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

According to the Department of Energy (DOE) renewable energy wind installations had explosive growth through 2016, and added approximately 32,000 jobs since 2015, to a total of 102,000!

In the Wind Technologies Market Report, DOE says the Production Tax Credit (PTC) is directly responsible for the expansion. Congress, however, is phasing out the PTC, which DOE believes will lead to a slowing of the wind energy industry. The PTC is incrementally being phased out over a five year period, and ends completely in 2020. Read here for more information.

In a highly-anticipated Technical Advice Memorandum (TAM) dated March 23, 2017 and released on July 21, 2017, the Internal Revenue Service (IRS) ruled that two taxpayers who had invested in a Limited Liability Company that owned and operated a refined coal facility (the LLC) were not entitled to refined coal production credits they had claimed because their investment in the LLC was structured “solely to facilitate the prohibited purchase of refined coal tax credits.” This analysis marks a departure from the position staked out by the IRS in a number of recent refined coal credit cases, which focused on whether taxpayers claiming refined coal credits were partners in a partnership that owned and operated a refined coal facility.

Continue Reading IRS Rules (Again) That Taxpayers Are Not Entitled to Claimed Refined Coal Credits

The D.C. Circuit last week denied the Department of Energy’s (DOE) petition for en banc review of the court’s November decision holding that the DOE could not continue to collect nuclear waste fees from utilities.  The Nuclear Energy Institute (NEI) and National Association of Regulatory Utility Commissioners (NARUC) filed suit after the DOE’s termination of the Yucca Mountain repository program in 2010.  The organizations argued that the DOE could not continue to collect the fee from utilities if it did not have a waste management plan in place.  Last fall, the D.C. Circuit agreed and held that the DOE could not continue to collect the nuclear waste fee of one-tenth of a cent per kilowatt-hour.

In January, Secretary Moniz sent a letter to the Senate requesting that the fee be reduced to zero, in accordance with the court’s mandate.  The Secretary expressed his discontent with the court’s decision stating that “this proposal, mandated by the Court of Appeals, is not consistent with the process established in the [Nuclear Waste Policy Act] for adjusting the fee charged to utilities.”  On the same day the DOE filed a petition for en banc review of the D.C. Circuit’s decision.

The D.C. Circuit denied the rehearing request on March 18.  Both the NEI and NARUC issued statements declaring the move a win for consumers.  NEI stressed that despite the reduction of the fee, the government has a continuing obligation to remove spent nuclear fuel to a disposal facility.  Secretary Moniz’s fee reduction request is subject to a 90-day congressional review period.  If Congress does not act on it within that time period, the Secretary’s proposal will become effective and the fee will be reduced to zero.

by Thomas Hefty

Last month, the Department of Energy (DOE) issued its Large-Scale (>10 MW) Renewable Energy Guide, which is subtitled “A Practical Guide to Getting Large-Scale Renewable Energy Projects Financed with Private Capital” (Guide).   According to The Guide, its main purpose is to “provide a project development framework to allow the federal government, private developers and investors to work in a coordinated fashion on large-scale renewable energy projects.” The Guide aims to achieve this purpose by (a) developing a common language between federal agencies and developers; (b) describing a “best practice” large-scale renewable energy project development process; (c) giving government employees an understanding of what his or her responsibilities and roles are within the development process; and (d) outlining for developers a recognizable, reliable and predictable process in which it can engage with a reasonable likelihood of commercial success.

Renewable energy developed on federal land is a prototypical government/private industry hybrid — the federal government is making more of its land available for renewable energy development (regardless of whether the federal government will be the energy off-taker), but relies nearly exclusively on private developers to develop and operate projects. However, the record of federal agency participation in renewable energy development has been less than stellar. According to the Guide, “many of the faults found in past federal contracts related to renewable energy can be attributed to a failure by the government to adequately understand the commercial power plant development side of the transaction during negotiation.”

To bridge the divide between federal agencies and their private development counterparts, DOE designed the Guide to provide a project development framework that allows the parties to work in a coordinated fashion — to enable “both sides of a transaction to better understand the deal because better informed people execute better deals.” The Guide maps a process that is grounded in the foundations of commercial project development while integrating traditional federal processes. That process is shown below:

The federal agency takes the lead role in the project acquisition and pre-development phase and, by using the techniques in the Guide, the federal agency can methodically identify, analyze and choose projects that are more likely to be successful when offered to private developers in the late pre-development or early development phases.

The Guide maybe useful to private developers as well because if it can reduce developers’ perceptions of out-sized development risk when dealing with the federal government. To the extent that the Guide represents “best practices” for successfully developing renewable energy projects, private developers can use the Guide to analyze and improve their practices and strategies.

The Guide was developed in cooperation with the U.S. Army Energy Initiatives Task Force, the National Renewable Energy Laboratory and private industry consultants. DOE intends to update the Guide periodically.

by Bethany K. Hatef

The Department of Energy (DOE) announced that it has $15 million available to award for the development and demonstration of biomass-based oil supplements, or bio-oils.  The grants will go toward research and development projects aimed at speeding the development of thermochemical liquefaction technologies to produce bio-oil feedstock from high-impact feedstock biomass or algal biomass.  Successfully produced bio-oils could then be blended with petroleum to produce transportation fuels, including gasoline, diesel, and jet fuels, without significantly modifying oil refining processes for conventional transportation fuels, existing fuel distribution networks, or engines.

DOE explained in the early April announcement that it expects to fund five to ten projects in 2012.  The projects will aim to produce bio-oil prototypes that can be used for testing in refineries and for research and development of bio-oil technologies and renewable fuels produced from bio-oils.  Projects may propose technologies using bio-oil produced from a variety of feedstocks, including algae, corn and wheat stovers, dedicated energy crops, or wood residues.

Projects must produce bio-oils using: (1) high-impact feedstocks with an agronomically and ecologically sustainable potential of at least 50 million dry tons per year in the United States, or (2) oils extracted from algae, if that algae is grown using a high-impact cellulosic biomass feedstock.  Grant eligible projects must propose bio-oils that can be used at one or more insertion points within an oil refinery, defined as any point after vacuum or atmospheric distillation where a feedstock may be inserted for further processing. Any American company, university, or laboratory may apply for a grant, which will be between $400,000 and $4 million each.

The DOE’s investments in renewable transportation fuels, explained Energy Secretary Steven Chu, are a “key part” of President Obama’s plan “to develop America’s domestic energy resources and reduce our nation’s dependence on foreign oil.” DOE’s biofuels grant announcement comes on the heels of another announcement that the DOE would revitalize its expired loan guarantee program for solar, wind, and geothermal energy projects by setting aside $170 million of its congressionally approved funds for such projects.