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

Strickland, a Democrat, also has backed an economic stimulus package for the state that includes $150 million to help make Ohio, which is both a big producer and consumer of coal,  "a powerhouse of renewable and advanced energy production such as wind, solar and clean coal (see Climate Law Update story here).

The Ohio measure, signed May 1, comes as other states are also making efforts to boost the renewable portfolios of their utilities. Maryland recently took similar action, and other states, including Vermont and Utah, have also moved to increase the share of renewable energy flowing to consumers (see Climate Law Update stories here and here). 

California remains among the most aggressive, with its mandate that private utilities achieve a 20 percent renewable goal by 2010, and it is considering upping that objective to require 33 percent renewables by 2020 (see background on California program here). California grants some flexibility, allowing utilities to come up short, for instance, if insufficient transmission facilities are available. But it also restricts the power sources that can comply with the standard to those defined as "renewable," including solar, wind, biomass, small hydro and other similar sources.

(Photo:  Ohio governor's office) 

O'Malley also signed HB 368, establishing the Maryland Strategic Energy Investment Fund. That fund will house proceeds from the sale of Maryland greenhouse gas emission "allowances" under  the Regional Greenhouse Gas Initiative, a 10-state cooperative. Other sources of money include fees utilities will pay if they fail to meet the new renewable porfolio standards (see press statement from Maryland Energy Administration here; related fact sheet here).

Money from the fund will be used for loans and grants to support renewable energy sources, energy conservation, climate change programs and efforts to encourage electricity customers to lower their use at peak times. The Sun estimated that Maryland could expect to get between $80 million and $260 million annually from the cap-and-trade system. The RGGI auctions are scheduled to begin this year.

Separately, the newspaper reported on plans by Maryland's Department of the Environment (no link available) to set aside up to 5 percent of the carbon credits for cleaner energy generators that come into operation before the summer of 2012. The paper noted that there had been some opposition to free credits but that the state faces an acute energy shortage and that many now support the idea.

The legislation recently signed by O'Malley included:

• HB 373, which encourages development near public transit hubs;
• HB 374, which establishes a state goal of reducing per-capita electric consumption by 15 percent by 2015;
• HB 376, which sets green building requirements for new and renovated state buildings and schools;
• HB 377, which increases grants for small-scale, such as residential, solar energy and geothermal heat pumps, and includes a package of tax incentives;
• HB 117, creates a system of easements for solar energy systems to prevent projects that would block the sun, and prohibits restrictions on solar energy installations, such as homeowner or condominium association covenants.

Despite the state's moves to generally encourage new renewable development, the governor has also taken some moves to restrict where it can occur. O'Malley recently announced that public lands managed by the state's Department of Natural Resources would not be considered as sites for commercial wind power generation (see press statement here).

(Photo: Maryland governor's office)

She noted that other questions arise when considering the placement of wind farms and solar power facilities, some in remote and environmentally sensitive areas, such as California’s desert lands:

“Surely there are good places to build these things and bad places to build these things. What’s the right process and what’s the right way to engage people who care about the desert and don’t just see it as deadland to put things on. None of us sees deserts that way any more.”

In her presentation to the conference, which was sponsored by the school’s California Center for Environmental Law and Policy, Carlson also highlighted transmission issues. She focused on the ambitious plans of the Los Angeles Department of Water and Power, the nation’s largest municipally owned utility, to aggressively increase its generation from renewable sources. Goals include boosting to 20 percent the proportion of the utility’s electricity coming from renewables by 2010 – more than doubling the current proportion -- and hitting 35 percent by 2025, she said. California has established its own renewable portfolio standards, which generally apply to private utilities, that are similar (see background here). 

Among the consequences of the Los Angeles utility's action, Carlson noted, was the need to build a lengthy transmission project from the proposed site of some of that new generation (see project description here). That is being opposed by a number of groups, including residents and local officials in areas where the lines will run who will not benefit directly from the power (see opposition group site here). Carlson said the utility also faces other pressures. Those include demands from its own unionized workers that the utility itself own much of the renewable generation. Additionally, the facilities must comply with an array of state and federal environmental laws, legal requirements that themselves provide ample opportunity for lawsuits filed by opponents. The challenges aren't unique to Los Angeles, she said: 

“So the sort of localized environmental clashes or values battles is a problem that is really international in scope and also is really long-term, as opposed to short-term. It raises real problems for not just again LADWP but for any utility that is seeking to shit its energy sources away from conventional sources to renewable sources.”

For another example of the kind of fights that can occur and their potential consequences, the Washington Post recently looked at opposition in the “green” state of Wisconsin over new wind farms planned for offshore waters in the Great Lakes (see story here).

Of course, that might not be the full extent of the societal conflicts that could occur as restrictions on greenhouse gases tighten up. In California and other states, there are movements already underway to reduce the amount of vehicle miles people travel (see Climate Law Update stories here and here). That's an issue that might produce some real backlash in a state that has never meaningfully connected land use and transportation policy, warned  William Fulton, a land-use expert who runs the Solimar Research Group. Fulton predicted that once people realize that reducing “VMT” means driving less, they could respond politically, even launching a new recall campgain similar to the 2003 recall of Gov. Gray Davis. That led to Gov. Arnold Schwarzenegger, the politician perhaps most closely identified with California’s climate change-fighting efforts, getting into office in the first place.

(Photo of Ann Carlson via UCLA School of Law)

Utah’s new law also places the 20 percent against a base of retail sales reduced by the amount of power generated by a nuclear plant or a coal plant using carbon sequestration. Additionally, it would only impose the requirement if it were “cost effective.” It also does not set interim targets. All of those qualifications drew skepticism from some observers.

“This bill is so fuzzy in terms of who it is really protecting,” Tim Wagner of the Utah Chapter of the Sierra Club told Climate Law Update. Wagner, who has followed the legislation closely,  said it accomplished little more than codifying what major Utah utilities, including Rocky Mountain Power had already planned to do. The club did not oppose the measure, although it supported a rival bill that would have established interim goals. Wagner noted, however, that the utility was not opposed to renewables, and that the state currently has neither a nuclear plant nor a coal plant using carbon sequestration.

Neither state Sen. Curt Bramble, the legislation's Republican sponsor, nor a spokesman for the utility could be reached for comment. Bramble, however, according to a least one Salt Lake Tribune report, has said he believes that mandatory goals are not necessary.

The Vermont legislation also nods toward boosting renewable energy by stating a a state goal of producing 25 percent of the energy consumed within its borders by 2025, “particularly from Vermont’s farms and forests.” Along those lines, the bill expands the concept of “net metering,” in which customers earn credit for electricity sent back onto the grid, for systems of up to 250 kilowatts. That’s an increase over the previous limit of 15 kilowatts. Only renewable systems or small “micro-combined heat and power systems” that meet air quality standards can qualify.

Provisions in that part of the bill allow customers who are within the service area of an individual electric company to combine into a “group net metering system.” That would include farms and various buildings owned by municipalities, including water districts, fire districts, school districts and towns. In addition, scattered or “noncontiguous” groups of customers, could be bundled together if that was found to “promote the general good.” A report on the legislation distributed by the U.S. Department of Energy’s division of energy efficiency and renewable energy said the bill would allow even individuals, including residents of apartment buildings or subdivisions, to be treated as a group.

“Such group net metering could encourage people to band together to install a large renewable energy system that will serve them all,” said the energy department account.

Among other provisions, the bill establishes a energy efficiency fund that Douglas pegged at $4 million, including $2.4 million from the state’s participation in RGGI. Money from the fund will be used to provide “energy efficiency services to Vermont heating and process fuel consumers,” according to the bill, as well as carrying out “cost-effective efficiency measures and reductions in greenhouse gas emissions from those sectors.”

Funding for such programs had been a sticking point for previous versions of the legislation and had led to a veto, according to news reports, including this dispatch from the Bennington Banner. In his public statement, Douglas did not directly address his earlier rejection of similar legislation but he noted it was important to protect the state’s taxpayers. He added:

“I am very proud of the fact that Vermont is the nation’s greenest state. Because we have made responsible decisions in recent years regarding our energy development and the preservation of our green space, Vermont absorbs more carbon than we produce. This puts us in a strong position to capitalize on our RGGI relationship to obtain new revenues to make sustainable [investments] in this energy efficiency and affordability.”

(Photo: Gov. Jim Douglas, courtesy Vermont governor's office)

The report noted that meeting California’s ambitious goals for renewable power “will require a substantial amount of new transmission development, as most large-scale renewable resources are located in remote areas rather than near the state’s major load centers.” State law, although it has some flexibility, requires that 20 percent of electric energy come from renewable resources by 2010 and a 2005 executive order signed by Gov. Arnold Schwarzenegger anticipates that figure should hit 33 percent by 2020 as part of the state’s strategy for meeting the requirements of the greenhouse gas reduction law, AB 32.

The report incorporated a variety of assumptions, including renewable demand, and information about current generation and the transmission system. It also looked at resource operating and cost assumptions, as well as economic assumptions. A key criteria was the development of the “base case,” or group of resources the RETI process included as the starting point. For power generation, that incorporated renewable projects that are operating or currently under construction, or those that are in advanced planning stages with contracts and permits in place.

Whether or not to include a technology in the next phase, known as Phase 1B, of study depended on a number of factors, according to the report, including the likelihood the resource had enough potential to contribute to the state’s renewable portfolio standards, the ability to deliver power cost-effectively to the grid and the maturity of the technology. According to the report: 

“Based on these assessments, resources with limited potential to provide energy to California are eliminated from further review in Phase 1B. While there may be discrete resources in these regions that might provide energy to California, there are not sufficient resources in these areas to merit exploring potential new transmission to access these resources.”  

The report concluded that anaerobic digestion -- which generates power from such sources as municipal sewage treatment plants and livestock operations -- and landfill gas were, among other things, too small to include in the next phase. On the other hand, it concluded the potential for solar voltaic was "virtually unlimited" and that for biomass was “substantial.”

Interested parties can participate in a Webcast scheduled for March 26 and can submit comments until March 28. Overseeing the RETI project are the California Public Utilities Commission, the California Energy Commission and the California Independent System Operator, as well as several publicly owned utilities.

An recently prepared by Peter V. Allen and Paul C. Lacourciere of Thelen Reid Brown Raysman & Steiner contains further details and background about the RETI process. It is available here. 

(Wikipedia photograph of electrical transmission lines in Sweden)

“Clean energy has moved from the margin to the mainstream and the proof is in these numbers,” Pernick said in a statement announcing the report. “Amid last year’s plummeting housing prices, rising foreclosure rates and record high oil prices, clean energy continued to provide a bright spot in an otherwise sluggish economy.”

Wind constituted the largest component of the global increase in capacity, REN21 reported; solar voltaics connected to the grid comprised the fastest growing energy technology. The United States was the leader in new wind capacity added each year, as well as ethanol production, according to REN21. Clean Edge, meanwhile had figures showing wind power sales jumped by an estimated 68 percent in 2007 to $30.1 billion compared to a year earlier, equalling the generation of 20 conventional fossil-fueled plants.

Ethanol production also spiked in the United States, according to another report, this from the Renewable Fuels Association, an industry group. It estimated that the country produced 423,000 barrels of ethanol per day, an increase of more than 34 percent from a year earlier (see press release and economic report).

Meanwhile, a California company, Ausra, Inc., issued a report (view press release and report here), which concluded that more than 90 percent of the United States electrical grid and auto fleets’ energy needs could be met by solar thermal power. The company happens to be the developer of such technology, which uses fields of mirrors to generate heat and drive steam turbines.

Several forces appeared to be driving the global renewable industry’s numbers, experts noted. According to New Energy Finance’s press statement:

"Among the key factors pushing [the] numbers sharply upwards in 2007 were government policies around the world to promote renewable power and cleaner fuels, oil prices approaching $100-a barrel and rising corporate and investor awareness of the opportunities in clean energy.

One of the themes of 2007 was geographic diversification. Western Europe and North America continued to enjoy sharp increases in VC/PE, public market and project investment – but the momentum spread out to include other developed economic regions such as Eastern Europe and Australia. Even more significant was the pick-up in activity in emerging economies, with China moving strongly ahead with projects in wind, biomass and energy efficiency, Brazil seeing huge investment interest in its sugar based ethanol sector, and Africa starting to see renewable energy and efficiency as partial answers to its power shortages."

In speaking to Climate Law Update, Clean Edge's Pernick also cited the fact that while the costs of fossil fuels were on the rise, the technology used for wind and solar is getting cheaper. In addition, he said many governments are taking steps, such as imposing renewable portfolio standards requiring utilities to supply customers a certain amount of power from renewable sources. The governments, he said, are interested in attracting jobs and other economic gains.

“They’re competing to be clean tech leaders,” Pernick said.

He also noted that to reduce greenhouse gas emissions, public officials are moving toward establishing a price on carbon, either through cap-and-trade systems or other market means.

“There’ll be mandatory markets,” he said.

Investment, said experts such as Micael Liebreich, chairman and CEO of New Energy Finance, must accelerate. While 2007 was strong, he said in the company's statement, “on our estimate a further, fivefold increase is required for major countries to meet their own ambitious targets for reductions in greenhouse gas emissions.”

Clean Edge’s report, however, also warned that some clouds remain on the horizon. Those include the rising impact of biofuel production on food supplies and commodity agriculture prices and the uncertainty over production tax credits for renewables. And, despite the recent gains in renewables, they still represent only about 3.4 percent of global power generation, according to the REN21 report. That doesn’t include large hydropower projects, accounting for about 15 percent of the generation total.

Which brings us to Hoover Dam. And another new report, this one prepared by researchers at the Scripps Institution of Oceanography. According to a statement from the American Geophysical Union, which has accepted the paper for publication, the Scripps researchers have put 50-50 odds on Lake Mead, which lies behind the dam, running completely dry by 2021, given expected climate change scenarios and if future water demands are not reduced. That’s, of course, bad news for hydropower, since water from the lake pouring through turbines generates enough electricity for an estimated 1.3 million people in the West.

Meaning there might be even more riding on the development of the renewable industry.  

(Photo of Hoover Dam: U.S. Bureau of Reclamation)              

The state's largest utilities, including PG&E, have until 2010 to meet the state's demands.  The Chronicle noted that the standard, which state policy makers are now working to boost to 33 percent, has been tough to meet:

Even PG&E's achievement comes with a caveat. The company now has enough power contracts to hit 20 percent, but some of those contracts won't kick in until after the state deadline passes, delivering power to PG&E customers in 2011. That isn't a legal problem. If a utility falls just short of 20 percent by the end of 2010, it can still comply with the law by overshooting the 20 percent goal the following year.

But that caveat underscores the difficulty utilities have had in meeting California's ambitious renewable-energy goals. Simply put, the state does not have enough geothermal generators, wind farms and solar power plants to produce as much clean energy as California's politicians and citizens want. More renewable-power projects have been proposed, but it's an open question how many will get built. 

Nevertheless, numerous projects are on the drawing boards and the state's ambitious goals would seem to provide significant incentives for at least some of them to go forward, and quickly, as California attempts to meet its self-imposed demands to reduce greenhouse gas emissions under legislation such as 2006's AB 32.