Commissioner Wellinghoff Publishes Article On FERC Regulatory Process for Marine Renewables

FERC Commissioner Wellinghoff published an article in the Energy Bar Journal (Nov. 2008) on FERC’s regulatory process for marine renewables and describes FERC’s efforts to develop innovative and creative approaches to spur marine renewables development. The article is extremely comprehensive, giving a detailed overview of FERC’s past policies and a peek into where FERC might head in the future.  Plus, footnote 69 references OREC’s White Paper on Preliminary Permits, acknowleging that this paper helped bring to FERC’s attention some of the problems in FERC’s permit process.   Some of the problems have since been addressed or at least identified through FERC’s strict scrutiny policy.

House Stimulus Package to Benefit Marine Renewables

A proposed House stimulus bill contains several provisions that would give a boost to marine renewables, through a variety tax incentives and financing mechanisms (clean energ bonds) that will help bring needed capital to marine renewables projects.  To view the legislation, click here. Here’s a summary of the features that would benefit marine renewables.

• Long-term extension and modification of renewable energy production tax credit. The bill extends the in-service date for the production tax credit (PTC) for wind facilities through December 31, 2012, and for marine renewables through December 31, 2013.
• Temporary election to claim the investment tax credit in lieu of the production tax credit. The bill will allow marine renewables facilities placed in service in 2009 and 2010 to elect either a PTC (which is currently worth 1 cent/kwh payable over a ten year period) or an upfront 30 percent investment tax credit (ITC) in the year that the facility is placed in service.  If a marine developer cannot use the ITC, it may apply to DOE to convert the dollar value of the ITC into a grant.
• Repeal subsidized energy financing limitation on the investment tax credit. The bill would repeal this subsidized energy financing limitation on the investment tax credit in order to allow businesses and individuals to qualify for the full amount of the investment tax credit even if such property is financed with industrial development bonds or through any other subsidized energy financing.
• Clean Renewable Energy Bonds (”CREBs”). The bill authorizes an additional $1.6 billion of new clean renewable energy bonds to finance facilities that generate electricity from various renewables, including marine renewables.
• Enhanced R&D credit. The bill would provide for an enhanced twenty percent (20%) R&D credit in taxable years beginning in 2009 and 2010 for research expenditures incurred in the fields of fuel cells, battery technology, renewable energy, energy conservation technology, efficient transmission and distribution of electricity, and carbon capture and sequestration.  We anticipate that these provisions will encompass marine renewables.

OREC supports these provisions, though the 2009-2010 time frame for eligibility is narrow.  We will be exploring the feasibility of extending the time frame, or perhaps making it applicable to projects that begin construction between 2009-2010 instead of being placed in service as of that date.  But overall, OREC supports the general concept of allowing marine renewables developers to opt for either an ITC or PTC.  An ITC/PTC election, with potential ITC/grant exchange ensures developers maximum flexibility in structuring financing deals and generating funding to build projects.  Though the PTC for marine renewables and several other technologies still remain at half the value for wind (1 cents/kwh as opposed to 2 cents/kwh), the benefits of an ITC/PTC election and the ITC conversion compensate for the lack of parity in this limited area.

To view an 84 page summary of the House stimulus tax provisions, click here, and for revenue estimates, click here.

If you have further questions about this legislation, please contact Sean O’neill at sean@oceanrenewable.com or carolynelefant@fercfights.com.

OREC Letter to Congressional Leaders Regarding Stimulus Package

On January 14, 2009, OREC wrote to congressional leadership seeking inclusion of $100 million for ocean and marine renewable energy development in the stimulus package that is currently the subject of negotiations between President Elect Obama and the new Congress.  In the letter, OREC emphasized the national importance of building a marine renewables industry in the United States:

With the right support, the United States ocean energy industry can be competitive internationally. With the right encouragement, ocean renewable energy technologies can help us reduce our reliance on fossil fuels and provide clean energy alternatives to conventional power generating systems. And with the right public awareness, our coastline communities can use ocean and marine renewables as a spring board for sustainable economic development, including the creation of thousands of new high-paying “green” jobs. the case that funding development of marine renewable energy projects will create green jobs and ensure that the United States does not fall behind.

To view the entire OREC letter, click here: OREC Letter to Congressional Leaders re: $100 million for ocean renewables development (1/14/ 09)

A Podcast With Keith Martin on Marine Renewables Tax Iniatitives for the New Congress

OREC is mobilizing quickly to take advantage of opportunities on the Hill to implement more favorable tax policies for marine renewable technologies in order to stimulate private investment and effectively reduce the capital costs of these projects. First, OREC seeks to amend 26 U.S.C. sec. 168 so that marine renewables may use a five year accelerated depreciation period for project assets, the same methodology available to other renewables. Currently, marine renewables projects are depreciated over a twenty year period.

Second, OREC is attempting to secure a full 2.1 cent/kwh PTC, instead of the half credit (1.0 cents/kwh) included in last year’s financial bailout legislation. In addition, with the economic turmoil on Wall Street, many big banks no longer have an appetite for PTCs, either because they’re not profitable anymore or, in the case of Lehman, because they’ve been vaporized, explains the New Republic Blog. Consequently, OREC along with the wind and solar industry is exploring the possibility of refundable PTCs, by which the government would write entities that hold PTCs a check if they lacked tax liability for the PTC to offset.  But already, the refundable tax credit concept is turning out to be a non-starter, due to concerns about dispensing cash when the budget is so tight.

Another tax alternative under consideration would allow renewable companies to choose between a production tax credit or an investment tax credit. OREC proposed the PTC/ITC option two years back and in recognition of our member companies’ differing stages of technology development and diverse business strategies and is glad to see that it has now been resurrected.

Tax issues are extremely complex, yet can have a substantial impact on investment decisions in renewables. Moreover, with a new President and a wobbly economy, there’s a certain urgency to act quickly, which means that proposals are perpetually a moving target. To help our members understand and try to keep abreast of these issues, OREC counsel Carolyn Elefant interviewed project finance expert and renewable tax policy guru, Keith Martin of member law firm, Chadbourne & Parke. Please listen to the podcast for a succinct, but comprehensive synopsis of the renewable-related tax proposals currently under consideration.

Click to listen : Keith_Martin_Podcast

New OREC Website!

As you may have noticed, the OREC website has gotten a facelift!  We’ve updated the content so that emerging developments are easily viewed on the front page of the site and created a Press Room to house our Press Releases, newsletter and press clippings. We’re happy to add OREC members to our Press Clippings list, so please inform us if there’s a news story about your company.  In addition, you can receive email updates to our website by entering your email in the box in the upper right hand of the site.

To make our positions more accessible, we’ve uploaded OREC’s testimony, regulatory filings and policy papers under the Policy Positions menu bar. Over the past three and a half years, we’ve filed hundreds of pages of comments on FERC and MMS proposals, and also given testimony to Congress. Because of our comprehensive filings, which are the result of substantial membership input and despite our short existence, OREC is regarded as a well-informed and knowledgeable advocate for the marine renewables industry, both in the United States and overseas.

With the new administration’s focus on technology and social media, we’ve incorporated those tools to promote our message. OREC has created a Community site and Facebook group open to members and others with an interest in marine renewables. Participants can use either forum to engage in dialogue about marine renewables, learn about new technologies and build relationships with others who are interested in the marine renewables industry. We publicize updates to our website to Twitter (you can follow us @OREC) to build interest in our organization. Just as marine renewables are very much a cutting edge 21st century technology, we at OREC aspire to be a 21st century trade assocation, leveraging technology to serve our members effectively and efficiently.

We hope to start a podcast series with members and welcome articles from our member organizations.  If you are interested in being interviewed or contributing a piece for our website, contact Sean O’Neill or Carolyn Elefant at sean@oceanrenewable.com or carolynelefant@fercfights.com.

2nd Annual Global Marine Renewable Energy Conference

We’ve just launched the website and registration page for the upcoming Second Annual Global Marine Renewable Energy Conference in Washington D.C. As was the case last year, we’re expecting participants from all over the world, and from diverse sectors with an interest in marine renewables, from technology developers to utilities to financial institutions, coastal communities, resource agencies and NGOs. For a sampling of the content of last year’s conference, you can view the speaker’s power point presentations from the 2008 conference in New York. Washington D.C. is well traveled in April, so reserve your spot and book a hotel room as soon as possible. Keep an eye on the conference site as well as the OREC website for additional updates.

OREC Briefs Transition Team

FERC Chairman Kelliher To Depart

On January 7, 2009, FERC Chair Joseph Kelliher announced his intention to step down from the Commission effective January 20, 2009.  Kelliher, who was appointed by President Bush, served on the Commission for three and a half years. In a recently issued Press Release, OREC thanked Chairman Kelliher for his service as Chairman and his leadership in formulating policies to promote the emergence of a marine renewables technology in the United States. Here’s one of Chairman Kelliher’s statements regarding marine renewables from December 2006.

MMS-FERC Jurisdictional Dispute Continues

In an order issued in October 2008 , FERC upped the ante in the ongoing dispute with MMS over which agency has jurisdiction over marine renewables projects on the Outer Continental Shelf.  FERC claims authority to license marine renewables projects under the Federal Power Act (FPA), but acknowledges that developers will still need to obtain a lease from MMS to secure the property rights to site a marine renewables project required by the FPA and terms of a license. MMS, by contrast, takes the position that it has exclusive authority over marine renewables projects on the OCS , and that FERC’s regulatory jurisdiction does not extend beyond the traditional three mile limits of navigable waters as used in many federal statutes. If you’re interested, I’ve analyzed the jurisdictional dispute between FERC and MMS in excruciating detail at my blog, Renewables Offshore.

Efforts to resolve the FERC-MMS dispute, including an MOU between the agencies and mediation by the Department of Justice, have apparently both failed. The possibility of resolving the dispute through an Executive Order (EO) has been suggested by some groups, however, because FERC is an independent and not an executive agency, an EO would not bind it. Unless a new administration results in a change in FERC or MMS positions, Congressional intervention may offer the only viable option to resolve the stalemate.

OREC Comments on MMS NOPR (9/09)

On September 9, 2008, OREC filed sixty pages of comments in response to MMS Notice of Proposed Rulemaking for Alternative Energy Leases on the Outer Continental Shelf. The rules represented a culmination of extensive participation and comment on MMS’ development of rules for issuing leases on the OCS. While OREC commends MMS’ efforts to oversee renewable energy development in an orderly manner, several aspects of MMS’ proposed rules were troubling. Among other things, the proposed regulations imposed several layers of environmental review on small projects and added significant costs through royalties payments, lease fees and a certified verification agent requirement. Moreover, OREC expressed concern that MMS’ bonus bidding system, which works in a well-capitalized, mature industry such as oil and gas, can give rise to gamesmanship in the nascent renewables industry.

MMS had hoped to issue its regulations by the end of 2008, but to date, it has not done so. OREC will continue to monitor MMS’ regulatory process and notify members when a final rule is released.

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