As part of our continuing effort to provide current, topical information relating to renewable energy projects, RenewableEnergyLawInsider provides a series of posts from individuals with a wide range of experience and expertise. Today, Tracy Hammond from the Polsinelli Public Policy Group in Washington D.C. provides an update about the U.S. House of Representative’s failed Farm Bill and its impact on the renewable industries.

I was prepared to title this piece “A Tale of Two Farm Bills” after the U.S. House of Representative’s presumed-passage of comprehensive farm legislation this week.  I would have reported on the drastic differences between the Energy Titles within the House and Senate Farm Bills while speculating on what a future compromise might look like.  However, after the House failed to pass its version of the bill (H.R. 1947) 195-234, it is now unclear if we will even see legislation enacted at all.  While the Senate approved its bill (S. 954) on June 10th by a bipartisan vote of 66-27, the House’s failure leaves the fate of the Farm Bill and its energy provisions uncertain at best.  This, coupled with the expiration of current programs at the end of September, leaves us all with an option no one wants—an extension of current policy with no real funding for renewable energy in rural America.

How did we get here?  Well, in addition to setting federal agriculture policy, the Farm Bill also has a dramatic impact on rural, renewable energy. In 2002, Congress began shaping energy policy through farm legislation.  Then—and again in the 2008 bill—Congress has used the Farm Bill to create renewable energy programs for rural America and incentivize ethanol and biodiesel production.  This year; however, many of these innovative programs are likely to receive reductions in funding or may be ended completely.

The 2008 Farm Bill expired in 2012; however, Congress approved a bare-bones extension (to September 30, 2013) of current policy in the year-end “Fiscal Cliff” deal.  Unfortunately, this deal failed to include any funding for the bill’s energy programs, essentially suspending them for 9 months.

Even if Congress can get the Farm bill back on track, the House and Senate bills treat their respective energy titles very differently in terms of funding levels and prioritization.  The Senate bill provides $880 million in mandatory funding (over 5 years) for various energy programs like the Rural Energy for America Program, the Biorefinery Assistance Program, and the Biomass Crop Assistance Program. S. 954 would also authorize another $1.12 billion in discretionary funds. H.R. 1947, on the other hand, would eliminate all mandatory funding and authorize $1.4 billion in discretionary funds.  By comparison, the current 2008 farm bill authorized $1.1 billion in mandatory funds and $1 billion in discretionary funds.

Although these figures sound like a lot of money, Congress rarely (if ever) actually appropriates any of the discretionary funds included in these bills.  Thus, the only money that will ever go to farmers and rural small businesses must come from mandatory funds.  Because of their budgetary concerns, House Republicans have essentially called for the end of several energy programs aimed at rural America even if they can pass a bill out of their chamber.

It is still possible that the House can approve a bill and that some funding will survive a House-Senate compromise later this year; however, it’s increasingly likely that several energy programs will receive dramatically reduced funding and may end altogether if Democrats and Republicans can’t compromise and cobble together a path forward.

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.

 

 

 

 

 

 

 

 

 

 

As one of the final acts of the 2013 legislative session, on May 17th the Missouri legislature approved an amendment that will phase-out the Missouri solar rebate between 2014 and 2020. The approved amendment was based largely upon similar legislation that was supported by the Missouri solar industry trade group, MOSEIA, as well as the Missouri public utilities.

As background, pursuant to Proposition C, the voter intiative implementing Missouri’s Renewable Energy Standard, the state’s public utilities provide a rebate of $2.00 per watt for new or expanded solar systems on customers’ premises, up to a maximum of 25 kW per system (for a maximum total rebate of $50,000 per system), subject to a 1% annual cost cap for the utilities.

This rebate has been viewed as extremely effective in encouraging the development of the Missouri solar industry over the last few years. In light of this success, going into the 2013 legislative session both the solar industry and the public utilities believed that it was necessary to begin planning for the phase-out of the incentive over the next few years. To this end, a number of bills were introduced setting forth proposed phase-out schedules ranging from 4 to 6 years. Though none of the stand-alone bills garnered enough support to pass both chambers prior to the session end on Friday, an amendment to an existing utilities bill which included the phase-out language was successfully proposed and passed on the final day of the session.

As passed, the amendment sets forth the following phase-out schedule for the solar rebate:

  • $2.00/watt before June 30, 2014;
  • $1.50/watt between July 1, 2014 and June 30, 2015;
  • $1.00/watt between July 1, 2015 and June 30, 2016;
  • $0.50/watt between July 1, 2016 and June 30, 2019; and
  • $0.25/watt between July 1, 2019 and June 30, 2020.

In addition to the phase-out, there are a number of other provisions included in the amendment that could potentially impact the Missouri solar industry and the public. If you have any questions about the solar rebate, this legislation, or the potential impacts on the solar industry or your company, please feel free to leave a comment or contact me at lhagedorn@polsinelli.com or (913)234-7416.

As part of our continuing efforts to provide current, topical information relating to renewable energy projects, RenewableEnergyLawInsider provides a series of posts from individuals with a wide range of experience and expertise. Today, Tracy Hammond from the Polsinelli Public Policy Group in Washington D.C. provides an update about the various energy industry tax policy options that are being considered by the Senate Finance Committee. Enjoy!

Last week, the Senate Finance Committee outlined a variety of options to overhaul many of the provisions of the tax code that relate to the energy industry.  Options included eliminating all existing incentives, replacing energy tax expenditures with a carbon tax or making narrower tweaks to credits, deductions and other preferences that apply to energy sources. The document is only an early indication of how comrehensive tax reform could impact the energy sector.

The white paper developed by Democratic and Republican committee staff serves as a menu of nearly all prominent energy tax reform ideas that have been put forth over the past several years. It is presented as a set of options—not recommendations.  None of the varied proposal have been endorsed by Finance Chairman Max Baucus (D-MT) or ranking member Orrin Hatch (R-UT).  Instead, it represents “a non-exhaustive list of prominent tax reform options” for committee members to consider.

Suggested principles include:

  • providing certainty to energy firms
  • simplifying the tax code
  • making tax expenditures fair and efficient
  • encouraging energy independence
  • addressing externalities inherent in energy production

The document cites Congressional Budget Office estimates that this year alone energy-related tax expenditures will cost the government over $16 billion in unrealized revenue in addition to $3 billion in direct spending. Renewable energy companies will receive 45% of the benefits, with 29% going towards energy efficiency, 20% for fossil fuels and 7% for nuclear power.

Options for reform include eliminating all energy expenditures—including permanent oil and gas tax deductions and temporary renewable PTCs—to maintaining some incentives while tweaking others. The paper discusses a carbon tax, and considers expanding master limited partnership (MLP) treatment and extending accelerated depreciation to renewable energy companies.

The paper reflects a growing sentiment that may ultimately result in the elimination of temporary tax breaks targeted at wind and solar energy, biofuels, and electric vehicles; and replacing them with “one or more technology-neutral tax incentives.”

Upon release, Finance Committee members met for over an hour to discuss the paper, but did not disclose which options they might seek to enact into law.

Sen. Debbie Stabenow (D-MI), Chair of the Finance subcommittee on energy, said she had suggested the need to provide longer-term certainty for renewable energy companies, but admitted there was no consensus among committee members.

“It was a pretty good discussion,” Sen. Pat Roberts (R-KS) said after the meeting.  “But I think everybody agreed we need more information…then we can get into the weeds.”

After several months of anxious anticipation, yesterday the IRS released guidance on its interpretation of certain provisions relating to Congress’ extension of the federal Production Tax Credit (“PTC”).

Specifically, the provisions in question relate to how far along in development a project will need to be in order to qualify for the PTC before the credit expires on January 1, 2014.  In January of 2013, Congress passed the American Taxpayer Relief Act of 2012.  Among the many provisions in that legislation, Congress agreed to extend the then-expired PTC so that it would include projects that have begun construction before January 1, 2014.  This represented a welcome departure from prior versions of the PTC statute, which required projects to be “placed in service” by the deadline, as opposed to having to “begin construction.”

Though this modification was excellent news for the wind industry, replacing the “placed in service” requirement with a “begin construction” requirement created some ambiguities in how the statute would be interpreted and applied by the IRS.  What does it mean to “begin construction” in this context?  How much money will need to be spent?  What kinds of activities will qualify?  While there was some previous precedent for a similar “begin construction” requirement with the Section 1603 Grant program, there was no guarantee that the IRS would apply a similar rationale to the PTC extension.  Though it is impossible to measure the exact impact of this ambiguity, there is little doubt that the uncertainty about what it means to “begin construction” created some degree of a chilling effect on wind developments in the first quarter of 2013.

In an effort to resolve this issue, IRS has released Notice 2013-29, entitled “Beginning of Construction for Purposes of the Renewable Electricity Production Tax Credit and Energy Investment Tax Credit.”  Using the Section 1603 standards as a guide, IRS states that there are two methods for satisfying the “begin construction” requirement:

1.)    Starting physical work of a significant nature; or

2.)    Meeting a safe harbor threshold by paying or incurring 5% of more of the total cost of the facility and thereafter making continuous efforts to advance towards completion.

Physical Work of a Significant Nature

The first alternative is to begin construction before January 1, 2014.  The IRS Notice makes clear that “[c]onstruction of a qualified facility begins when physical work of a significant nature begins,” whether performed by the taxpayer or by other persons for the taxpayer under a binding written contract. 

Ultimately, the determination of whether activities qualify as “physical work of a significant nature” is a judgment call by the IRS based upon the relevant facts and circumstances of a particular project.  However, IRS does provide the following guidelines:

  • Both on-site work (excavation of the faoundation, setting of anchor bolts, pouring of concrete pads) and off-site work (manufacturing of components if performed pursuant to a binding contract and not held in manufacturer’s inventory) may be taken into account;
  • Production of property that is held or normally held in inventory by a vendor does not qualify; and
  • Preliminary activities do not qualify, including the following:

Safe Harbor

The second alternative is to qualify for the PTC safe harbor by paying or incurring 5% or more of the total cost of the facility before January 1, 2014, and thereafter making continuous efforts to advance towards completion of the facility.

For the purposes of calculating the 5% threshold, all costs properly included in the depreciable basis of the facility are to be taken into account, not including the cost of land or any property not integral to the facility.

Additional Issues

Construction of Individual Portions of Larger Projects

Answering a question that has been posed by many industry insiders over the past few months, the IRS Notice specifies that, for the purposes of determining whether construction of a facility has begun, work on individual turbines that are part of a larger project can qualify as work on the entire project.  For example, a wind developer may commence work on some but not all of the planned turbines for a wind project and qualify as having begun construction for the entire project.  It is not necessary to have begun construction of each individual turbine within that larger project.  Whether a single facility will be deemed to be part of a larger project will be a question left to the discretion of the IRS, but the major factors considered are as follows: 

Integral Versus Non-Integral Property

Construction of a wind project involves numerous small tasks, some of which are integral to the production of electricity and some are not.  For the purposes of determining whether construction of a facility has begun, only tasks that are integral to the production of electricity will be counted. 

Continuous Construction & Continuous Efforts

Finally, in order to qualify the “physical work of a significant nature” standard, the taxpayer must engage in a continuous program of construction.  As with many of the other requirements discussed above, this is determined through a facts and circumstances analysis by the IRS. 

In regards to the “continuous efforts” standard for the 5% safe harbor, the IRS Notice provides the following list of factors which may be considered in determining whether there have been continuous efforts:

However, for both the Physical Work and theSafeHarboralternatives, the IRS does allow certain disruptions in construction that are beyond the taxpayer’s control, such as:

 

 

 

 

 

 

 

 

Cost Overruns

The IRS Notice briefly touches on one final point relating to situations where the costs of a single facility that is part of a larger project (i.e., a single wind turbine) ends up costing more than anticipated, and causes the total project cost to rise by the placed-in-service date such that the safe harbored funds no longer satisfy the 5% threshold.  In that event, the Notice state that IRS will allow the PTC to be claimed with regards to some, but not all, of the individual turbines, but the total aggregate cost of the individual facilities for which the PTC will apply cannot be more than twenty times the amount of safe harbor funds that the taxpayer claimed prior to January 1, 2014.

If you have any questions about the IRS Notice or the requirements discussed therein, please feel free to leave a comment below or contact the Polsinelli Energy Group at (913)234-7416 or lhagedorn@polsinelli.com.

As part of our continuing efforts to provide current, topical information relating to renewable energy projects, RenewableEnergyLawInsider provides a series of posts from  individuals with a wide range of experience and expertise.  Today, two representatives from the Polsinelli Public Policy Group in Washington D.C., Andy Wright and Tracy Hammond, provide an update on the Obama administrations efforts to extend Master Limited Partnerships and Real Estate Investment Trusts to renewable energy projects.  Enjoy!

Earlier this week, President Obama’s top climate and energy advisor Heather Zichal stated that the White House is working with Congress to open up new financing avenues for renewable energy projects that would help put them on more equal footing with their incumbent, fossil fuel counterparts.

Zichal indicated that the White House is reaching out to both Democrats and Republicans in both Chambers of Congress on several energy-related tax measures that could be included in a more comprehensive tax reform effort later this year. Specifically, the Administration is working with Members of Congress to “help get their heads around” two financial structures called Master Limited Partnerships (MLPs) and Real Estate Investment Trusts (REITs) that would allow renewable energy companies to leverage more equity financing for building new infrastructure.

“Because we view the tax code as an important way to actually affect energy policy, we’re doing a lot of groundwork right now to help provide technical assistance to some of the other Members on both sides of the aisle,” Zichal said.

MLPs allow a business to organize a partnership where ownership interests are traded in financial markets like common stock, allowing a broad pool of investors to put up needed capital. A REIT is a security that sells like a stock and invests in real estate property directly.

Currently neither MLPs nor REITs are open to renewable energy projects, forcing developers to partner with tax equity investors that provide financing in exchange for the benefits of the renewable energy tax credits. This arrangement increases financing costs and limits the universe of possible investors to about $3 billion to $5 billion by some estimates. However, the MLP and REIT products open up potential pools of $350 billion and $800 billion of market capitalization, respectively.

Senators Chris Coons (D-DE) and Jerry Moran (R-KS) introduced legislation last Congress that would extend MLPs to renewable projects and Coons has promised to reintroduce his legislation this year. REITs, meanwhile, could be extended to renewable energy through administrative action by the Treasury Department, or Congress could pass new legislation authorizing renewable developers to access the tax structure.

In addition to Zichal’s comments, Ernest Moniz, nominated to be the next Secretary of the Department of Energy (DOE), also spoke out in favor of “Green MLPs” in his confirmation hearing before the Senate Energy Committee on April 9th. DOE has already convened several workshops to explore how it can assist companies that want to organize MLPs or REITs to attract investment. These include ongoing efforts focusing on how to standardize power purchase contracts to make them easier to use as investment vehicles and on continuing DOE’s role as an information clearinghouse for the private sector.

While conservative Members in Congress have been widely critical of the Production Tax Credit (PTC) for renewable electricity generation, MLPs and REITs offer ways to support energy development with little cost to the federal government. Neither is a direct subsidy for the industry. Rather, they are designed to attract additional private investment in renewable projects. These financial vehicles can also help the renewable power sector avoid more boom-and-bust cycles that have plagued the industry’s reliance on tax credits.

In a time of hyper-partisanship inWashington, extending MLPs and REITs to the renewable energy sector offers a rare opportunity to enact meaningful, bipartisan public policy that can both increase domestic energy production and equal the playing field for energy technologies.

It’s been a busy few months here at RELI, with major projects taking up a substantial amount of my time.  Hopefully, I’ll be able to provide some details on that work in the next few days, but for the time being I wanted to pass along an article that I wrote for the March edition of the Missouri Municipal League‘s publication The Review.  Enjoy!

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There can be no doubt about it.  Electric vehicles are on the way.  In his 2011 State ofUnionaddress, President Obama put forth a firm challenge for theU.S.automotive industry when he called for theUnited Statesto “become the first country to have a million electric vehicles on the road by 2015.” 

Though President Obama’s goal of 1 million electric vehicles (“EVs”) by 2015 is probably overly optimistic, there are signs that the EV market in theUnitedStateis gaining momentum.  In the span of one year, the market for EVs tripled from approximately 17,500 EVs sold in 2011, to approximately 53,000 new EVs in 2012.  This growth is particularly impressive when you consider that even the most mainstream EV offerings such as the Chevrolet Volt, Nissan Leaf, and Toyota Prius Plug-in Hybrid have often only been available in limited quantities in major markets.  Additionally, it is unlikely that the market penetration of EVs will continue to grow at a slow, incremental pace.  Instead, it is likely that the number of EVs on the nation’s highways will increase dramatically as consumers become more exposed to EV technology and manufacturers release a broader selection of makes and models of EVs that appeal to a wider range of consumers.

Being the “Show-Me” State, it is perhaps unsurprising that many Missouricommunities have delayed planning the local infrastructure and procedural processes that will be necessary to support wide-spread EV adoption.  Fortunately, in 2011 the U.S. Department of Energy awarded a grant to the MetropolitanEnergyCenterin Kansas City, MOto produce a regional plan that can be implemented by municipalities in Kansasand Missourito prepare public resources and secure the economic and environmental benefits of EVs.  This plan, which will be accessible at www.electrifyheartland.org, compiles expert analysis from EV industry participants, local communities, public utilities, and subject matter experts such as Black & Veatch and the law firm of Polsinelli Shughart to provide guidance to communities that are seeking to lay the foundation for widespread EV adoption. 

Among the numerous findings detailed in the plan,Missouricommunities should perhaps benefit the most from the discussion of the unique planning and regulatory efforts that will likely be required to accommodate EV adoption.  While at face value EV usage may not appear to require much attention, local governments should strongly consider taking the following steps before EVs start appearing on city streets: 

  • First, an estimate should be prepared of exactly how many EVs might be purchased in the community in order to get a sense of the scope and timing of the planning efforts that should be undertaken. 
  • Second, the municipality should examine its existing building codes to determine what standards should be applied to the installation of EV charging stations in residential and non-residential settings. 
  • Third, the municipality should examine its current electrical permitting and inspection process to determine how it will ensure that EV charging stations installations are conducted in a safe and reliable manner without unduly burdening either the installers or the permitting office.
  • Finally, the municipality should examine its existing parking and signage ordinances to determine how it will treat parking spots with electrical vehicle charging stations.

Projections for Missouri EV Adoption

When talking about long-term national goals, it can be easy to lose perspective on local impacts.  If theUnited Stateswere to reach its goal of 1 million EVs on the road, how many EVs could be expected in the average community inMissouri? 

Based upon motor vehicle registration data gathered by the U.S. Federal Highway Administration,Missourihad a total of just over 5 million vehicles registered in the state in 2011, or roughly 8 vehicles for every 10 people in the state.  As Figure 1 below illustrates, assuming that the 1,000,000 nation-wide EVs are distributed proportionally with population among the states, Missouri could expect a total of just over 20,500 EVs, or about one EV for every 300 people in the state. For a community of 10,000 people, this equals roughly 34 EVs, or roughly 340 EVs for a community of 100,000.

Of course, the real challenge for municipal governments lies not in the vehicles themselves, but with the infrastructure necessary to charge the vehicles, known as Electric Vehicle Supply Equipment (“EVSE”) or simply as “charging stations.” 

It is probably safe to assume that every person who purchases an EV will also purchase a charging station for their home, so they will be able to charge their vehicles overnight.  Additional charging stations will likely be installed by local businesses, by potential third-party suppliers of electricity, and by the municipalities themselves.  Taking these additional charging stations into account, it can be estimated that roughly 1.5 charging stations will need to be permitted, installed and inspected for every EV located within a community.  Figure 2 below extrapolates this estimate across the state to show the projected number of charging stations that will be required.

Updating Building Codes to Address Charging Stations

Once local planners have a sense of how many EVs can be expected in their jurisdiction, the question raised is what changes should be made in the local ordinances and policies to accommodate this influx of new vehicles and charging stations.  Because there is no state-wide authority for building codes inMissouri, it will be necessary for local communities to review their building codes to ensure that EV charging stations will be safely integrated into new and existing structures.  As with any revisions of building codes, the main goal of the process is to incorporate as much flexibility as possible while still maintaining the highest level of safety for installers and citizens.

Specifically, there are a number of revisions that communities can make to their building codes that will significantly improve the processing time and effectiveness of their planning efforts for EV charging stations, a few of which are described below:

  • To ensure safe and up-to-date practices are utilized during installations, adopt the most current version of the National Electrical Code (“NEC”), or at least Article 625 of the NEC which includes best practices for wiring methods, equipment construction, control and protection, and equipment locations for EV charging stations.
  • Require all new, reconstruction and renovation building projects to ensure that the electrical room and all conduits leading to the electrical room in new multi-unit, commercial or industrial developments are appropriately sized to accommodate future electrical equipment necessary for charging stations, as well as the voltage and amperage capabilities of the accompanying infrastructure.
  • Require that all newly permitted construction or renovation projects install sufficient conduits, junction boxes, wall space, electrical panels and circuitry capacity in locations that could potentially serve EVSE sites in the future, such as garages and parking facilities.

Update Electric Permitting Ordinances to Address Charging Station Installations

For most municipalities acrossMissouri, the primary logistical hurdle for EV adoption is how to design a permitting and inspection process for EV charging stations that will allow for safe and reliable installations without unduly burdening their administrative staff.  Currently, when faced with an electrical permit for the installation of an EV charging station, most municipalities default position is to either follow the pre-established procedure for miscellaneous electrical permits, or fail to permit the installations at all.  Both scenarios present unsatisfactory results and fail to consider the particular complexities of installing an EV charger.  This puts the public confidence in EVs and EVSE at risk unnecessarily.

When designing these inspection programs, one of the easiest ways to minimize the administrative burden while efficiently allocating resources is to recognize the fact that communities will face a wide spectrum of potential scenarios for charging station permits, and there is no single permitting process that would be appropriate for all occasions.  For example, significantly less regulatory scrutiny will be needed for installation of a small charging system in a residence than would be required for a large commercial entity that wants to install numerous charging stations for use by customers and employees. As discussed more thoroughly below, in order to accommodate these different needs and allocate resources appropriately, many communities across the country are adopting a multi-tiered process that applies different levels of scrutiny to projects based upon the project’s complexity. 

Single-Family Residential Installations

By far the easiest EV charging alternative for most consumers is to utilize an existing 120-volt outlet located in the garage.  Obviously, in these cases an electrical upgrade is not required, so no permit is needed.  In cases where a dedicated 120V or 240V receptacle and circuit is desired for a charging station, a minor electrical permit likely needs to be issued, though it can easily be handled under the city’s existing permitting requirements. 

However, in cases where the resident’s existing electrical panel cannot safely meet the increased electricity needs, then an additional permit will be required in order to either upgrade the electrical panel or install a new panel and meter.  In order to gather all of the information needed to properly assess the safety of the installation, many municipalities across the country are adopting a stand-alone permitting form for these installations.  Often, these permits are based in large part upon a form permit application that has been prepared by the U.S. Department of Energy’s Alternative Fuels and Advanced Vehicles Data Center, available at http://www.afdc.energy.gov/pdfs/EV_charging_template.pdf.

Beyond adopting a specialized stand-alone permit, there are other steps that a community can take to streamline the permitting process.  For example, if the non-minor permit application has been submitted by a certified electrician that has received training in the installation of EV charging stations from an nationally-recognized training program, the local government can have some comfort that the installation is safe and therefore can adopt less stringent inspection processes, such as inspecting one out of ten installations or foregoing inspections altogether.  Where the installation was conducted by an electrician that has not been trained in EVSE, then many local governments have made it a priority to inspect the projects as soon as possible.  For example, many municipalities across the country have committed to conducting inspections within 24 hours of the installation of the charging station equipment.

Large Single-Family Residential, Multi-Family Residential and Commercial Installations

While small single-family residence installations likely present relatively few safety risks, charger installations in larger settings can be significantly more complex and thus require more significant oversight from local permitting bodies.  As an example, compare the installation of a new 120V / 1.8 kilowatt outlet in a residential garage to the installation of ten quick-charge stations outside of a movie theatre or grocery store, each of which are capable of handling 240V and up to 20 kilowatts of electricity.  For these more complex projects, communities should consider requiring applicants to fill-out a specialized permit and provide significantly more scrutiny to these types of installations.

EV Signage and Parking Marking Plans

Though we seldom stop and think about their impact, street signs can serve three important functions to facilitate the adoption of EVs in a community. First and most obviously, they can direct EV drivers to the nearest public charging stations.  Second, they serve to educate non-EV drivers about the availability of charging stations, and thus promote confidence that, should they decide to purchase an EV, there will always be a charging station readily-available.  Finally, they can publicize premium reserved parking spots, should the government choose to utilize the parking locations as an incentive for EV drivers.

Given the potential importance of signage to the public’s perception of EVs, it is perhaps not suprising that a significant amount of debate has occurred at the national level regarding the adoption of a uniform standard for EV charging station signs.  Currently, roadway signage is regulated by the U.S. Department of Transportation, Federal Highway Administration (“FHWA”).  Specifically, approved signage requirements are contained within the Manual of Uniform Traffic Control Devices (“MUTCD”).

In its current form, the MUTCD does not contain any requirements for EVSE signage.  However, there is a process by which state transportation agencies may submit a request for so-called “experimental” signage.  If approved, the experimental signs may be used within the state subject to certain requirements and restrictions.  By way of example, in 2011, the Departments of Transportation for the States of Washington andOregonsubmitted a request for the FHWA to consider an EV Charging General Service symbol, displayed as Figure 3 below. The FHWA granted those states an interim approval to use the signs to designate charging station locations.

In order to promote consistency,Missouricommunities should seriously consider adopting this FHWA-approved signage, and encourage the Missouri Department of Transportation to submit a request and obtain approval from the FHWA to utilize the symbols in the State.  These symbols have already been thoroughly evaluated by the FHWA and were found to be highly visible and comprehensible by a large segment of the population.  Additionally, adopting a symbol that is being utilized in other jurisdictions across the country increases the effectiveness of the symbols by promoting uniformity and recognizability.

While the FHWA approval process is being pursued, local communities can also begin to present this signage as an option for local businesses to utilize on private property, similar to what many businesses use currently for “Pregnant Mother” parking spaces.  Of course, such signage would be unofficial and entirely without the force of law, but its adoption would signal that the business recognizes and supports the needs of its EV-driving clientele.

Incentives or Penalties for EV Charging Station Parking

 

Finally, once the stations are installed and the signs are put up, public and private parking facility owners will need to determine whether, and to what extent, such signs will be enforced. 

InMissouri, the enforcement of street signs on public property is currently a prerogative of local governments, and thus each community will need to determine the level of enforcement that is appropriate for its populace.  However, when setting these enforcement policies, it is important that communities carefully weigh several competing interests.  First, during the early years of EV adoption, parking spots with EV charging stations may be vacant for large periods of time.  It is possible that a negative sentiment could develop if these spots are located in high-traffic areas and parking by non-EVs is prohibited and strictly enforced.   On the other hand, the availability of these charging locations is critically important for fostering range confidence for EV drivers.

To successfully balance these concerns, local communities might consider promoting the placement of EVSE in locations that are convenient and accessible, but not necessarily in the most desired or prominent parking locations.  Additionally, if the community is considering adopting punitive actions for non-EVs parked in an EV spot, the community might consider foregoing enforcement of those penalties until the level of EV adoption in the community is strong enough to ensure that the spots are filled a significant amount of the time.

Proper Planning Will Lead to a Smooth Transition to EVs

There can be no doubt about it, EVs are on the way.  By taking a few relatively minor steps to prepare for this influx of new vehicles and the infrastructure needed to support those vehicles, local communities will be able to minimize logistical and administrative burdens and ensure that local residents across the state are able to enjoy their new vehicles safely.

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.

________________________________________________________

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.

 

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.