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.

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

Introduction of the 2009 Marine Renewable Energy Promotion Act

The press release for OREC on the introduction of the 2009 Marine Renewable Energy Promotion Act in the House of Representatives by Rep. Jay Inslee can be found here OREC Inslee Marine Act 04/28/09 .

OREC Releases Case for Funding

OREC recently released a Case for Funding.  To view it click here.

$40 Million for Water Power in FY09 Omnibus Act

The FY2009 Omnibus Appropriations Act has been released (click here to view) and there’s more good news for marine renewables.  Appropriations for FY09 include $40 million for the Department of Energy’s water power program, a substantial increase over the $10 million that OREC was instrumental in securing for 2008.  OREC has been working to ensure inclusion of increased funding for water power since last year.

Stimulus Bill Promises to Buoy Marine Renewables Industry

On Tuesday, February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009, or as it is commonly called, the “stimulus package.”  The legislation contains a combination of tax cuts and funding programs that bring unprecedented support to the marine renewables industry.

Despite the legislation’s fast track, OREC managed to ensure parity for marine renewables.  In particular, OREC is proud of the legislation’s inclusion of a choice between an investment tax credit (ITC) and production tax credit (PTC), as this is an option that we’ve been pressing since early 2007.
Read more

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)

Marine Renewables Finally Get PTC (10/08)

In September 2008, Congress passed a $700 billion financial bailout package, which included the Energy Improvement and Extension Act of 2008 , (H.R. 1424) signed into law by President Bush on October 3, 2008. Of significance to marine renewables, the legislation included a production tax credit (PTC) of 1.0 cent/kwh for marine renewable projects that come online between the October 3, 2008 and December 31, 2011.  The new legislation represents the first time that marine renewables have been eligible for the PTC.

At the same time, marine renewables still lack parity.  Other renewables, such as wind, geothermal or closed-loop biomass qualify for a 2.1 cents/kwh PTC, whereas marine renewables are eligible for only half that amount. OREC’s legislative agenda for 2009 includes pressing for equal treatment with other renewables with regard to PTC eligibility.

OREC Secures Some Benefits for Ocean Energy in New Energy Bill…But Tax Credits Must Wait Until Next Year

On December 19, 2007, President Bush signed into law the Energy Act 2007. OREC played an instrumental role in securing important benefits for the ocean and marine renewable energy industry, including:

* Authorizing $250 million for Research, Development, Demonstration and Commercial Application to Expand Marine and Hydrokinetic Renewable Energy Production.

* Authorizing the Secretary of the Department of Energy to Establish National Marine Renewable Energy Research, Development and Demonstration Centers.

* Directing the Department of Energy to Conduct a Report on Environmental Impacts and Recommendations to Mitigate Environmental Impacts.
While these provisions will help the marine renewables industry move forward, disappointingly, the Energy Act 2007 did not include other provisions which would have helped not just marine renewables, but all forms of renewable energy. For example, the Energy does not expand the Production Tax Credit (PTC) to include marine renewables (which currently do not qualify for the PTC), nor did the legislation extend the PTC, now due to expire at the end of 2008, for other renewables. Also missing from the bill was a national Renewable Portfolio Standard (RPS)that would have required utilities to obtain a mandatory percentage of their power supply from renewable energy sources.

Finally, one version of the bill would have resolved the ongoing jurisdictional spat between the Federal Energy Regulatory Commission and the Mineral Management Service. The final Energy Act did not include this provision, which means that MMS and FERC are likely to continue to work on the terms of an MOU that would delineate each agency’s role in authorizing marine renewable projects on the Outer Continental Shelf.

To read OREC’s official statement, visit this link.

Next Page »