Page 967 – RTO Insider

May 26, 2021

Legislators Considering Bill to Replace Maine’s IOUs

A bill before Maine legislators seeks to replace the state’s two investor-owned utilities with one consumer-owned nonprofit, should regulators find the IOUs unfit.

“LD 1708 will let us control our own money and our own energy destiny, and will let us advance both fast and fairly toward our own clean energy and connectivity future,” Rep. Seth Berry (D), sponsor of the bill, told the Committee on Energy, Utilities and Technology in a hearing on the bill last week.

The bill would require the Public Utilities Commission to direct the sale of Central Maine Power and Versant Power if by 2024 if it is found unfit based on customer satisfaction, reliability and rates. It would then create a consumer-owned utility called Pine Tree Power to purchase the IOUs’ assets.

Maine IOUs — Maine’s Committee on Energy, Utilities and Technology heard testimony last week on a bill that would replace the state’s investor-owned utilities with a consumer-owned utility. | *Maine Legislature*

Maine law already allows the PUC to determine a utility’s fitness to serve, but there are no standards for making that determination.

“This bill would set a definition and set a baseline of expectations of our utilities that we entrust with the privilege of a monopoly, that we allow to use our public rights of way and that we allow to use eminent domain against our own citizens,” Berry said.

CMP is owned by Spain-based Iberdrola via Avangrid (NYSE: AGR), and Versant is owned by the Canadian city of Calgary’s utility, ENMAX.

If the bill passes, it will go before voters in November.

In testimony opposing the bill, Versant President John Flynn said the utility is working to change how it performs and is perceived in Maine.

“The idea that the government may force divestiture of Maine’s two privately owned transmission and distribution utilities is perhaps the single largest variable in terms of disruption to” the state’s climate progress, he said. “To achieve our climate and grid modernization objectives, we need everyone working together, and we have neither the time nor the money to waste on polarizing fights.”

Joshua Dunlap, an attorney with Pierce Atwood, testified on behalf of CMP in opposition to the bill, saying that it is unconstitutional and would, therefore, “generate lengthy and complex litigation.” The state, he added, would potentially be responsible for paying millions of dollars in legal fees from a constitutional challenge.

The PUC also sees the bill as risky, although it did not support or oppose it in testimony.

Potentially time-consuming litigation before the PUC and the courts could “frustrate the state’s goals of grid modernization and beneficial electrification,” said Garrett Corbin, PUC legislative liaison.

The proposal for what amounts to a government takeover of the IOUs is significant and requires caution, according to the Governor’s Energy Office (GEO). It raises “substantial and serious questions” that deserve more time to address than allowed during the current session, Director Dan Burgess said. While the GEO neither supports nor opposes the bill, it believes further study should be conducted on the income and property tax impacts of the proposal as well as issues of eminent domain and how Pine Tree would be governed.

Sen. Richard Bennett (R) co-sponsored the bill along with a bipartisan group of senators and representatives. The ownership model by foreign governments and corporations, Bennett said, “has been a disaster.”

It “drains money from Maine while leaving us with the most outages, the longest outages, the worst customer service and among the highest rates in the country,” he said.

The bill is not the first attempt by Maine lawmakers to create a consumer-owned utility to replace the state’s IOUs. But Berry said LD 1708 improves on previous iterations based on input from the public, lawmakers and experts. It includes, among other things, a clear climate- and jobs-focused mission statement and strict regulatory oversight of the transition and the utility itself.

May 26, 2021

NJ Proposal Rewrites EV Incentives to Drive Sales

The New Jersey Board of Public Utilities (BPU) is looking to enhance an incentive program — which has helped put 7,000 electric vehicles on state roads — by making state and local government agencies eligible for EV rebates and adding a $250 incentive for home chargers.

The BPU’s proposal for the second phase of the Charge Up New Jersey program, which offers incentives of up to $5,000 for the purchase or lease of a new electric vehicle, would also reshape the package to incorporate a point-of-sale incentive, rather than making users apply for a rebate after the sale or lease.

The proposed revisions also seek to more effectively encourage the adoption of plug-in hybrid electric vehicles (PHEVs), implementing a fixed incentive system to replace an existing incentive based on the vehicle’s electric battery range, which resulted in an average payment for PHEVs of just $625, the BPU said. The agency is also proposing a “soft cap” on EVs priced above $45,000, to encourage the purchase of cheaper models. The more expensive models would be eligible for only a $2,000 incentive.

The proposed changes, which will be discussed at a public hearing Thursday, reflect the state’s continued support for the Charge Up program, which is designed to move the sticker price of EVs closer to that of vehicles powered by internal combustion engines.

New Jersey EV incentive — | *Shutterstock*

Running from January to December 2020, the first phase of the program awarded incentives totaling $36 million, resulting in 7,000 new EV purchases or leases, according to the BPU. Further incentives valued at around $6 million will likely be awarded for EV buyers who sought incentives after the payment window closed, the BPU said.

Boosting EV Sales

New Jersey Gov. Phil Murphy has set a goal of putting 330,000 electric vehicles on state roads by 2025, as part of his master plan for the state to run 100% on clean energy by 2050. EVs would account for at least 85% of light-duty vehicles sold or leased in New Jersey by 2040. The EV incentive proposal comes as the BPU is also evaluating the best strategies for increasing the number of EV charging stations across the state. (See: BPU Rules Would Codify Charging Station Development.)

The New Jersey Department of Environmental Protection estimates that about 40% of the carbon emissions in the state come from transportation and believes that reducing vehicle emissions will be vital to reaching the goal, set by Murphy and the legislature, to cut carbon dioxide emissions to 80% below 2006 levels by 2050.

Yet the state will have to work hard to reach its vehicle goals. While BPU figures show a 37% increase in the number of EVs registered in New Jersey from December 2019 to December 2020 ― a jump from 29,960 vehicles to 41,096 vehicles ― the electric fleet accounts for only 12.5% of the 330,000 goal.

Ashkan Shokoohy, a sales manager at Hudson Nissan in Jersey City, said he was not aware of the details of the Charge Up New Jersey program, but he said that an incentive of $5,000 could help persuade customers to make a purchase.

“It’s a good amount,” said Shokoohy, who sells the Nissan Leaf, which has a manufacturer’s recommended price of between $31,670 and $43,970, according to the Nissan website. “It may move the needle a little bit, but it doesn’t turn into that huge flow of customers that, due to this program, now they are changing their lifestyle or car hobbies or switching from gas to electric.”

Stefanie A. Brand, director of the New Jersey Division of Rate Counsel, the state’s consumer advocate, said that the BPU appears to be building on the success of the first phase. But because the price of electric vehicles is still high, the program is mostly focused on granting incentives to richer residents, she said.

“I don’t think these incentives really bring them into the average car buyer’s price range,” she said. “But I’m sure every little bit helps.

“It still has value to try to encourage people to switch over to electric, and I’m hopeful that car companies are working on getting these electric cars into an affordable range,” Brand said. “I think we’re not really there right now, and this program is designed to try to help get us there.”

High End Buyers

In the program’s first phase, 93% of recipients received the maximum $5,000 incentive, according to the BPU. Tesla vehicles accounted for 83% of the EVs purchased, with 17% going for all other makes and models, the agency said.

One reason for the shortfall in non-Tesla vehicles was the limited number of models on offer in the state, the BPU’s proposal said.

“Many car buyers indicated that their vehicle of choice was not present or offered in New Jersey,” the proposal said, adding that the lack of availability could serve as a barrier to the adoption of a wider variety of EVs. “New Jersey will need ample available EV product in order to successfully expand its market and meet customers’ desires for more EV options,” the proposal said

Only 4% of the incentives in the first phase of the program went to plug-in hybrid vehicles, according to the BPU. That can be important, the agency added, because PHEVs “are often the entry point into EV ownership and may help ease the transition from gas to electric for those most concerned about the range of an EV.” Plug-in hybrids are also an attractive option for residents of multi-unit dwellings where charging points are not available and residents can’t install their own, the proposal says.

Eligibility Rule Changes

Both the first proposal and the revised version offer consumers who buy or lease an EV an incentive equal to $25 per mile of electric battery range, up to a maximum of $5,000. The new proposal suggests these changes:

For vehicles with a manufacturer’s recommended price of $45,000 to $55,000, incentives would be reduced to $2,000. Vehicles costing more than $55,000 are not eligible for rebates.
The sale or lease of a PHEV would be eligible for a fixed incentive, the size of which has still to be determined.
State and local governments would be eligible for program incentives for the first time.
The approval process for incentives would be streamlined to provide rebates at the point of sale. Instead of an EV buyer applying for the incentive at a program website after purchasing a car, and waiting to be reimbursed by check, the customer would receive the incentive while buying the vehicle. The dealer would process the paperwork as the consumer buys the car, with the sale price reduced by the amount of the incentive. The dealer would be reimbursed for the cost of the incentive by the BPU.

A third phase of the program, to run concurrently with the second, would add an incentive for EV owners to install a “smart charger” that can collect and transmit operating data to be used to analyze consumer behavior. The incentive would pay half the cost of the charger, to a maximum of $250.

Doug O’Malley, state director of Environment New Jersey, said the shift away from after-purchase rebates to a point-of-sale model makes the program much more user friendly.

“That’s to both boost sales,” he said, and make the potential incentive much clearer to a buyer. “Psychologically, when they are making that decision on the lot, you can immediately see the savings off the sticker price with the EV rebate incorporated into it.”

That will enhance a program that has already shown it can “spur sales,” and so too will the incentive for home chargers and the “expansion of the program to state and local police,” he said.

“This is exactly the direction that we want to see the BPU moving toward,” he said.

May 26, 2021December 4, 2023

BOEM to Offer Leases for California Offshore Wind

The Biden administration Tuesday announced it plans to offer leases for California’s first offshore wind areas, a 399-square-mile block off Morro Bay that could support 3 GW, and the Humboldt Call Area off Northern California, which it said is big enough for an additional 1.6 GW.

Interior Secretary Deb Haaland, National Climate Adviser Gina McCarthy and California Gov. Gavin Newsom took part in the announcement of the two potential wind energy areas (WEAs).

The announcement followed years of consultation between Interior and the Defense Department to identify areas that would not interfere with the Pentagon’s training and testing operations.

“Tackling the climate crisis is a national security imperative, and the Defense Department is proud to have played a role in this important effort,” Under Secretary for Policy Colin Kahl said in a statement. “The Defense Department is committed to working across the U.S. government to find solutions that support renewable energy in a manner compatible with essential military operations.”

The Bureau of Ocean Energy Management issued a call for information and nominations for offshore wind on Oct. 19, 2018, for three areas, including Humboldt, Morro Bay and the Diablo Canyon Call Area. Plans for Diablo Canyon were not disclosed in Tuesday’s announcement. Fourteen developers responded to BOEM’s 2018 solicitation.

BOEM and California officials will hold an Intergovernmental Renewable Energy Task Force meeting on June 24 to discuss the potential WEAs. After the task force meeting, the WEAs can be finalized and undergo environmental analysis. BOEM expects to include both the northern and central areas in a single lease sale auction targeted for mid-2022.

The Biden administration has proposed deployment of 30 GW of offshore wind by 2030, but most of the attention has been focused on the East Coast, which has the advantage of relatively shallow waters on the continental shelf, allowing turbines to be installed in the seabed. The deeper waters of the West Coast will likely require use of floating turbines.

California must triple its renewable capacity to meet its goal of 100% clean energy by 2045. Senate Bill 100, which established the goal, envisions 10 GW of offshore wind and more than doubling onshore wind from 6 GW to 12.6 GW.

State Assemblymember David Chiu (D) has proposed legislation that would require the California Energy Commission to set offshore wind targets within three months (Assembly Bill 525).

“I am excited about the opportunity for offshore wind on the West Coast and the Pacific,” BOEM Director Amanda Lefton said during an appearance Tuesday at Reuters’ U.S. Offshore Wind 2021 conference. “There is clearly interest from our state partners, and I think there is a tremendous opportunity to move forward.”

Experts say the distance between the wind areas and California’s ports will be among its biggest challenges in making offshore wind a reality. (See Port System Big Challenge for Calif. Offshore Wind.)

“While interest from the global industry will be unprecedented, West Coast development requires American ingenuity and innovation in next generation technologies that will create opportunities for engineering firms and skilled labor,” said Liz Burdock, CEO of the Business Network for Offshore Wind.

May 26, 2021

New Report Could Support Adoption of Colo. SB200

A recent report by Energy Innovation and RMI shows that Colorado is a long way from meeting emissions reduction targets set by the state’s 2019 Climate Action Plan. Even so, Governor Jared Polis is wary of strict legislation to cap emissions.

Democrats and environmental activists support SB200, which requires Colorado’s Air Quality Control Commission (AQCC) to “adopt rules that will result in the statewide reduction of greenhouse gas (GHG) emissions of 26% by 2025, 50% by 2030, and 90% by 2050, as compared to 2005 emissions.”

Energy Innovation and RMI’s report is based on data from the Colorado Energy Policy Simulator (EPS), which is intended to provide “additional analysis of policies that can drive deep emissions reductions in Colorado.” According to the simulator, which includes a “business-as-usual” scenario, existing policy, plant retirements and technology innovation will not be sufficient to meet the goals in the Climate Action Plan.

The EPS also includes a “GHG Roadmap 2019 Action Scenario based on legislation, utility commitments and executive action in 2019 and 2020.” However, even when taking these into consideration, there is still a significant gap between the state’s projected economywide GHG emissions and the goals set in 2019.

emissions reduction — Colorado economy-wide GHG emissions | *Energy Innovation: Policy and Technology LLC and RMI*

According to the EPS scenario, Colorado would produce more than 100 million tons of emissions in 2030. To meet the state’s targets and help limit climate change to 1.5 degrees Celsius, the state must curb emissions to about 70 million tons by 2030.

Environmental groups and democratic lawmakers see SB200 as a way to close this gap. In January, the Polis Administration released the GHG Pollution Reduction Roadmap, which also concluded that current policy would not be sufficient to meet Colorado’s emissions targets. But Polis has been known to favor incentive programs and voluntary action rather than stringent legislation.

His concern with SB200 mainly lies in the authority it gives the AQCC and its potential to stunt Colorado’s economy. In April, Polis told The Colorado Springs Gazette’s editorial board that he would veto the bill if it made it to his desk. He said a reliance on future technology to meet these goals would require a flexible approach, and he’s unwilling to “give this unelected board, the Air Quality Control Commission, near-dictatorial control of our entire economy with a legal mandate to meet certain hard carbon reduction goals, many of which we’re already much of the way to.”

“We have a plan to be able to continue to clean our air, reduce carbon emissions, and part of that plan is additional legislative action like the infrastructure bill, like a building electrification bill, but requiring one particular state committee to have dictatorial authority across every sector of the economy is not a constructive way to achieve Colorado’s climate goals,” he said.

During a Senate hearing in April, one of the bill’s sponsors, Democratic Sen. Faith Winter, said that there are no “hard caps.”

The AQCC “has the flexibility to adjust goals as necessary to make sure we’re meeting our statewide goal,” she said.

May 26, 2021

Overheard at ARPA-E Innovation Summit Day 2

Transportation may account for one of the largest shares of greenhouse gases, Transportation Secretary Pete Buttigieg said, but “that means we get to be one of the biggest parts of the solution. And that calls for both urgent, immediate action using the tools that we have and long-term, strategic visions that allow us to prepare for changes that will unfold over time.”

Buttigieg was speaking at the opening session on the second day of the Department of Energy’s virtual ARPA-E Innovation Summit, where he and other industry leaders made the case for both current and visionary technologies, as well as putting forward strong bipartisan arguments for clean energy.

“We also believe in pushing the boundaries a little bit on what infrastructure means because ironically that’s actually a very traditional thing to do,” Buttigieg said. “The Erie Canal, the transcontinental railroad, the interstate highway system itself: None of those things were traditional until we built them. They became traditional because we built them.”

Launched in 2009, the Advanced Research Projects Agency-Energy (ARPA-E) has funded research and development for more than 1,000 cutting-edge clean energy projects across the U.S., drawing in $4.9 billion of private investment and launching 88 companies, according to information on the agency’s website.

Talking with Kara Hurst, vice president and head of worldwide sustainability at Amazon, the former mayor of South Bend, Ind., stayed on message, promoting President Biden’s infrastructure package, the American Jobs Plan, while adding in some of his own insights.

Rather than only looking at the downside of climate change, Buttigieg said, it’s also important to think about “what happens if we succeed. It’s in transportation, particularly, that we can prove the president’s point that the old climate-versus-jobs framework is a false choice; that actually job creation, economic opportunity are the results of good climate action.”

Looking ahead, Buttigieg said his department is looking at innovation in “alternate fuels like hydrogen and fuel economy improvements like power train optimization algorithms that actually, whatever your fuel source, could improve efficiency. … Then there’s the conceptual innovations — mobility as a service [and] helping travelers adapt their mode and timing and route in ways that makes sense.”

Sidewalk Data Centers

Jessica O. Matthews’ vision for the smart city of the future is built from the sidewalk up, with “smart pavers” installed under pedestrian walkways that can integrate “last mile” energy, communications and other infrastructure to ensure system reliability.

“This is a massive global problem,” said Matthews, founder and CEO of Uncharted Power. “While it is true that the number of people living without access to any type of electricity has steadily gone down, the number of people living without access to reliable, resilient energy services consistently is going up.”

The technologies to provide reliable power exist, but they “are not very good at interoperating with each other,” Matthews said. “And this lack of interoperability makes it difficult to capture, share and analyze data across different technologies in the built environment, especially at that last mile of infrastructure.”

One of clean energy’s high-profile black female entrepreneurs, Matthews started Uncharted about 10 years ago and has successfully raised millions of dollars of private investment for the company. The company’s smart pavers essentially “transform the sidewalk into a data center,” according to a company video played at the summit. “What that means is we’re taking the ground, which is a city’s most underutilized asset, and we’re turning it into a wireless, mesh network of power, communications and computability.”

“Infrastructure edge computing becomes the foundation for next-generation internet and the way to fix the last mile, that tricky part of infrastructure service delivery that’s been plaguing us as a society,” Matthews said. “It’s our goal to empower local government to use their assets, both physical and digital to bridge the gap between the world they want for their citizens and the world that currently exists.”

The company is working on a pilot project in Poughkeepsie, N.Y.

Different Motivations, Common Goals

Alaska Gov. Mike Dunleavy acknowledged being the odd man out at the summit, a Republican leading a red state heavily dependent on fossil fuels. But he sees clean energy innovation as critical to “cut our second-highest-in-the-nation energy costs” by harnessing Alaska’s abundant wind, tidal power and sunlight from its long summer days.

“That’s why I am here today. Our motivations may differ, but our destinations are aligned,” he told the ARPA-E audience. “A lack of access to inexpensive clean power is a death sentence for any economy. … If you can provide the investment, we can provide the world-class locations, aggressive permitting and local support.”

Dunleavy also pointed to successful renewable development in the state, such as the close to 100% mix of hydro, wind and battery storage power that provides electricity for Kodiak Island’s more than 12,000 residents. The small tribal village of Igiugig has also piloted an underwater turbine producing enough power to cut its need for diesel generation in half, he said.

Technology and Market Evolution

Vistra CEO Curt Morgan provided insights for innovators on developing technologies for the competitive retail power markets that, he said, serve approximately two-thirds of the nation’s electricity demand.

“We have three core principles in assessing [technology] development opportunities,” Morgan said. “They [must] support the affordability, reliability and lower emissions levels of the electric grid. All three of these are very important, and we have to ensure that they stay in balance. Furthermore, we assess the various methods to commercialize the product, including what it brings in the perspective of cost effectiveness, durability, reliability and unique characteristics, and supports the direction of the grid and consumer needs and desires.

Technology will drive change in market and regulatory structures but also will have to adapt to such changes, he said.

“We believe more and more value will exist beyond the core energy provided,” Morgan said. “In fact, the proliferation of intermittent renewables [will] ultimately drive the price of electricity power markets [to] very low levels, given the marginal cost of these resources is essentially zero.

“Competitive markets must continue to evolve to assess properly and compensate resources based on specific needs in the marketplace; and for grid reliability and balancing with intermittent resources, not a single price for all attributes. These payments for attributes will become the primary revenue source for power generation in the future market,” he said.

May 26, 2021

Clean Energy Creates Opportunity, Challenges For Sea Businesses

The global push to protect the environment and cut carbon emissions has opened a host of ocean-based commercial opportunities — from seaweed farming to wind and water turbine energy production — that can be rewarding, but challenging to execute, said speakers at a Tuesday session of the ARPA-E Energy Innovation Summit.

Obstacles to this “blue economy” include maneuvering through the demands of multiple stakeholders, resolving technical problems and securing the support of government agencies, according to speakers on a panel about the potential of the ocean for commerce. The newness of the technology itself can create difficulties, said Emily Morris, CEO of EMRGY, which designs and constructs hydro kinetic devices, or water turbines.

Some problems “we really don’t even know yet, because we don’t have the decades of operational experience in those areas that provide us that intelligence,” said Morris, one of five speakers at the session looking at the energy and climate opportunities of the blue economy. “Unfortunately, too many companies or technologies or startups have ventured into those spaces, still with many lingering product challenges [and] technical challenges to solve, where environmental challenges sort of cause those [initiatives] to break down.”

The Department of Energy and its Advanced Research Projects Agency-Energy (ARPA-E) have only recently begun to explore the huge potential of ocean-based clean energy production. A 2020 study by the DOE and National Renewable Energy Laboratory found that the tidal energy resources in the United States, most of which are in Alaska, could be as high as 445 TWh per year.

ocean-based commercial opportunities — | *Shutterstock*

ARPA-E has provided funding for research and development for floating offshore wind turbines and seaweed farming and, last November, announced $35 million in funding for 11 projects as part of its Submarine Hydrokinetic and Riverine Kilo-megawatt Systems (SHARKS) program. EMRGY received $3.6 million to develop control systems and new hardware that will improve performance and lower the levelized cost of energy for its turbines.

The company’s hydro turbines are the size of a large SUV and can generate 10 to 40 kW, she said. But “there are many, many environmental challenges that must be considered for ocean energy to become a standard practice.”

According to a 2017 ARPA-E study, environmental concerns about water turbines range from potential alteration of currents and ocean sediment to impacts on the migration patterns of fish.

Wind Sector Growth

Entrepreneurs in the offshore wind sector have faced such factors for a while, with some success. The offshore wind energy sector is growing dramatically, said Laura Morton, senior director for offshore policy and regulatory affairs for American Clean Power Association, a trade association. She cited the example of President Biden’s announcement Tuesday of an agreement with California Gov. Gavin Newsom to open two areas off the state’s northern coast for offshore wind projects as part of the president’s plan to deploy 30 GW of offshore wind by 2030.

Yet the United States lags the rest of the world in offshore wind power generation, she said, referring to statistics from the Global Wind Energy Council’s 2021 Global Wind Report that found of 35,293 MW of installations worldwide, the U.S. accounted for just 30 MW. Europe has 24,837 MW of installations, and Asia-Pacific has 10,414 MW, she said.

Paul Dobbins, senior director of impact Investing and ecosystems services, aquaculture for the World Wildlife Fund (WWF) said the challenges facing ocean-based projects often include competing demands for space on the ocean. WWF has invested heavily in seaweed farming because of the potential to generate a source of food and industrial feed stocks from the high yields of biomass in the weed, while also cutting carbon emissions and creating jobs, he said.

The seaweed sector, where demand is rising at about 8% a year, provides building blocks for everyday products such as toothpaste, milkshakes and processed foods, Dobbins said. But it is not without its difficulties.

“When you stand at the beach and you look out over the horizon to the ocean, it looks like a pretty empty place,” he said. “But when you’re working on the ocean, in the ocean, and next to the ocean, you realize that it’s an incredibly busy place. And there are a lot of stakeholders … their concerns need to be addressed and taken into account when we’re doing marine spatial planning.”

Seaweed can help mitigate the economic pains of coastal communities, especially those where fishing has declined, he said. And in the United States, the growing season — from October to June — is usually the off-season for coastal activity, he added.

“However, conflicts still exist,” he said. “There is concern that seaweed farming will impinge upon [fishermen’s] ability to make a living. Recreational boaters are concerned. There are defense areas out in the ocean that have to be taken into account — transportation and logistics areas.”

Shipping Fuel Transformation

The shipping sector is grappling with how to comply with the International Maritime Organization’s (IMO) greenhouse gas reduction strategy, while maintaining its position as a major commercial sector, said Sotirios Mamalis, manager of sustainability, fuels and technology for the American Bureau of Shipping. The IMO’s goal is to reduce the carbon emissions of the international shipping fleet by 40% of its current emissions by 2030, and 50% by 2050, he said.

“Compared to other industries, such as the automotive industry or the stationary power generation industry, the shipping sector has been lagging in terms of enforcing emissions regulations and efficiency regulations,” Mamalis said.

Shipping companies are looking at a variety of methods to cut emissions, including alternative fuels and energy sources, such as methanol, biofuels, hydrogen, liquefied natural gas and liquefied petroleum gas, he said. The IMO in 2020 also required vessels to cut sulfur oxide emissions, mainly through the use of low-sulfur fuel.

Technological improvements, such as energy-saving devices, new propeller designs and wind-assisted propulsion systems, are also being studied, Mamalis said.

“We basically have a world of opportunities in front of us in shipping,” he said. “And I think this is driving a lot of, I would say deployment and scale-up of [synthetic] fuels or renewable fuels, which we’ll see in the future.”

May 26, 2021November 19, 2023

Lenders, Developers Bullish on East Coast OSW

The Biden administration’s climate goals and a new investment tax credit (ITC) have U.S. offshore wind developers bullish about the future of the industry, with proposed projects attracting strong interest from lenders, speakers told the Reuters U.S. Offshore Wind 2021 conference Tuesday.

In December, Congress approved a one-year extension of the production tax credit (PTC) for wind developers and a new 30% ITC for offshore projects that begin construction by the end of 2025. (See Wind, Solar, EE, CO₂ Storage Win Tax Breaks.)

“For Vineyard Wind [the ITC] was a big relief,” Vineyard Wind CFO Alvaro Ortega Sebastián told the conference, saying it removed the uncertainty that faced wind developers in recent years as tax credits were reduced or expired.

“More [important] than the increase in the ITC … is certainty,” he said. “You know that you have until the end of 2025 to begin construction and then you have 10 years” to finish.

Vineyard got more good news on May 11, when the Bureau of Ocean Energy Management approved the final permit for 800-MW Vineyard Wind I, making it the first commercial-scale OSW project to win approval in the U.S.

With the permit in hand, Vineyard — a 50/50 venture of Copenhagen Infrastructure Partners and Avangrid Renewables (NYSE:AGR) — expects to close its financing by the end of 2021, with commercial operation targeted for 2023.

Hopes for the project were threatened in August 2019, when the Trump administration announced it would postpone Vineyard’s final environmental impact statement to conduct an expanded analysis of “cumulative impacts” from the multiple offshore projects proposed for New England. Sebastián said the company feared the delay would undermine the credibility of the OSW market in the U.S. “And we have seen quite the opposite. For the past two years, we have received more interest, more calls, more demand from lenders to participate in our project,” he said.

‘Attractive Opportunities’

With the Biden administration targeting 30 GW of OSW by 2030 — and Massachusetts, New York, New Jersey, Virginia, Connecticut, Maryland and Rhode Island having awarded contracts for 10.5 GW — Vineyard is far from the only belle at the ball. (See Biden Administration Marshaling Agencies in Push for 30 GW of Offshore Wind by 2030.)

“We’ve received extraordinarily strong interest already in the project from the lending community,” said Justin Johns, CFO of Mayflower Wind, which expects commercial operation in the mid-2020s under a 20-year 804-MW power purchase agreement with Massachusetts’ electric distribution companies. There has been interest “from American banks, from the European banks, as well as the Asian banks,” Johns said.

Mayflower is a partnership between Shell (NYSE:RDS.A), which entered the OSW market in 2000 in the U.K., and Ocean Winds, a joint venture between Madrid-based EDP Renewables (OTCMKTS:EDRVF) and French multinational ENGIE (OTCMKTS:ENGIY). Ocean Winds has 1.5 GW of OSW under construction and 4 GW under development in the U.S., Europe and Asia.

“These are really attractive opportunities” for lenders, agreed CIBC Capital Markets’ James Wright, managing director of renewables, clean energy and sustainability (NYSE:CM). “Every single major bank has significant green lending commitments. These are very sizable assets, which will require a lot of financing. The Biden administration’s plan to have 30 GW in nine years — that’s a lot of capital that’s going to have to go into this space.”

The size of the projects also means multiple lenders for each project, he added. “A solar deal or an onshore wind deal would probably have three to four lenders involved, maybe a single tax equity investor,” he said. “Here in the offshore space, you’re probably talking about double-digit bank groups; maybe more than one tax equity investor; multiple sponsor [companies]. There’s actually a lot of financing complexity.”

Wright noted that Europe has been building utility-scale OSW for 20 years. “So there’s a lot of experience from the European market which we can leverage,” he said.

European Experience not Fully Transferable

But Johns said knowledge of the unique challenges of the U.S. also is essential to developing successful projects.

“You can’t approach this with the [idea of a] ‘lift and shift’ of Europe to the U.S.,” he said. “We’ve got to bring European prices into the U.S. but recognize the uniqueness of the U.S. development. … In the U.S. you’ve got to figure out the Jones Act,” which requires that goods shipped between U.S. ports be transported on ships that are built, owned and operated by U.S. citizens or permanent residents. “You’ve got grid considerations; you’ve got ports that need to be built. You got manufacturing [that] still needs to be built out. From a developer’s perspective, you need to bring your experience but really bring that intimacy of the U.S. knowledge to it.”

That supporting infrastructure also presents opportunities for lenders and manufacturers, Johns said. “This buildout will be much bigger than just projects. It’s going to be into the whole supply chain. This will extend into the manufacturing side, into blades, into turbines, into ports and the grids. You name it.”

For developers, the U.S. market is a more complicated regulatory environment than, for example, the Netherlands. “The Dutch government … takes care of the transmission asset. They take care of a lot of that development risk, and you pretty much have one material government interface,” Johns said. “In contrast, [in the U.S.] you’ve got interface with federal agencies; you’ve got state interfaces; you’ve got local interfaces. … The stakeholder management perspective becomes much, much broader.”

Watching Steel Prices, Interest Rates

The developers say they are now keeping a close eye on factors that could raise project costs, such as increases in interest rates or steel prices.

There are also questions about lenders’ willingness to offer long-tenor debt and what kind of assurances they will require. “Will lenders seek 15- to 20-year” service and maintenance agreements? “How are they going to think about availability guarantees?” Johns asked.

Project developers should be careful “not to underestimate the financing timetable for projects of this complexity,” CIBC’s Wright said. “I’ve yet to see a single onshore renewable deal that meets its original financing timetable.”

Despite the increased complexity of OSW projects, Wright said he expects only a small premium in financing them compared to land-based wind.

For competitive reasons, however, he said he wouldn’t offer any specifics on the interest rates he expects. “There’s not much more I want to say on that that won’t come back to haunt me over the next 30 GW,” he joked.

May 25, 2021

CAISO Updates Board Selection Policy

The CAISO Board of Governors approved changes Wednesday to the ISO’s criteria for recommending new board members to California’s governor.

The updates, the first in 16 years, are intended to broaden the pool of nominating committee members and candidates to reflect changes in the electric industry.

“The policy has not been substantively revised since its adoption in 2005,” CAISO General Counsel Roger Collanton wrote in his memo to the board. “While the existing board selection process has worked well over the years, we have determined, with the benefit of stakeholder feedback, that certain aspects of the policy should be updated to account for changes in the industry and the ISO’s markets since 2005.”

“The ISO’s footprint and market have evolved considerably since 2005, with new market offerings, technologies and types of market participants,” Collanton wrote. “In light of these changes, and with the benefit of stakeholder input, management recommends certain relatively modest revisions to the policy to better align the process with current circumstances.”

CAISO Board — CAISO headquarters in Folsom, Calif. | © *RTO Insider LLC*

Among the approved changes are additions to the stakeholder sectors of the Board Nominee Review Committee, which identifies and recommends qualified candidates to the governor.

When the board selection policy was established in 2005, community choice aggregators and energy storage resources did not exist, Collanton pointed out. Stakeholders from those sectors can be considered for the nomination committee under the revised policy.

Another change was to update candidate qualifications “to align with the development of the grid and market and with experience through recent board member searches,” his memo said.

The section of the policy dealing with candidate qualifications was updated to “more specifically reference, under the general category of electric industry expertise, certain characteristics that have more recently gained importance, including experience in forward-looking electric industry technologies, expertise in grid security and operations and experience in other industry sectors closely linked to the electricity sector.”

The revised policy also includes adjustments to categories of qualifying nominee experience, including adding a reference to experience as a “law professor or other prominent legal professional and nonprofit management experience.”

“The updated and expanded set of qualifications should enhance the pool of available board candidates and ensure that the board collectively has the experience needed to meet the current and future challenges of the ISO’s evolving markets and grid,” Collanton wrote.

May 25, 2021

New York Clean Fuel Standard Bill Targets Indirect Emissions

New York lawmakers are working to establish a state clean fuel standard that encompasses indirect emissions in the production and distribution process, in addition to emissions from the fuel itself.

The policy is based on a low carbon fuel standard originally adopted in California in 2009 and amended in 2018.

“My entire 30-year career I’ve worked on decarbonization of the transportation fuel sector in one way or another, and the low carbon fuel standard was the first policy that actually successfully accomplished that goal,” said Eileen Tutt, executive director at the California Electric Transportation Coalition, at a webinar Thursday.

Electricity is considered a fuel in the language of the bill (A 862), which is intended to reduce “carbon intensity,” or amount of greenhouse gas emissions per unit of fuel energy over its lifecycle, by 20% by 2030. Further goals would be implemented based on advances in transportation technology in the next decade.

The standard is effective, Tutt said, because it “doesn’t mandate a particular fuel type, but rather an outcome” of transportation decarbonization.

New York Clean Fuel Standard Bill — A bill under consideration in New York would establish a clean fuel standard that takes into consideration indirect emissions, such as a company’s distribution methods. | *Shutterstock*

Natural Resources Defense Council, which supports the standard, described it as complementary to and supportive of the multistate Transportation Climate Initiative program. New York is monitoring that program but has not agreed to join it officially. The state’s Climate Action Council transportation advisory panel recently recommended to the full council that New York join TCI-P to help fund regulatory changes for vehicle electrification. TCI-P would cap and reduce transportation emissions 25% by 2030. (See New York Should Join TCI-P, Climate Council Says.)

One of the most controversial aspects of the Clean Fuel Standard in California and proposed in the New York bill is the indirect emissions calculations. They include land use changes caused during generation or extraction, throughout distribution and delivery and during the final use of the fuel by the customer.

“If you derive your fuel from something like palm oil that destroys the planet, it does not generate credit,” Tutt said.

The regulation also impacts the ethanol industry. Depending on how ethanol is produced, the carbon intensity can be higher than that of oil.

Under the clean fuel standard, fuel providers that exceed specific standards to be determined by the New York State Energy Research and Development Authority would receive credits that can be applied to future emission reduction obligations. The credits also could be traded to other providers that are not meeting the standard.

“It has caused the oil industry to really wage war against the low carbon fuel standard in California and other states because it recognizes you can’t just shift to another carbon-based fuel manufacturer or import oil,” Tutt said.

The bill would require all fuel industries, including electricity, to consider the upstream emissions associated with the alternative fuel. Electric utilities would be encouraged to garner clean and renewable sources of electricity generation, but the bill also leaves room for the growth of hydrogen fuel cell vehicles, Tutt added.

Groups such as the Alliance for Clean Energy New York and New Yorkers for Clean Power are advocating in support of the bill and hosted the webinar where Tutt addressed the New York legislation.

After passing the bill, the next step would be to build out vehicle charging infrastructure, Tutt said, to help accelerate consumer adoption of electric vehicles.

May 25, 2021

Biden Admin Must Show How US Will Reach Net Zero Ahead of Glasgow

The Biden administration does not have specific plans to coordinate domestic efforts and prove to other nations, as well as U.S. utilities and industries, that the country is fully committed to cutting carbon emissions in half by 2030 and achieving net-zero emissions by 2050.

Net Zero Glasgow — President Joe Biden | *The White House*

President Biden “has yet to announce a clear plan for achieving his pledge. He’s announced billions of dollars of new spending on green projects, but I haven’t found any clear plan with specific targets or timetables for translating spending into progress,” Richard Parker, a University of Connecticut School of Law professor and expert on climate law and policy, said in kicking off a breakout panel discussion Thursday at the annual New England Energy Conference and Exposition, held virtually this year.

Parker initiated the conversation by recalling Biden’s announcement of the U.S.’ pledge on Earth Day. (See Biden Commits US to Cutting GHG Emissions 50% by 2030.) He also convened a two-day virtual summit that included 40 world leaders.

“I think the main goal of this Earth Day summit,” Parker continued, “was not to elicit immediate concessions from around the world, but to signal that the U.S. is back in the climate game and to promote key nations to undertake their own reassessment of their voluntary commitments under the Paris Agreement — with a goal of eliciting more ambitious pledges from delegates at the 26th meeting of the Conference of the Parties [COP26], which will be held this November in Glasgow, Scotland.”

He noted that the UN’s Intergovernmental Panel on Climate Change concluded in a 2018 report that average global temperatures had been rising over the preceding decade and that steep carbon reductions would be needed by roughly 2030 to avoid a global average annual temperature increase of more than 1.5 degrees C (2.7 degrees F) over preindustrial levels.

Parker was joined by James Cotter, general manager of Shell’s Offshore Wind Americas, and Jason Albritton, director of climate and energy policy for The Nature Conservancy.

Albritton said achieving the kind of carbon reduction envisioned by the administration — most of it in the power and transportation sectors — will require “policy action at multiple levels,” he warned.

“We realize that getting to net zero by 2050 is not going to be easy, and there’s really no one silver bullet,” he said. “Clearly, things have changed dramatically in the last few months with the new administration in the White House, Congress changing hands at the leadership level and, clearly, climate change becoming a central part of the policy discussion where it hadn’t been in past years.” The administration’s goal is “the level of ambition that a lot in the environmental community, the business community, and mayors [and] state governors were advocating … prior to the administration’s announcement. …

“The international community is now looking at the U.S. and what’s going to happen next. We have a commitment, but how are we going to get there? What are we going to do? What policies is the U.S. going to put in place?

Jason Albritton, The Nature Conservancy | *The Nature Conservancy*

“I think what happens in the next few months … are pretty critical. The administration has indicated it is going to put out more detail on their path to get there, but obviously that’s constrained by Congress; it’s constrained by their legal authority. What are the near-term actions is really the next question that I think everybody’s going to be watching,” he said.

Complicating any predictions is that the president’s $2 trillion infrastructure spending proposal is the centerpiece of the administration’s agenda to address climate change, Albritton said.

“The investments and the incentives that are included address a lot of different areas that are relevant to the climate conversation. A key piece is electrification of the transportation sector. That includes investments in charging infrastructure, conversion of fleets [to electric], tax incentives for vehicle purchases to really drive electrification of the transportation sector [and] investment in transit as a way to reduce emissions by increasing transit opportunities.

“There is a big focus on energy efficiency and weatherization both for public buildings and residential buildings as a way to reduce energy use, and a lot of attention to transmission and grid investments, which I think everyone on this call likely knows is critical if we’re going to increase clean energy deployment across the economy,” Albritton said.

While the debate on policy and politics is expected to drag on indefinitely, wind developers are already racing to get steel in the water off the Atlantic Coast. And that could create big problems in the future.

Shell’s Cotter stressed the importance of planning an integrated transmission system now to ensure that future wind farms generating as much as a combined 30 GW by 2030 — and much more later — can be integrated into the electric grid.

“Transmission is one of the most significant hurdles, especially here in the Northeast,” he said. “We should not underestimate how hard it is to physically get cables to the points of interconnection. When individual projects connect, we should ensure that they enable the highest capacity possible both over the beach and into those points of interconnection.”

In other words, allowing each project to plan its own interconnection to the existing transmission system, without an overall transmission plan designed to handle the massive amounts of offshore power that will eventually be generated, could in the long run stymie continued wind development that East Coast states envision.

“Individual projects exist to deliver by themselves, so they can and do make decisions [that] benefit themselves and maybe not the broader industry,” he warned.