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.