Primers on Renewable Law Topics

I wanted to provide a quick heads-up to let you all know that I will be participating as a panelist at the Linda Hall Library’s “Second Saturday Conversation”  tomorrow, March 11th, from 11 AM to noon Central Time.  The topic will be the hopes, concerns, and possibilities for research funding, infrastructure projects, and energy development under the new Trump administration, which should prove to be a fruitful topic. I’m looking forward to an excellent discussion.  I will be joined by Gretchen Ivy, ‎Planning Group Director and Associate Vice President for HNTB Corporation and Sarah Zanders, PhD, Assistant Investigator for the Stowers Institute for Medical Research.

For those of you that are not familiar with the Linda Hall Library, it is one of the world’s foremost independent research libraries devoted to science, engineering, and technology, located in Kansas City.  It is a fantastic organization with an admirable mission statement, and I’m thrilled that they’ve asked me to participate in this conversation.

For more information about the event, please visit http://www.lindahall.org/event/second-saturday-conversation-science-outlook-2017/.  I’m also told that the discussion will be live-streamed, so if you are not able to attend in person, feel free to check out their website and view the proceedings online.

Recently, Alan Anderson and I were thrilled to be invited to present to a class at the Washburn University Law School.  For those of you that don’t know, Washburn has developed a truly exceptional energy and oil & gas law program (something that I dearly wish I could have had in law school), thanks in large part to the efforts of Prof. David Pierce.  When Prof. Pierce’s invites us to do just about anything, we usually jump at the chance.

For this presentation, our goal was to provide a high-level but fairly comprehensive overview of the types of legal issues that arise during the main stages of a wind project’s design, construction and operation phases.  Interestingly, after we sat down to plan out the basic categories of information that we wanted to cover, we realized the rough outline of our presentation could be converted into an interesting one-page resource.  With a little coaxing, we were able to distill our notes down into the following chart:

Polsinelli - Wind Project Chart

When it came to preparing the presentation itself, however, we obviously had to provide quite a bit more detail on each of the three main phases of project development.  Our environmental law colleague, Adam Troutwine, proved to be invaluable (as he so often does) by providing an overview of the various state and federal permits that are required for a wind project.  A copy of our PowerPoint is available here:

Powerpoint

I know that I speak for Alan in once again thanking Washburn, Prof. Pierce, and the students for inviting us to speak., and we are very much looking forward to the opportunity to do it again soon.

As always, if you have any questions about any of the materials that we’ve linked to above, or any of the issues discussed therein, please don’t hesitate to reach out to me at lhagedorn@polsinelli.com or give me a call at (816)572-4756.

 

I wanted to drop in to quickly announce that the June edition of North American WindPower includes a cover article drafted by yours truly, Alan Claus Anderson and Britton Gibson of the Polsinelli Energy Group.  The article, entitled “On the Front Lines: Advocates Prevail in State RPS Fight,” provides an overview of the recent legislative battles that have occurred in Kansas in relation to the state Renewable Portfolio Standard.

As part of the combined legislative efforts of the wind industry, the Wind Coalition, the Climate and Energy Project, the Kansas Energy Information Network, and many other groups, Polsinelli and Scott White of KEIN prepared a report that detailed the economic benefits of wind generation for the state of Kansas.  We presented that report before several Kansas House and Senate Committees, as well as at a series of Business Leader Forums hosted by the Climate and Energy Project across the state to help educate business owners and community leaders about the numerous economic benefits of wind energy.

Ultimately, I’m happy to report that the efforts to repeal the Kansas RPS were unsuccessful.  However, there are numerous other states all across the United States that are facing very similar legislative challenges to RPS policies.  We believe that the lessons we have learned in Kansas can translate well into defending RPS policies in other states, and hopefully this article can serve as a template of sorts for organizing a successful defense of these important policy initiatives.

If you have any questions about the national or state-level attacks being raised against RPS policies, or about the economic benefits of the wind industry for a particular state or region, please feel free to write a comment, email me at lhagedorn@polsinelli.com, or call me at (913)234-7416.

On June 7th, 2013, the U.S. Court of Appeals for the Seventh Circuit issued an opinion that could have significant impacts on transmission and renewable energy policies across the country. The decision, issued by Judge Richard Posner, one of the most influential legal scholars in the country, considers the propriety of two orders of the Federal Energy Regulatory Commission (“FERC”) pertaining to the allocation of the costs of new transmission projects that bring renewable energy (primarily wind) from remote locations in the Midwest to population centers.

As a brief overview, transmission projects in the United States are largely controlled by Regional Transmission Organizations (“RTOs”), which are regional non-profit organizations tasked with operating transmission facilities in an efficient and non-discriminatory manner. The activities of the RTOs by law, involving the cost of constructing and operating these transmission projects must be “just and reasonable” and must be apportioned to individual customers based, to some degree, on the customer’s role in creating such costs.

In 2010, the Midwest (now Midcontinent) Independent System Operator (“MISO”), one of the RTOs, sought FERC’s approval to implement a tariff allocating the cost of construction of new “multi-value projects” among its members. MISO proposed allocating the cost of these projects, consisting of a series of transmission lines designed primarily to bring wind power in the Midwest to market, among the various utilities based upon each utility’s share of the total power consumption. In effect, this places the majority of the costs of these new transmission lines on the urban population centers that consume the energy, rather than on the typically rural areas where the energy is generated.

FERC approved MISO’s proposed allocation in 2011, and the issue was brought before the Seventh Circuit Court of Appeals for review. In its June 7th, 2013 opinion, the U.S. Court of Appeals upheld FERC’s orders, thus approving MISO’s proposed allocation. Though the issues could be further appealed to the U.S. Supreme Court, for the time being the Court of Appeals’ decision will be controlling.

Potential Impacts

This decision could have several significant impacts for public utilities, transmission operators, renewable project developers, and retail customers throughout the region, but perhaps the two most pressing results are as follows:

Impact on State RPS Policies

In reaching its conclusion, the Court of Appeals considered the propriety of Michigan’s renewable portfolio standard, which requires Michigan utilities to obtain at least 10 percent of their generation from renewable sources by 2015 and mandates that, with certain exceptions, the renewable energy must come from projects located within the state. Because the law restricts the use of out-of-state renewable energy, Michigan argued that they would receive less benefit from the proposed multi-value projects, and thus should pay a lesser portion of the costs. Rejecting this argument, the Court of Appeals held that “Michigan cannot, without violating the commerce clause of Article I of the Constitution, discriminate against out-of-state renewable energy.” Most states in the U.S. have “geographic sourcing” requirements in their renewable energy standards (“RES”) or renewable portfolio standards (“RPS”) that favor in-state generation, and this precedent could encourage a surge of legal challenges to those provisions in the coming months. If successful, such challenges could open up numerous new markets for comparatively inexpensive Midwestern wind generation.

Impact on the Development of Transmission Projects

By approving MISO’s cost allocation methodology, this decision should help drive the continued development of transmission lines that bring remote renewable generation to market. Allocating the costs of constructing these lines based upon the total consumption of energy rather than by local region, MISO’s previous allocation method, effectively increases the economic viability of the lines for the transmission developers and Midwestern utilities that would construct the projects.

If you have any questions about the Court of Appeals decision or the impact of transmission projects generally, please contact myself or another member of the Polsinelli Energy Group. In addition to its established group of energy attorneys, Polsinelli is proud to have recently been joined by Kevin Gunn, the immediate past Chairman of the Missouri Public Service Commission (“MPSC”), who bring unique insights to these issues through his work with the MPSC, his service on the board of directors of the national Association of Regulatory Utilities Commissions, and his participation on the executive committee of the Eastern Interconnection States’ Planning Council.

 

 

Energy policy issues are notoriously complex.  Seemingly small changes in a state’s energy policy can lead to wide-ranging and often unintended political, economic, and environmental consequences.  In an effort to facilitate thoughtful policy discussions about these issues in the state of Kansas, several attorneys from the Polsinelli Shughart energy practice group, Alan Claus Anderson, Britton Gibson and myself, have partnered with Dr. Scott W. White of the Kansas Energy Information Network to draft a report that relies on empirical evidence gathered from the nineteen wind farms currently in operation or under construction in the state of Kansas to estimate the true economic impact of these projects.  The text below is part of a larger report, which is also available at http://www.polsinelli.com//files//upload/StudyKansasWind.pdf.  We have already discussed the history of Kansas’ unique wind resource in Part 1, and provided a brief history of Kansas wind generation in Part 2.

Today, we will cover the significant potential for future project development in the state, due in large part to the expansion of Kansas’ transmission grid and exciting advancements in wind generation technology.

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Future Project Development

Despite the significant growth the Kansas wind industry has experienced over the past few years, the vast majority of the state’s wind resource remains untapped. This growth potential is attributable to many factors, including the fact that the wind resource in Kansas is still significantly underutilized, with a large number of potential projects sites ready to be developed.  While some of these sites simply await a buyer, some of them merely require access to sufficient transmission to move the electricity, while others require incremental improvements in wind generation technology.

1.         Expansion of the Transmission Grid

Wind energy projects are viable only if they have access to a transmission grid that can transport the power to customers.  Historically, this has been an important factor for wind project developers looking for suitable project locations in Kansas, because the bulk of the state’s best wind resource is located in areas with limited access to transmission lines.  This issue is currently being addressed by a number of public and private entities.

The Kansas“V-Plan,” the northern portion of the Southwest Power Pool’s (“SPP”) “Y-Plan,” is particularly noteworthy.  The “V-Plan” consists of high-voltage transmission that connects eastern and western Kansas with the dual purpose of improving electric reliability and carrying more electricity from various sources, including wind, and thus further establishing a competitive energy market in the state.  Two companies, ITC Great Plains and Prairie Wind Transmission, LLC, a joint venture between Westar Energy and Electric Transmission America, are participating in the construction of this 180-mile transmission line which is expected to be completed in 2014.  The “Y-Plan” will help support the addition of 2,500 MW of new wind generation in Kansas, Oklahoma, and the Texas panhandle.[i]

In addition to the “V-Plan,” ITC is also developing a 210-mile high-voltage transmission line between Spearville, Kansas and Axtell, Nebraska.  Construction of this line, known as the “KETA Project” began in 2009 and is expected to be completed by the end of 2012.[ii] Once completed, the KETA Project, which was encouraged by the Kansas Electric Transmission Authority (“KETA”), will support renewable generation development by providing more potential interconnection locations and transmission capacity for renewable energy generators.[iii]

Finally, Clean Line Energy, a private company based in Houston, Texas, is in the process of developing a significant transmission project across the state known as the “Grain Belt Express Clean Line.”  Once constructed, this privately-owned project will provide a 700-mile, 600 kV extra high voltage direct current (“HVDC”) transmission line starting in Kansas and running east through Missouri, enabling Kansas wind to be exported to serve utility customers in Missouri, Illinois, Indiana, and points farther east.  Clean Line anticipates that this project will enable approximately $7 billion of new, renewable energy projects to be built.[iv]  Clean Line Energy has set 2018 as the goal for commercial operation of this new transmission line.[v]

As the Figure below illustrates, these new transmission lines are located in the heart of Kansas’ most productive wind areas and provide valuable paths to market for future wind projects in those areas.

Generally speaking, wind speeds increase as turbine heights (referred to as “hub heights”) increase. Since wind speed is the single most important factor in creating electricity out of the wind, tapping into high winds is key to a successful wind project. For this reason, the most noticeable wind turbine technology improvements have focused on taller hub heights and larger rotor diameters. The combination of these improvements have led to significant increases in efficiency, which have resulted in wind farms with higher capacity factors or similar capacity factors in areas with lesser winds or lower elevations.

Wind speeds have historically been measured at 50 meters for wind farm development. However, utility-scale wind turbine hub heights have been significantly higher than 50 meters for many years (as an example, the Gray County wind farm, built in 2001, has a hub height of 65 meters).

On average, Kansas possesses a robust wind resource at a height of 50 meters.  However, as the Figure below illustrates, at a height of 80 meters, roughly half the state experiences average wind speeds between 8 and 9 meters per second,[vi] which is well above the 7 to 8 meters per second commonly found at a height of 50 meters.

Given that wind speed increases with an increase in altitude, there has been a trend across the wind industry to erect turbines with taller hub heights.  As seen in the Figure below, over the last decade, hub heights across the country have steadily increased from an average of approximately 60 meters in 2001 to 81 meters in 2011.[vii]

As technology continues to improve, and construction costs for these towers decrease, it is probable that 100 meter hub heights will become common for wind projects in Kansas.  This trend towards taller hub heights is evidenced by the fact that, in 2011, 128 turbines were installed in the United States with hub heights of 100 meters, a sharp increase over the 17 turbines of that size installed in 2010.[viii]  The following Figure provides some context to the significant technological advances that have occurred over the last decade.[ix]

As the average hub heights for Kansas projects increase from the current average of 80 meters, access to high-quality wind resources will increase and more locations in Kansas will be economically viable.  As shown in Figure 8, the wind speeds available at 100 meters are predominantly in the range of 8.5 to 9.5 meters per second.

Ultimately, the combination of an expanding transmission infrastructure and technological advancements will significantly expand the areas of the state that can support viable wind development.

If you have any questions or comments about the Kansas wind industry, please feel free to leave a comment below or contact me directly at lhagedorn@polsinelli.com or (913)234-7416.


[i] Edison Electric Institute, ITC Holdings, Corp. Company Overview, available at http://www.eei.org/ourissues/electricitytransmission/documents/transprojrenew_e-m.pdf.

[ii] ITC Great Plains Kansas Spearville-Axtell project profile, http://www.itc-holdings.com/images/itc-greatplains/projects/ITCGP_Profile_KETA_Gen_52311.pdf

[iii] Edison Electric Institute, ITC Holdings, Corp. Company Overview, available at http://www.eei.org/ourissues/electricitytransmission/documents/transprojrenew_e-m.pdf.

[iv] Clean Line Energy Partners Website, Grain Belt Express Clean Line Project Description, available at http://www.grainbeltexpresscleanline.com/site/page/project_description.

[v] Clean Line Energy Partners Website, Grain Belt Express Clean Line Schedule, available at http://www.grainbeltexpresscleanline.com/site/page/schedule.

[vi] Kansas Wind map at 80-m Height, Wind Powering America, U.S. Department of Energy, September 2008, available at http://www.windpoweringamerica.gov/pdfs/wind_maps/ks_80m.pdf.

[vii] U.S. Department of Energy, 2011 Wind Technologies Market Report, August 2012, available at http://www1.eere.energy.gov/wind/pdfs/2011_wind_technologies_market_report.pdf.

[viii] Id.

[ix] Lantz, E.; Wiser, R.; Hand, M. (2012). IEA Wind Task 26: The Past and Future Cost of Wind Energy, Work Package 2, available at http://www.nrel.gov/docs/fy12osti/53510.pdf.

 

Energy policy issues are notoriously complex.  Seemingly small changes in a state’s energy policy can lead to wide-ranging and often unintended political, economic, and environmental consequences.  In an effort to facilitate thoughtful policy discussions about these issues in the state of Kansas, several attorneys from the Polsinelli Shughart energy practice group, Alan Claus Anderson, Britton Gibson and myself, have partnered with Dr. Scott W. White of the Kansas Energy Information Network to draft a report that relies on empirical evidence gathered from the nineteen wind farms currently in operation or under construction in the state of Kansas to estimate the true economic impact of these projects.  The text below is part of this larger report, which is available at http://www.polsinelli.com//files//upload/StudyKansasWind.pdf

In Part 1 of this series, we discussed Kansas’ unique wind resource.  Today, we will provide a brief history of Kansas wind energy generation.  Additional sections of this report will follow in subsequent posts.

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A Brief History of Kansas Wind Energy

The substantial growth inKansas’ wind energy capacity in 2012 has been the culmination of more than a decade of hard work byKansas’ citizens, utilities and electrical cooperatives, local, county and state officials, and third-party participants. 

Although Kansas has long been known for the winds sweeping across its prairielands, it was not until 1999 that Westar Energy (then Western Resources) took the first steps into utility-scale wind power with the installation of two 600 kW Vestas wind turbines near the Jeffrey Energy Center in Pottawatomie County, north of St. Marys, Kansas.  In 2001, Westar’s Jeffrey Energy Center project was followed by the state’s first large scale wind farm, the Gray County Wind Project built near the town of Montezuma by NextEra Energy Resources (then FPL Energy). Containing 170 Vestas 600 kW turbines with a total installed capacity of 112 MW, the Gray County Wind Project is still operating today.

Since those early successes, at least one project has come online in Kansas every year since 2008, (see Table 1), and the period from 2011-2012 has seen a boom that will nearly double the state’s installed wind capacity (see Table 2).

Though there were a number of early wind projects inKansas, Table 1 above illustrates that there was a significant increase in project development beginning in 2008 and 2009.  A lot of this growth is the result of steady improvements in wind generation technology and increasing access to new areas of the state due to the expansion of transmission infrastructure (as will be discussed in a future post).  This is also the period when theKansasstate legislature adopted the state’s Renewable Portfolio Standard (“RPS”), a policy implemented to diversify the state’s electricity generation mix by adding more renewable generation.

Prior to 2009, demand for wind energy in Kansaswas driven by voluntary measures. Some utilities, like Empire District Electric (“Empire”), began purchasing wind energy due, in part, to high natural gas prices and a high percentage of natural gas baseload generation, which wind-powered generation could offset. Empire believed that the addition of wind power to their system was a way to “decrease exposure to natural gas, provide a hedge against any future global warming legislation” and to help them provide their customers “lower, more stable prices.”  Empire noted that the energy purchased from wind farms allowed them to decrease the amount and percentage of electricity generated by natural gas, and thus decrease their exposure to fuel price volatility. Similarly, the Kansas City Board of Public utilities saw wind power as “a hedge against high market purchase prices” and estimated their 20-year power purchase agreement for wind power would save the utility $3 million during the first decade.  Ultimately, some utilities decided to participate in the voluntary RPS that then-Governor Kathleen Sebelius had proposed, while others foresaw the potential for a future, mandatory, RPS.

Since 2009, demand for renewable energy in Kansasby public utilities has been driven by the RPS, as passed by the Kansas Legislature in May 2009 through Senate Substitute bill for H. 2369 and incorporated by Kansas Statutes Annotated (K.S.A.) 66-1256 through 66-1262. Under the RPS, every regulated public utility in the state is required to own or purchase renewable generation, such that the nameplate capacity of the renewable generation owned or purchased by the utility satisfies the following minimum threshold percentages of the utility’s average three-year annual peak retail sales:  

  • 10 percent for 2011 through 2015
  • 15 percent for 2016 through 2019
  • 20 percent for 2020 and beyond

Importantly, for renewable capacity generated in Kansas, utilities are awarded an additional 10 percent credit toward their requirements, thus incentivizing utilities to keep the renewable projects, and the economic benefits that they create, within the state. Additionally, a key provision of the RPS language was a one percent cap on the rate impact of compliance.[v]  Under this guideline, the Kansas Corporation Commission (“KCC”) is permitted to exempt any utility that can demonstrate that compliance with the RPS would cause retail rates to increase by one percent or more.  This effectively ensures that, to the extent that there is a cost associated with developing renewable generation opportunities as compared to traditional fuel sources, the rate impact for retail customers will be minimal.

Since 2010, the KCC has prepared and submitted an annual report to the Legislature that details each utility’s progress toward fulfilling its RPS requirements, including forecasts for its renewable energy generation over the next 20 years. The most recent data for each of the six affected utilities are summarized in the following Table 3.

As the chart above illustrates, all Kansas utilities currently have enough renewable generation in their portfolios to satisfy the RPS through 2015, with most possessing far more renewable generation than is required.  Additionally, most Kansas utilities currently have more than enough renewable generation in their portfolios to satisfy the 15 percent threshold that will take effect from 2016 through 2019, with only a small amount of additional renewable generation required for Westar and Midwest.

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If you have any questions or comments about the Kansas wind industry, please feel free to leave a comment below or contact me directly at lhagedorn@polsinelli.com or (913)234-7416.

The legislature of the State of Colorado has been very active on renewable energy issues over the last few weeks.  Three bills have been making steady progress through the House and Senate in Denver, each of which could have a noticeable effect on the renewable industries in the state.

I.   Coal-Mine Methane as a Renewable Energy Source

House Bill 1160 seeks to amend Colorado’s renewable energy standard to include electricity generated by burning captured coal-mine methane.  The legislation has passed in the House, and is now being considered by the Senate Local Government Committee.  The bill faces strong opposition by many environmental and renewable energy advocacy groups, including Western Resource Advocates (“WRA”), based in Boulder, Colorado.  In a March 23, 2012 guest commentary in the Denver Post, John Nielsen, the Energy Program Director at WRA stated as follows:

By allowing coal-mine methane to qualify as “renewable energy,” something it is not, HB 1160 would diminish further investments in Colorado’s wind and solar resources. Those resources are sustainable, emission-free, use little or no water, provide important health and economic development benefits, and reduce greenhouse gases.

II.   Prohibition on Severance of Wind Rights

House Bill 12-1105 seeks to establish a non-severable wind energy right in real property.  Essentially, under this proposal a landowner would not be able to sell fee simple title to the wind rights on his or her property, but must instead execute a lease, license, easement or other agreement to develop or participate in the income from or the development of a wind project on the property.  The legislation has passed in the House, and is now being considered by the Senate Local Government Committee.  This proposal law is in-line with a national trend against severance of wind and solar rights, and effectively prohibits a landowner from selling the wind or solar rights to a project developer while retaining the ownership of the underlying property.  Interestingly, however, this legislation seems to expressly contemplate and allow for the transfer of the rights to receive the income from the wind project to a third-party, which could potentially lead to many of the same down-stream ownership concerns that commonly give rise to severance restrictions in the first place.  K.K. DuVivier, professor of law at the University of Denver Sturm College of Law and author of the excellent resource “The Renewable Energy Reader,” was recently interviewed by Colorado Public Radio about this legislation.

III.   Ending PUC’s Authority Over Transmission Siting Issues

House Bill 12-1312 seeks to modify the Colorado Public Utilities Commission’s approval process for transmission line certificates of convenience and necessity, so that the PUC no longer has jurisdiction over the land use rights or siting issues related to the location or alignment of the proposed transmission lines.  Instead, those issues would be left to the discretion of the county and local governments.  Ms. Becky Quintana, a representative of the PUC, recently testified before the House Committee on Transportation about this legislation and stated that the PUC neither supported nor opposed the legislation.  From the PUC’s perspective, the legislation does not restrict the authority of the PUC, but rather more clearly defines the jurisdiction of the PUC and local governments, though she noted that, under the proposal, any transmission project that spanned multiple counties would require inter-governmental agreements as each county’s jurisdiction would end at the county line.

Do you have any questions or comments about any of these bills or about developing renewable energy projects inColorado?  If so, leave a comment below or contact me directly at lhagedorn@polsinelli.com.

President Barack Obama delivers the State of the Union address in the House Chamber at the U.S. Capitol in Washington, D.C., Jan. 24, 2012. (Official White House Photo by Pete Souza)

On Tuesday, President Barack Obama presented his annual State of the Union address. One of the most interesting topics discussed, at least to my biased ears, was the importance of pursuing an “all-of-the-above” strategy for developing every potential energy resource at the country’s disposal.

While I’m always thrilled when renewable energy policy gets a prominent place in our public discourse, the President’s remarks necessarily only skimmed the surface of the issues that the administration will face when seeking to continue promoting renewable energy in 2012, especially in light of the significant uncertainty caused by the PTC issue.  So, I went digging for more information.  Fortunately for me, the White House has released a “Blueprint for An America Built to Last”, which contains additional information about the President’s energy policy.  This is in addition to the “Blueprint for a Secure Energy Future” issued by the White House last March.  Boiling these documents down into the main points, it appears that the administration is planning on focusing its renewable energy efforts on the following:

Implementing a federal clean energy standard: During the State of the Union address, I was surprised and pleased to see the President renew the call for a federal Renewable Energy Standard, something which has been introduced numerous times through legislation but has failed to gain any serious traction among the legislators.  We have discussed state-level Renewable Energy Standards at length on this blog, but action taken at the federal level would provide much needed regulatory uniformity and a more robust and consistent REC market, both of which would make it quite a bit easier for projects to get financing from risk-averse lending institutions.

Targeted tax incentives: The President briefly called upon Congress during the State of the Union to “[p]ass clean energy tax credits.  Create these jobs.  We can also spur energy innovation with new incentives.”  The most obvious example of a program that needs a life-line from Congress is the Production Tax Credit originally set forth by Section 1603 of the American Recovery and Reinvestment Act of 2009.    These credits have been a major driver of project financing for the last few years, and the uncertainty surrounding their extension has put a major damper on the number of projects in the pipeline past 2012.

Opening public lands:  Community-level opposition has long been an obstacle that many renewable projects have faced.  President Obama’s energy plan seeks to assuage some of this resistance by opening up sizable tracts of public lands to renewable developers.  To this end, the President has directed the Department of the Interior to commit to issuing permits that will enable the generation of 10 gigawatts of renewable generation capacity.  Of course, projects that are developed on these lands will also introduce additional regulatory burdens, including compliance with the National Environmental Policy Act (“NEPA”).

Powering the U.S. military with renewable energy: During the State of the Union, President Obama announced that the Department of the Navy will make a 1 gigawatt renewable energy purchase.  As the largest consumer of goods and services in the world, the Federal Government consumes an enormous amount of energy.  Additionally, the government often asserts requirements upon its agencies and departments to take into consideration societal benefits rather than pure price points when making its purchasing decisions, as is seen through the “Buy American” mandates and small and disadvantaged business requirements in federal procurement.  Ultimately, as far as the renewable industries are concerned, the more heavily-invested the various departments and agencies become in renewable energy, the better.

Ultimately, the President’s energy plan will not guarantee a bright future for renewable energy, but such guarantees are exceptionally rare in the business world (if you know of any, my contact information is below).  The key question that must be answered is whether or not this plan will incentivize the development of renewable projects.  To answer that question, we have to take a step back and look at the plan’s impact on the most significant risks that all renewable projects face, such as:

1.) Finding land for the project, and overcoming any community-level resistance.  The President’s plan reduces this risk by opening up public lands for development.

2.) Finding buyers.  The plan would increase the number of buyers by implementing a federal renewable energy standard and allowing the federal government to be a major consumer of renewable energy.

3.) Making a profit.  If tax incentives are increased, projects make more money.  Additionally, introducing a federal RES and opening up a federal REC market could potentially increase profits.

4.) Acquiring financing.  Lenders don’t like to lend money to risky ventures.*  However, by decreasing the risks discussed above, the President’s plan should increase the level of financing available to new projects.

* stunningly insightful analysis, I know, but you get what you pay for.

Taken as a whole, this plan appears to address a number of key areas of risk that renewable developers face over the life of their projects and this should help the various industries as they continue to grow.

Now, if only we could convince the federal legislature . . .

If you have any questions or comments about the information discussed above or about renewable project development generally, please feel free to leave a comment below or contact me directly at lhagedorn@polsinelli.com.

Despite the doom and gloom that seems to be dominating the renewable energy headlines of late, I’ve noticed an interesting trend that should bode very well for the continued development of renewable energy in the United States.  While the Federal Government’s lack of action on the 1603 grant has cast serious uncertainty about the future of federal tax incentives for renewables, many state governments have quietly introduced legislation to increase their Renewable Energy Standards (“RESs”) or Renewable Energy Portfolios (“REPs”).

I’ve provided an overview of these very important policies before, but as a quick refresher RES programs are essentially state legislative initiatives that require a certain threshold percentage of a utility’s total energy portfolio be generated from renewable sources (such as wind, solar, biomass, geothermal or other sources) by a certain date in the future.

For states that are trying to incentivize their public utilities to invest in renewable technologies, RES programs provide a relatively straight-forward way to achieve their goals.  However, RES programs are only effective for as long as it takes the utilities to build enough renewable generation or purchase enough Renewable Energy Credits (“RECs”) to meet the thresholds.  Encouragingly, many states that have set RES thresholds have seen their utilities quickly obtain sufficient renewable generation to satisfy the RES for years into the future.  However, once those projects have been developed, the utilities then have no further incentive to continue investing, so development of renewable projects unsurprisingly begins to languish.

This leads us to the good news.  Presented with undeniable evidence that RES programs do in fact lead to increased development of renewable projects, many states are now seeking to either implement RES programs for the first time, or increase the amount of renewable energy that is required.  Below are a few examples…

  • Kentucky: Legislation introduced by State Rep. Mary Lou Marzian, D-District 34, calls for the establishment of a RES which would require utilities to obtain 12.5% of their electricity from renewable energy by 2022.  (Source: NA Windpower)
  • MissouriRenew Missouri, a group formed several years ago to support the state’s first RES, is introducing a new ballot initiative to close existing loopholes that have delayed implementation and increase the thresholds to 25% by 2025.  Jeffrey Tomich of the St. Louis Post Dispatch recently wrote an excellent article summarizing the issue.
  • Illinois: A ballot initiative is being considered which would increase the state’s current 10% by 2015 mandate to 25% by 2025.
  • New Jersey: Though ultimately struck down by Gov. Christie, legislation sponsored by State Sen. Bob Smith and Assembly Member Upendra J. Chivukula sought to more than double the solar output from utilities by 2014.  Jessica Lillian of Solar Industry Magazine provides this overview.
  • Vermont:  Legislation proposed in Vermont seeks to adopt very aggressive RES thresholds, amounting to 40% from existing renewable resources, plus 10% more from new resources by 2013, and adding an additional 40% from new renewable resources by 2025.

I would be remiss if I didn’t also mention a wonderful defense of Renewable Energy Standards written by Peter Fox Penner, Principal and Chairman of the Brattle Group, on Think Progress.  The article is packed full of great information, but among my favorite facts is the following:

In the midst of the worst economy since the great depression, the worldwide market for renewable energy continues to provide jobs and investment. And states are recognizing these economic benefits when setting energy and environmental policies.  The nonpartisan Brookings Institution recently studied employment trends in the clean energy sector and found that, “though modest in size, the clean economy [in the U.S., which according to the study includes many sectors other than renewable energy] employs more workers than the fossil fuel industry and bulks larger than bioscience.” The study also found that the renewable energy sectors “added jobs at a torrid pace.”

Energy policy issues are notoriously complex.  Seemingly small changes in a state’s energy policy can lead to wide-ranging and often unintended political, economic, and environmental consequences.  In an effort to facilitate thoughtful policy discussions about these issues in the state of Kansas, several attorneys from the Polsinelli Shughart energy practice group, Alan Claus Anderson, Britton Gibson and myself, have partnered with Dr. Scott W. White of the Kansas Energy Information Network to draft a report that relies on empirical evidence gathered from the nineteen wind farms currently in operation or under construction in the state of Kansas to estimate the true economic impact of these projects.  The text below is part of this larger report, which is available at http://www.polsinelli.com//files//upload/StudyKansasWind.pdf

In Part 1 of this series, we discussed Kansas’ unique wind resource, and in Part 2 we provided a brief history of Kansas’ wind industry.  Today, we will take a look at how technological advances and a increasingly robust transmission grid will effect Kansas’ potential for future generation.  Additional sections of this report will follow in subsequent posts.

Future Project Development

Despite the significant growth the Kansas wind industry has experienced over the past few years, the vast majority of the state’s wind resource remains untapped. This growth potential is attributable to many factors, including the fact that the wind resource in Kansas is still significantly underutilized, with a large number of potential projects sites ready to be developed.  While some of these sites simply await a buyer, some of them merely require access to sufficient transmission to move the electricity, while others require incremental improvements in wind generation technology.

Expansion of the Transmission Grid

Wind energy projects are viable only if they have access to a transmission grid that can transport the power to customers.  Historically, this has been an important factor for wind project developers looking for suitable project locations in Kansas, because the bulk of the state’s best wind resource is located in areas with limited access to transmission lines.  This issue is currently being addressed by a number of public and private entities. 

The Kansas“V-Plan,” the northern portion of the Southwest Power Pool’s (“SPP”) “Y-Plan,” is particularly noteworthy.  The “V-Plan” consists of high-voltage transmission that connects eastern and western Kansas with the dual purpose of improving electric reliability and carrying more electricity from various sources, including wind, and thus further establishing a competitive energy market in the state.  Two companies, ITC Great Plains and Prairie Wind Transmission, LLC, a joint venture between Westar Energy and Electric Transmission America, are participating in the construction of this 180-mile transmission line which is expected to be completed in 2014.  The “Y-Plan” will help support the addition of 2,500 MW of new wind generation in Kansas, Oklahoma, and the Texas panhandle.

In addition to the “V-Plan,” ITC is also developing a 210-mile high-voltage transmission line between Spearville, Kansas and Axtell, Nebraska.  Construction of this line, known as the “KETA Project” began in 2009 and is expected to be completed by the end of 2012. Once completed, the KETA Project, which was encouraged by the Kansas Electric Transmission Authority (“KETA”), will support renewable generation development by providing more potential interconnection locations and transmission capacity for renewable energy generators.

 Finally, Clean Line Energy, a private company based in Houston, Texas, is in the process of developing a significant transmission project across the state known as the “Grain Belt Express Clean Line.”  Once constructed, this privately-owned project will provide a 700-mile, 600 kV extra high voltage direct current (“HVDC”) transmission line starting in Kansas and running east through Missouri, enabling Kansas wind to be exported to serve utility customers in Missouri, Illinois, Indiana, and points farther east.  Clean Line anticipates that this project will enable approximately $7 billion of new, renewable energy projects to be built. Clean Line Energy has set 2018 as the goal for commercial operation of this new transmission line.

As Figure 4 below illustrates, these new transmission lines are located in the heart ofKansas’ most productive wind areas and provide valuable paths to market for future wind projects in those areas.

Improvements in Wind Generation Technology

 Generally speaking, wind speeds increase as turbine heights (referred to as “hub heights”) increase. Since wind speed is the single most important factor in creating electricity out of the wind, tapping into high winds is key to a successful wind project. For this reason, the most noticeable wind turbine technology improvements have focused on taller hub heights and larger rotor diameters. The combination of these improvements have led to significant increases in efficiency, which have resulted in wind farms with higher capacity factors or similar capacity factors in areas with lesser winds or lower elevations.Wind speeds have historically been measured at 50 meters for wind farm development and subsequent wind maps (such as that shown in Figure 1) reflected this. However, utility-scale wind turbine hub heights have been significantly higher than 50 meters for many years (as an example, the Gray County wind farm, built in 2001, has a hub height of 65 meters).

On average, Kansas possesses a robust wind resource at a height of 50 meters.  However, as Figure 5 below illustrates, at a height of 80 meters, roughly half the state experiences average wind speeds between 8 and 9 meters per second, which is well above the 7 to 8 meters per second commonly found at a height of 50 meters.

Given that wind speed increases with an increase in altitude, there has been a trend across the wind industry to erect turbines with taller hub heights.  As seen in Figure 6 below, over the last decade, hub heights across the country have steadily increased from an average of approximately 60 meters in 2001 to 81 meters in 2011.

As technology continues to improve, and construction costs for these towers decrease, it is probable that 100 meter hub heights will become common for wind projects in Kansas.  This trend towards taller hub heights is evidenced by the fact that, in 2011, 128 turbines were installed in the United States with hub heights of 100 meters, a sharp increase over the 17 turbines of that size installed in 2010.

As the average hub heights forKansasprojects increase from the current average of 80 meters, access to high-quality wind resources will increase and more locations inKansaswill be economically viable.  As shown in the following Figure, the wind speeds available at 100 meters are predominantly in the range of 8.5 to 9.5 meters per second.

Ultimately, the combination of an expanding transmission infrastructure and technological advancements will significantly expand the areas of the state that can support viable wind development. 

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If you have any questions or comments about the Kansas wind industry, please feel free to leave a comment below or contact me directly at lhagedorn@polsinelli.com or (913)234-7416.