NYSERDA Sailing Forward On Offshore Wind

Author: Valerie Stori, Clean Energy Group | Project: Offshore Wind Accelerator Project

Red thumbtack in a map pushpin pointing at New York city

The New York State Energy Research and Development Authority (NYSERDA) announcement that it will participate in the Bureau of Ocean Energy Management’s (BOEM) auction of the New York Wind Energy Area is an exciting and potentially significant opportunity for offshore wind development. NYSERDA’s announcement came shortly after BOEM announced that it would hold a competitive auction for over 81,000 acres offshore Long Island and several months after Governor Andrew Cuomo revealed his administration’s commitment to developing an Offshore Wind Master Plan.

If NYSERDA wins the lease auction, it plans to conduct pre-development work and secure a power purchase mechanism before “re-auctioning” the development rights to the lease area. In its press release, NYSERDA outlined the steps it would take before opening a competitive bidding process for the wind energy area: environmental studies, site characterization, resource assessments, and stakeholder outreach. NYSERDA’s strategy will not only provide much of the needed scientific data for turbine placement, but also engage all stakeholders in early discussion about future development. The process is reminiscent of Rhode Island’s marine spatial planning efforts in which the state, under the leadership of the Coastal Resources Management Council, Rhode Island Sea Grant, and URI Coastal Resources Center, developed an Ocean Special Area Management Plan (SAMP) that identified a 13 square-mile zone as a preferred area for offshore wind development and streamlined the regulatory process for evaluating development proposals. The SAMP-identified zone enabled Deepwater Wind to secure permits quickly—within two years of its application. Delineating and refining development zones can help expedite the permitting process. Furthermore, pre-development site studies (geotechnical, meteorological, etc.) by NYSERDA could help minimize risks for potential developers who otherwise invest in these site studies without guarantee of construction permits.

While NYSERDA’s press release does not reveal a timeline for completing pre-development studies, the process could streamline and accelerate what is currently a lengthy siting and permitting process (approx. 7 years), rather than adding regulation, limitations, and delays to the process. The power procurement mechanism that NYSERDA would secure for the developer could accelerate finance and construction by providing revenue certainty.

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This blog post was also published in Renewable Energy World.

From Oil to Offshore Wind

Author: Lewis Milford, Clean Energy Group | Project: Offshore Wind Accelerator Project

Curraheeshutter/ Bigstock.com If U.S. oil companies stop drilling for more oil, as climate activists want, what would they do to keep their shareholders happy and solvent? Maybe they could repower the American electric industry with offshore wind.

Recently, an emerging group of Exxon and Chevron shareholders almost forced the companies at their annual meeting to conduct climate “stress tests.” The close vote, if it had gone the other way, would have compelled the oil giants to disclose their financial risks in a world growing less favorable to endless oil production.

That would have been a good thing. But it’s not the only way to change the companies’ behavior on climate.

A more immediate strategy would be to push the industry into more climate friendly businesses now, like offshore wind, where U.S. oil companies could both prosper and protect the climate.

This is not pie in the sky, anti-fossil fuel rhetoric. A recent report by the respected international industry consultancy, BVG Associates, suggests how oil companies could reposition their businesses in a clean energy world.

As an example of that transition, the report looks at future offshore wind opportunities for Scottish oil and gas companies. It points out that the future global market for offshore wind will be in the hundreds of billions of dollars.

The BVG report also highlights something that few in the United States might know. In Europe, nine oil and gas companies already are competing in the offshore wind market, largely because of the similarities between the offshore oil sector and the offshore wind industry.

Both must lay long cables from floating platforms to shore. Both build structures in deep water locations. Both must build platforms to hold either turbines or rigs. Both involve construction and maintenance of complex equipment that must perform in tough environments for decades. Both use standardized construction methods to bring down the high costs of complicated projects.

And both must amass large amounts of capital to finance large infrastructure investments. The oil companies’ still strong balance sheets hold special promise for easing their entry into these new offshore wind markets in the United States.

Some oil industry companies are taking small steps into the American market. U.S. project developer Deepwater Wind engaged Louisiana-based Keystone Engineering, an oil and gas engineering firm, to build its steel jacket foundation. Similarly, DONG Energy, a European oil giant, is proposing to build two offshore wind projects off the East Coast.

But U.S.-based oil companies – unlike their European counterparts – are almost nowhere to be found in the American offshore wind industry. That is unfortunate. U.S. oil companies are not diversifying their business portfolios to account for climate change, which will be bad for their shareholders. But as important, they are not bringing their expertise to help this country build out its offshore wind industry, which now lags far behind Europe.

Perhaps the most important reason to have large corporate players like the oil companies involved in offshore wind is their capital. The oil companies are still strong enough to finance multi-billion-dollar offshore wind projects off their balance sheets.

They also have access to capital markets in addition to their strong balance sheets. They don’t need to rely only on public subsidies to build projects. They can do expensive projects that even large utilities cannot afford to finance, which is how the European offshore wind market got off the ground. Their deep pockets also mean they could ride out the regulatory ups and downs that have stalled projects like Cape Wind.

Energy transitions driven by market forces are a brutally efficient way to destroy incumbent companies. Predecessors to Exxon ended the whale oil business over a century ago. Today, competitive markets for natural gas and renewables are burying the coal industry. In the future, electrification of cars could well bankrupt the oil companies. It’s not a matter of if such technology turnovers will happen, but when. And the when usually comes with unpredictable financial fury.

The major oil companies could wait for their eventual demise or they could put capital into markets that survive the next wave of energy disruption. They might find that offshore wind projects are more economically profitable than banking the companies’ future on an increasingly volatile commodity like oil.

All it takes is for U.S. companies to follow the lead of their European oil colleagues, which have aggressively pursued offshore wind projects around the world for years.

For U.S. oil companies, offshore wind is the climate-smart investment opportunity waiting on the water’s edge.

State Clean Energy Programs Honored for Efforts to Transform U.S. Markets

Author: Warren Leon, Clean Energy Group | Project: Clean Energy States Alliance

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The Clean Energy States Alliance (CESA), a national, nonprofit coalition of public agencies working together to advance clean energy, is pleased to announce the recipients of the 2016 State Leadership in Clean Energy Awards. The 2016 awards recognize six outstanding state programs and projects that have accelerated the adoption of clean energy technologies and strengthened clean energy markets. Winners were chosen by an independent panel of five distinguished judges and are featured in a new report.

This year’s award winners represent many of the cutting-edge ideas that are driving the adoption of clean energy. They involve combining commercial property assessed clean energy (C-PACE) with power purchase agreements; combining water conservation with clean energy generation; implementing comprehensive programs to advance the solar industry in the East and the West; and tapping into the power of distributed generation and geo-targeting to ease grid constraints.

The 2016 awards were given to the following organizations:

  • The California Energy Commission for the New Solar Homes Partnership (NSHP)
  • The New Hampshire Public Utilities Commission Sustainable Energy Division for the Useful Thermal Energy Certificate (T-REC) Program
  • The Connecticut Green Bank for the CT Solar Lease Commercial Program
  • Energy Trust of Oregon for the Irrigation Modernization Program
  • The New York State Energy Research and Development Authority (NYSERDA) for NY-Sun
  • The Rhode Island Office of Energy Resources for the System Reliability Procurement Solar Distributed Generation Pilot Project

SLICE-report-cover-tiny-border“These award winners illustrate the tremendous creativity and commitment being shown by state agencies across the country in implementing clean energy,” said CESA Executive Director Warren Leon. “These six programs are not only substantially increasing clean energy deployment and reducing carbon-based emissions, they are also creating jobs and benefiting the local economy. Moreover, they are doing so in smart, efficient, and effective ways. These innovative programs are providing models for the next generation of state clean energy initiatives in the United States.”

CESA-member organizations from across the U.S. submitted nominations for the leadership awards. Entries were judged based on public benefits and results, cost effectiveness, leadership and innovation, and replicability. Winners were chosen by an independent panel of distinguished judges: Todd Foley (Chief Strategy Officer, American Council on Renewable Energy); Jenny Heeter (Senior Energy Analyst, National Renewable Energy Laboratory); Brian Keane ((President, SmartPower); Heather Rhoads-Weaver (Principal Consultant/Founder, eFormative Options); and Governor Bill Ritter (Director, Center for the New Energy Economy).

A report on this year’s State Leadership in Clean Energy award winners, including case studies for each program, is available on CESA’s website at www.cesa.org/projects/state-leadership-in-clean-energy/2016. This webpage also contains information and registration links for a webinar series on these exemplary programs. These webcasts are free to attend and open to the public.

The State Leadership in Clean Energy Webinar Series will feature the winning programs on the following dates and times:

 

This blog post was also published in Renewable Energy World.

Can Reforms Shift California Program from Controversy to Energy Storage Incentive Model?

Author: Seth Mullendore, Clean Energy Group | Project: Resilient Power Project

cal flag 480x330The California Public Utilities Commission (CPUC) recently proposed a few changes to California’s Self-Generation Incentive Program (SGIP) that may begin to reshape the program into a national model for incentivizing energy storage deployment.

Anyone involved in behind-the-meter energy storage project development in California is likely to have a bit of a love-hate relationship with SGIP. The program began back in 2001 when Assembly Bill 970 (Ducheny, 2000) directed the CPUC to offer financial incentives for utility customers to install on-site distributed energy technologies that reduced grid electricity consumption. In 2011, California Senate Bill 412 modified the primary purpose of SGIP from peak load reduction to greenhouse gas (GHG) emissions reductions, leading to CPUC modification of the criteria determining technology eligibility. Energy storage appeared on the SGIP scene in 2012 with two projects. Since then, SGIP has been a boon to the behind-the-meter energy storage market, helping California become a national leader in customer-sited storage resources. SGIP has a total annual budget of about $80 million per year and is expected to continue through 2019.

But the program wasn’t designed with energy storage in mind, and debate over which technologies should be eligible has led to some controversy over the past few years. A sometimes heated debate has been ongoing around what exactly constitutes a GHG reducing technology. The argument has largely been focused on the inclusion of natural gas powered fuel cells as an eligible technology, with energy storage companies and many clean energy advocates wanting to see fuel cells removed from the program. After a CPUC decision in 2015, which continued to allow for fuel cell inclusion, the California legislature even weighed in with a letter to CPUC President Michael Picker expressing its deep disappointment in the decision.

A second bit of controversy concerns alleged “gaming” of the system by certain energy storage companies. It appears a few companies may have taken advantage of some loose rules around reserving incentives during the latest round of SGIP solicitations. For example, one company was able to secure the first 56 online applications for the program, while others were locked out of the online platform. While the companies involved have stated they were acting within the specified rules, there appear to be some serious issues with how the program is currently administered.

Now for some good news. The CPUC released a proposed decision last month detailing a number of reforms to SGIP that could help rework the program into an improved model for energy storage incentives. Not all of the changes are directly related to advanced storage technologies, but a few in particular could significantly impact how the program functions as a storage incentive.

  1. Rather than making additional funds available every year, SGIP shall be administered on a continuous basis with incentive levels declining based on the capacity reserved in the program, similar to the California Solar Initiative.

The change may allow the program to be more flexible and reflective of actual market development conditions.

  1. The incentive budgets will be divided between two broad categories: energy storage and generation. Energy storage is allocated 75% of program funds, with 15% of the energy storage budget carved out for projects less than or equal to 10 kilowatts. Generation is allocated the remaining 25%, with 10% carved out for renewable generation projects.

This is a big assurance for energy storage, mandating that 75 percent of the funds are devoted to this market segment; it’s also a boost for small-scale system deployment.

  1. A lottery will replace the first-come, first-served system when applications received on the same day request more incentives than the remaining budget at the current incentive step. Projects which have additional greenhouse gas/grid benefits will be given priority in the lottery.

An attempt to resolve any “gaming” issues and reward those with greater GHG or grid benefits.

  1. Each participating project developer will be capped at a total of 20% of the incentive budget on a statewide basis. This replaces the previous 40% cap that applied to equipment manufacturers.

The change would prevent any large developer from monopolizing SGIP incentives and give smaller developers more of a chance to take advantage of available incentives before they have been exhausted.

On June 6th, 18 organizations submitted comments on the proposed decision with their own take on the issues. In analyzing comments from three major players – storage company Tesla, solar industry group California Solar Energy Industries Association (CALSEIA), and nonprofit SGIP administrator Center for Sustainable Energy (CSE) – there was a surprising degree of similarity between such diverse parties.

In general, each was supportive of the CPUC’s proposed reforms. There was support for making funds available on a continuous basis and reducing current incentive levels. In fact, both CSE and CALSEIA called for even lower incentive levels.

There was also agreement on the CPUC’s decision to shift incentives from a power (per kilowatt) basis to a capacity (per kilowatt-hour) basis. However, the organizations unanimously cautioned in their comments that this could lead to an over-incentive for longer duration systems that may not reinforce the goals of SGIP. As stated by Tesla, “The maximum allowable duration of energy storage that can receive SGIP incentives should be based on the ability of storage to meet the stated program goals of reducing emissions and supporting the grid.” Both Tesla and CALSEIA suggested that the incentive cap should be at six hours, while CSE suggested four hours would be appropriate. All three organizations argued that incentives should decline with increasing storage duration.

The last main point of agreement concerns a proposal to require 260 hours of annual discharge for commercial energy storage systems. While each organization proposed a somewhat different method of altering this requirement, each agreed that it should be adjusted in light of the switch in compensation criteria from power to capacity.

In all, there was little in the way of disagreement between Tesla, CALSEIA, and CSE. Their differences derived largely from the topics each organization chose to address, rather than from the conclusions they reached.

While the final outcome is still very much up in the air for SGIP, it is positive to see much needed revisions being considered. Only time will tell the true effect any change to SGIP may ultimately have on California’s energy storage market, but many of the proposed changes appear to be taking the program at least a few steps in the right direction.

So far, no state has implemented a truly targeted energy storage incentive program. Hopefully, a reformed SGIP will serve as a roadmap to successful program design and encourage other states to adopt similar measures.

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This blog post was also published on Renewable Energy World, and in Microgrid News under the title “California: Out of Controversy Comes a Role Model for Energy Storage?”