Late last night, President Obama officially signed into law legislation to avoid the “fiscal cliff.”  The adoption of this measure, which was approved overwhelmingly by the Senate and by a vote of 257 to 167 in the House of Representatives, is excellent news for advocates of renewable energy, as it includes an extension of the vitally important Production Tax Credit for wind facilities. 

There has been some confusion by the various media outlets covering the PTC over exactly how much additional time this extension buys for wind developers.  Prior to this fiscal cliff deal, IRC 45(d) (the section of the Internal Revenue Code setting forth the PTC) stated that qualifying wind facilities had to be placed in service before January 1, 2013, meaning that the projects have to be fully constructed and capable of generating energy.  Over the last few months, this requirement has forced many developers to aggresively ensure that their projects were placed in service by Monday, December 31st.  With the new deal, this provision has been amended by replacing the deadline of “before January 1, 2013” with “the construction of which begins before January 1, 2014.”  Thus, as amended, IRC 45(d) will read in pertinent part as follows:

In the case of a facility using wind to produce electricity, the term “qualified facility” means any facility owned by the taxpayer which is originally placed in service after December 31, 1993, and the construction of which begins before January 1, 2014.

Thus, effectively, the extension grants wind project developers another year to design, procure equipment, and break ground on new projects. 

It is important to note that this is more time than might have been granted had the legislation followed the current statutory language and required the projects to be placed in service by December 31, 2013.  Such a measure would have been significantly more onerous on the industry, as wind projects typically require more than a year to  engineer, acquire the necessary land rights, locate potential offtakers for the power generated, and complete construction.

This is certainly excellent news for renewable developers across the country, and credit should be given to all of the lawmakers who fought for this vital incentive to be included as part of the fiscal cliff package.  A special thanks should be extended to President Obama for his insistence that the wind PTC be included in any final deal.

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

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.

 

 

 

 

 

 

 

 

 

 

 

 

Photo Credit: Larry Downing, Reuters

The votes have been cast and the dust has settled, and it is now clear that Democrats were able to score some significant points in the 2012 election.  For the advocates of wind, solar, and biomass projects across the U.S., however, the key question is what this means for the future of federal renewable energy policy.

President

Of course, the big news of the night was the re-election of President Barack Obama.  President Obama has been a consistent supporter of renewable energy of all types, and has publically endorsed an extension of the vitally important federal Production Tax Credit (“PTC”). 

Governor Romney, on the other hand, appeared to be less enthusiatic about the PTC.  As pointed out in an excellent article by Laura DiMugno in North American WindPower, Gov. Romney stated in July that he was in favor of letting the PTC expire, but then revised that opinion to support a phase-out of the credit at a late-October campaign event in Iowa.  “We will support nuclear and renewables but phase out subsidies once an industry is on its feet.” Romney said.

Fortunately, the uncertainty of the election is now behind us, and with voters showing strong support for Democrats across the board, it is much more likely that President Obama will have the political capital necessary to ensure continuing, consistent support of the various renewables industries.

Senate

With the imminent consideration of the wind energy Production Tax Credit on the immediate horizon, and a more broad evaluation of tax incentives for renewables likely to occur over the next legislative session, it is extremely important that the renewable industries continue to find strong support in the U.S. Senate. With this in mind, taking a broad look, the fact that the Democratic Party has maintained its majority should be excellent news for advocates of renewable energy.

More specifically, renewable project developers have been fortunate to find a number of staunch allies on the floor of the Senate, and for the most part this core of support appears to have remained largely in-tact through the election.  Of particular note, Republican Sen. Scott Brown of Massachusetts (who co-sponsored a bipartisan four-year PTC extension bill) appears likely to lose his bid for re-election, but he will be replaced by Democrat Elizabeth Warren who is likely to share his support for the PTC.  Many other stalwart advocates of renewables, such Sens. Chuck Grassley (IA), Mark Udall (CO), Al Franken (MN) and Ron Wyden (OR), were not up for re-election in 2012.

Additionally, as Ben German of The Hill’s Global Affairs Blog points out, the election also has a significant impact on key Senate committees relating to energy issues.  Of particular importance, Sen. Jeff Bingaman (D-N.M.) is retiring and will step down as Chairman of the Energy and Natural Resources Committee.  Because Democrats retained control of the Senate, the chairmanship will likely pass to Sen. Ron Wyden (D-Ore.), rather than passing to Sen. Lisa Murkowski (R-AK). Sen. Murkowski, who will likely be the ranking member of the Energy and Natural Resources Committee, has said in the past that she is in favor of a phase-out of the PTC.  As quoted by Nick Juliano, Sen. Murkowski has stated “I’m in the camp that says we need to figure out how we phase down, how we transition out, but I’m also not one that just wants to cut it off cold turkey.”

House

Leading up to the 2012 election, Democrats held 190 seats as compared to Republicans 240 seats in the U.S. House of Representatives.  Increasing, or at the very least maintaing, this number is extremely important for the renewable industries, as there are a number of Representatives who are willing to reach across the aisle in support of renewable energy. With this in mind, it is fortunate that voters in the 2012 election appear to have looked favorably upon Democrats.  With a number of races still too close to call as of the time of this writing, it appears very likely that the Democrats will manage to win a few additional seats in the House, but those gains will fall short of taking back control from the Republicans.

Of particular relevance to wind developers, however, is how the most vocal opponents of the federal Production Tax Credit have fared.  In September, 47 House Republicans signed a letter to House Speaker John Boehner asking that the PTC not be extended.  Using those signatories as a representative group of PTC opponents, it appears that the core group of PTC opponents in the House remains largely in-tact.  Specifically, 43 of the 47 signatories were reelected.  Of those four, one successfully ran for Senate (Jeff Flake of Arizona), and three were replaced by Republicans (Jeff Flake, Cliff Stearns of Florida, and Jeff Landry of Louisiana).  Only one signatory of the anti-PTC letter has been replaced by a Democrat, as Joe Walsh of Illinois lost to Tammy Duckworth.

Of course, not all of the excitement yesterday was at the federal level, as renewable project developers also had significant stake in a number of state-level races.  With the continued support key incentives and state Renewable Energy Standards hanging in the balance, these races also deserve some commentary, but that analysis will have to be left for another day.

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.

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.

Like the rest of America, I have been closely following the numerous (and often unflattering) accounts of the debt-ceiling drama that has unfolded in the U.S. Congress and Senate.  The questions being debated have countless implications for industries all across the country, but very few have quite as much at stake as the renewable energy industry.   

As we all know, renewable resources will only become the new standard when the cost of generating energy from wind and solar resources is equal to or less than the cost of generating energy from natural gas.   As the market stands right now, both traditional and renewable energy sources receive a number of tax breaks and economic incentives from the federal government.  The legislature can tip the scales one way or another and make those incentives favor renewable resources or traditional resources, and which way they go is a huge factor in determining how quickly cost parity can be reached.

Last week, Congress and President Barack Obama agreed on a deal that increased the U.S. debt limit by at least $2.1 trillion, and implemented additional discretionary spending caps for a period of 10 years.  Perhaps most importantly for renewable energy developers, the legislation also created a bipartisan committee of Congressman and the Senators to take a hard look at the U.S. federal budget and propose $1.5 trillion in cuts.  The Committee’s recommendation will then go to Congress for approval, but if Congress fails to approve the Committee’s recommendations by December 23, 2011, automatic spending reductions will be made beginning in 2013, split evenly between domestic and defence spending.

In essence, the true impact of these budget cuts will depend entirely on the Congressman and Senators that are appointed to the “Super-Committee.”  As I have described previously, energy policy has always seemed to defy traditional party lines, and you can’t always predict whether a politician will favor traditional resources, nuclear energy, or renewable resources based solely upon their party affiliations.  Nonetheless, whether the federal energy incentive scale gets tipped towards coal and natural gas, nuclear or renewable energy will largely depend on how many representatives on the Committee are willing to take a stand for each of these camps.

In short, it is clear that energy policy will be one of the issues that the “Super-Committee” closely examines, but without knowing more about the specific political motivations of the decision-makers, we cannot know which programs are likely to be cut.  Bloomberg writers Jim Efstathiou Jr. and Christopher Martin wrote an excellent summary of the energy programs that might be at risk over the coming months.  In an effort to shed some positive light on the potential ramifications of this process on renewable energy, they close the article with the following quote from Denise Bode, the chief executive officer of the American Wind Energy Association (AWEA):

Current wind ‘projects are safe, and prospects for extension of the program beyond 2012 are as good as ever,’ Bode said in an e-mail. ‘I had a front-row seat to tax reform in the mid-1980s, and I feel confident that wind incentives will survive this process.’

As an optimist-at-heart and a supporter of the various renewable energy industries, I certainly hope that this is the case.  However, as someone who has had a front-row seat to the political process, I am also positive that we won’t be able to predict the true impacts of this deal until we know which Congressman and Senators will be appointed to the “Super-Committee.”  There is no question that quite a bit is at stake.

As this blog has noted numerous times, it isn’t always easy to get a solar or wind project constructed.  In fact, as we’ve discussed before, often one of the most expensive impediments to a project’s development is the local and state permitting process.  The Colorado Solar Energy Industries Association (COSEIA) puts a number on this expense, stating that permitting costs can add about $2,516 per U.S. residential installation and can easily exceed $100,000+ for large scale installations.

As it turns out, the state of Colorado has been, until recently, one of the worst offenders when it comes to tacking on substantial state and local permitting fees to renewable energy projects.  The Vote Solar Initiative and the COSEIA recently teamed up to collect and evaluate information about the current state of permitting in 34 local jurisdictions throughout Colorado.  The resulting study, which was recently released by the two groups, indicated that the average fee for obtaining the necessary local permits in Colorado for a solar project is nearly twice as high, and the approval process can take up to seven times as long, as the national permitting best practices.  The groups point to this result as reinforcing the need for Colorado to adopt a more standardized, streamlined solar permitting practices.

However, there is hope in sight.  Shortly after the study was released, the Colorado State Senate approved legislation that seeks to prevent the state and local governments from charging excessive permit fees and plan review fees to customers installing solar technologies.  The Legislation, entitled the Fair Permit Act (H.B.1199), was sponsored by Rep. Bob Gardner, Sen. Bob Bacon, and Sen. Shawn Mitchell to address these high permit costs and inefficiency.  The legislation now only needs the signature of Colorado Governor John Hickenlooper to become law.

Specifically, the Act improves transparency in the permit process by requiring the government agency to clearly and individually identify all solar fees and taxes assessed on an invoice, and limits solar permit fees to the government’s actual costs in issuing the permit, not to exceed $500 for a residential installation or $1,000 for a commercial system.

If you have any anecdotes about permitting renewable energy projects in Colorado, or if you’d like more information about permitting projects in general, leave a comment or send me an email at lhagedorn@polsinelli.com.

Yesterday, the Montana legislature passed important new legislation that will have a significant impact on the development of wind projects within the state.  The bill, titled the “Wind Energy Rights Act” addresses many of the big issues that state legislatures around the country are grappling with, including:

1) How to create uniform wind energy agreements between developers and landowners;

2) Whether landowners should be allowed to separately sell their interest in the airspace over their property from their interest in the land and mineral rights (commonly referred to as “severing” the wind rights); and

3) How to address any conflicts between wind developers and oil and gas developers that have rights to explore the same piece of land.

The Montana legislation takes an interesting approach to these issues:

Uniform Agreements

On the issue of uniform wind agreements, the Act sets out the information that must be included as part of several of the most common types of agreements between landowners and project developers: wind energy agreements, wind easements, and wind option agreements.

Severance of Wind Rights

The Act follows the recent trend across the U.S. of prohibiting severance.  However, interestingly, the Act states that if a landowner decides to enter into a wind agreement, but later decides to sell the property, the seller is allowed to retain any payments associated with those existing wind agreements to the exclusion of the new owner.

This would seem to increase the long-term risk for project developers, because the new owner of the property would be required to uphold the agreement with the developer, without being entitled to payments.

Dominance of Mineral Estates

Finally, the Act specifically states that it does not modify the existing statutory language regarding the dominance of mineral estates, so holders of a wind interest will be subordinate to oil and gas developers with existing mineral rights leases on the property.  This potentially raises a number of problems for renewable project developers, and can significantly increase the cost and risk of a given project.

For example, say a developer spends a significant amount of money building a turbine on property that is already subject to an oil and gas lease.  Arguably, should the oil and gas developer decide to construct an oil derrick or pipeline that interferes with the wind project in some way, this provision will make it very difficult for the wind developer to raise any objections.

The Act has passed the legislature and now just needs to be signed by Governor Schweitzer to go into law.

A few weeks back I discussed the importance of robust Renewable Energy Standards for the future of renewable energy development in the United States.  It seems that the the state of California agrees, as yesterday the state legislature passed legislation which will give California the most ambitious renewable energy standard in the nation.  This legislation, which was introduced by State Senator Joe Simitian, will require private and public utilities to utilize renewable energy for 33% of their total energy portfolios by the year 2020.

Previously, under legislation that was also introduced by State Sen. Simitian, state utilities were required to generate 20% of their total portfolios from renewable sources by 2010.  A study performed by the California Public Utilities Commission found that the state utilities have met this goal.  Specifically, they had achieved 18% renewable energy as of the end of 2010, and are expected to be at 20% by the end of this year.

Interestingly, the previous law included a rate cap which the new legislation would remove.  I’ve discussed the significant impact of rate cap provisions in a previous post, but suffice it to say that this move should help spur renewable production even further.

The legislation has now passed both houses, and all the remains for it to become effective is the signature of Gov. Jerry Brown.  Congratulations to State Senator Simitian for once again helping to raise the bar on renewable energy policy in the United States.

The full text of the bill is available on the California Legislature’s Bill Information Site, here, and an excellent “Fact Sheet” prepared by a member of Senator Simitian’s staff can be found here.

*Update:  Gov. Brown officially signed this legislation into law on April 12, 2011.  Angela Binewal wrote an excellent article for North American Windpower about the signing, and provides great insights into the industry’s response to the new standard.