Here’s a webinar on FERC market pull incentives for marine hydrokinetics and other small renewables.  It’s 50 minutes in length and you can access it at this link.  If you have any questions about the webinar or you’d like to contact me about a live workshop for your company or a copy of the slide deck, please email me at carolyn@carolynelefant.com

The latest injection of financial support for offshore renewables is coming from an unlikely and overlooked source:  electric utility mergers.    In February 2012, the offshore wind industry reaped substantial benefits from two utility mergers.  In Maryland, the state’s offshore wind development fund will pick up $32 million courtesy of  Maryland Public Service Commission order issued in February 2012 approving a merger between Exelon and Constellation Energy that includes a commitment to fund offshore wind.   Meanwhile, just up the East Coast, Massachusetts extracted an agreement from NStar Utilities to sign a 15-year contract with Cape Wind to purchase27.5 percent of the project’s output as a condition of state approval for its acquisition of Northeast Utilities.  NStar’s purchase along with a previous purchase by National Grid means that 77 percent of Cape Wind’s capacity is spoken for, which should lay the groundwork for Cape Wind’s financing.

So how do offshore renewables come into play in merger proceedings?  Actually, on the federal level, offshore renewables aren’t all that relevant in merger approval proceedings at the SEC or  FERC.  Both of those agencies focus on largely financial issues such as anti-competitive impacts, economies and efficiencies and rates.

But the situation is different at the state level.  For starters, state utility commissions have more at stake when a local utility like BGE or Northeast Utilities is gobbled up by a behemoth company halfway across the country or even overseas.  These types of acquisitions can result in the departure of jobs and tax revenues, and diminish states’ regulatory control over the newly merged company.  For that reason, states will often play hardball  in merger proceedings to extract the best possible benefits from companies to offset potential losses and to mitigate adverse impacts.

The states’ approach is perfectly legal:   generally, most state laws authorize states to apply a broad public interest standard in deciding whether to approve a merger, taking account of a wide array of factors such as anti-competitive effects, impacts on jobs, potential  harm to ratepayers and overall benefits to the state.   States also have the power to override a merger that’s been approved by federal agencies since federal law does not preempt state review.

Companies recognize that states can veto a multi-billion dollar transaction.  Though companies won’t willingly offer up voluntary concessions, if pressed by the states and intervenors, they’ll do what it takes to push the deal through. It’s just another cost of doing business, after all.

It’s against this backdrop that offshore renewables – or to date, offshore wind – come into play.  Even though a state may lose jobs when a hometown company leaves the state, the losses can be offset through investment in offshore renewables, thus allowing the state to stake a claim in a new industry with a promising future.  Moreover, long term contracts with offshore wind developers, along the lines of what NStar has accepted with Cape Wind can actually reduce rates in the long run by acting as a hedge against the volatility of buying and selling electricity on the spot market.  Finally, offshore wind can also mitigate potential market power since introducing additional power sources into a market puts downward pressure on price simply because there’s greater supply.

Admittedly, most of the benefits of utility mergers have gone to offshore wind rather than MHK.  Still a rising tide lifts all ships and development of a robust offshore wind industry in the U.S. will clear a path for MHK.  Moreover, there may be future opportunities for MHK since experts  predict that utility mergers will continue at least through 2012.

At the same time, the squeaky wheel (or turbine, in MHK parlance) is the one that gets the grease.  Many renewable groups lack the resources to stay abreast of merger approvals at the state level and if the issue of supporting offshore renewables isn’t raised, it may go unnoticed.  For that reason, OREC will keep you up to date on these state developments and to leave no stone unturned in identifying new and innovative funding sources for the MHK industry.

On February 21, 2012, the U.S. Army Corps of Engineers issued a Nationwide Permit 52 for small water-based renewable energy products.  I’ve tracked this issue for a while; announcing the Corps’ intent to develop an NWP for water based renewables back in 2010, and in 2011, in my capacity as counsel to Ocean Renewable Energy Coalition (OREC), I filed these comments.

Still, if you’d rather not read these old posts, by way of background, a nationwide permit is essentially a permit that is automatically granted to all projects that meet the established criteria.  Instead of evaluating a project on a case by case basis as is typically what happens when a permit is issued, with an NWP, a project holder basically makes the case that it meets certain criteria under the permit and it is automatically granted.  By creating a standard, one-size-nearly-fits-all permit, the Corps’ nationwide process speeds up the permit issuance process and creates more certainty and uniformity.

The NWP 52 is ideally suited  for water-based renewable energy projects like marine hydrokinetic.  Projects that fall within FERC’s definition of “pilot” (i.e., projects getting a pilot license and/or less than 5 MW), are fewer than 10 units in size and cause a loss of less than a 1⁄2-acre of non-tidal waters of the United States, including the loss of no more than 300 linear feet of stream bed will generally qualify for the NWP. There is also a provision for the district engineer to waives the 300 displacement requirement.

Each NWP program is implemented on a regional specific basis – and regions can define how the stream bed requirements are measured, whether the program is consistent with other regulation, etc.

Moving forward, an NWP may assist MHK developers in further streamlining the process of obtaining a pilot license at FERC.  And as I previously opined, the NWP will prove even more useful for developers who wish to apply for a Verdant exemption, i.e., which allows a developer to deploy an MHK device and connect it to the grid without a license for a period of up to 18 months, so long as the purpose of the deployment is to gather data to support the licensing process.  Even though a FERC license is not required to deploy under the Verdant exemption, other permits, notably, a Corps Section 10 and 404 are necessary.  So the availability of an NWP could expedite the process of deployment for test purposes while reducing the costs.  A positive development all around.

Interested in figuring out where the marine hydrokinetic industry is heading? Look no further than the Roadmap released last fall by the Ocean Renewable Energy Coalition (I drafted the sections dealing with regulatory policy).

The roadmap is available here, or if you prefer, you can view it in flip book fashion by scanning the QR code on the cover above.

My name is Carolyn Elefant and I am an infographic-aholic. In other words, I’m addicted to charts and pictorials and graphics and other visual means of succinctly and colorfully captures the complex legal and regulatory concepts that I deal with on a day to day basis, then I’ve got to have it. So for that reason, I’ve taken to collecting infographics depicting issues relevant to the green energy sector.

Whether the charts show the level of non-renewable energy subsidies or how Europe is beating the US when it comes to offshore wind energy development or renewable energy usage by state, they enable me to advocate on behalf of my clients and the offshore renewable industry without putting people to sleep with 7000 footnotes.

Feel free to join me in this harmless little addiction by following my Green Tech PinBoard at Pinterest.

I first posted about Verdant Power just a little more than seven years ago, when I reported on the company’s plans to place six tidal turbines in the East River. Eventually, Verdant Power did just that, and used its experience in real water conditions to further refine its technology. Subsequently, Verdant was one of the first company’s to avail itself of FERC’s pilot license process.

Seven years since my first post, Verdant’s efforts have paid off. On January 23, 2011, FERC awarded Verdant a ten year pilot license , the first ever issued by FERC according to this news release. Here are a couple of quick observations about the license:

1. Verdant filed its application at the end of 2010, and FERC noticed the application on February 2, 2011. FERC’s January 23, 2012 license issuance is thus within the one year time frame that FERC intended when it developed the pilot process. Of course, from Verdant’s perspective, the licensing project took far longer than year; as noted, Verdant has been developing the project and license application since at least 2005.

2. The state of New York issued a Section 401 water quality certificate and CZMA consistency finding within the timeframes provided by statute and in both cases, within less than a year after Verdant filed its applications. Frequently, the CZMA or Section 401 process can take longer since the state agencies will often ask for additional information before they start the clock on processing. Apparently, that added time wasn’t needed here. However, (and without having seen the state certificates), my guess is that because Verdant had an opportunity to test the project and generate actual data on operations, it had real evidence of minimal impacts.

3. Even though Verdant received a pilot project, FERC applied its traditional Section 10 licensing analysis under the FPA, giving equal consideration to environmental impacts and energy benefits, and evaluating whether the project is best adapted to the comprehensive plan for the waterway. Under Section 10, FERC also evaluates project economics and while early stage demonstration projects are unlikely to be economic, FERC found that the project’s real value comes in its demonstration of a promising new technology.

4. Under Section 10, FERC must also give heightened consideration to recommendations by fish and wildlife agencies, known as “Section 10(j)” recommendations. Somewhat surprisingly the agencies did not present Section 10(j) recommendations, which is a testament to the level of consensus that must have been achieved in the process.

5. The monitoring plan incorporated into the Pilot License is extensive and detailed. The data generated will advance the public’s collective knowledge of the impacts and promise of MHK while ensuring against any possibility of adverse effects during the license term.

In short, the license process may be over for Verdant, but there’s still plenty of hard work ahead. Let the new challenges begin!

Just as they say that the grass isn’t any greener on the other side, so too, it appears, that the waters aren’t any bluer for MHK on the other side of the pond.  On February 7, 2012, the Energy & Climate Change Committee of the UK House of Commons released a this Report on the future of marine renewables in the UK.  Many of the hurdles identified in the report are the same as those experienced here in the US.

For example, the Report recognizes that to attract private investment to MHK, the cost must come down – and that cost reduction must be a priority over the next decade.  The Report also notes that changing levels in government support can increase uncertainty and that there is a need to provide clarification on continued policies like renewable obligation certificates (ROCs) will last.  At the same time, there is a need to continually balance industry support with rate burdens posed for consumers.  Remaining issues include access to grid connections (potentially less of a problem in the US), protracted planning an consenting process and gaining widespread public acceptance.

To its credit, the UK government has vetted all of these obstacles publicly and made recommendations for moving forward.  Perhaps we need to have similar discussions about the future of MHK here in the US as well.

One of the most exciting aspects of practicing law in the marine and hydrokinetic space is that I have a birds-eye view of innovation-in-action.  And while I sometimes think that it might be nice to work in a more mature industry like wind, where the three-blade turbine design is set or stone (or more accurately, fiber glass),  in the MHK business, there’s always something new over the horizon.

Even now.  Though leaders like Ocean Power Technologies have a technology that’s ready to go once a FERC license issues (should be getting close now that water quality certificate has been granted), other designs continue to bubble up, according to Forbes.  What’s even more interesting is that it’s not just the prototypes themselves that are changing, but also the method used for testing them.  Thanks to new software technology, companies are able to quickly test hundreds of designs in “virtual” oceans before settling on a prototype to scale up.  And even at full scale, software simulations continue to help companies with existing prototypes build and refine designs.  Finally, new advancements have enabled companies to simplify device design – a positive development since fewer moving parts will produce a more dependable machine that can survive in the harsh marine climate. 

Even a technology like Ocean Thermal Energy Conversion (OTEC), which has been around for almost a century, is still evolving.  OTEC’s achilles heel hasn’t been technology so much as cost; scaling up requires enormous intake pipes more than a mile or more and they don’t come cheap.  But now,
Clean Technica reports on a breakthrough by Lockheed which may reduce the cost and boost the efficiencies of OTEC’s heat exchangers. Though this won’t solve all of the cost issues related to scaling up OTEC, it’s an important step in the right direction.

Finally, new technology may even help companies learn more about ocean currents.
Reuters reports on a company, Liquid Robotics, with its new Wave Glider technology – essentially, it’s a floating robot — that can measure large amounts of ocean data and track minute variations in current that wouldn’t have been practical to track using old technology.  Not clear whether it will have direct implications for wave technology, but it’s another innovation to keep an eye on.

Obscure, complex, duplicative and uncertain.  While those adjectives don’t make for good law or regulation, they’re the stuff that law review articles are made of.  Perhaps that explains why in the decade since my original (and now, grossly outdated) journal article, Ocean Energy in the 1990s, dozens of other papers and articles have emerged summarizing the regulatory regime in excruciating detail and offering up ways to improve it.  These reforms typically consist of calls for increased collaboration (one of those great ideas in theory…), increased stakeholder engagement or additional regulation (which is difficult to imagine).

In any event, here’s the latest crop of law review articles on MHK regulation. Although a couple of these articles discuss the US regulatory process and some of reforms noted above, two are more international in scope.  One article summarizes and compares the equally complex EU and US regulatory process, while another discusses the applicability of international law to Google’s proposal for floating sea-powered data servers.  Irrespective of whether you agree with all of the conclusions in these pieces or not, they all offer solid, accurate and fully footnoted summaries of the US, EU and international regulatory process and in that regard, serve as useful references.

Rachael Salcido, Siting Offshore Hydrokinetic Energy Projects: A Comparative Look at Wave Energy Regulation in the Pacific Northwest,  5 Golden Gate U. Envtl. L.J. (2011) (examining on the regulatory scheme in Oregon and Washington State and how these differences impact the FERC process.

D. Murray et. al., Congronting Jurisdictional Regulatory Barriers to Ocean Energy Development,  5 Golden Gat U. Envt. LJ (2011)(describing regulatory process for MHK in the US, using San Francisco Golden Gate bridge project as an example and summarizing procedures in EU)

S. Swanson, Google Sets Sail: Ocean-Based Server Farms and International Law,  43 Connecticut Law Rev. 709 (2011)(examining international law regulatory regime that might apply to sea based data centers)

It’s not often that the United States Supreme Court hears a case with consequences for the offshore wind and marine hydrokinetic industry. The last time I mentioned a Supreme Court case was back in April 2008, where I posted about Delaware v. New Jersey. There, the Court interceded to resolve a dispute over whether the State of Delaware could veto an LNG project that originated in New Jersey’s portion of the Delaware River (answer – it can, based on the terms of a 1905 Compact between the two states).

Whereas Delaware v. New Jersey bears on permitting offshore renewables project by clarifying that all states need to be on board, Pacific Operators Offshore LLP v. Valladolid, the case scheduled for oral argument before the Court tomorrow headline, will have a far less immediate impact. Pacific Operators raises the question of whether a worker on the Outer Continental Shelf (OCS) who is injured while on the job, but off the OCS, is eligible for compensation under the OCS Lands Act (OCSLA) which provides for compensation for “any injury occurring as a result of operations conducted on the OCS.”

Specifically, Section 1333b of the OCSLA states that:

With respect to disability or death of an employee resulting from any injury occurring as the result of operations conducted on the outer Continental Shelf for the purpose of exploring for, developing, removing, or transporting by pipeline the natural resources, or involving rights to the natural resources, of the subsoil and seabed of the outer Continental Shelf, compensation shall be payable under the provisions of the Longshore and Harbor Workers’ Compensation Act [33 U.S.C. 901 et seq.]

As SCOTUS Blog explains, the statutory language “as the result of operations,” gave rise to several conflicting decisions in different circuits regarding the scope of the OCSLA’s compensation provisions, thus requiring resolution by the Court. The Pacific Operators comes out of the Ninth Circuit, and involves a worker who spend 98 percent of his time on an oil rig on the OCS was injured while processing oil at a land-based facility inland from the coastline. The Ninth Circuit agreed with the Third Circuit that an offsite injury could qualify for compensation under the OCSLA so long as there is a substantial relationship between the the offsite and OCSLA activities. The Ninth Circuit found that the lower court had not made determined if there was a relationship between the OCS and offsite activities and therefore sent the case back for additional findings.

Of course, the outcome of Pacific Operations may not matter much to offshore renewables largely because there’s not much actual activity, let alone operations, taking place on the OCS — although hopefully that’s bound to change soon. Deepwater Wind has gotten necessary approvals and is moving ahead with surveys. (Cape Wind, once again is stalled for the time by more litigation). In addition, the Bureau of Ocean Energy Management ( BOEM and BSEE as of today ) recently launched a study of safety issues in connection with offshore renewables operations.

However, it’s not clear whether the Longshoreman’s Act compensation provisions of the OCSLA apply to offshore renewable workers. Section 1333b of the OCSLA speaks to operations for the purpose of exploring for, developing, removing, or transporting by pipeline the natural resources, or involving rights to the natural resources, of the…OCSLA. The OCS references the types of extractive activities but does not discuss operations related to renewable energy development which were added as authorized uses as the result of EPAct 2005. See Section 1337b(empowering the Secretary of Interior to lease OCS lands for alternative energy production). For similar reasons, there’s been confusion for some time over whether the Jones Act provisions requiring that US flagged vessels be used for operations on the OCS carries over from the oil and gas industry to offshore renewables. Pacific Operations will draw additional attention to the compensation provisions of the OCSLA — but ultimately won’t resolve the question of whether these compensation provisions apply at all to renewables workers involved in OCS operations.