The US stimulus bill passed into law yesterday includes several key extensions and additions to the tax credits available for renewable energy. The bill had been agreed to by Congress early last week and was signed into law by the president last night.
On July 21, 2020, New York Governor Andrew Cuomo announced the largest combined clean energy solicitation ever issued in the United States, seeking up to 4 GW of renewable capacity. This capacity is broken up into 2500 MW of offshore wind and 1500 MW of onshore large-scale renewable energy projects.
McDermott recently hosted Andrew Ellenbogen of EIG Partners and Jeff Hunter of Apollo Global Management for a lively discussion about the trends and developments in today’s shifting investment landscape.
Below are key takeaways from this week’s webinar.
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On August 8, 2016, Massachusetts Governor Charlie Baker signed into law a major energy bill aimed at putting Massachusetts at the forefront of states developing offshore wind power. The law, An Act Relative to Energy Diversity (H. 4568), requires Massachusetts electricity distribution companies to procure 1,600 megawatts (MW) of offshore wind energy by June 30, 2027. The United States currently has no offshore wind generation, but Rhode Island wind developer Deepwater Wind is nearing completion of a 30 MW offshore wind farm, which will be the first of its kind in the country. In a statement, Governor Baker’s office said the bill “spurs the development of an emerging offshore wind industry…and represent[s] the largest commitment by any state in the nation to offshore wind.”
The new law requires Massachusetts distribution companies and the Department of Energy Resources (DOER) to jointly develop a competitive bidding process for offshore wind energy generation resources by June 30, 2017. The bidding process will be subject to review by the Massachusetts Department of Public Utilities (DPU). The law permits one solicitation or multiple staggered rounds of solicitation that must result in at least 1,600 MW of aggregate nameplate capacity of offshore wind energy. If the solicitation is staggered, each round must seek proposals for at least 400 MW of capacity, and the costs in each subsequent round must decrease or the proposal will be rejected by the DPU. All proposals received during the solicitation process are subject to review by DOER.
Each distribution company will enter into a contract with the solicitation’s winning bidders for the distribution company’s apportioned market share, calculated based on the total energy demand for all distribution companies, compared to demand in an individual distribution company’s service territory. Distribution companies may use the long-term contracts to purchase renewable energy certificates, energy, or a combination. All proposed long-term contracts executed with distribution companies will be filed with the DPU and subject to DPU approval. Specifics on the solicitation, contracting, and approval processes will come when the DPU and DOER promulgate regulations carrying out the new legislative mandate for offshore wind.
The legislation represents a new chapter in offshore wind for Massachusetts. The infamous Cape Wind project—a proposed 468 MW wind farm—has been held up in the planning stages for years and its current status is uncertain. The new law is a definite step towards Massachusetts’ development of offshore wind energy generation resources. Several wind development companies already hold leases in Massachusetts waters.
For the fourth time the Federal Aviation Administration (FAA) on August 15, 2012 issued a Determination of No Hazard to the proposed Cape Wind project, which, if constructed after a decade of planning, will be the United States’ first offshore wind farm. Energy Management Inc., the project’s developer, proposes to construct and operate 130 wind turbines in a 25-square-mile shallow area of Nantucket Sound known as Horseshoe Shoal at an estimated cost of $2.5 billion. The project has now received all required permits, including Construction and Operations Plan approval from the Bureau of Ocean Energy Management, Regulation and Enforcement and various other federal and state approvals, and a 25-year commercial lease from the Department of the Interior.
The FAA began its review of the Cape Wind project in 2002 and originally approved the project in May 2010, but the Cape Cod town of Barnstable and the Alliance to Protect Nantucket Sound, an environmental group created in 2001 to oppose the project, appealed the agency’s decision. In October 2011, the United States Court of Appeals for the District of Columbia reversed the FAA’s decision and remanded the matter to the agency for further review of whether the project posed safety hazards to air traffic. The D.C. Circuit found that the FAA had ignored its own regulations and failed to demonstrate that it had analyzed whether the project would negatively impact air traffic in approving the Cape Wind project.
The FAA’s most recent determination found that the Cape Wind project poses no hazard to air navigation, as the project falls within the agency’s obstruction standards and would not have any electromagnetic radiation effect on air traffic. FAA regulations provide that a structure negatively affects visual flight rules (VFR) air navigation if its height is more than 500 feet above the surface and if it is located within two miles of a commonly traveled VFR route. The Cape Wind project does fall within two miles of a commonly traveled VFR route, but the project’s proposed turbines will only reach 440 feet above the surface. The FAA found that, provided the Cape Wind project adheres to the agency’s height restriction, files construction forms with the agency as required, and properly lights structures that may obstruct planes, the project will pose no hazard to air traffic.
Appeals of the FAA’s decision are certainly possible; the Alliance for the Protection of Nantucket Sound has already indicated it will appeal. In addition, Republican Congressmen Darrell Issa (R-CA) and John Mica (R-FL) have suggested that the FAA may have been politically influenced to approve the Cape Wind project in 2010; a formal congressional investigation could add further delay to the Cape Wind project.
Energy Management Inc. plans to begin construction on the project in 2013. Three-quarters of the Cape Wind project’s anticipated electricity output has already been sold through power purchase agreements with electrical utilities in Massachusetts, and Energy Management Inc. is now seeking to raise capital. Each of the 130 proposed turbines [...]
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The Department of Energy (DOE) has announced new funding opportunities for offshore wind energy projects. The DOE has not yet confirmed the amount of new funding that will be made available, but early indications from officials suggest grants could total between $100 million to $175 million. The DOE awards are expected to cover roughly half of a selected offshore project’s total costs.
According to a draft funding announcement available on the DOE’s website, the focus of this assistance is to support advanced technology demonstration projects that test new technology and verify performance and cost under actual operating and market conditions. The announcement indicates that one of the primary goals of providing financial assistance to advanced technology demonstration projects is to expedite development of offshore wind farms with the potential for bringing the cost of energy down to a point where these sources can compete with other generation technologies on an unsubsidized basis.
The announcement includes a potential roadmap to cost competiveness for offshore wind projects. The roadmap highlights development of innovative turbine architectures and advanced infrastructure to cut costs and increase efficiency. The DOE’s roadmap assumes that validation of construction, generation and operating expenses will be key drivers to reducing financing costs.
The DOE funding announcement is part of a broader effort by the federal government to facilitate offshore wind projects in the U.S. Recently, the U.S. Department of the Interior, Bureau of Ocean Energy Management announced completion of an environmental assessment for wind energy development off the coasts of New Jersey, Delaware, Maryland and Virginia. The assessment — required by the National Environmental Policy Act — identifies areas where offshore wind development would not have a significant impact on wildlife and the environment. Lease solicitation and application processes are underway for areas offshore of these Mid-Atlantic states.
Applications for offshore wind project funding are tentatively due on May 31, 2012. The DOE anticipates that it will select award recipients in August 2012 and make awards available in September 2012.
Promoting development of Maryland’s considerable offshore wind energy resources tops Governor Martin O’Malley’s recently announced 2012 legislative agenda. The Maryland Offshore Wind Energy Act of 2012, S.B. 237, if enacted, will tweak the state’s existing renewable portfolio standard (RPS) to require that a small percentage (no more than 2.5 percent) of generation be sourced from qualifying offshore wind projects. The current draft of the bill requires utilities to meet the new offshore wind RPS beginning in 2017 and specifies that qualifying projects must interconnect to the PJM Interconnection at a point located on the Delmarva peninsula. Maryland’s utilities will be able to satisfy the offshore wind RPS by obtaining (through development or purchase) a new category of renewable energy credit (REC) — the offshore wind renewable energy credit (OREC).
The Maryland bill borrows from New Jersey’s Offshore Wind Economic Development Act of 2010. Other States in the Mid- to Upper-Atlantic region have successfully lured emerging renewable technologies to their region using similar modifications to RPS legislation. Delaware amended its RPS in an attempt to attract fuel cell technology, which resulted in the Delaware PUC’s recent approval of a tariff that allows the utility to rate-base portions of the cost of developing a utility-scale fuel cell project in Delaware. As mentioned above, New Jersey’s addition of an OREC in 2010 has garnered significant attention from developers, one of whom hopes to receive Public Utilities Commission-approval and start offshore construction later this year.
This is Governor O’Malley’s second attempt to encourage development of Maryland’s considerable offshore wind resources. The Governor’s first attempt, last year’s S.B. 1054, would have required the State’s utilities to enter into long-term (25+ years) power purchase arrangements with offshore wind projects. The Maryland Legislature rejected that approach, based largely on concerns over the ultimate costs to the average Maryland ratepayer, which were estimated to be between $24 and $108 annually.
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