Climate Law Update: Climate Change & Sustainable Energy News : Thelen Reid Law Firm : Renewable Energy, Construction, Project Finance Lawyers & Attorneys

Wind power developers in the United States built new installations at a fast rate during the first quarter of 2008, according to an industry group. But the American Wind Energy Association, which issued the report, also warned that the boom could go bust if Congress doesn't move to renew tax credits.

The association documented installations of 1,400 megawatts of new capacity, or about $3 billion worth, in its quarterly market report (see press statement here; text of report here). In its statement, the group said the industry was working at a "breakneck pace." The new installations were enough to serve 400,000 homes, according to the group. However, executive director, Randall Swisher, issued some caveats:

"But if Congress does not act quickly, this momentum could be derailed at the worst possible time for the economy, placing 76,000 jobs and over $11.5 billion in investment at risk. While 2008 is shaping up to be another great year, we could see a very different story in 2009 as uncertainty looms over investment in wind power projects and manufacturing due to continuing delay in extending the production tax credit (PTC).”

The tax credit for the production of energy from renewable sources is the primary federal incentive program for wind power, the association said in its public statement. The credit expires at the end of the year, along with other federal incentives for alternative energy.  

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• Businesses in the United Kingdom will not back the case for high levels of environmental taxation, such as those placed on emissions auctions, if the money goes towards meeting other public spending commitments, argues Independent business columnist Jeremy Warner.
• British great tits have proved themselves to be far more adaptable to climate change than their counterparts in the Netherlands. Or so reports London's ever-vigilant The Times. 
• Think there's nothing funny about climate change? There are those who disagree, reports the Guardian.
• Environmental groups are urging Congress to keep in place a ban on purchases of fuel from Canadian tar sands deposits, writes the Globe and Mail (see environmental organizations' press statement here).
• Another day, another verbal beating administered by Congress upon the Environmental Protection Agency for its alleged failure to make decisions based on science rather than politics, as recounted by McClatchy Newspapers. 
• Giant Danish wind power company Vestas says Europe should focus on land-based rather than offshore facilities, reports the Wall Street Journal's Environmental Capital. 
• President Bush and Congress remain at odds over the latest version of a farm bill, according to the Des Moines Register.
  

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Coal may be a fossil but apparently it isn't dead.

The U.S. Department of Energy looks to be backing carbon sequestration projects and clean coal in a big way, despite some setbacks for the fuel in recent months (see Climate Law Update stories here and here). The Bush administration acted just as some environmentalists have raised new concerns about the technology.

The department announced this week it was supporting sequestration research efforts, which also could be used for capturing carbon from non-coal sources, in California and the Midwest to the tune of more than $126 million (see press statement here). An executive of the company where the California project will be located said the technology would be useful for many fuels. 

Then on Wednesday the department outlined the separate restructuring of its "FutureGen" program, which could help underwrite "clean coal" projects using carbon sequestration technology to the tune of  many more hundreds of millions of dollars (see press release here).

While neither of the two newest sequestration projects appeared to rely on coal as a primary fuel source, coal clearly wasn't far from the minds of Bush administration energy  officials. The energy department's announcement earlier this week said that "advancing carbon sequestration is a key component of the Bush administration's comprehensive efforts to commercially advance clean coal technology" to meet the nation's energy needs. 

In a statement, California Energy Commission Vice Chair James Boyd waxed enthusiastic about the $65.6 million headed toward the state (see press release here):

"By demonstrating how greenhouse gas emissions can be safely contained through carbon sequestration, we make strides to curb the effects of global warming. Using the newest carbon capture and storage technology, California can show how environmental and industrial concerns are working together for the same cause."

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A compromise farm bill that reportedly includes some sharp reductions in subsidies for some forms of ethanol underwent heavy criticism Tuesday from President Bush. At a news conference, he called the overall multi-billion-dollar measure a “massive, bloated” bill that would do little to solve the problem of rising food prices (see White House transcript here).

That cast uncertainty on the legislation, which emerged with some fanfare late last week from behind-the-scenes negotiations between key lawmakers. Among the notable features in the bill, according to news reports (see Reuters story here), was a 6-cent-per-gallon cut in federal tax credits for ethanol. That would take the incentive down from 51 cents to 45 cents. However, Reuters reported the bill would also create a $1.01-a-gallon subsidy for ethanol distilled from cellulose, found in grasses, woody plants and crop residue.

Last week, the bill, which also contains incentives for public nutrition programs, took life with a boost from Senate Agriculture Committee Chairman Tom Harkin, D-Iowa. He said the compromise legislation, among other things, "invests heavily in renewable energy and will help bring the promise of cellulosic biofuels to reality by providing grants and loans to move from corn ethanol to other renewable feedstocks." Access the full text of Harkin's statement here.

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• The X Prize Foundation, which has previously handed out millions of dollars to stimulate developments in such fields as space travel, has announced it will distribute $100 million in awards for innovations in alternatives to fossil fuels, Business Week reports.
• The world's poorest and most vulnerable children are being hit hardest by climate change, according to a report prepared by UNICEF UK, writes the Telegraph.
• Sweden, which introduced a carbon tax in 1991, has made great strides in cutting emissions, putting it at the top of a European environmental group's list, according to the Guardian.
• Hurricane expert and global warming skeptic William Gray is on the outs with the Colorado university at which he is a professor emeritus, reports the Houston Chronicle.
• Connecticut's House of Representatives has overwhelmingly approved a tough new mandate that requires the state to drastically cut the greenhouse gas emissions associated with global warming, according to the Hartford Courant. 
• Duke Energy Corp. chief executive Jim Rogers wants a national use tax on every kilowatt of electricity sold across the nation, writes the Charlotte Observer.
• Global warming may open enormous economic opportunities in the Arctic, writes author Barry Zellen, director of the Arctic security research project at the U.S. Naval Postgraduate School's Center for Contemporary Conflict, in a lengthy commentary in the Globe and Mail.
       

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On Earth Day, attention naturally turns to all things green – as in money.

Pocketbook issues are at the center of a number of new reports that assess the impact of efforts to combat climate change and promote the development of renewable sources of energy. One report shows government subsidies taking a big jump in recent years with renewables such as solar and wind getting a proportionately large share of the money.

The Environmental Defense Fund has come out with a document that studies the studies out there on the economic cost of a cap-and-trade system to cut emissions of greenhouse gases. Perhaps coming as no shock, the organization concludes that “a clear consensus” among the models demonstrates such a market system “is consistent with long-term economic growth.” The overall cost of capping the gases would amount to less than 1 percent of household budgets over the coming two decades, according to the EDF, which supports market approaches to the problem (see press statement here; text of study here).

Release of the analysis comes as the U.S. Senate is readying to take up the Lieberman-Warner Climate Security Act, which would establish a cap-and-trade system in the country. It also comes against a background of other reports issued by the government and business organizations showing potentially significant  economic impacts from such a system (see Climate Law Update story here).

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The Federal Energy Regulatory Commission has partially approved Pacific Gas and Electric Company's request that allows the company to recover from customers at least some of the costs related to a 1,000-mile transmission project intended to deliver power from renewable sources.

In the words of a statement from the federal agency, it gave partial approval to the Northern California utility's "petition for a declaratory order for recovery of prudently incurred pre-commercial and abandonment costs" related to the effort (see text of statement here; see full text of decision here). The $3.2 billion project would deliver up to 3,000 megawatts of new renewable power to California from Canada's British Columbia and from states in the Pacific Northwest.

The project will also be designed to take advantage of the fact that demands in the region peak at different times of the year, according to a statement from one of the commissioners. 

The Energy Policy Act of 2005 gave the commission authority to encourage greater investment in the power grid, including granting incentives allowing the recovery through rates of the costs associated with the projects. Barbara Connors, a spokeswoman for the commission, declined to put a dollar figure on the items so far approved by the panel.

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California utility regulators have voted to commit more than a half-billion dollars – paid for by the ratepayers of the state’s privately owned utilities -- to a research and development effort devoted to finding new technologies to reduce greenhouse gas emissions and getting them to market.

The five members of the California Public Utilities Commission, meeting at the commission's San Francisco headquarters (pictured) unanimously approved the proposal creating the California Institute for Climate Solutions. However, not all of them were fully pleased with the result. Commissioner John Bohn said the decision pushed the boundaries of the commission’s jurisdiction almost to the breaking point and he questioned charging ratepayers for investigating new technologies that might never be successful.

Commission President Michael Peevey, who carried the proposal, said California had long been a leader in environmental issues and that it was again time “to take bold and immediate action.”

The plan (see CPUC press statement here; full text of decision here) calls for $60 million a year for 10 years in ratepayer funds to go toward the institute. Most of that money, at least 85 percent, would be used to fund grants for applied research intended to support greenhouse gas reductions, as demanded by California’s landmark law, AB 32.

The institute was charged with targeting research focused on “practical and commercially viable technologies that will reduce" greenhouse gas emissions, as well as the means of adapting to the impacts of climate change that may now be inevitable. It is also intended to speed "the transfer of these technologies from the laboratory to market place," according to the lengthy decision approved by the commission Thursday. 

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The U.S. Senate Thursday moved forward with its version of an extension of tax credits for renewable energy. But it did so without identifying how to pay for the estimated $6 billion in incentives for wind, solar and other projects.

Introduced by Sens. Maria Cantwell, D-Washington, and John Ensign, R-Nevada (pictured), only a week ago (see Climate Law Update story), the Clean Energy Tax Stimulus Act (see text here) was grafted as an amendment onto a housing bill before the Senate. Lawmakers adopted the energy amendment on an 88-8 voted and passed the entire bill 84-12.

In many ways, the Senate bill is roughly similar to a measure the House passed earlier in the year extending incentives known as the investment tax credit and the production tax credit. The renewable industry has been pushing hard for Congress to adopt some kind of legislation extending credits which expire at the end of the year.

Both bills provide short-term extensions of credits for producing electricity from renewable sources and for a longer period, until 2016, for business investment tax credits for solar and fuel cell projects. Residential solar and energy efficiency projects would also benefit under the Senate bill.

But the major difference in the Senate legislation lies in the fact that bill avoided the House approach of funding the incentives through reducing tax breaks for the oil industry. Instead, the Senate bill contains no identified funding mechanism. That could give the bill a difficult road in the House.

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A key member of the international body that has done much to warn the world of the dangers of climate change says that a needed part of the solution – government support for research into new technologies – is falling ominously short.

In a recent presentation in San Francisco sponsored by the California Public Utilities Commission, Bert Metz, co-chairman of a key group of researchers within the Intergovernmental Panel on Climate Change, added his voice to what appears to be a growing chorus calling for major new public investments into energy technology research and development. While other measures, such as market systems to promote energy efficiency and greenhouse gas reductions can help, they may not be enough, according to these experts.

In his presentation to an auditorium filled with energy experts and members of the public, Metz (pictured) foresaw the need for society "to rely on technologies that are not yet on the marketplace today. So that brings us to the area of how can we get them into the marketplace later. That means sufficient [research and development] investment." But there is a problem, he noted: 

“One sobering fact from the IPCC assessment was that energy R&D has gone down significantly since 1980. It’s now about half the level that we saw in the 80s. I’m talking about government, public R&D. That has not been taken over by the private sector. So we are worse off than we were 25 years ago. That is, of course, completely counter to the messages in this report.” 

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By any measure, it’s been a tough few weeks in the spotlight for biofuels such as corn-based ethanol and other alternative sources for transportation energy, including hydrogen.

A Time Magazine cover story not-so-subtly titled: “The Clean Energy Scam,” set the tone for the criticism. But it was met by a spirited rejoinder from the biofuels industry, which sees itself as helping to lead the way toward sustainability.  

The scrutiny focused on biofuels didn't stop with the magazine. 

Recently, reports have emerged that American biofuel subsidies have, in the characterization of the Wall Street Journal’s Environmental Capital, been “boomeranging” across the Atlantic (see story here). Meanwhile, the Los Angeles Times reported a California biofuels manufacturer was “short on cash and suffering from higher corn and plant construction costs” which threaten the company. The paper also noted a number of other plants that have been put on hold across the country, citing narrowing margins between the cost of production and the selling price of ethanol (see story at newspaper's Web site here).

Then, late last week, reports began emerging that corn had hit a record $6 a bushel, prompting the food industry to pin the blame rising prices squarely on government encouragement of ethanol production. The Grocery Manufacturers Association said the "ripple effects" are being "felt throughout the economy" (see statement here).  

On the hydrogen front, the San Jose Mercury News tweaked California Gov. Arnold Schwarzenegger, who four years ago proclaimed the creation of a “hydrogen highway” that would allow motorists to fill up fuel cell cars. So far, however, the newspaper reported (see story here), “not a single hydrogen fueling station has been built under the program.” The article cited a number of possible reasons, from economics to politics, for the failure. The paper also reported that Mary Nichols, the chairwoman of the California Air Resources Board, believes up to 100 stations will be built by 2015, five years later than expected.

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Legislation extending tax credits for renewable energy including wind, geothermal and solar for at least a year was introduced Thursday in the U.S. Senate by a bipartisan group of lawmakers. The move drew immediate praise from the solar industry.

Senate authors of the measure, who left out a controversial hit on the oil industry that was contained in a recent House bill, hoped to break a logjam that has blocked progress on keeping incentives for renewable energy in place. Backers stressed the need to act quickly, with billions of dollars in projects possibly on the line. The bill also includes financial encouragements for energy efficient buildings, homes and appliances.

Introduction of the Clean Energy Tax Stimulus Act of 2008 in the Senate (see bill summary and text), comes more than a month after the House passed its own multi-year extension measure. The Senate legislation is sponsored by Sen. Maria Cantwell, D-Washington (pictured), and Sen. John Ensign, R-Nevada. It has 21 other co-sponsors. Cantwell urged swift action (see full statement):

“Critical tax incentives are set to expire this year. If both houses of Congress don’t pass a bill, and the president doesn't ’t sign it into law within the next one to two months, we will start to see as much as $20 billion of anticipated investments in 2008 delayed or canceled. This could result in more than 100,000 U.S. jobs lost at a time when the country is skidding into a recession, and energy prices keep getting higher.”

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Governors in Vermont and Utah have become the latest to sign legislation intended to curtail greenhouse gas emissions, boost renewable energy generation, or both.

Of the two, Vermont’s was the more comprehensive (see text of bill). Senate Bill 209, signed by Gov. Jim Douglas, establishes an efficiency program he said was intended to help homeowners and businesses reduce fuel consumption and save money (see press release). At least part of the money would come from the state’s participation in the Regional Greenhouse Gas Initiative’s cap-and-trade program.The first auction under that fast-developing program is scheduled for this fall (see press release).

One key provision in the bill appears to encourage cooperative efforts among the population to develop local renewable energy projects. 

Utah Gov. Jon Huntsman put his name to a measure that establishes a renewable portfolio standard for the state. Senate Bill 202 (see text) sets a goal for Utah utilities, both municipal and privately owned, that would mean 20 percent of their “adjusted” electric sales would come from renewable sources by 2025. That’s somewhat more modest than standards set in other states, including California, which has established a 20 percent renewable goal by 2010 and is considering efforts to increase that proportion.

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Led by Washington state, where the governor just signed a new law charting a path to reduced greenhouse gas emissions, Western states have made several recent moves on the climate change and renewable energy fronts.

Oregon and South Dakota put in place new laws to boost the renewable energy industry. Oregon’s statute is aimed at manufacturers of renewable energy equipment, while the South Dakota legislation gives breaks to wind energy facilities and transmission lines serving them.

The new Washington statute, signed by Gov. Chris Gregoire, firms up goals established in a law passed last year and a 2007 executive order that would reduce Washington’s climate-related emissions to 1990 levels by 2020, the same as California’s AB 32. The Washington statute also sets goals for later years, including a 50 percent reduction below 1990 levels by 2050. (See here for text of 2007 law; the 2007 executive order; Gov. Gregoire's press release upon signing the 2008 legislation, House Bill 2815, into law and the full text of the 2008 statute, as well as a legislative analysis.)

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New Mexico Gov. Bill Richardson, himself a former secretary of energy, has signed legislation in that state requiring electric and natural gas utilities to beef up their efforts to improve energy efficiency.  Under HB 305, by 2014, utilities must achieve a minimum of 5 percent energy efficiency savings compared to 2005, and 10 percent by 2020.

A key provision in the bill requires the state's utility regulators, the New Mexico Regulation Commission, to provide utilities with ways to make a profit from "cost-effective" programs that are "financially more attractive to the utility than supply-side utility resources."

In a statement upon signing the bill, Richardson, who unsuccessfully sought the Democratic presidential nomination this year and who served as Energy Secretary under President Clinton, lauded the measure:

 “This bill is good for the environment and good for New Mexico's energy consumers. We will now guarantee that utilities will provide more energy efficiency to New Mexico consumers. In the long-run, this requirement will be less costly than building and operating new power plants.”

Programs that New Mexico utilities could fund under the program include rebates for appliances and home weatherization assistance. The bill also provides a mechanism for alternate goals to be set if a utility demonstrates it cannot meet the legislation's minimum requirements.   

(Photo: Gov. Bill Richardson, from Wikipedia) 

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Environmentalists are claiming victory in their efforts to at least temporarily shelve federal financial support for rural coal-fired power plants the critics believe contribute to climate change. An official of the Rural Utilities Service,  an arm of the U.S. Department of Agriculture and a key financial player in such facilities, recently revealed that service would be "precluded from financing base load generation plants" both this year and likely next.

The government's decision has already helped lead to the demise of at least one coal-fired plant and has raised financing questions about several others.

An early word came in a Feb. 19 letter from James M. Andrew, administrator of utilities programs for the RUS, to the head of a Montana electric cooperative that had hoped to win financing from the agency for its Highwood Generating Station, a coal-fired plant. In the letter, Andrew pulled the plug on the federal service's involvement in the 250-megawatt project. The letter also mentioned the "uncertainty" posed by pending litigation.

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Officials of the Bay Area Air Quality Management District in San Francisco are pursuing what they believe to be the first regulatory fee on greenhouse gas emissions in the United States.

The new fee, which would be set at 4.2 cents per metric ton, would generate an estimated $1 million annually, according to a district spokeswoman, Karen Schkolnick. The money would go toward the district's Climate Protection Program, for projects that  include developing a regional inventory of the gases.  The proposal is laid out in a series of documents, including the planned rule itself, a fact sheet and an announcement of a workshop that occurred Feb. 25.

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Daniel Yergin, a widely known energy expert who closely advises  the oil and gas industry, is predicting a rosy future for renewable energy, and other "clean" technologies such as nuclear and hydropower, partly as a result of public concern over global warming and driven by subsidies and government mandates. 

"High energy prices, climate change and energy security are converging as the new engine driving the development of clean energy," Yergin (pictured at left), chairman of Cambrige Energy Associates, told a gathering at the National Governors Association in Washington, D.C. (Feb. 23). "There is a major shift in public opinion towards clean energy, which is being bolstered by the growing conviction that new carbon policies will reshape the competitive landscape of the global energy business."

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Renewable energy advocates are prodding Congress to extend tax credits, the loss of which they warned could threaten 42,000 megawatts of planned developments and put billions of dollars of potential investments at risk.

As part of the lobbying campaign, in a letter to congressional leaders of both parties, the American Council On Renewable Energy, a nonprofit representing hundreds of companies and groups involved in or advocating the development of wind, solar and other forms of sustainable energy, demanded quick action on investment and production tax credits. Those include a 30 percent investment tax credit for solar projects and about a 2-cent per kilowatt hour income tax credit for qualifying facilities, such as wind. 

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For some time, countries such as Germany have adopted "feed-in tariffs" as a way of providing an incentive to develop new renewable generation. Renewable energy advocates have pushed for a similar boost in the United States for some time. Now, the California Public Utilities Commission has granted the wish, at least in a small way.

The CPUC recently gave the green light to the tariffs, a long-term pricing structure for renewable power that utilities purchase from their customers. In an action Feb. 14, the rate-setting agency approved a tiered program involving seven utilities. For two of them, Southern California Edison and Pacific Gas and Electric Company, the tariffs apply to power purchased from any customer. For the others, however, the tariffs are limited to water and wastewater customers. The tariffs apply to renewable generators sized up to 1.5 megawatts.

As described in a CPUC statement, the tariffs offer a simple mechanism for small generators to sell power at predefined terms and conditions, without contract negotiations.

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Anyone who somehow thinks it's going to be easy to tackle the climate change issue should probably read at least some of a new report issued by a panel advising the California Air Resources Board as the board pushes forward with implementing the state's aggressive greenhouse gas reduction goals.

For starters, the report by the Economic and Technology Advancement Advisory Committee notes that in addition to California's well-known AB 32, the 2006 law that requires a likely 25 percent cut in climate-changing emissions by 2020, Gov. Arnold Schwarzenegger had earlier signed an executive order calling for even greater reductions by the year 2050. Given the state's expected growth in population over that time, that all translates to an anticipated 90 percent per-capita reduction in greenhouse gas emissions, according to the 307-page document. Meeting that target "will require a sense of urgency for vastly more efficient use of energy and virtual elimination of of all GHG emissions from the state's energy infrastructure," write the report's authors, who represent a broad array of interests, including utilities, petroleum companies, academia and environmentally friendly businesses.

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