Archive for the ‘International Markets’ Category

Clean Power Plan: 2016 & Beyond

Posted March 9th, 2016 by SRECTrade.

On February 9th, the U.S. Supreme Court ordered in a 5-4 decision to issue an unprecedented emergency stay on the Environmental Protection Agency’s (EPA) Clean Power Plan (CPP), as states and other stakeholders continue to present legal challenges before lower courts. The Clean Power Plan calls for a 32% reduction of carbon dioxide emissions by 2030 (from a 2005 baseline), requiring states to present their initial compliance plans to the EPA by 2022.

The implementation of the CPP could encourage the states to consider instituting new–or to improve existing–state Renewable Portfolio Standards (RPS) to help meet their goals. Today, only twenty-nine states, Washington, D.C., and two territories have adopted an RPS. Seven of these RPS states have a solar carve out, where a specific percentage of renewable energy requirements must be satisfied with solar energy resources. In addition, eight states and two territories have set some form of renewable energy goals. The CPP’s call to action will mandate all 50 states to develop cost-effective plans to combat climate change, improve air quality and create new jobs.

Twenty-nine states, the U.S. Chamber of Commerce and other entities invested in fossil fuels are challenging the CPP. Many of these CPP opponents argue that the EPA is acting beyond its authority and that, at a minimum, the CPP’s merits must be fully reviewed before imposing federally mandated plans upon the states. CPP opponent Wyoming Governor Matt Mead stated that he is “thrilled” that the EPA’s climate rule was stayed, because the stay may leave the door open for the new administration to evaluate whether there is a “better way to go” than what the CPP would require. However, it is possible that the issue will be brought back to the Supreme Court for a decision before the new president is sworn in on January 20, 2017, leaving time for President Obama to make the Plan law before he leaves the White House.

Litigation in the lower courts is scheduled to begin on June 2, 2016, and a ruling from the Court of Appeals is expected by the end of 2016. Once an appellate decision is made, the case is expected to go back to the Supreme Court. But the sudden passing of Supreme Court Justice Antonin Scalia adds additional uncertainty and complexity to the future of the CPP, as the late Justice Scalia’s successor may very well shape the future of the Clean Power Plan. A new voice on the Court could result in a vote in favor of the CPP, which could swing the 5-4 decision in favor of lowering carbon dioxide emissions and fostering a sustainable change.

Alas, it remains to be seen if President Obama will successfully appoint a new Justice before the end of his term, potentially leaving the appointment to the next President. And if a new Justice is not appointed before the Court revisits the CPP, there is a chance we could see 4-4 decision from the Court on the issue, which would mean that the Court of Appeal’s ruling would be automatically upheld. As D.C. plays tug-of-war over the Supreme Court vacancy, CPP opponents are working to convince the lower courts that the CPP would spell economic disaster for the nation, while CPP’s proponents assert that the Plan would guide our nation away from coal-fired electricity and forestall millions of metric tons of greenhouse-gas emissions.

The Obama Administration vowed to press forward with the President’s climate policy. If approved, the Clean Power Plan would set a historic precedent on how environmental laws are structured and serve as an example for national and global policies. The CPP was instrumental in influencing heavily polluting nations such as China and India to sign the Paris Agreement at the 2015 United Nations Climate Change Conference.  The Paris Agreement aims to prevent, mitigate and respond to climate change. If the Clean Power Plan is ultimately struck down, the decision would challenge the implementation of national and worldwide environmental policies. Evermore, the selection of our next President and Supreme Court Justice will greatly influence the future of clean energy and shape how environmental issues are prioritized and responded to in the years to come.

FERC Rules Against Feed In Tariffs

Posted August 19th, 2010 by SRECTrade.

Several states have been exploring an alternative to solar renewable energy credits with laws establishing feed-in tariffs (FIT).  A FIT law works by requiring utilities to purchase electricity from certain sources, like solar, at a fixed rate.  This rate is higher than the utilities normal wholesale electricity purchase price in order to subsidize their higher cost.  Unlike SREC laws, the FIT is a relatively blunt policy instrument.  By setting a fixed tariff, the state legislature must exactly calculate the cost needed to incentivize new solar installations.  If the rate is set too high, ratepayers unnecessarily oversubsidize solar (remember cash for clunkers?) and if it is set too low the solar build-up is too slow.  An SREC program, by contrast, allows the market to determine the exact price necessary to incentivize solar, leading to the desired amount of solar at the minimum cost to ratepayers.

State FIT laws were recently dealt a setback by the Federal Energy Regulatory Commission (FERC) who determined that a California  Feed-in Tariff for combined heat and power (CHP) was preempted by Federal Law.  The ruling specifically determined that  FERC has exclusive jurisdiction to set rates, terms, and conditions for the sale or resale of electricity, and that feed-in tariffs are a means of setting rates for the sale or resale of electricity.  The ruling goes on to state that feed-in tariffs would be allowed for certain facilities in certain circumstances, but not at rates above the utilities avoided cost.  Since avoided cost is far below FIT levels, this ruling effectively ends solar FITs in the U.S.

Existing programs in California, Oregon, Connecticut, and Vermont will probably be impacted immediately, while pending legislation in several states will have to be re-examined.  The  good news is that most of these states have existing renewable portfolio standard laws, they only lack a solar carve-out.  By adding a solar component to these existing laws, they can join states like NJ, MD, DE, DC, PA, OH, and MA using a market based approach to drive solar growth.

Some other coverage:
Full ruling can be found at FERC’s website under dockets EL10-64 and EL10-66

FERC deals blow to above-market rates (Feed-In Tariffs)

SEIA makes plans to appeal to congress to give states authority to implement FITs

Australia Creates Separate Target for Small-scale Renewables

Posted July 26th, 2010 by SRECTrade.

On June 28th, the Australian government decided to split the REC trading environment within the country into two parts: one REC market for large-scale technologies like wind (LRECs) and one market for small-scale technologies like solar (SRECs). The law will go into effect on January 1, 2011. Of the original Australian target—45,000 GWh by 2020—LRECs are to account for 41,000 GWh and SRECs 4,000 GWh. This separation is theoretically akin to the “carve out” for solar energy development seen in several US states, but has been created with the opposite intention: to aid large-scale renewable energy development that would otherwise be dampened by a tendency toward small-scale systems.

The original Australian Renewable Energy Target law was passed last year with a target of 20% renewable electricity generation by 2020, along with a system for requiring utilities to buy all Renewable Energy Certificates (RECs – equivalent to 1 megawatt-hour, like in the US) created within the country.

The government also created a “Solar Credits Multiplier” which effectively multiplied by 5 the number of RECs produced by solar installations less than 1.5kW. This program, however, quickly flooded the market with RECs from small household solar thermal heaters and pumps. These government-discounted systems ultimately lead to a steep decline in REC prices. At values as low as $29 per REC (~$25 USD) large-scale renewable technology developers could no longer take on the financial risk of new projects. The Australian government, aware that larger wind and solar projects have greater potential to provide baseload power, decided to reinvigorate incentives for investment in large-scale renewable energy technologies.

Under the amended law, small-scale SRECs can be sold at a fixed price of $40 per MWh in a clearinghouse set up by the government. These SRECs will be sold quarterly in the order that they are produced. If supply of SRECs is greater than demand, then the government can lower this fixed price or reduce the Multiplier. Yet, if demand outpaces supply, then the government can sell “advance” SRECs to keep the price stable at $40.

The government does allow for SRECs to be traded outside of this clearinghouse, but this will most likely only attract sellers who do not want to wait if their SRECs are too far down the “first-come, first-served” list. Their SRECs will not be purchased for more than the fixed price clearinghouse, as utilities will be able to buy “advanced” SRECs at $40 if necessary. Without a true market for these SRECs, an efficient market price in Australia will be impossible to establish.

In the other market, LRECs will be sold and purchased annually, but it is important to note that those RECs that are produced from small-scale systems before January 1, 2011 will still be eligible. Critics have pointed out that the oversupply of RECs from 2010 will keep prices in both markets low until around 2014 when utilities will need to replenish their supply.

This decision was an important step for the Australian government in creating a more balanced mix of renewable energy technologies within the country. Nonetheless, one of the most pervasive elements of the initial law was the Solar Credits Multiplier. This policy instrument, coinciding with high rebates for solar thermal systems that were also eligible to create RECs, created too much overcapacity in the market. This multiplier provided the overwhelming incentive to install small solar installations. With a REC market flooded by credits that did not accurately represent the electricity produced from small systems, REC prices faced continued downward pressure. With both large- and small- scale renewable developers looking to this same pool of RECs as a means of financing their projects, most large projects (solar and wind alike) were pushed aside.

Multipliers have also been utilized within the United States as well, yet nearly always create an imbalanced mix of renewable technologies within the state’s portfolio. For Australia, it was small-scale solar that overtook the market. The government was forced to amend the law to create a “carve out” for larger-scale projects such as wind. This “carve out” mechanism has worked in the United States to provide the necessary developmental period for high-value, nascent technologies to become competitive in an otherwise hostile market. Yet, Australia may soon find that it’s support will simply create a new dominant technology. The Australian government has opted to favor large-scale projects in proposing that they should inhabit 90% of the total renewable target. These projects, given the current economic superiority of large-wind in a separated LREC market, will most likely be filled entirely with wind power.