Photo of William M. Friedman

William M. Friedman focuses his practice on regulatory, legislative, compliance and transactional issues related to energy and commodities markets. While in law school, William was a notes editor for The George Washington International Law Review. He held internships at the Department of Justice and the Energy and Telecommunications Division of the Massachusetts Attorney General's Office. Read William Friedman's full bio.

On February 15, the Federal Energy Regulatory Commission (FERC) issued a much-anticipated order designed to remove barriers to electric storage resource participation in organized wholesale electricity markets. The order—dubbed Order No. 841—creates new rules that require each regional transmission operator (RTO) and independent system operator (ISO) to revise its tariff to establish a “participation model” consisting of market rules that facilitate the participation of electric storage resources in the RTO/ISO markets. Order No. 841 will make it easier for electric storage resources to participate in wholesale power markets and access the accompanying revenue streams.

Each RTO/ISO must file its tariff changes to implement Order No. 841 within 270 days (i.e., by November 12, 2018). FERC will review the filings and must approve all tariff changes. Each RTO/ISO will have an additional one year from the filing date to implement its new tariff provisions.

FERC defined an electric storage resource as “a resource capable of receiving electric energy from the grid and storing it for later injection of the electric energy back to the grid.” This definition encompasses a variety of technologies including batteries, flywheels, compressed air and pumped hydro. It also explicitly includes resources located on a distribution system or behind the meter, as well as resources located on the interstate transmission grid, and opens the door to participation in RTO/ISO markets for smaller storage resources.

Continue Reading Highly Anticipated FERC Rule Removes Barriers to Electric Storage

Yesterday, the US Trade Representative announced that President Trump approved recommendations to impose a safeguard tariff on imported solar cells and modules under Section 201 of the Trade Act of 1974. The tariff will be in effect for the next four years at the following rates:

This tariff is the result of petitions filed in May 2017 by two US solar cell manufacturers at the (ITC under Section 201 of the Trade Act of 1974. The petitions alleged that a global imbalance in supply and demand in solar cells and modules and a surge of cheap imports caused serious injury to the domestic solar manufacturing industry. In September, the ITC found injury to the US solar equipment manufacturing industry and, in October, released its recommendations to the White House to impose tariffs. The President’s final decision was in line with the ITC’s recommendations.The first 2.5 gigawatts (GW) of imported solar cells will be exempt from the safeguard tariff in each of those four years. According to the International Trade Commission (ITC), the United States imported approximately 12.8 GW of solar cells in 2016, which was expected to grow in 2017.

Supporters hope the tariff will encourage increased domestic solar manufacturing. Reports are circulating that a solar manufacturer is considering opening a new module factory in Florida. However, critics of the tariff like the Solar Energy Industries Association (SEIA) say that the tariff will result in a loss of 23,000 domestic jobs this year, including many in manufacturing, and will result in the delay or cancellation of billions of dollars in solar investments. The U.S. solar energy industry currently employs 260,000 Americans in jobs ranging from installation to manufacturing racking systems and inverters. The industry created 1 out of every 50 new US jobs in 2016. According to SEIA, only 2,000 people in the United States are employed manufacturing solar cells and panels.

The tariff is also expected to increase solar module costs, with early estimates predicting an increase of 10 to 12 cents per watt based on current US import prices of 35 to 40 cents per watt.

The US Trade Representative’s press release and fact sheet took clear aim at China, singling it out as a major cause of injury to the domestic solar manufacturing industry: “Today, China dominates the global supply chain and, by its own admission, is looking to increase its capacity to account for 70 percent of total planned global capacity expansions announced in the first half of 2017.” The US Trade Representative also stated that it will “engage in discussions among interested parties that could lead to positive resolution of the separate antidumping and countervailing duty measures currently imposed on Chinese solar products and U.S. polysilicon.” Despite the aggressive rhetoric, the tariff will not be limited to Chinese imports.

Additional details on whether any countries will be exempted from the tariff and how the 2.5 GW exemption is determined should be available upon publication of a Presidential Proclamation finalizing the tariff.

Alongside the tariff on solar cells, the Trump Administration also announced a tariff on imported residential washing machines.

On January 8, 2018, the Federal Energy Regulatory Commission (FERC) rejected the Department of Energy’s (DOE) Proposed Rule, which would have required organized wholesale electricity markets run by independent system operators (ISOs) or regional transmission organizations (RTOs) to establish tariff mechanisms for purchasing energy from eligible “reliability and resilience resources” and mandated a recovery of costs plus a return on equity for such resources. Eligible reliability and resilience resources would have to be (1) located within an RTO/ISO, (2) able to provide essential reliability services, and (3) have a 90-day fuel supply on-site. Practically, these requirements would limit participation to coal and nuclear plants. Continue Reading FERC Rejects Department of Energy Proposal Benefitting Coal and Nuclear

On October 31, 2017, the US International Trade Commission (ITC) released its recommendations to impose a tariff on imported solar equipment. The proposals it issued, however, would result in duties substantially lower than those sought by the petitioners. The ITC’s four commissioners issued several remedy recommendations, including, at the high end, a 35 percent tariff on imported solar modules and a 30 percent tariff on solar cells. This would result in an estimated 10-13 cent per watt increase on imported solar panels, far below the tariff levels requested by the petitioners.

In May, Suniva, a US solar cell manufacturer, filed a petition at the ITC requesting relief from foreign imports. The petition alleged that a global imbalance in supply and demand in solar cells and modules and a surge of cheap imports caused serious injury to the domestic solar manufacturing industry. SolarWorld, another US manufacturer, joined the petition and the ITC instituted an investigation. Suniva and SolarWorld requested a 32 cent per watt tariff on crystalline silicon photovoltaic (CSPV) cells, and Suniva sought a price floor on solar panels of 74 cents per watt.

While US solar manufacturers argued in favor of imposing duties on foreign imports, others like the Solar Energy Industries Association (SEIA) have opposed the petition, arguing that it poses a major threat to the 260,000 US workers in the solar industry.  Specifically, SEIA argues, the higher cost of panels would lead to decreased demand and make solar energy less competitive in the United States, costing jobs in solar installation and other areas of the solar industry. Solar manufacturing accounts for approximately 38,000 jobs in the United States while solar installation accounts for over 137,000 jobs.

In September, the ITC found injury to the US solar equipment manufacturing industry. Since that finding, the ITC has been working on the remedy phase of the proceeding.

The commissioners issued three separate sets of recommendations. One recommendation proposes, among other things, imposing tariffs of up to 30 percent on imported CSPV cells and a 35 percent tariff on imported CSPV modules, each of which would be incrementally reduced over four years. A second proposal recommended imposing a 30 percent tariff rate on imports of cells exceeding 1 gigawatt, decreasing by five percentage points and increasing the in-quota amount increase by 0.2 gigawatts each year over a four year period, as well as a 30 percent tariff on modules that would be phased down by five percentage points each year. The third proposal recommended a quantitative restriction on cells and modules starting at 8.9 gigawatts in the first year, increasing by 1.4 gigawatts each subsequent year.

The ITC will forward its report, which contains its injury determination, remedy recommendations, additional findings, and the bases for each, to the President by November 13, 2017. The President must make a final decision on whether to impose a remedy and what that remedy should be by January 12, 2018.

On September 29, 2017, the Illinois Power Agency (IPA) released its Long-Term Renewable Resources Procurement Plan (Plan) to implement renewable energy goals set forth in Illinois’s Future Energy Jobs Act, which went into effect on June 1. Together, the new legislation and the Plan, among other things, make significant modifications to Illinois’s renewable portfolio standard (RPS) goal of 25 percent of retail electricity sales sourced from renewable energy by 2025. The Plan sets forth procurement programs designed to meet the state’s annual RPS targets until 2030 and will be updated at least every two years. These changes significantly expand renewable energy development opportunities in Illinois—by some estimates, leading to the addition of approximately 1,300 megawatts (MW) of new wind and nearly 3,000 MW of new solar capacity by 2030.

Expanding the Illinois RPS

While maintaining the same 25 percent renewable energy sourcing goal, the Future Energy Jobs Act functionally increases the state’s RPS target because Illinois’s RPS standard previously applied only to customers buying power through a utility’s default service, not customers taking supply through alternative retail suppliers or through hourly pricing. According to the IPA, in recent years, only 30-50 percent of potentially eligible retail customer load actually received default supply services, while competitive class customers (including larger commercial and industrial customers, which represent approximately half of total load) had no default supply option. Given this transition, meeting Illinois’s RPS goal of 13 percent of retail electric sales in the state sourced from renewable energy for the 2017–2018 delivery year will require the IPA to procure on behalf of the state’s electric utilities an additional 7.5 million renewable energy credits (RECs), which will gradually increase to a forecasted procurement of 31.5 million RECs for the 2030–2031 delivery year. One REC represents 1 megawatt hour (MWh) of generation produced by an “eligible renewable resource.” Eligible resources include wind, solar, thermal energy, biodiesel, anaerobic digestion, biomass, tree waste, landfill gas and some hydropower. Many other states, including California and Massachusetts, utilize RECs to demonstrate compliance with the state’s RPS program. Continue Reading Illinois Renewable Resources Procurement Plan Aims to Boost Renewable Energy Development

On September 28, 2017, the US Department of Energy (DOE) submitted a proposed rule to the Federal Energy Regulatory Commission (FERC) that, if implemented, could reshape organized wholesale electricity markets. Citing electric grid reliability and resiliency issues like the 2014 Polar Vortex and recent hurricanes, DOE asked FERC to enact a new compensation system for coal and nuclear power plants—dubbed “fuel-secure resources” by DOE. Coal and nuclear plants have been retiring prematurely and, according to DOE, the retirements are “threatening the resilience of the Nation’s electricity system.”

In order to stem the tide of retirements, DOE submitted to FERC a proposed rule requiring organized wholesale electricity markets run by independent system operators (ISOs) or regional transmission organizations (RTOs) to develop and implement market rules that “accurately price generation resources necessary to maintain the reliability and resiliency” of the bulk power system. The proposed rule would require ISOs and RTOs to provide “a just and reasonable rate” for the purchase of electricity from a fuel-secure resource and “recovery of costs and a return on equity for such resource.” Eligible resources must (i) be located within an ISO or RTO, (ii) be able to provide energy and ancillary services, (iii) have a 90-day fuel supply on site, (iv) be compliant with all environmental laws, and (v) not be subject to cost-of-service rate regulation at the state or local level. Practically, these requirements limit participation to coal and nuclear plants. Continue Reading Department of Energy Proposes Rule Benefiting Coal and Nuclear to FERC

On June 30, 2017, the Massachusetts Department of Energy Resources (DOER) announced that Massachusetts would adopt an aspirational 200 megawatt-hour (MWh) energy storage target to be achieved by January 1, 2020. The target is the second largest in the nation, although it is far lower than California’s 1.3 gigawatt storage mandate. Still, Massachusetts’ storage target will make the commonwealth a leader in the burgeoning energy storage field.

The process of setting storage targets began last summer, when Massachusetts enacted a law directing DOER to determine whether to set targets for electric companies to procure energy storage systems by January 1, 2020. In September 2016, Massachusetts released a report called the “State of Charge,” which recommended the installation of 600 megawatts (MW) of energy storage by 2025. The report predicted that 600 MW of storage could capture $800 million in system benefits to Massachusetts ratepayers. The energy storage industry praised the 600 MW level as a good starting point.

DOER’s “aspirational” 200 MWh by 2020 target falls short of the “State of Charge” recommendation, but leaves the door open to achieving 600 MW by 2025. DOER’s letter announcing the target noted that “[s]torage procured under this target will serve as a crucial demonstration phase” for Massachusetts to gain knowledge and experience with storage. “Based on lessons learned from this initial target,” the letter continues, “DOER may determine whether to set additional procurement targets beyond January 1, 2020.”

Beyond DOER’s storage target, Massachusetts has a broader Energy Storage Initiative, which includes a $10 million grant program aimed at piloting energy storage use cases and business models in order to increase commercialization and deployment of storage technologies. DOER also announced that it will examine the benefits of amending the Alternative Portfolio Standards, an incentive program for installing alternative energy systems, to expand the eligibility of energy storage technologies able to participate. While Massachusetts’ storage targets are not as lofty as some in the industry were hoping, the commonwealth is demonstrating a clear commitment to developing its energy storage industry beyond the few megawatts currently installed.

UPDATE: This bill was signed into Maryland law on May 4, 2017 with a $75,000 maximum credit for commercial systems. A previous version of the bill offered credits to commercial systems up to $150,000.

In April, the Maryland legislature passed a bill creating a state income tax credit for the costs associate with installing an energy storage system. Governor Larry Hogan is expected to sign it into law. Unlike measures in other states such as California and Massachusetts, the Maryland bill does not contain mandated amounts of energy storage that utilities must procure. Instead, if the current bill is signed, Maryland will be the first state in the country to incentivize the deployment of energy storage systems by offering a tax credit. Presently, an energy storage system can qualify for the federal investment tax credit if it is installed alongside a solar photovoltaic system. This is the first ever tax credit for storage-only projects, although qualified energy storage systems still may be paired with renewable energy projects.

Under the terms of the bill, a taxpayer will receive a credit equal to 30 percent of the installed costs of the system, not to exceed $5,000 for a residential system or $150,000 for a commercial system. The incentive program has a funding cap of $750,000 per year, and applications for the credit will be approved on a first-come, first-served basis. Additionally, the tax credit may not be carried over for use in future tax years. The tax credit is currently slated to run from 2018 to 2022. Continue Reading Maryland Likely to Become First State to Adopt Energy Storage Tax Credit

Last week, the US Environmental Protection Agency (EPA) published a request for comment asking for “input on regulations that may be appropriate for repeal, replacement, or modification.” EPA’s request is part of a federal government initiative under Executive Order 13777, “Enforcing the Regulatory Reform Agenda,” which established a federal policy “to alleviate unnecessary regulatory burdens” on the American people. The Executive Order directs federal agencies to establish a Regulatory Reform Task Force that will evaluate existing regulations and make recommendations on repeal, replacement and modification.

Pursuant to the Executive Order, the Task Force will identify regulations that:

  1. Eliminate jobs, or inhibit job creation;
  2. are outdated, unnecessary, or ineffective;
  3. impose costs that exceed benefits;
  4. create a serious inconsistency or otherwise interfere with regulatory reform initiatives and policies;
  5. are inconsistent with the requirements of section 515 of the Treasury and General Government Appropriates Act, 2001 (44 U.S.C. 3516 note), or the guidance issued pursuant to that provision in particular those regulations that rely in whole or in part on data, information, or methods that are not publicly available or that are insufficiently transparent to meet the standard of reproducibility; or
  6. derive from or implement Executive Orders or other Presidential directives that have been subsequently rescinded or substantially modified.

EPA’s request comes on the heels of the Department of Commerce’s request for comments from manufacturers asking what regulations the government could repeal to benefit domestic manufacturing. Commerce received approximately 170 responsive comments, nearly half of which targeted various environmental regulations for amendment or repeal.

EPA offices are conducting various outreach programs designed to engage the public. These include public teleconferences, public meetings and contact with key stakeholders. Outreach efforts will begin on April 24 with a public meeting via teleconference held by the Office of Air and Radiation. Other divisions of EPA, such as the Office of Small and Disadvantaged Business Utilization, Office of Water, Office of Chemical Safety and Pollution Prevention, and Office of Land and Emergency Management will hold scheduled outreach sessions through May 9.  Comments are due to EPA by May 15.

Last week, the Federal Energy Regulatory Commission (FERC) issued a Policy Statement to provide guidance on the ability of electric storage resources to recover costs through both cost-based and market-based rates concurrently. The Policy Statement appears intended to reconcile two lines of FERC precedent on this topic. The issue of multiple payment streams is one of particular concern for electric storage resources that, due to their technological capabilities, can switch from one type of service to another almost instantaneously. The Policy Statement is separate from FERC’s ongoing Notice of Proposed Rulemaking regarding electric storage resource participation in wholesale electricity markets (RTO/ISO markets), discussed here and here.

FERC’s guidance stems from two orders with opposite outcomes – Nevada Hydro and Western Grid. In the 2008 Nevada Hydro order, FERC denied a hydroelectric storage project’s petition to be treated as a transmission facility that would receive payments through cost-based rates. Then, in the 2010 Western Grid order, FERC granted the applicant’s request for cost-based rate recovery for its sodium sulfur batteries that would provide voltage support and thermal overload protection for transmission facilities.

FERC identified three major concerns present in scenarios where an electric storage resource seeks both cost-based and market-based rates: (1) the potential for cost-based and market-based rate recovery to result in double recovery; (2) the potential for cost-based rates to inappropriately suppress competitive market prices; and (3) the level of control of a storage resource exercised by a RTO/ISO that could jeopardize the RTO/ISO’s independence from market participants.

To address the concern of double recovery, FERC suggested that crediting any market revenues back to the cost-based ratepayers is a possible solution. Such crediting may vary depending on how the cost-based rate is structured; FERC provided examples of an up-front reduction in the cost-based rate or a later crediting procedure for cost-based ratepayers. Addressing the issue of suppressing competitive market prices, FERC disagreed with commenters that allowing market participants with cost-based rate recovery to also sell at market-based rates would create an adverse impact on other market competitors. FERC pointed out that some vertically integrated public utilities currently recover costs through cost-based retail rates while also making market-based rate sales to others. Finally, to maintain RTO/ISO independence, FERC clarified that RTO/ISO dispatch of a storage resource should receive priority over the resource’s provision of market-based rate services and that the provision of market-based rate services should be under the control of the resource owner rather than the RTO/ISO.

FERC Commissioner LaFleur dissented from the Policy Statement, arguing that its sweeping conclusions related to storage resources may be read to reflect FERC’s views about the impact of multiple payment streams more generally. Commissioner LaFleur also disagreed with FERC’s decision to separate the issues from FERC’s pending Notice of Proposed Rulemaking on storage participation.