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Key Takeaways | Developments in the PJM Market

On June 18, 2020, McDermott partners Neil Levy and David Tewksbury were joined by Paul M. Sotkiewicz, PhD, of E-Cubed Policy Associates, LLC, to discuss recent developments in the markets operated by PJM Interconnection (PJM). Below are key takeaways from this week’s webinar. In December 2019, the US Federal Energy Regulatory Commission (FERC) issued an order requiring PJM to expand its Minimum Offer Price Rule (MOPR). Under the expanded MOPR, a capacity resource that receives a state subsidy will be subject to a minimum offer floor price in PJM’s capacity auctions, unless it is entitled to one of the exemptions set forth by FERC. The expanded MOPR is not expected to have significant impacts on the results of PJM’s capacity auctions, particularly in the near term. There are at least three reasons for this: First, there are various exemptions to the expanded MOPR, including, but not limited to, exemptions for existing renewable resources, as well as for...

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Six Takeaways: Utilization and Structuring for Section 45Q Carbon Capture Credits

On Thursday, June 11, McDermott partners Phil Tingle, Heather Cooper and Jacob Hollinger were joined by Ken Ditzel, managing director at FTI Consulting, to discuss their insights into the proposed Section 45Q carbon capture and sequestration credit regulations. The Treasury Department and IRS recently published proposed regulations implementing the Section 45Q carbon capture and sequestration credit. The regulations clarify some questions about the credit, though many questions remain. For further discussion, see our On The Subject. Below are six key takeaways from this week’s webinar: Carbon capture projects are likely to be economically important moving forward. Ken Ditzel estimated there are more than 600 economically viable projects, including both secure geological storage at deep saline formations and enhanced oil recovery projects. The proposed regulations provide a compliance pathway for satisfying the reporting requirements. For long-term storage,...

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Three Takeaways: Tensions in the Renewable Energy and Environmental Markets

McDermott recently hosted Jonathan Burnston, Managing Partner of the energy sector financial services firm Karbone, for a discussion of recent developments affecting environmental, social and governance (ESG) investing, renewable energy and carbon offsets. Three takeaways from this week’s webinar below: Interest in ESG investing is unlikely to fade. ESG indices have performed relatively well in the COVID-19 environment and the concerns that motivate ESG investing are not going away. ESG investing is different from reducing emissions or pursuing carbon neutrality. Positive returns from ESG investments do not themselves reduce emissions or mitigate the impacts of climate change. Corporate interest in becoming “carbon neutral” is also likely to continue. Due to recent economic disruptions, there may be some delays in achieving some previously announced commitments. However, the pressures and concerns that have motivated the interest in carbon neutrality remain...

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How Energy Company Buyers Can Limit Environmental Liability Risk

Many energy companies may be driven into bankruptcy because of the COVID-19 pandemic. Third parties seeking to purchase those companies’ assets may be concerned about potential successor liability for the seller’s environmental obligations. This article highlights some steps that asset purchasers in bankruptcy can take to reduce the risk of such liability. Successor liability exists under each of the major federal environmental laws. Four especially important statutes for energy companies are the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, the Resource Conservation and Recovery Act, the Clean Water Act and the Clean Air Act. Access the full article.

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IRS Extends Deadline for ITC and PTC Projects

The IRS yesterday released anticipated guidance extending the placed-in-service deadline for the Investment Tax Credit (ITC) and Production Tax Credit (PTC). Under Notice 2020-41, the “Continuity Safe Harbor” was extended to five years for any project that otherwise began construction in 2016 or 2017. As background, the applicable credit rate for the ITC and PTC turns on when a project begins construction. The IRS has issued a series of Notices providing guidance on when a project begins construction for these purposes. Under the guidance, taxpayers can either satisfy the “Five Percent Safe Harbor” or “Physical Work Test”. In addition to requiring certain activities in the year construction begins, both methods include a second prong, requiring certain continuous work until the project is placed in service. The IRS has previously provided the Continuity Safe Harbor, under which a project will be treated as having met the second prong so long as it is placed...

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Five Takeaways: Navigating President Trump’s Executive Order on US Bulk Power System Electric Equipment

President Trump’s May 1, 2020 Executive Order prohibiting certain transactions involving bulk-power system electric equipment developed, manufactured or supplied by a foreign adversary could have far-reaching implications for both the renewable and conventional power industries. It has also raised a high level of uncertainty and risk while the industry awaits the actual implementation of the Executive Order. This interim period, as well as the breadth of the Executive Order, raises key questions and concerns for sponsors and developers of energy projects, construction contractors and energy project investors. Read our latest On the Subject for more in-depth information. Yesterday, after the Department of Energy's stakeholder call, we hosted a webinar that addressed important considerations as to how the Executive Order may impact your business. In particular, our hosts provided a step-by-step framework on navigating the Executive Order based on their prior US...

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Five Takeaways: An In-Depth Look at the Federal Legislative Game Plan to Support Renewables

On Thursday May 14, McDermott was joined by Gregory Wetstone, president and chief executive officer of the American Council on Renewable Energy (ACORE) to discuss the latest market updates on the severe disruption and uncertainty brought on the renewables industry by COVID-19. Five takeaways from this week’s webinar below: There is no clear insight yet into what a congressional relief package regarding renewable energy might look like, despite the fact that congress is discussing its fifth COVID-19-related response bill. Even though the outlook was already pessimistic, clean energy job loss has been worse than expected; there has been a loss of 94,000 jobs in the renewable sector between March and April and 600,000 additional unemployment claims across the clean energy sector. Renewables have a great potential to continue to be part of the nation’s economic recovery; two of the fastest growing job categories in the nation have been wind turbine technicians...

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Six Takeaways: Shifting Market Dynamics in Corporate PPAs

On Thursday, May 7, McDermott Partners Ed Zaelke and Carl Fleming were joined by Christen Blum, head of the Renewable & Analytics Advisory practices at Edison Energy, to hear her thoughts on the current effects of COVID-19 on the corporate power purchase agreement (PPA) market. Below are six takeaways from this week’s webinar: Despite COVID-19, there is still a strong appetite for corporate renewable procurement: market leaders (such as tech, pharma, and food and beverage companies) have been less impacted by COVID-19 and remain interested in renewable procurement. On the other hand, companies that have been hit the hardest by COVID-19 (such as services and hospitality businesses) have traditionally demonstrated limited interest in renewables; but industrial companies have seen the largest effect of COVID-19—they remain interested in renewables, but are delaying their procurement as they focus on their core business. Although the trend for buyer-friendly...

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President Trump’s Executive Order on US Bulk Power System Electric Equipment: Questions and Analysis

President Trump’s May 1, 2020, Executive Order prohibiting certain transactions involving bulk-power system electric equipment developed, manufactured or supplied by a foreign adversary could have far-reaching implications for both the renewable and conventional power industries. The breadth of the Executive Order raises key questions and concerns for sponsors and developers of energy projects, construction contractors and energy project investors. Access the full article.

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Six Takeaways: How Utilities and IPPs Are Responding to COVID-19

On Thursday, April 30, McDermott was joined by Brett Kerr, vice president of external affairs at Calpine, Drew Murphy, senior vice president of strategy and corporate development at Edison International, and Andrew Campbell, director of regulatory support and planning at NiSource who shared their perspectives on how investor-owned utilities and independent power producers are managing the COVID-19 crisis. Below are six takeaways from this week’s webinar: As businesses go back to work, it is essential that they carefully plan for a new normal, including consideration of travel restrictions, acquisition of personal protective equipment, maintaining social distancing of employees and contractors, and compliance with new rules and regulations. Utilities have been and will continue to optimize their maintenance schedules to balance safety and reliability concerns considering the essential nature of electricity and risks potentially associated with deferred...

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