time, the Commission said that the transparency benefits it had hoped the policy would bring have been limited. Meanwhile, the Commission has gained access to other sources of information that support its investigations, and now uses "these data sets and sophisticated algorithmic screens to detect potential manipulation, anticompetitive behavior, and other anomalous activities in the energy markets we oversee."

Weighing the limited benefits against the risk of reputational harm to subjects, the Commission found that the "potential negative impacts on investigative subjects are no longer warranted in light of the limited transparency NAVs have generated and the alternative methods of adding transparency the Commission has developed since adopting the policy."

The Commission therefore rescinded its 2009 policy as "no longer warranted." This decision removes the Commission secretary's authorization to issue staff preliminary notices of violation.

The move bears resemblance to recent Commission practice of not publicly identifying utilities alleged to have violated reliability standards, despite calls for public disclosure and transparency.

FERC grants QF rule waiver for distributed solar developer

Last month federal regulators issued an order that could facilitate the development of small-scale distributed solar projects. The Federal Energy Regulatory Commission's April 18, 2019 order granting certain waivers to residential solar developer Sunrun, Inc. could open the door to reduced administrative burdens for developers of clustered residential-scale solar projects.

Under the federal Public Utility Regulatory Policies Act of 1978 (PURPA), certain electrical generators can be certified as "qualifying facilities" or QFs if they meet defined standards. QFs can avail themselves of benefits under federal law, such as the right to sell energy and capacity to utilities, as well as exemptions from certain other federal laws.

The Federal Energy Regulatory Commission's regulations generally require a facility to file a Form No. 556 for self-certification or to apply for Commission certification in order to be a QF. But for generating facilities with net power production capacities of 1 MW or less, the Commission's Order No. 732 created an exemption, such that those facilities are not required to file either a notice of self-certification or an application for Commission certification in order to qualify as a QF.

The Commission's regulations also include what is commonly referred to as the "one-mile rule," under which a small power production facility located within one mile of another small power production facility that uses the same energy resource and has the same owner is considered to be the same facility for purposes of determining if the facility exceeds the 80 MW limit on a small power production QF. In a pair of rulings known as SunE B9 and SunE M5B, the Commission found that the one-mile rule should also be used to determine whether the exemption from the QF certification filing requirement is applicable for QFs that are 1 MW or less.

On September 24, 2018, residential-scale solar developer Sunrun, Inc. filed a petition to the Commission requesting waivers of qualifying facility certification filing requirements, including the rule requiring identification of other generating facilities within one mile with at least 5 percent common ownership. Sunrun's business model allows its client homeowners to buy and own the photovoltaic systems installed by Sunrun, but also offers an option whereby Sunrun will finance, own, and maintain the system. In its petition to the Commission, Sunrun expressed concern that the PV systems Sunrun owns will collectively, as a cluster, be deemed to be owned by the same person for purposes of the Commission’s one-mile rule, under which QFs that are owned by the same entity or an affiliated entity and are located within one mile of each other are considered to be one QF (and therefore are limited to 80 MW in the aggregate).

On April 18, 2019, the Commission issued an order granting Sunrun's petition for declaratory order. The Commission found that granting Sunrun waiver of the QF certification filing requirements for separately-interconnected, individual residential rooftop solar PV systems and related equipment with maximum net power production of 20 kW or less for which Sunrun provides financing, "aligns with the purpose of the 1 MW filing exemption, which was set forth to ease the administrative burden for both the Commission and small scale QFs." The Commission also granted waiver of the requirement to submit a list of affiliated generation within one mile when filing Form No. 556 for Sunrun-owned clusters of residential PV systems of 20 kW or less located within one mile.

On its face, the ruling applies only to Sunrun and is limited in scope to the waivers Sunrun had requested. But the order suggests the Commission could be willing to grant similar waivers for other developers who aggregate significant amounts of small-scale residential or other distributed solar projects, which could help reduce the administrative burden on project developers and thereby could make solar more accessible to homeowners.