On January 23, 2012, FERC issued the first pilot project license to Verdant Power, LLC (“Verdant”) for its Roosevelt Island Tidal Energy Project No. 12611 (“RITE”).  The RITE project will be a 1,050 kW tidal project located on New York’s East River, and the project will use natural tidal currents to generate power from turbines mounted on the riverbed.  In approving the pilot license, FERC required a number of environmental measures to preserve the fish, wildlife, cultural, and aesthetic properties of the area surrounding the RITE project.

The term “hydrokinetics” describes zero-emission renewable power from the movement of water.  Hydrokinetic projects are often referred to as “tidal” or “wave” projects, and unlike traditional hydropower projects, hydrokinetic projects do not require the building of infrastructure to create an impoundment of water (such as dams that collect and cascade water) to create energy.  Low-head hydropower projects can be confused with several hydrokinetic projects because several low-head hydropower projects are smaller projects that utilize “run-of-the-river” technology, but actually, low-head hydropower usually refers to sites with a head (i.e., elevation difference) of less than five meters (about 16 feet) for the falling water.

In an effort to encourage hydrokinetic development, the Commission developed the pilot license process in 2008 to test new technologies and to evaluate appropriate sites for these new technologies.  FERC also hopes to assess the environmental impact of implementing new hydrokinetic projects.  In order to be eligible to receive a pilot license the project must be: (1) small, (2) short term, (3) located in environmentally non-sensitive areas based on the Commission’s review of the record, (4) removable and able to be shut down on short notice, (5) removed, with the site restored, before the end of the license term (unless a new license is granted), and (6) initiated by a draft application with the appropriate environmental analysis.  To date, FERC has issued 100 preliminary permits to study the feasibility of developing a pilot hydrokinetic project, and currently there are nine entities in the pre-filing process for license applications.  Only three entities have actually submitted full license applications. 

The RITE project will be operated remotely, and although there will be no manned control center, dispatch technicians will be available to check interconnections.  A supervisory computer will collect data on the status of each turbine and allow for real-time and post-processed performance monitoring.  During periods of “no-load” when energy is not being generated, an automatic brake will be applied to the turbines and prevent the rotors from rotating.
 
A full copy of the Commission decision is available here.

On November 29 and 30, 2011, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) held a Commissioner-led Technical Conference on electric reliability issues.  Of note, the Commission devoted an entire day of the conference to the impact of the EPA’s regulations on electric reliability. The conference produced an active discussion and debate among FERC Commissioners, EPA leadership, industry leaders, and state regulators about whether EPA’s new power plant rules will degrade electric reliability and what, if anything, FERC should be doing to evaluate and mitigate those risks. A copy of prepared testimony submitted by all panelists is available here.

The first day of the conference was devoted to NERC activities and processes.  At the November 29 session, there were two panels, entitled: (1) Identifying Priorities for NERC Activities; and (2) Incorporating Lessons Learned into a More Reliable Grid.  Participants on Panel 1 were asked to provide general views on “how NERC’s prioritization tool has been working” and address specific issues related to the NERC compliance and enforcement process.   Panelists on Panel 2 were asked to address how “lessons learned” are incorporated into NERC priorities, including lessons from events analysis and how those get disseminated to industry.  Further, panelists on Panel 2 were asked if there is a “feedback loop” into the Reliability Standards development process to locate gaps in the process.

The November 30 session was dedicated to the EPA discussion and consisted of two panels.  The first panel, Panel 3, included “Presentations and Discussion on the Current State of Processes for Identifying Unit-Specific Local or Regional Reliability Issues in Response to Final EPA Regulations.”  Panelists were asked to give details about their local and regional processes to identify unit-specific reliability issues in connection with final EPA environmental requirements.  Panelists were also asked for details surrounding proposed exemption processes and whether they supported exemption processes identified by the RTOs or other entities in comments to the EPA.  The second panel, Panel 4, was titled “Discussion on multi-jurisdictional processes.”  Panelists were asked how they coordinate processes like state integrated resource planning with reliability requirements and the “safety valve proposal.”  They were also asked about what role the Commission or the Department of Energy (“DOE”) should play in reliability solutions due to retirements.

The EPA-related sessions produced a sometimes spirited debate on what has become a controversial issue – whether FERC has done enough to study the reliability impact of the EPA rules and what role FERC should play in communicating reliability risks to EPA.  EPA Assistant Administrator Gina McCarthy began the session with prepared remarks, in which she reiterated the public health concerns driving the EPA rules and pledged that, “the lights will not go out in the future as a result of EPA rules.” 

Kicking off the subsequent panel discussion, NERC’s Mark Lauby presented the results of NERC’s most recent annual reliability assessment, which predicted a significant amount of generation retirements as a result of the EPA rules.  Lauby also voiced concern over the reliability impacts of taking down large portions of the nation’s coal fleet for retrofits: “NERC is concerned about the risk to reliability from retrofitting by 2015, environmental controls in over 500 units, representing over 250 gigawatts of capacity driven by the utility air toxics rule,” Lauby said.

In the panel discussions, industry representatives, including regional transmission organizations (“RTOs”), utilities, NERC, and state regulatory commissions, debated whether the EPA rules would degrade electric reliability and what role FERC should play. 

Chairman Wellinghoff argued that he sees no significant role for FERC, arguing that “planning authorities… had generally indicated that they are able to step up and address these issues.”  Commissioner LaFleur noted that “while the panelists disagree on some things, maybe we would say disagree on most things, I believe they all agree that coordination and flexibility will be needed.”  Commissioner Moeller voiced significant concerns about the reliability impacts of the EPA rules and suggested that “generators should not have to choose between violating reliability standards and clean air standards.”  Commissioner Norris remarked that he is “sufficiently satisfied that the reliability of the electric grid can be adequately maintained as compliance with EPA regulations is achieved.”  (Commissioner Spitzer did not participate.)

The day after the conference, the DOE and EPA jointly presented a new DOE report entitled, Resource Adequacy Implications of Forthcoming EPA Air Quality Regulations, which argues that the EPA’s Cross-State Air Pollution Rule (“CSAPR”) and the Mercury and Air Toxics Standards (“MATS”) will not affect grid reliability.

On November 28, 2011, Secretary of the Interior Ken Salazar and Assistant Secretary for Indian Affairs Larry Echo Hawk announced the beginning of a major reform of federal surface leasing regulations for American Indian Lands.  The Department of the Interior, as trustee responsible for managing approximately 56 million surface acres in Indian Country, currently processes requests for land leases and subleases without a defined process or deadline for review.  Attempts to engage in lease or mortgage transactions can languish for years. The proposed rule, which was published in the Federal Register on Tuesday, November 30th, was designed in response to scheme changes requested by tribal leaders, and is intended to remove what has become a federal roadblock to economic and renewable energy development on Indian lands.

The proposed rule reform sets out specific processes for the Bureau of Indian Affairs (“BIA”) review of leases and subleases, and for the first time, includes enforceable deadlines.  For commercial and industrial development projects, the BIA has sixty days to review leases and subleases.  If the BIA does not complete review within sixty days, the agreement will automatically be allowed.  Further, under the new rule the BIA will be required to approve the leases unless it finds a compelling reason to disapprove.

For a copy of the proposed rule, click here.

The DOE loan guarantee program has faced heightened scrutiny in the wake of the bankruptcy of Solyndra, Inc., the first renewable energy company to receive a loan guarantee of this kind.  See September 23, 2011 edition of the WER.  The White House has refused to turn over all its internal communication concerning Solyndra, despite requests from the House Energy and Commerce Committee.  On November 3, 2011, the House Energy and Commerce Committee moved to issue a subpoena to William Daley, or appropriate custodian of records, and Bruce Reed, Chief of Staff to the Vice President, or appropriate custodian of records concerning the loan guarantee made to Solyndra, Inc. by the DOE.  The news of an independent analysis and the subpoena comes as another loan guarantee recipient, Beacon Power Corp. (“Beacon”), filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware on October 30, 2011.

Beacon is a flywheel energy storage system manufacturer that received a $43 million loan guarantee from the DOE, $2 million from the New York State Energy Research and Development Authority and a $5 million grant from the Commonwealth of Pennsylvania.  In an October 31, 2011 filing with the Securities and Exchange Commission, Beacon cited a poor economic and political investment climate as the cause for its bankruptcy filing.  Beacon, however, unlike Solyndra, could benefit from an influx of revenue in the wake of the Federal Energy Regulatory Commission’s (“FERC” or the “Commission”) recent ruling concerning frequency regulation service. See October 31, 2011 edition of the WER.  Additionally, Beacon plans to reorganize and could regain its solvency due to FERC’s recent order. 

A copy of Beacon’s SEC filing is available here.

A copy of the subpoena is available here.