Markey/Waxman legislation on Climate Change Released; News for Marine Renewables Developers

On May 15, 2009, Representatives Waxman and Markey released the American Clean Energy and Security Act of 2009 (ACES) (H.R. 2454) comprehensive energy legislation to deploy clean energy resources, increase energy efficiency, cut global warming pollution, and transition to a clean energy economy. This brief summary focuses on key provisions of the the bill relevant to the marine renewables industry.  A copy of the bill, with provisions of interest to marine renewables developers is available here.

Key Provisions:

A.    Marine Spatial Planning Provisions

Part I, Subtitle I of the ACES directs FERC, Secretary of Interior, NOAA, in consultation with Council on Environmental Quality (CEQ) and as appropriate coastal states and relevant NGOs to “jointly conduct a study of the potential for marine spatial planning (MSP) to facilitate development of offshore renewable energy facilities in a manner to protect and maintain the coastal and marine ecosystem.  The study is to identify the steps involved in regional MSP for siting offshore energy facilities and recommend an approach to develop regional MSPs for siting offshore renewable energy facilities.  Among other things, the recommendations must cover:

• an assessment of the adequacy of existing data, including baseline environmental data, to support such marine spatial planning and identification of gaps in such data and the studies needed to fill such gaps;
• an assessment of the resources required to carry out such marine spatial planning;
• recommended   mechanisms for the formal adoption and implementation of regional marine spatial plans for the development of offshore renewable energy facilities by relevant Federal agencies;
• identification of any additional authority relevant Federal agencies would need to adopt and implement regional marine spatial plans for the development of offshore renewable energy facilities.

Once the report is published, the public will have an opportunity to comment.  The report recommendations will go to CEQ which will either approve the proposed approach and direct the agencies to implement it within 18 months, or else, CEQ will devise its own alternative approach.

The legislation states that no existing laws will be impacted prior to implementation of a recommended or alternative MSP approach.

B.  Renewable Electricty Standard

Previously termed a “renewables portfolio standard,” (RPS), the Energy Efficiency and Renewable Electricity Standard (Title I, Subtitle A) amends the Public Utility Regulatory Policies Act to require retail electric suppliers (utilities that sell more than 4 million megawatt hours (MWh) of electricity directly to consumers or end users) to meet a certain percentage of their load with electricity generated from renewable resources and energy efficiency savings. The standard requires utilities to meet 6% of their power needs through a combination of efficiency and renewables in 2012 (with up to one quarter coming from energy efficiency), increasing to 20% in 2020.  However, a state may petition FERC to increase the proportion of compliance that can be met with efficiency savings from 25% to 2/5.

For each megawatt of renewable energy purchased, a utility receives a renewable electricity credit.  However, distributed generation facilities, i.e., facilities which generate electricity for one or more electricity customers at or near the facility site and are no larger than 2 MW qualify for three credits.  At the end of each year, utilities that lack sufficient credits (or have not accomplished sufficient savings) to meet the compliance standard must pay $25 for each compliance credit.

The bill recognizes marine and hydrokinetic renewables as an eligible resources by which a utility can meet its renewables/energy efficiency obligation.

In addition, it is possible that some marine renewables technologies could be classified as “distributed generation” and thus, could qualify for three renewable energy credits rather than one.

C.  Climate Change Provisions

Generally speaking,, H.R. 2454 creates a “cap and trade” system for emissions by directing EPA to establish an annual tonnage limit on greenhouse gas emissions from specified activities.  (Title III.C, Section 721).  Entities are prohibited from emitting greenhouse gases in excess of their allowable emissions level, which is equal to the number of emissions and allowances and offset credits that they hold.  The bill distributes 30 percent of the allowances to electric distribution utilities and 9 percent to local natural gas distribution companies on the condition that they use these allowances to protect consumers from price increases due to compliance with emissions reductions.  Utilities can also meet their allowance limits through participation in projects that offset emissions.

States would receive 10 percent of allowances from 2012 through 2015; 7.5 percent in 2016 and 2017; 6.5 percent from 2018 through 2021; and 5 percent after that.  States can auction the allowances and use the proceeds for investment in renewable energy and energy efficiency.

Marine renewables companies stand to benefit from cap and trade system in several ways.

First, marine renewables projects could potentially qualify as “offset” projects, meaning that utilities investing in marine renewables could offset emissions and meet allowance limits.

Second, as noted, states will receive allowances that they can auction to fund renewable energy and energy efficiency projects.  Title I, Subtitle D establishes a program for “State Energy And Environmental Development” (SEED) Accounts, which will be used to manage funds generated by allowance auctions.  The bill specifically provides that states may spend SEED money on all renewable energy resources defined in Section 101, which includes marine renewables.

D.  Clean Energy Exports

Part IV, Subtitle D of H.R. 2454 is intended to encourage U.S. companies to assist in promoting widespread implementation of activities that reduce greenhouse gases in developing companies.  To this end, the bill establishes a Clean Technology Account administered by the State Department in consultation with an interagency group, which will distribute allowances from the Fund for qualifying activities in developing countries.  Qualifying facilities include marine renewable energy projects.

The provision potentially benefits marine renewables developers by helping to fund deployment of these technologies in developing countries, thus creating additional market opportunities.

E.    Clean Energy Technology Centers

Subtitle H, Section 171, Clean Energy Innovation Centers establishes a program to support development and commercialization of clean energy technologies through eight regional Clean Energy Innovation Centers selected competitively by the Secretary of Energy.   Centers may be awarded to consortiums consisting of research universities, private research entities, industry, and relevant state institutions.  Marine renewables are among the clean energy technologies that qualify for study within the Clean Energy Innovation Centers.

FERC FY10 Budget Shows Limited Growth For Marine Renewables

We at OREC recently reviewed FERC’s FY10 Budget to see if we could glean any insights about the future of the marine renewables industry.

Going by FERC’s budget predictions, there won’t be much significant growth in the marine renewables industry, at least over the next two years.  From the budget document:

Since FY 2007, FERC has experienced a moderate increase in interest in both conventional hydropower projects and hydrokinetic technology projects with over 10,000 MW of new hydropower proposals before the Commission.  This trend is a result of high oil prices and market forces, growing interest in low emission, domestic and renewable energy sources, state renewable portfolio standard policies, and federal incentives consisting of tax credits, tax free bonds and direct subsidies.

In FY 2008 Commission staff developed licensing procedures for pilot projects tailored to meet the needs of entities interested in testing new hydrokinetic technology, while minimizing the risk of adverse environmental impacts. The goals of the pilot procedures are to:  accommodate the rapidly expanding interest in hydrokinetic technologies; allow developers to test their new technologies; determine appropriate siting of these technologies; and confirm their environmental effects, all while maintaining Commission oversight and input. The process allows the issuance of short- term licenses (five years) of small scale hydrokinetic projects (5 MW or less) in as few as six months to allow for project installation, connection with the electric grid, operation, and environmental testing as soon as possible.  Projects eligible to use this process are of limited size, are removable or able to shut down on short notice, and are not located in waters with sensitive designations. The resulting license would be short-term and include rigorous environmental monitoring and safeguards.   The Commission expects three FTEs will be necessary in FY 2010 to work on these new technology issues, consistent with FY 2008.

So - three Full Time Employees to handle marine renewable for FY2010 and no growth over FY2008.  Moreover, the Commission doesn’t appear to be anticipating any larger scale projects - which is probably reasonable given that so few small projects have gotten through licensing.  Though I wish the news were better, I tend to believe that the Commission’s assessments of its needs are probably accurate.  This is the first time I’ve wished for more government (since more FTEs for marine renewables would mean more projects) rather than less.

Marine Renewables News Round-Up

Here’s a quick round up of some recent developments and interesting news items from the past two weeks:

The Scottish Saltire Prize - the largest single innovation prize for marine renewables -  which I posted about a year ago continues to attract international attention.   According to this story, 100 entities from 23 different countries worldwide have submitted entries to compete for the $20 million (USD) prize.

A new study will evaluate the potential for wave, tidal-stream and tidal technologies around the English and Welsh coastlines, says this Press Release.  In the meantime, there’s some disagreement over when marine renewables technologies will achieve full blown commercialization.  According to the Irish Times, a recently published report forecast that “wave energy would not develop in Ireland for at least a decade,” though these findings were disputed by  John McCarthy, Chief Executive of Ocean Energy, LTD.  Martin McAdam, CEO of Aquamarine Power is equally optimistic, telling Reuters that “What we feel is we can offer a device in future that will be competitive with offshore wind energy. By 2014 we will have a commercially available device.”

There’s progress in the U.S. as well.  Mike Rafterty of Stevens Institute in New Jersey reports progress on the Wave Energy Harnessing Device (WEHD), a system of submerged platforms and buoys will utilize a wave’s motion to create electricity.  And over in Maine, a collaboration between the University of Maine, Maine Maritime Academy and Portland-based Ocean Renewable Power Co. has landed nearly $1 million in grant money from the federal government to research and develop tidal power according to this Release.

Finally, an April 30, 2009 article by industry thought leaders Roger Bedard, Mirko Previsic and Brian Polagye, up at Renewable Energy Access gives a good overview on how much marine energy is available for development in the United States.

OREC Searching for a Few Good Interns for Important Project

OREC has just posted a request for 2 or 3 interns to help with an important white paper project on the Job Board. Please note: Rather than applying through the Jobbi job board, please follow the instructions to forward resumes to Caroly Elefant at the e-mail indicated.  See the complete job posting on our Job Board page.

Good News! President’s Budget Released

Good news!  The President’s FY10 budget request to Congress that was just released (view it here) includes $30 million for the Water Power R&D program.  By comparison, President Bush’s budget request for FY09 was only $3 million.  By the end of the appropriations cycle for FY09, Congress had appropriated $40 million for the water power program.

OREC has been lobbying the House and Senate appropriators to add $20 million to the President’s budget request of $30 million for a total of $50 million in the FY10 Energy and Water Development Appropriations bill for Water Power R&D.  As you know, that is the current authorized amount for the water power program which was contained in the last two Energy bills (EPACT05 and EISA07).  We should know the final funding level for FY10 sometime late this summer as the Energy and Water appropriations bills are negotiated.  We are also working to include language in the energy/climate change measures being negotiated in Congress that would raise the authorized amount for the water power account from the current $50 million per year to $250 million per year.

Credit:  Thanks to our friends at SMI for this summary