On February 19, 2020, the IRS published two guidance documents (links here and here) of significant legal and commercial importance to the nascent market for carbon capture and sequestration production tax credits set forth in Section 45Q of the Internal Revenue Code. Although there are certain differences, the guidance bears striking similarity to existing guidance relied upon by participants in the existing wind production tax credit (Wind PTC) tax equity market. Because of the highly developed state of the Wind PTC market, the similarities make it likely that existing Wind PTC deal structures could be adapted for the 45Q tax credits, thereby improving market adoption and transactional efficiencies. On the other hand, technical and economic differences exist between wind generation and carbon sequestration that need to be overcome in order for a robust 45Q tax credit market to develop. While we are continuing to review and consider this new guidance, we have some preliminary observations as to its practical implications on potential 45Q tax credit transactions.
Continue Reading New IRS Guidance on Section 45Q Carbon Capture and Sequestration Tax Credits: Key Preliminary Takeaways for Potential Market Participants

On February 20, 2020, the California Energy Commission approved its first community solar system under the 2019 Energy Code, which allows developers of new homes within Sacramento Municipal Utility District (“SMUD”) to meet mandatory solar energy system requirements through solar agreements with SMUD instead of installation of solar panels on new homes.
Continue Reading CALIFORNIA MANDATORY SOLAR UPDATE: First Community Solar Program Approved by California Energy Commission

The Federal Energy Regulatory Commission (“FERC”) requested comments on a proposed rulemaking to revise its regulations under the Public Utility Regulatory Policies Act of 1978 (“PURPA”). The Notice of Proposed Rulemaking (“NOPR”), among other things, would diminish benefits that have been afforded to Qualifying Facilities (“QFs”), including the availability and value of the “PURPA-put.” The proposed changes also could potentially block certain wind and solar projects that previously would have qualified as small power production facilities from receiving that designation. The NOPR presents uncertainty for renewable developers, as well as other non-utility generators. Adoption of the proposed changes may hinder the development of some renewable energy projects. Comments on the proposed rulemaking are due within 60 days of its publication in the Federal Register.
Continue Reading FERC Proposes Major Changes to PURPA Regulations Impacting Qualifying Facility Rates and Requirements; Throwing Roadblocks in the Path of Renewable Energy Development

On August 13, 2019, the Federal Energy Regulatory Commission (FERC) approved a request by Midcontinent Independent System Operator, Inc. (MISO) to modify its Tariff and pro forma Generator Interconnection Agreement (GIA) to permit shared interconnection facilities among multiple projects in cases where all parties are amenable to such an arrangement. The Tariff modifications now allow electric generators located in MISO to share interconnection facilities through consent agreements. Previously, MISO did not permit the sharing of interconnection facilities between different projects due to the administrative and practical challenges with such arrangements. However, MISO changed its position after FERC issued Order 807, which created a blanket waiver of certain regulatory requirements, including the obligation to file an Open Access Transmission Tariff (OATT), for certain entities. MISO noted that Order 807 significantly reduced the administrative complexity of many shared facilities arrangements, and led to increased interest in new interconnection arrangements as a means to speed development and/or reduce development costs. Nevertheless, generators should still be careful to meet all remaining MISO Tariff requirements for such agreements.
Continue Reading FERC Approves MISO’s Tariff Change Permitting Generators to Voluntarily Share Interconnection Facilities

In a recent opinion, the Ninth Circuit held that the California Public Utilities Commission’s (CPUC) Renewable Market Adjusting Tariff (Re-MAT) program and alternative Qualifying Facility (QF) standard offer contract (Standard Contract) were preempted by federal law. The Re-MAT program and Standard Contract required California utilities to purchase energy from certain QFs with capacities up to three and twenty megawatts (MWs), respectively. The court found that the program and the contract violated the Public Utility Regulatory Policies Act of 1978’s (PURPA) pricing requirements. The decision, Winding Creek Solar LLC v. Peterman, USCA Case Nos. 17-17531 and 17-17532 (9th Cir. 2019) demonstrates that PURPA continues to maintain a floor from which state regulatory programs must encourage the development of renewable energy from small producers. In 2018 and prior to Winding Creek, the CPUC instituted a rulemaking to consider adoption of a new Standard Contract but has not yet taken action. Winding Creek reemphasizes the importance of that proceeding for ensuring that California has a PURPA-compliant program in place for utilities to purchase QF-produced energy.
Continue Reading 9th Circuit Says CPUC’s Standard Contract and Re-MAT Program for Certain Renewable Generators are not PURPA Compliant

On July 18, 2019, the Federal Energy Regulatory Commission issued Order No. 860.  The order requires entities with or seeking market-based rate authority (sellers) to submit certain data related to FERC’s market power analyses, including its indicative screens and asset appendices, into a “relational database” maintained by FERC.  The order also requires the submission of information associated with long-term firm sales.  When changes occur to data previously submitted, the relational database must be updated monthly by sellers.  The database will be used to, among other things, develop asset appendices and indicative screens for FERC filings that require a market power analysis.  Finally, Order No. 860 altered the deadline for “change in status” filings.  Beginning on January 1, 2021, sellers will need to comply with the order by making a baseline submission and using the “relational database” to make future market-based applications.
Continue Reading FERC Order No. 860 Mandates New Market-Based Rate Filing and Reporting Requirements for Sellers of Electric Energy

The Federal Energy Regulatory Commission in Order No. 856-A on July 18, 2019 granted in part and denied in part a request for rehearing of Order No. 856. Order No. 856 eased restrictions on current or potential interlocking officers and directors, where the circumstances would not involve substantial opportunities for conflicts of interest or self-dealing. Order No. 856 and 856-A will be helpful to individuals employed at financial institutions or at public utilities who seek to or currently hold positions across both types of businesses.  As described in detail below, the orders’ clarifications limited the instances when applicants would be required to obtain Commission approval or file notice of changes, permitted certain temporary appoints, and also eased FERC’s prior position regarding late filings.
Continue Reading FERC Order No. 856-A Clarifies Regulations Regarding Interlocking Directorates of Public Utilities and Certain Other Entities

Recent developments in the energy sector indicate that blockchain technology is being embraced to address a range of issues including network security and improved integration of renewable generation and demand response resources. This emerging technology continues to have the potential to become a disrupter in the energy industry.
Continue Reading Blockchain Continues to Make Headway in the Energy Industry

On June 13, 2019, the Office of the United States Trade Representative ruled that bifacial solar modules are exempt from the Section 201 tariffs on solar cell and module imports. This exemption applies to articles imported on or after June 13, 2019, and creates an opportunity for cost savings over traditional monofacial solar modules. Developers and solar companies who have been importing, or are considering importing, solar modules should consider the potential for such savings in light of this exemption.
Continue Reading Bifacial Solar Modules Now Exempt from Section 201 Tariff

In a recent opinion, the D.C. Circuit suggested the Federal Energy Regulatory Commission (FERC) must attempt to obtain information necessary to evaluate the environmental effects of a proposed interstate pipeline project due to the project’s effect on natural gas production and consumption. In Birckhead v. FERC, USCA Case No. 18-1218 (D.C. Cir. 2019), the court criticized FERC for failing to obtain and consider information about upstream production and downstream consumption in its National Environmental Policy Act (NEPA) review of a proposed project to add compression to an existing pipeline, even though the applicant was unlikely to have information regarding the origin and destination of the gas to be transported. The court indicated that FERC has an obligation to at least request information about upstream and downstream activities from pipeline applicants, and suggested that, under the decision in Sierra Club v. FERC, 867 F.3d 1357 (D.C. Cir. 2017), FERC may be required to consider the environmental effects of those activities as indirect effects of FERC’s pipeline approval.
Continue Reading D.C. Circuit Says NEPA Requires FERC To Inquire Into Up and Downstream Effects of Pipeline Project