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 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
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.
President Trump released his budget proposal for the 2018 FY on May 23, 2017, expanding on the budget blueprint he released in March. The budget proposal and blueprint reiterate the President’s tax reform proposals to lower the business tax rate and to eliminate special interest tax breaks. They also provide for significant changes in energy policy including: restarting the Yucca Mountain nuclear waste repository, reinstating collection of the Nuclear Waste Fund fee and eliminating DOE research and development programs.
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 Daryl Kuo
The discovery and accessibility of vast domestic shale gas reserves in the United States has motivated states and industry alike to lobby heavily for the approval of liquefied natural gas (LNG) exports. LNG exports to non-Free Trade Agreement (FTA) countries, including China and Japan, are of particular interest because estimates for exports to those countries are as high as 16 billion cubic feet per day, more than ten times greater than all U.S. LNG exports in 2011. So far, the U.S. Department of Energy (DOE) has approved only one LNG export project to non-FTA countries, and that approval is being challenged. Meanwhile, more than a dozen applications sit in DOE’s queue pending the release of a critical study by the end of the year. The debate over exports to non-FTA countries is likely to become more intense in the coming months once that study is released and subjected to a public comment period prior to any decisions by the DOE on the pending applications.
Section 3 of the Natural Gas Act (NGA) prohibits the export of LNG without the prior approval of the DOE, which must approve an export project unless it determines that the proposed export will be inconsistent with the public interest. To date, the DOE has authorized only one project to export LNG to non-FTA countries, the Sabine Pass liquefaction project on the border of Louisiana and Texas. However, on September 6, 2012, Sierra Club requested a rehearing and stay of the DOE’s order authorizing Sabine Pass to export LNG to non-FTA countries. The DOE issued a tolling order on October 5, 2012 to extend the date by which it must act on Sierra Club’s request, which would otherwise have automatically been denied after 30 days. Sierra Club filed a motion to supplement the record in that case on November 1, 2012.
Fourteen other applications for projects involving non-FTA countries are currently pending DOE review (the most recent application was submitted by Golden Pass Products LLC, an affiliate of Exxon Mobil, on October 25, 2012), but the approval process is frozen while the DOE waits for the second half of a two-part study on the domestic impact of LNG exports to non-FTA countries. The first part of the study, conducted by the U.S. Energy Information Administration, found that increased exports would raise electricity bills in the U.S. by an average of 1 percent to 3 percent annually between 2015 and 2035. The DOE is delaying any further action until the release of the second part of its study looking at the macroeconomic impact of LNG exports, which is not expected until the end of the year.
Given the political sensitivity of exporting domestic resources, particularly to non-FTA countries, lawmakers and industry have expressed concern about whether DOE could withdraw an approval. In a letter to Congressman Edward J. Markey (D-MA), dated February 24, 2012, the DOE responded to this concern by referencing its Sabine Pass order and noting that its authority to issue supplemental orders modifying previous authorizations is contained in NGA Section 3(a), which requires a showing of good cause. The DOE went on to state that it "would be reluctant to withdraw or modify a previously-granted authorization, except in the event of extraordinary circumstances." While "extraordinary circumstances" is not clearly defined, the DOE has indicated that any complainant bears a heavy burden of proof to show that the existing authorization is not in the public interest.
More recently, Senator Ron Wyden (D-OR), an outspoken critic of exporting LNG and considered a possibility to Chair the Energy and Natural Resources Committee, sent a letter to Secretary Chu expressing concern about the pending applications and asking how DOE will evaluate them. Senator Wyden noted that applicants have cumulatively requested to export more than 25 percent of current U.S. daily consumption to non-FTA countries, far exceeding the amount considered by DOE in its Sabine Pass decision. He requested an “all-inclusive description of the factors that DOE will consider in determining whether to approve a supplier’s authority to export LNG, and what factors DOE will consider in revoking such authority.”
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.