Mintz Levin. Not your standard practice.
Policy and Legal Implications ofImplementing Renewable Energy at Scale
Thomas R. Burton III, Chair, Energy Technology Practice
August 2015
12th Annual AREDAY Summit
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• Supply and Demand GeographicMismatch
• Finance Gap for Innovation Deployment
• To DG or Not to DG – That's the Question
• Intermittent Power GenerationCharacteristics
Key Barriers to Adoption of Renewable Energy At Scale
Supply and Demand Geographic Mismatch
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• About 60% of wind energy is produced inland
• Extensive transmission networks necessary tomeet demand
Currently, the supplyof renewables is
inland, while demandis on the coasts
• Federal Power Act's limitations
States and localitieshave a say intransmissionregulations
• CapX2020 – "Buy the Farm" Law
• Ohio revised setback distance last year to aminimum of 1,125 ft. from property line,immediately killed several proposed windfarms
Regulatoryrequirements vary
widely and changedrastically during
project development
Solution: Federal Preemption to Simplify the Process
• Congress can and should have acomprehensive response
– On energy, the Supreme Court agrees
• Precedent: Telecommunications Act of1996, 1980 Comprehensive EnvironmentalResponse, Compensation, and Liability Act(CERCLA)
• For more, read Ann Klee, Jeffrey Porter, and KatyWard's analysis in Gas Lines to Pipelines: The Case forComprehensive Federal Energy Legislation
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Solution: Clean Power Plan
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Overview
•Building Block 3
•Federal Implementation Plan
Challenges
•Increased Generation Costs
•Infrastructure Gap
Opportunities
•Regional Partnerships – RGGI
•Corporate Leadership
• U.S. offshore wind potential is > 1000 GW according to NationalRenewable Energy Laboratory estimate
• Deepwater Wind: 30 MW project off Block Island, Rhode Island
• Atlantic Wind Connection
Solution: Deploy Offshore Wind to bring supply todemand
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Finance Gap for Innovation Deployment
• Tremendous innovation, but shortfall in matching capital toprojects
• New U.S. CleanTech Investment peaked in Q4 2013, accordingto Bloomberg New Energy Finance
• Need creative financial structures to accelerate adoption
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New Investment in Clean Energy in the U.S. ($BN)
Source: BNEF
Solution: Consistent Financial Policy
• Congress extends tax credits, but offers little certainty
– PTC: Senate approved extension July 21st through 2016
– ITC: Likely addressed via a tax reform negotiation in 2017
– Sustainable proposals to sunset may be a solution
• Grow More Green Banks
– Connecticut: Attracted $225 million last year
– New York: Initial commitment of over $800 million
– PACE
• For renewable solutions to scale, government must lead the wayas an early adopter, which can unlock financing
– Federal
– Local8
Solution: Matching Capital with Projects
• Aligned Intermediary (AI): a mechanism for helping long term investorsinvest in the most promising resource innovation ventures, according toAlicia Seiger's Energizing The US Resource Innovation Ecosystem report
• Structured as a non-profit, non-stock corporation organized andoperated for charitable, educational, and scientific purposes.
• Roles would include:
– Facilitator
– Buy-side Advisor
– Collaborator
– Finance Expert
– Syndicator
– Standardizer
– Anonymizer
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Source: Seiger's Energizing The U.S. ResourceInnovation Ecosystem
To DG or Not to DG – That's The Question
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Have to strike a balance that encourages DG and allows utilities to adapt to achanging landscape
This creates a rate design issue
As DG customers pay less, non-DGcustomers pay more to compensate
Massachusetts California
Rapid growth of DG over the past two years expected to continue
Criticism: DG users take advantage of utility infrastructure without paying full share into the system
Current battleground: utilities' traditionally centralized business models andconsumers employing DG
Striking the Right Balance Can Take Many Forms
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• Could increase cost protections or endsubsidies
• Example: Net Metering Changes in AZ,CA, MN, MA
• Could increase cost protections or endsubsidies
• Example: Net Metering Changes in AZ,CA, MN, MA
Policy andRegulation
Reform
• NRG
• Issues for Entrepreneurs
• NRG
• Issues for Entrepreneurs
UtilitiesLeveraging DG
• Access Charges
• Examples: NM and KS
• Access Charges
• Examples: NM and KS
AdjustingTraditional
Business Models
Renewables Intermittent Power Generation
• Ramp up – generationdeclines as demandincreases
– California ISO "duck curve"
• Ramp down – supplyoverload on transmissionlines
– Vermont: ISO-NE renewableenergy cutbacks
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Source: CA ISO
Solution: Policies Supporting Energy Storage Deployment
• Current market compares to solar5 – 7 years ago (Baird EquityResearch)
– Costs have dropped 72% since2010 (Clean Energy Pipeline).
• Government Action – Carrots andSticks
– CA Self Generation IncentiveProgram - Extended through 2019
– Massachusetts Energy StorageInitiative
– CA Energy Storage Mandate
• Large utilities need 1.3 GW of storageby 2020
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