Page 360 – RTO Insider

January 5, 2023

NJ Extends Comment Period on 3rd OSW Solicitation

New Jersey has extended by two weeks the comment period on the plan to hold its third — and largest — offshore wind solicitation in early 2023 after speakers at a public hearing into the plan criticized the way the period straddled the holidays and questioned whether the state is ready for such a big expansion.

The New Jersey Board of Public Utilities on Dec. 22 extended the final date by which the public could submit written comments, from Dec. 29 to Jan. 13, after “several stakeholders requested an extension to the comment deadline.”

The concern was raised at a Dec. 13 online hearing into the proposal organized by the BPU to receive stakeholder input. The solicitation guidance document outlines a plan to award project capacity of between 1.2 and 4 GW early next year with the option to go higher, potentially far larger than the 1.1 GW and 2.658 GW awarded in the first and second rounds, respectively. (See NJ Shoots for 4 GW+ in 3rd OSW Solicitation.)

Environmental groups told the BPU that the large size and speed of its third solicitation was essential to combating climate change, which is already disrupting the state and planet. But other speakers, among them local residents, asked the board to slow down, and written opposition to the plan has trickled in since the hearing.

Speaking at the hearing, Kari Martin, advocacy campaign manager for Clean Ocean Action, criticized the BPU for providing insufficient due process for the project by having the public comment period end Dec. 29 and holding a stakeholder hearing two weeks before Christmas.

“This is the largest offshore wind solicitation for New Jersey thus far,” she said. “There is a short time frame for reviewing these documents and providing comments during the height of the holiday season.”

She added that it “it is clear that New Jersey is unprepared for the third solicitation for offshore wind, as well as offshore wind already being fast-tracked in this region,” and she worried about the impact on marine life.

Martin cited a report published by Rutgers University’s Center for Ocean Observing Leadership on strategies for monitoring offshore wind development that stated that the “pace of offshore wind development is faster than the pace of fisheries science.” She noted that the report said that baseline studies should begin at least two to three years prior to construction and added that it is “premature” for the state to move ahead with the solicitation when “current baseline information is deficient and impacts from projects from previous solicitations are unknown.”

Brian O. Lipman, director of the Division of Rate Counsel, also noted that “the comment deadline was placed in between two major holidays when many commenters may be taking a respite from work and may not be available.”

Lipman’s comments, however, focused mainly on concern about the size of the proposed solicitation, and he urged the agency to be “conservative” and ensure that ratepayers don’t bear an unnecessary burden.

Lipman noted the economic turbulence in the U.S. and said the BPU should think about the risk to ratepayers in deciding the size of projects to award in the next round. He said that parts of the economy are suffering wage stagnation, supply chain disruptions, worker scarcity, and higher prices for commodities and equipment.

“It is not unlikely that bids offered in this solicitation may propose to shift some, or a large number, of these risks onto ratepayers,” Lipman told the hearing, adding that his office has “great concern” that developers may try such a move if they get project approval. “Ratepayers simply cannot afford drastically higher electric bills.”

He said one developer is mulling such a move. Danish developer Ørsted, which is developing New Jersey’s first OSW project, Ocean Wind 1, said during a Nov. 3 earnings call that returns on the project are “not where we want to be” and that it is exploring its options, according to a Seeking Alpha transcript of the call.

“This particular solicitation … will represent the largest potential capacity block or range of any solicitation scheduled by the board,” Lipman said. “Rate Counsel suggests that now may be the time to be conservative in making larger awards, given the fact that times are uncertain and challenging for all large energy investments.”

He added that “there are at least four more solicitations of a fixed 1,200-MW target that could be used to make up any lower offshore wind procurement amounts in the third round of bids.”

Reducing Costs, Increasing Competition

The BPU plans to open the third solicitation in the first quarter of 2023 and accept applications through the second quarter. The agency plans to make one or more awards in the third quarter.

“We really want to encourage competition and see reduced overall prices in this third solicitation,” said Andrea Hart, the BPU’s senior program manager of offshore wind, who made the board’s presentation on the solicitation at the public hearing.

Project applications must include the dollar-per-megawatt-hour price at which the developer would execute the project and the impact on ratepayers, which will account for 70% of the evaluation weight, the BPU said in the presentation. Non-price factors such as the economic impact, the strength of guarantees that those benefits will happen, and the impact on the environment and fisheries will account for the remaining 30%.

The Impact of Meeting Climate Goals

About 20 speakers spoke during the hearing, among them local residents that oppose the projects and a nonprofit opposition group, Save Long Beach Island. Supporters of the solicitation included a business group, New Jersey Alliance for Action, several clean energy companies and developers, including a representative of offshore wind developer Atlantic Shores, and environmental groups.

In a Dec. 29 letter to the board, resident Ken Lagana said he understands the importance of renewable energy but that there are “other locations where windmills could be installed.” He expressed concern at the impact of the turbines on fishing in the area.

“The placement of windmills in such close proximity to our waters could potentially disrupt the migration patterns of fish and other marine life,” creating a negative impact on commercial and recreational fishing.

Doug O’Malley, executive director of Environment New Jersey, called the solicitation proposal “a clear plan on how to reach Gov. [Phil] Murphy’s goal of 11 GW of clean renewable energy from offshore wind by 2040.”

“If we are serious about our climate goals, we need to be able to develop offshore wind in an environmentally responsible way,” he said. “Offshore wind is the best source of powering our economy with clean renewable energy.”

David Pringle, representing Clean Water Action, said, “The science says we have eight years to deal with the climate catastrophe unfolding. The state needs not only the third solicitation, but a fourth and a fifth and a sixth, and a heck of a lot more.”

But some speakers at the hearing expressed concern that the state is moving too fast.

Cindy Zipf, executive director of Clean Ocean Action, said there are “too many questions” about OSW to move ahead and urged the BPU to hold off doing so.

“From our view, there is little responsible about the current pace, scope and magnitude, literally paving the ocean in wind power plants,” she said. “The solicitation does not provide evidence of how the clean ocean and that economy can coexist with the industrial economy of the future that is planned.”

January 5, 2023June 14, 2023

NREL Boosts Development of Distributed Wind Energy

The National Renewable Energy Laboratory last month distributed another round of grants to boost small- to mid-sized wind turbine technology and marketing.

In announcing the funding, NREL said growth in this market sector will boost the development of distributed wind energy, which in turn will support local electrification, grid resilience and reliability, especially when combined with solar and/or storage technology.

NREL said this could support decarbonization in rural communities; support commercial, agricultural and industrial operations in windy regions; and avoid adding load to already strained transmission networks by delivering power directly to users.

The grants are part of the Competitive Improvement Project (CIP) that the U.S. Department of Energy began in 2012.

The sums of money involved are not huge: 11 companies will split $2.9 million in this latest round, bringing the program total to $15.4 million in grants plus $7.9 million in leveraged private-sector funding. But collectively the grants will improve technology, lower costs, encourage innovation and mitigate regulatory barriers, NREL said.

Increasing electrical output without also increasing manufacturing or installation expenses reduces a wind turbine’s levelized cost of electricity (LCOE) and makes it more competitive in more situations with fossil-generated power.

NetZero Insider spoke with three of the recipients. Each has a significantly different niche within the small-to-medium wind market, but all said they see significant benefits from the CIP grants.

Bergey Windpower

In announcing the grants, NREL singled out Bergey Windpower in Oklahoma as a CIP success story, having doubled the power output of its flagship turbine with research and development assisted by several rounds of grants.

CEO Mike Bergey said the company’s Excel 10 became uncompetitive when Chinese solar manufacturers started flooding the U.S. markets with panels that could produce power more cheaply than the 10-KW wind turbine.

So the company followed the example of General Electric and Vestas in squeezing more power out of their megawatt-scale turbines: With CIP help, it lengthened the Excel 10’s rotors and optimized their aerodynamics to create the Excel 15, which produces 15 kW with essentially the same nacelle and tower as the Excel 10.

“The DOE funding has allowed us to develop a whole new design that cuts the LCOE in half,” Bergey said.

He co-founded the company with his father, the late Karl Bergey, in 1977 and has spent his career in the wind industry, with stints as president of the Distributed Wind Energy Association (which he founded) and the American Wind Energy Association (now the American Clean Power Association).

In the distributed energy sector, wind has suffered for years from solar competition, Bergey said.

“There’s so much promotion of solar, we’re kind of stuck in the shadows,” he said. Also, “we don’t have the kind of financing alternatives that the solar industry has.”

This year’s CIP grant to Bergey Windpower is not for technology development: It will help the company set up a financing model that cuts upfront costs for customers. The Excel 15 and a 100-foot self-supporting lattice tower run about $100,000 installed, before incentives.

The events of 2022 are a game-changer, Bergey said: He can direct potential customers to a 30% investment tax credit through the Inflation Reduction Act plus a 10% domestic production adder, because the Excel 15 is made in the U.S. with mostly American parts.

The cost drops even further via tax deductions for depreciation and Department of Agriculture grants, if the buyer qualifies.

The CIP grants, Bergey said, now seem prescient: They allowed the company to have a new product ready when a new financial paradigm created new market opportunities.

“Because we’re in the sixth year of [CIP], it’s really helped fill the pipeline,” he said.

Carter Wind Energy

Carter Wind Energy, another multigeneration family-run company, is based in Texas, which produces more wind power than the next three highest states combined.

But CEO Matt Carter said his company is not producing the megawatt-scale machines that are creating all that electricity.

“We’re focused on what we call a mid-sized market,” he explained — turbines producing 100 to 1,000 kW.

Carter Wind also uses a different technology than most other wind power manufacturers: lightweight towers designed to sway like a palm tree, and lightweight two-blade rotors oriented downwind from the tower, rather than three blades oriented upwind.

Further, the product is portable, can be set up without a crane and can be relocated on a two-wheel dolly. This is attractive for certain agricultural and manufacturing applications and for industries such as water treatment or oil and gas production.

Finally, customers do not have to buy the tower and turbine: Carter Wind (and investors) will own it and sell the power to the customer or lease the equipment to the customer.

This latest CIP grant — Carter Wind’s third — will help it develop a 60-meter tower whose six sections are tapered, allowing them to nest like a telescope for transport.

“From a shipping standpoint, you can make it much more portable,” Carter said.

The economics are lining up now for small-scale distributed and behind-the-meter wind power operations, he said.

Carter Wind has long been able to pitch a significant savings to potential customers who use diesel-burning generators in remote locations, but now it will be easier to sell wind power to customers who burn natural gas, Carter said, as the 10-year window of the IRA incentives firms up the financing picture.

“These industrial projects are now easier to pitch. … The ebbs and flows have been a challenge for our market, [with its] on-again-off-again incentives.”

XFlow Energy

Two previous CIP grants have helped XFlow Energy take its vertical-axis wind turbine from a concept on paper to testing in the field. This third award will help it design a tower and move toward a prototype incorporating the lessons learned from the models tested.

A half-scale prototype of the 25-kW vertical-access wind turbine being developed by XFlow Energy is shown in California. | XFlow Energy

The Washington state-based firm hopes to go to market with a 25-kW turbine in two years’ time, CEO Ian Brownstein said.

Vertical-axis wind turbines and the more commonly seen horizontal-axis designs each have their advantages and disadvantages, he said.

A key drawback of the vertical-axis orientation is the cyclical stress exerted on the rotors, which can cause fatigue. Brownstein and XFlow co-founder Ben Strom both focused on eliminating this problem in their doctoral research and in the subsequent R&D for their turbine.

A key advantage of the vertical-axis design, meanwhile, is its relative mechanical simplicity.

XFlow’s task is the classic R&D goal: Boost output and reliability while cutting costs, enhancing strengths and eliminating weaknesses.

“We’re trying to translate that to a true LCOE-competitive product,” Brownstein said.

Continual technical support from NREL has been just as important as the financial assistance in moving XFlow closer to a point where it can go to market, he said.

“We started with them when our design was pretty much on paper,” Brownstein said. “NREL support has been critical along the way.”

Mass production of the 25-kW turbine is a milestone goal for the company, not the destination, Brownstein said: “XFlow is definitely interested in building larger turbines.”

January 5, 2023November 15, 2023

Biden Appointees Take Majority on TVA Board

President Biden’s appointees control the majority of seats on the Tennessee Valley Authority’s Board of Directors after six new members were sworn in Wednesday.

The U.S. Senate approved all six of Biden’s board nominees through a voice vote just before Christmas. Without the Senate’s approval, the TVA board would have lost quorum and its ability to make business decisions.

The new members are:

- - Beth Geer, chief of staff to former Vice President Al Gore and a participant in the Nashville Sustainability Accountability committee;
  - Bobby Klein, vice president of the International Brotherhood of Electrical Workers after a decades-long career as a lineman and foreman in Chattanooga, Tenn.;
  - Michelle Moore, author of “Rural Renaissance” and CEO of Groundswell, a nonprofit that builds community power to reduce energy burdens and expand economic opportunity;
  - Bill Renick, a former Mississippi state legislator and mayor who chairs the Commission on the Future of Northeast Mississippi;
  - Joe Ritch, an Alabama-based attorney and former TVA board member (2013-2017); and
  - Wade White, a former Kentucky county judge-executive.

They join TVA Board Chair William Kilbride, whose term expires in 2023, and fellow incumbents Beth Harwell and Brian Noland; their terms expire in 2024. The full nine-member board will meet publicly for the first time in February when it holds a quarterly business meeting in Muscle Shoals, Ala.

Kilbride said in a press release that the federal agency was delighted to welcome the newcomers aboard “during this challenging but exciting period.”

“They each bring diverse perspectives and experience to the board that will help guide TVA as it plans for the future while entering its 90th year of service to the region,” he said.

Biden originally nominated Geer, Klein and Moore in the spring of 2021 and re-upped their nominations in January 2022. The trio faced a somewhat combative Senate confirmation hearing last year, with Republican lawmakers expressing worry that adding more progressive board members would lead to abandoning TVA’s fossil fuel fleet. (See TVA Board Nominees Back Renewable Power, Affordability.)

Biden nominated Renick and White in June 2022; Ritch’s nomination followed in July. Renick and Ritch have Democratic affiliations, while White is a Republican.

Ritch’s term expires in 2025 and Renick’s and White’s in 2027. The other three terms expire in 2026.

The full board has its work cut out for it. TVA was forced to order rolling blackouts ahead of Christmas day, leading to another FERC–NERC joint inquiry into grid performance during winter storms. (See FERC, NERC Set Probe on Xmas Storm Blackouts.)

The board is also tasked with approving TVA’s resource mix under its next 10-year integrated resource plan, due out in 2024. The federal utility has come under pressure in recent years from renewable power advocates, who say TVA is shortsightedly planning natural gas generation and overlooking renewable resources. (See Nonprofits Urge TVA to Reconsider Gas-fired Options.)

Some conservation groups have said the agency’s goal of reaching net-zero carbon emissions by 2050 is too gradual and out of step with the Biden Administration’s 2035 target for decarbonizing the power sector. TVA responded last year to a letter of inquiry from the U.S. House of Representatives’ Committee on Energy and Commerce that focused on its decarbonization goal and energy affordability. (See TVA Defends Rates, CO2 Reduction Plans in House Inquiry.)

TVA said it will contract this year with a third party to conduct a Valley Decarbonization Study, which will analyze how it can further slash emissions. It also plans to build 10 GW of solar generation by 2035.

January 5, 2023

NY Proposes Credit System to Fund 6 GW of Energy Storage

New York is considering a system of credits to help fund what it calls the most ambitious energy storage goal in the nation: 6 GW installed by 2030.

Gov. Kathy Hochul announced the proposed framework in late December; the Public Service Commission is expected to decide on it later this year.

Energy storage is a crucial component of the state’s plan to replace dirty but steady fossil-burning generation with clean but intermittent wind and solar power. About 130 MW of storage was installed statewide as of November, and 1,300 MW was in some stage of development.

The framework developed by the New York State Energy Research and Development Authority and Department of Public Service calls for bringing an additional 4,700 MW of short-duration storage online by 2030, at an estimated cost of $1 billion to $1.7 billion.

The proposed index storage credit would be similar in many ways to the renewable energy certificate structure used across most of NYSERDA’s Clean Energy Standard procurements, with one credit awarded each day for each megawatt-hour available for dispatch.

The credit system would cost residential ratepayers an estimated 34 to 58 cents/month on average for 22 years.

In a news release accompanying the proposal, Hochul said, “Storing clean, renewable energy and delivering it where and when it is needed is one of the most critical challenges we must overcome to reduce statewide emissions, especially from traditional fossil fuel peaker plants. This roadmap will serve as a model for other states to follow by maximizing the use of renewable energy while enabling a reliable and resilient transformation of the power grid.”

The proposed 6-GW framework is, however, only a small step toward the massive storage capacity New York will need in order to keep the lights on, heat running and cars rolling in the decarbonized future envisioned for the state.

Six gigawatts of short-duration energy storage will provide perhaps 2 million of New York’s 7.5 million households with a few hours of power; it is a tool for intraday load balancing, not a replacement power source to maintain resource adequacy during a multiday cold snap.

The framework’s authors acknowledge the need for long-duration storage and suggest large-scale use of hydrogen and 100-hour batteries as a solution. But such technology is highly uncertain at present, the authors write, and it is critical to invest in their development now so they can be field tested before 2030 and deployed at scale after 2030.

State law requires that 70% of New York’s electricity come from renewable sources by 2030 and mandates 100% zero-emission electricity by 2040.

January 5, 2023

Entergy Seeks Review of FERC’s Block on MISO Capacity Obligation

Entergy’s operating companies have mounted a campaign at the D.C. Circuit Court of Appeals to override FERC’s rejection of MISO’s minimum capacity obligation.

The company’s Arkansas, Louisiana, Mississippi, New Orleans and Texas subsidiaries maintain that MISO’s unsuccessful bid to require load-serving entities to demonstrate that they have obtained at least 50% of the capacity required to meet peak load obligations before auctions are held can be beneficial and help rectify capacity shortages. Entergy attorney Michael Griffen petitioned the D.C. Circuit Court for reconsideration in a Dec. 28 filing (22-1334).

FERC in late August and again in late October rejected MISO’s request to install a minimum capacity obligation. The commission found that the RTO did not prove that such a rule would address resource adequacy concerns or that it would incent members to construct new generation. (See Regulators, LSEs Ask FERC to Reconsider MISO’s Seasonal Capacity Accreditation.)

The grid operator disagreed. It has said that an obligation would foster sensible planning by its members and regulators and serve as a “guardrail” against reliance on its voluntary capacity auctions for anything more than residual capacity needs.

MISO has claimed that years of inexpensive capacity prices have accelerated generation retirements and held up new investment in generating facilities. It said some LSEs depend on its residual auctions to provide for all their capacity needs.

Entergy has also characterized a minimum capacity obligation as “a practical safeguard to ensure that LSEs engage in reasonable resource planning practices that will maintain reliability in the MISO region and help mitigate a capacity market free rider problem.”

The utility said that without the obligation, the RTO’s current resource adequacy construct allows LSEs to become too attached to auctions. It said the current environment “distort[s] planning, shift[s] substantial costs to other LSEs’ customers and ultimately negatively impact[s] reliability.”

January 5, 2023November 9, 2023

California Storms Fill Reservoirs, Build Snowpack

A series of Pacific storms are beginning to fill the lakes behind hydroelectric dams and to build snowpack for spring and summer generation, but California will continue to be gripped by drought without far more precipitation, officials said.

“It’s always great to be above average this early in the season, but we must be resilient and remember what happened last year,” Sean de Guzman, the state Department of Water Resource’s supply forecasting manager, said in a news release. “If January through March of 2023 turn out to be similar to last year, we would still end the water year in severe drought with only half of an average year’s snowpack.

“We still have a long way to go before the critical April 1 total,” de Guzman said. Months of heavy snow and rain will be needed to reach a historical average on that key date, the department said.

The latest storm was forecast to hit the state from Wednesday evening into Thursday, with heavy snow and rain and winds gusting to 60 mph or more.

“A powerful hurricane-force low pressure system located over the eastern Pacific is set to surge a plume of moisture and damaging winds into the West Coast beginning tonight,” the National Weather Service said on its website Wednesday. “The greatest impacts, which include damaging winds, excessive rainfall, and extremely heavy snow, is forecast to occur over much of California and into southern Oregon through Thursday.”

The ground remains saturated from a New Year’s Day deluge with strong winds that caused flash flooding, toppled trees and knocked out power to about 680,000 customers in the territories of Pacific Gas and Electric and the Sacramento Municipal Utility District.

The next storm could fell even more trees, the weather service warned.

“Be prepared for widespread power outages, downed trees and very difficult driving conditions,” it said on Twitter.

Atmospheric river weather systems, which bring large amounts of moisture from the central Pacific, could continue over the next two weeks due to a “persistent mid-level low pressure anchored over the North Pacific,” it said.

While the storms wreak havoc, they also bring much-needed water and snow to California, which has had three dry years in a row. With a Mediterranean climate, the state gets almost all its precipitation from December through February.

On Tuesday, the first snowpack measurement of the year showed it to be far above average in the north-central Sierra Nevada.

The Department of Water Resources (DWR) measured 55.5 inches of snow and a snow water equivalent of 17.5 inches — or 177% of average — at a main survey site in the mountains above Lake Tahoe.

“The snow water equivalent measures the amount of water contained in the snowpack and is a key component of DWR’s water supply forecast,” it said.

Statewide the snowpack was 174% of average for Jan. 3 and 64% of the average total for April, it said.

However, it warned that this year could see a repeat of last winter when a wet December was followed by three dry months.

“Conditions so far this season have proven to be strikingly similar to last year when California saw some early rainstorms and strong December snow totals only to have the driest January through March on record,” DWR said.

The state’s major hydroelectric reservoirs are filling from the rains but some of the biggest lakes remain far below capacity, DWR said. Low water levels have hurt hydropower, adding to the state’s summer resource shortfalls.

Lake Oroville, which ran so dry that generation ceased in July 2021, stood at 39% of capacity on Tuesday and held 74% of its historical average total for this time of year. Lake Shasta was at 34% capacity and 57% of its historical average.

Others had filled past their historical averages. Folsom Lake near Sacramento filled to 141% of its average for the date and was releasing large amounts of water from the New Year’s storm. The reservoir, however, is about one-fifth the size of Lake Oroville and one-fourth the size of Shasta.

If above-normal rainfall continues into spring, it would extend the state’s recent pattern of multiple drought years followed by one year of heavy precipitation. The pattern is a product of climate change, the state’s top water official said in the news release.

“The significant Sierra snowpack is good news, but unfortunately these same storms are bringing flooding to parts of California,” said DWR Director Karla Nemeth. “This is a prime example of the threat of extreme flooding during a prolonged drought as California experiences more swings between wet and dry periods brought on by our changing climate.”

January 5, 2023November 26, 2023

Massachusetts OKs Sharing Cost of Maine Wind Power

Massachusetts electric distribution companies have been authorized to take on up to 40% of a two-part, $1.7 billion clean energy project in northern Maine.

The Massachusetts Department of Energy Resources, after consulting with the state Attorney General’s Office, notified Maine of the decision Friday.

The Maine Public Utilities Commission in October selected the 1-GW King Pine wind farm proposed by Longroad Energy and a 345-kV power line proposed by LS Power to help move the state closer to its renewable energy goals.

The transmission line is expected to cost ratepayers $2.78 billion, while the wind power is expected to provide a $1.08 billion benefit for a net cost of $1.7 billion over 30 years. But the PUC opted to also look for partnerships with other states that could reduce the cost of the projects to Maine ratepayers.

The DOER determined that the two projects would meet the standards set forth in Section 82 of last year’s Driving Clean Energy and Offshore Wind Act: They would provide cost-effective, clean-energy generation to Massachusetts ratepayers and help the state meet its decarbonization goals while improving energy security and reducing costs during the winter.

The department is additionally requiring that negative impacts be minimized to the extent possible; progress be demonstrated toward permitting and interconnection approvals; and a credible schedule and plans be in place.

It directed the EDCs to begin negotiations with the two projects’ developers for cost-effective long-term contracts that will be reviewed and approved by the Massachusetts Department of Public Utilities.

The Maine PUC has set a Jan. 15 deadline for its staff to report back on potential partnerships and recommend the next step. The Massachusetts DOER set a Feb. 28 deadline for Maine to obtain contract support to demonstrate the project’s viability.

The move comes as Massachusetts’ efforts to foster ocean-based wind power off its coast falter. Construction has begun on an 800-MW wind farm, but developers of two projects that would have a combined 1,600 MW capacity have said the financial terms are no longer viable because of escalating costs. (See related story, Mass. DPU Orders Commonwealth Wind Project to Continue.)

January 4, 2023

Treasury Delays Key Rules for IRA’s EV Tax Credits

Consumers looking to cash in on the Inflation Reduction Act’s tax credits for electric vehicles, scheduled to have gone into effect Jan. 1, may have to wait until the Treasury Department issues rules aimed at ensuring the EVs receiving those credits are manufactured in North America, using critical minerals and battery components also produced on the continent.

The rules were due by the end of 2022, but Treasury and the Internal Revenue Service on Thursday announced they would not be issuing the rules until March 2023, saying existing rules, which base EV tax credits on battery size, would stay in effect.

Sen. Joe Manchin (D-W.Va.), chair of the Senate Energy and Natural Resources Committee, called for an immediate halt on all EV tax credits until the required rules are issued.

“The information released today from the Treasury Department outlining how they will be implementing the commercial and consumer EV tax credits bends to the desires of the companies looking for loopholes and is clearly inconsistent with the intent of the law,” Manchin said in a statement also released on Thursday. “It only serves to weaken our ability to become a more energy-secure nation.”

In addition to demanding that Treasury and the IRS put the credits on hold, Manchin also said he would soon “introduce legislation that further clarifies the original intent of the law and prevents this dangerous interpretation from Treasury from moving forward.”

At issue are the IRA’s provisions setting out eligibility requirements for its “clean car” tax credits. Beginning this year, to qualify for the credit, an EV’s battery must contain at least 40% critical minerals mined and processed either in the U.S. or in a country with which the U.S. has a free-trade agreement. The percentage will go up 10% each year, topping out at 80% after 2026.

Similarly, the law requires that 50% of other battery components be made or assembled in North America, with an annual 10% increase that will reach 100% in 2028.

To qualify for the full $7,500 credit for a new EV, both the critical mineral and battery component requirements must be met. If only one is met, the credit is cut in half.

But while the numbers may be clear, Treasury and the IRS said, defining how they will be determined could be more complex, citing questions and concerns “from vehicle manufacturers and a broad range of stakeholders” about the new requirements.

In a white paper issued with the announcement, the agencies said, “The broad stakeholder interest in these new requirements has highlighted the importance of continued communication with stakeholders while Treasury and the IRS develop proposed guidance on these requirements.”

For example, the white paper notes that neither the IRA nor any other federal statute defines “free-trade agreement.”

Some of the criteria suggested in the white paper include “whether an agreement reduces or eliminates trade barriers on a preferential basis, commits the parties to refrain from imposing new trade barriers, establishes high-standard disciplines in key areas affecting trade (such as core labor and environmental protections), and/or reduces or eliminates restrictions on exports or commits the parties to refrain from imposing such restrictions, including for the critical minerals contained in electric vehicle batteries.”

The white paper also sets out a tentative proposal for a complicated, transitional process for determining compliance with the critical mineral requirement for the next two years. Manufacturers would have to identify individual supply or “procurement” chains for the critical minerals they use, determine if 50% of each mineral comes from the U.S. or a free-trade agreement country, and then calculate “the percentage of the value of qualifying critical minerals contained in the battery.”

“To determine this percentage, the sum of the values of all qualifying critical minerals (determined separately for each procurement chain) contained in the battery is divided by the sum of the values of all critical minerals contained in the battery,” the white paper says.

An equally complicated, four-step process is proposed for determining if a vehicle meets the percentage requirements for battery components.

While Treasury has made no direct response to Manchin, a department spokesperson stressed in an email to NetZero Insider that in the guidance issued thus far, “Treasury is simply following the tax laws and the IRA as written.” The department has also held multiple stakeholder meetings and is continuing to review comments it has received, the spokesperson said.

‘Tweaks’ to Rules?

But beyond any vagueness in the law, Treasury’s efforts at delay could be rooted in rising tensions between the U.S. and long-time allies over the impact of the tax credits, according to industry analysts ClearView Energy Partners.

“Pushback intensified in recent weeks, including European concerns that a combination of generous U.S. incentives and relatively low American energy prices could lead to the deindustrialization of the continent,” ClearView said in a recent email. “However, multiple allied automakers criticized requirements associated with the IRA’s expanded EV tax credit, and the White House appears to have prioritized its response to that issue accordingly.”

President Biden has signaled that the guidance on the EV tax credits coming in March could contain some “tweaks” to the critical mineral and battery component requirements, according to ClearView, hence Treasury’s three-month delay on issuing the guidelines.

Should the IRS heed Manchin’s call for a hold on the credits, it could mean more confusion and frustration for potential EV buyers. The IRA’s EV tax credits are already complicated, linked to a vehicle’s manufacturer’s suggested retail price and consumers’ household income.

EVs with an MSRP of more than $80,000 for a van, SUV or pickup truck, or $55,000 for other cars, are not eligible for the tax credits. Consumers earning more than $150,000 — or $225,000 for a single head of household or $300,000 for couples — are also not eligible.

According to information from Treasury, an EV ordered or purchased before, but not actually on the road until after the critical mineral and battery component rules are released, will still be subject to them.

January 4, 2023

NY Great Lakes OSW Too Expensive, Study Determines

Developing wind power on the two Great Lakes bordering New York would entail a set of challenges so expensive as to be uncompetitive with other renewable energy options, a new report concludes.

The New York State Energy Research and Development Authority last week submitted its Great Lakes Wind Energy Feasibility Study and supporting material to the state Public Service Commission, which in 2020 instructed NYSERDA to undertake the study.

NYSERDA recommended shelving the lake wind concept for at least the near term.

The study indicates that modeling shows potential for as much as 2 GW of nameplate wind power capacity in Lake Erie and 18 GW in Lake Ontario.

But it also flags several sticking points:

Lake Ontario is so deep that development there would rely on floating turbine technology, still in its infancy.
Both lakes ice up in the winter.
An entire onshore supporting infrastructure would need to be created, along with points of interconnection for the electricity generated.
Unlike the extensive OSW capacity that the state is developing in the Atlantic Ocean, the Great Lakes are far removed from the densely populated New York City region, where the need for clean energy is greatest.
The construction vessels used to erect offshore wind farms will not fit in the locks that lead to the Great Lakes.

A white paper submitted with the study concludes that wind farms in the two lakes would be substantially more expensive for ratepayers to support than other projects under Tier 1 of the state’s Clean Energy Standard, such as terrestrial wind and solar. That does not include construction of ports, ships and points of interconnection, which would be additional costs for ratepayers to bear.

NYSERDA began conducting the study in February 2021. Some support was offered for the idea of Great Lakes wind during the public input process, but extensive concern was raised about its impact on wildlife and on views from the shore.

Preserving the viewshed would be a significant limiting factor; siting turbines at least 12 miles offshore would limit the potential hosting capacity in Lake Erie to just 200 MW, for example.

There’s also widespread sediment contamination in the Great Lakes, a legacy of the industrial history of the cities along its shores. That contamination is not well-mapped, NYSERDA notes, nor is it known what effect construction would have on the contaminants.

“After completing the feasibility study and considering these various dimensions collectively, NYSERDA recommends that now is not the right time to prioritize Great Lakes wind projects in Lake Erie or Lake Ontario,” the white paper indicates.

But it adds: “Taking no action now does not mean there may not be an opportunity to advance Great Lakes Wind at some point in the future. The resource may become a feasible contributor to New York State’s goals in the future as the state advances toward its mid-century goals.”

An organization advocating for offshore wind buildout said the study made a convincing case.

“While New York needs a serious buildout of renewable energy sources and there is documented potential for wind resources in the Great Lakes, it’s clear from the report that the focus should remain on solar, land-based wind and offshore wind power in the Atlantic. Right now, these are the more critical, substantial and cost-effective opportunities,” New York Offshore Wind Alliance Director Fred Zalcman told NetZero Insider.

There is extensive interest in offshore wind as an emissions-free source of electricity, with the Biden Administration setting a goal of 30 GW installed capacity by 2030.

Just one facility is online in the U.S., producing up to 30 MW off the Rhode Island coast, but a few others are under construction and many more are in some stage of development.

Only one is in freshwater — the 20.7 MW Icebreaker project near Cleveland in Lake Erie — and it is still in development, more than 13 years after it was proposed.

NYSERDA said the Ohio project could eventually help inform New York’s decision-making process on wind turbines in its Great Lakes waters.

A previous proposal to build a freshwater wind farm in New York proved highly contentious. After nearly four years in the review process, developers in early 2019 withdrew their plans for a 108 MW project near Watertown, in the northeast corner of Lake Ontario.

January 4, 2023

DOE: 33 of 79 Preliminary Hydrogen Hub Applications Chosen

Industry, private developers and state governments from every region of the nation applied for federal funding to create hydrogen hubs consisting of industries or transportation companies interested in switching from carbon-intensive fuels to hydrogen.

Seventy-nine groups offered to invest a total of $157 billion for a chance to qualify for $7.5 billion in federal H2Hub matching grants, according to an unpublicized report now available on the Department of Energy Office of Clean Energy Demonstrations’ website. The report notes that DOE would require about $60 billion were it to approve all of the applications.

The department does not plan to announce or identify those applicants it has discouraged, nor identify those it has encouraged, to file a full application by close of business April 7.

Faced with so many preliminary or “concept” applications, all filed by the Nov. 7 deadline, DOE appears not to have made final decisions on all applications until the end of December, based on the few announcements made by some of the “encouraged” applicants.

And the department is leaving the door open for 46 applicants it has tried to “discourage.” Though their initial applications were determined to be incomplete or not feasible, they are free to file a full application or join with one of the 33 groups DOE has encouraged.

In an effort to explain the process its reviewers used, the department said it favored groups that appeared to have the best chance of creating a working hub — hydrogen production and nearby hydrogen consumption — in the earliest possible time.

“The encouraged concept papers plan to develop all elements critical to a H2Hub: comprising production, end uses and connective infrastructure; demonstrating capabilities to execute a project plan or to attract and hire such capabilities; planning to deploy proven technologies; and indicating commitments to clean hydrogen and meaningful community benefits,” the report noted.

The report also tried to explain why it rejected, or discouraged, some applications.

“The 46 concept papers were discouraged for many reasons, but one of the most common reasons was papers that described concepts focused on only one element of the hub. Concept papers were also discouraged that would depend on technologies unready for commercial-scale demonstrations and projects whose elements were not readily suited to help catalyze a national clean hydrogen network.”

And the report specifically noted that those applicants who have just received an “encourage” review are not guaranteed a win next year.

“An encourage notification simply means that the proposal is on the right path towards submitting a full application. DOE expects significant competition amongst applicants, even if only encouraged applicants proceed.”

Energy Secretary Jennifer Granholm announced the availability of the grants at a September hydrogen conference in Pittsburgh attended by more than 6,000.

The grants, funded by the 2021 Infrastructure Investment and Jobs Act, are the first step toward moving industry and transportation from hydrocarbon fuels to hydrogen, and key to the Biden administration’s goal to decarbonize the economy by 2050.

DOE appears not to have contacted applicants until after Christmas, based on the few news releases issued by the groups that received a “thumbs up” response.

The department contacted the 79 groups that had submitted applications, “encouraging” 33 of them to file full-blown applications by April 7. Those groups officially “discouraged” may still file full applications, the report noted, or they can join the encouraged groups.

A media search Monday indicated the following hydrogen hub applicants had received a positive DOE review:

Hawaii Pacific Hydrogen Hub;
HALO Hydrogen Hub, proposed jointly by Arkansas, Louisiana and Oklahoma;
Western Interstate Hydrogen Hub, proposed by Colorado, New Mexico, Utah and Wyoming;
Pacific Northwest Hydrogen, proposed by Washington state and Oregon;
ARCH2, by West Virginia, Pennsylvania, Ohio and Kentucky; and
Obsidian Renewables, an Oregon solar developer.