Next-Generation Feed-in Tariff for California? | Renewable Energy World

http://www.renewableenergyworld.com/rea/news/article/2010/08/next-generation-feed-in-tariff-for-california?cmpid=WNL-Friday-August27-2010

FW: Energy Tax Law Alert: Understanding "Beginning Construction" Under Section 1603

 

 

From: Stoel Rives LLP [mailto:stoel_rives@stoel.com]
Sent: Friday, August 27, 2010 10:38 PM
To: Bannerman, Monty
Subject: Energy Tax Law Alert: Understanding "Beginning Construction" Under Section 1603

 

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Energy Tax Law Alert Understanding "Beginning Construction" Under Section 1603 August 27, 2010 The Treasury Department recently issued a series of FAQs in an effort to clarify when projects will be treated as having "begun construction" for purposes of the section 1603 grant. As you may be aware, a project that otherwise qualifies for the grant but is not placed in service before the end of 2010 may still be eligible for the grant if construction on the project is begun in 2009 or 2010 and the project is eventually placed in service before the applicable "credit termination date." The new FAQs address a number of the unanswered questions. However, the framework adopted by the Treasury Guidance and the new FAQs is complex, and there appears to be a considerable amount of confusion among developers about how the "beginning construction" requirement can be met. Therefore, we thought it important to issue this alert. "Beginning Construction" There are two distinct ways to begin construction pursuant to the Treasury Guidance: (1) actual physical activity; or (2) the expenditure of money. These tests are entirely separate, and what counts toward meeting one test generally will not affect qualification for the other.  Physical Activity Test Actual physical activity is the first test for beginning construction. The Treasury Guidance states that "[c]onstruction begins when physical work of a significant nature begins." FAQ 4 provides that even a small amount of physical activity will meet this requirement. However, FAQ 5 states that Treasury will scrutinize projects where the physical activity, once begun, does not involve a continuous program of construction. In other words, Treasury will evaluate whether work begun in 2009 or 2010 is carried on continuously and may disallow the section 1603 grant if it is not. The Treasury Guidance and FAQs provide that both physical work done by the applicant itself and physical work done by others pursuant to a binding written contract may be taken into account. In addition, work done both on site and off site may count in meeting the physical activity test. Importantly, there are specific requirements that must be met for a contract to be considered binding for purposes of section 1603, and only work done after the binding contract is entered into will count for purposes of this test. On-site work may include excavation for foundations, pouring of concrete pads, building of certain roads, and assembly of machinery. Off-site work may include the manufacture of component parts, such as boilers or solar arrays, to be assembled or used on site. Preliminary work, such as planning and design, securing financing, researching, and site clearing, does not qualify. Physical work of a significant nature may begin even if a specific site for the facility has not been identified. Expenditure Test – The 5 Percent Safe Harbor As an alternative to the physical activity test, the Treasury Guidance provides that construction begins if a safe harbor is satisfied. To qualify for the safe harbor, an applicant must have "paid or incurred" more than 5 percent of the total cost of the property on or before December 31, 2010. As with the physical activity test, these costs must be paid or incurred pursuant to a binding written contract. This is strictly an expenditure test; physical work is neither required nor relevant. There has been considerable confusion about this test. The term "paid or incurred" has a specific meaning for tax purposes, based on whether the taxpayer is an accrual method or cash method taxpayer. For accrual method taxpayers, mere payment of an expense (e.g., making a nonrefundable deposit) generally is not sufficient for the expense to have been "incurred." For purposes of the safe harbor, the general rule is that amounts are not treated as paid or incurred by an accrual method applicant until the property or services have actually been provided to the applicant by the contractor (or until the payment date, if the property or services are reasonably expected to be provided within three-and-a-half months of the payment date). In addition, the Treasury Guidance provides that, if there is a binding written contract but the property or services have not yet been provided to the applicant, costs may be treated has having been paid or incurred by the applicant when costs have been paid or incurred by the contractor. Pros and Cons of the Two Tests The 5 percent safe harbor is useful if physical work, either on site or off site, will not begin before 2011. Conversely, where it is possible for physical work of a significant nature to begin before the end of 2010, the 5 percent safe harbor has limited application. However, one advantage of meeting the 5 percent safe harbor, rather than the physical activity test, is that there is no requirement for the safe harbor that construction be continuous (see FAQ 22). Planning and Drafting for Meeting the "Beginning Construction" Requirement It is important that various agreements, such as EPC and BOP contracts and turbine and other equipment supply agreements, address how the "beginning construction requirement" is intended to be met. Where necessary, these agreements should be drafted to ensure they meet the requirements for "binding written contracts." It may also be appropriate for them to set specific performance and payment deadlines, and to obligate particular parties to provide reports, allocate costs, etc. in order that the application for the section 1603 grant can be completed. Finally, the agreements should address the question of allocation of risks if the various requirements for "beginning construction" are not met. Conclusion Developing and implementing a strategy for satisfying the "beginning of construction" requirement requires a thorough analysis of the particular transactions being considered. In addition, great care must be exercised in drafting the various agreements to ensure that they address the various requirements. We would be pleased to assist you in accomplishing these goals. Please contact one of the Stoel Rives attorneys listed below. Energy David Benson at (206) 386-7584 or Email Bill Holmes at (503) 294-9207 or Email Morten Lund at (858) 794-4103 or Email Alan Merkle at (206) 386-7636 or Email Julia Pettit at (801) 578-6958 or Email David Quinby at (612) 373-4104 or Email Howard Susman at (858) 794-4111 or Email Tax Chris Heuer at (503) 294-9206 or Email Greg Jenner at (612) 373-8857 or Email Adam Kobos at (503) 294-9246 or Email Carl Lewis at (206) 386-7688 or Email Kevin Pearson at (503) 294-9622 or Email If you currently subscribe to Stoel Rives client alerts, click here to update your contact information and preferences. To join the Stoel Rives mailing list and ensure direct delivery of future alerts, click here to subscribe.

 

Attorney advertising. This is a publication of the Stoel Rives Tax Law Group for the benefit and information of clients and friends. This bulletin is not legal advice or a legal opinion on specific facts or circumstances. The contents are intended for informational purposes only. Copyright 2010 Stoel Rives LLP.  This email was sent from Stoel Rives LLP, 900 SW Fifth Avenue, Suite 2600, Portland, OR 97204. View this and other Legal Updates on the web at: http://www.stoel.com/alerts.aspx. To unsubscribe send an email to unsubscribe@stoel.com.

 

FW: Energy Law Alert: CPUC Proposes to End Moratorium on TREC Transactions; Increase Cap to 40%

 

 

From: Stoel Rives LLP [mailto:stoel_rives@stoel.com]
Sent: Friday, August 27, 2010 4:59 PM
To: Bannerman, Monty
Subject: Energy Law Alert: CPUC Proposes to End Moratorium on TREC Transactions; Increase Cap to 40%

 

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Energy Law Alert Proposed California Public Utilities Commission Decision Would End Moratorium on Tradable Renewable Energy Credit Transactions, Increase TREC Cap to 40%, and Exempt Existing Contracts from the Cap August 27, 2010 On August 25, the California Public Utilities Commission ("CPUC") issued a proposed decision ("PD") that would end the CPUC's moratorium on approval of tradable renewable energy credit ("TREC") transactions and increase the cap on such transactions for large investor-owned utilities to 40%. Previously at its March 11, 2010 meeting, the CPUC authorized the use of TRECs for compliance with California's Renewable Portfolio Standard (RPS), subject to certain limitations. CPUC Dec. 10-03-021 (Mar. 15, 2010)("March Decision"). Among the limitations that the March Decision imposed was a cap limiting the use of TRECs for RPS compliance for the largest investor-owned utilities (Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric) to 25% of their annual RPS compliance obligations. That cap was to remain in place until December 31, 2011, when the CPUC would consider modifying or removing that limitation. The March Decision also imposed a price cap of $50 per TREC. The price cap also expires on December 31, 2011. After issuance of the March Decision, Southern California Edison, Pacific Gas and Electric and San Diego Gas and Electric filed a joint petition for modification of the decision, seeking, among other things, modification of the usage and price caps, and modification of the criteria used to determine whether a contract was a TREC transaction subject to the 25% cap. The Independent Energy Producers Association also filed a petition for modification seeking modification of the criteria used to determine whether a contract was a TREC transaction. On May 6, 2010, the CPUC issued a decision staying implementation of the March Decision pending resolution of the petitions for modification. CPUC Dec. 10-05-018 (May 12, 2010)("May Decision"). The May Decision also imposed a moratorium on approval of any contracts that would be defined as TREC transactions under the March Decision. The PD issued yesterday would lift the stay imposed by the May Decision, and end the moratorium on approval of contracts defined as TREC transactions. The PD would also modify the cap on TREC transactions, allowing the largest investor-owned utilities to meet up to 40% of their annual compliance obligations through TREC transactions. The PD would further modify the cap by exempting future deliveries under contracts approved prior to the effective date of the March Decision from counting toward the cap. The March Decision would have included any future deliveries under existing contracts categorized as TREC transactions towards the 25% cap. The PD, however, would not alter the criteria used to determine whether a transaction was a TREC transaction. The definition of TRECs established in the March Decision (and unchanged by the PD) could have a significant effect on the use of generation from renewable resources located outside of California. TRECS are generally defined as renewable energy credits that can be traded separate and apart from the energy associated with their creation, in contrast to bundled transactions in which both the renewable energy credits and the associated power are sold together. The March Decision defined as bundled transactions any transactions with a generator that had its first point of interconnection with a California balancing authority, or in which the power associated with the renewable energy credits was dynamically transferred to a California balancing authority. The March Decision also recognized that some transactions with firm transmission arrangements might qualify as bundled transactions, but left that for future consideration. The definition of bundled transactions adopted by the March Decision would mean that any transactions with renewable resources that do not have their first point of interconnection with a California balancing authority, or do not dynamically transfer power to a California balancing authority, would be deemed a TREC transaction subject to the cap. This would be true even if the renewable resource delivered power to California under a firming and shaping arrangement. The more generous cap proposed by the PD would allow California's largest investor-owned utilities to enter into more contracts with renewable resources located outside the state. The PD will not be on the Commission's voting meeting agenda for at least thirty days from the date the PD was issued. Comments may be submitted on the PD by September 14, and reply comments are due by September 20. Also looming on the horizon is the California legislature's consideration of Senate Bill 722. Senate Bill 722, as currently drafted, would adopt statutory limits on the use of TRECs, as well as defining what would qualify as a TREC transaction. The legislature has until August 31, 2010, to approve SB 722. However, Governor Schwarzenegger has stated that he will veto the bill (as he did with similar legislation last year), unless the legislature increases the cap on TREC transactions. If SB 722 passes, however, in a form that Governor Schwarzenegger is willing to sign, it would preempt the standards established in the PD. If you have any questions about the issues of this update, please contact: Steven Hall at (503) 294-9434 or schall@stoel.com Seth Hilton at (916) 319-4749 or sdhilton@stoel.com Marcus Wood at (503) 294-9434 or mwood@stoel.com If you currently subscribe to Stoel Rives client alerts, click here to update your contact information and preferences. To join the Stoel Rives mailing list and ensure direct delivery of future alerts, click here to subscribe.

 

Attorney advertising. This is a publication of the Stoel Rives Energy Law Group for the benefit and information of clients and friends. This bulletin is not legal advice or a legal opinion on specific facts or circumstances. The contents are intended for informational purposes only. Copyright 2010 Stoel Rives LLP.  This email was sent from Stoel Rives LLP, 900 SW Fifth Avenue, Suite 2600, Portland, OR 97204. View this and other Legal Updates on the web at: http://www.stoel.com/alerts.aspx. To unsubscribe send an email to unsubscribe@stoel.com.

 

China’s 863 Program, a crash program for clean energy : The New Yorker

This is a very good snapshot of China emerging as an energy powerhouse and glutton.

http://www.newyorker.com/reporting/2009/12/21/091221fa_fact_osnos

The view from Bay Street: Climate climate: cool, getting colder

http://www.financialpost.com/news/climate+climate+cool+getting+colder/3396963/story.html

FW: Xcel Energy unveils plan to cut plant emissions

The cost of clean coal technology will change the fundamental economics of
coal and will drive a boom in natural gas generation.

Subject: Xcel Energy unveils plan to cut plant emissions

DENVER - Xcel Energy is proposing to spend $1.3 billion to convert
coal-fired power plants to natural gas and close a plant to comply with a
new Colorado law aimed at cutting pollution from power plants.

Xcel Energy, Colorado's largest electric utility, said the plan released
Friday will help meet statewide goals of reducing emissions of nitrogen,
carbon dioxide, sulfur dioxide and mercury. The company said it will also
save $225 million compared to installing pollution-control equipment.
The Associated Press

Global PV Supply: Realizing a Vision | Renewable Energy World

http://www.renewableenergyworld.com/rea/news/article/2010/08/global-pv-supply-realising-a-vision?cmpid=WNL-Wednesday-August11-2010

Ontario's Growing Pains: Will the Wind and Solar Industries Scale-up in Time? | Renewable Energy World

http://www.renewableenergyworld.com/rea/news/article/2010/08/ontarios-growing-pains-will-the-wind-and-solar-industries-scale-up-in-time?cmpid=WNL-Wednesday-August11-2010

Why Investors Like Solar PV | Renewable Energy World

http://www.renewableenergyworld.com/rea/news/podcast/2010/08/why-investors-like-solar-pv

Keeping Pace with Cost Reduction as Module Prices Continue to Decline | Renewable Energy World

http://www.renewableenergyworld.com/rea/news/article/2010/08/keeping-pace-with-cost-reduction-as-module-prices-continue-to-decline?cmpid=WNL-Friday-August13-2010

SunPower reports loss but sees strong revenue growth - SiliconValley.com

Biggest Silicon Valley bellwether manufacturer/developer.  

http://www.siliconvalley.com/news/ci_15734890

EIA US Short-Term Energy Outlook August 10, 2010 release.

 

 

 

        Short-Term Energy Outlook

August 10, 2010 Release                                   

 

Highlights

 

• EIA projects that the West Texas Intermediate (WTI) spot price, which ended July at more than $78 per barrel, will average $81 per barrel in the fourth quarter of 2010 and $84 per barrel in 2011, slightly above the forecasts in last month’s Outlook.

 

• EIA expects that regular-grade motor gasoline retail prices, which averaged $2.35 per gallon last year, will average $2.77 per gallon over the second half of 2010, up one cent per gallon from the average for the first half of the year.

 

• The projected Henry Hub natural gas spot price averages $4.69 per million Btu (MMBtu) this year, a $0.74-per-MMBtu increase over the 2009 average, but virtually unchanged from the forecast in last month’s Outlook.  EIA expects the Henry Hub spot price will average $4.98 per MMBtu in 2011, down $0.19 per MMBtu from last month's Outlook.

 

• The annual average residential electricity price increases only moderately over the forecast period, averaging 11.6 cents per kilowatthour (kWh) in 2010, up slightly from 11.5 cents per kWh in 2009, and rising to 11.9 cents per kWh in 2011.

 

• Estimated U.S. carbon dioxide (CO₂) emissions from fossil fuels, which declined by 7.0 percent in 2009, are expected to increase by 3.4 percent and 0.8 percent in 2010 and 2011, respectively, as economic growth spurs higher energy consumption.  However, even with these increases, projected emissions remain below their level in any year from 1999 through 2008.

 

 

 

 

To see details of this forecast update, go to the following World Wide Web site on the Internet:

http://www.eia.doe.gov/emeu/steo/pub/contents.html

Contact:

Tancred Lidderdale

tancred.lidderdale@eia.gov

phone: (202) 586-7321 

 

 

or

 

Neil Gamson

neil.gamson@eia.gov

phone (202)  586-2418

 

 

 

 

 

 

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Portugal Makes the Leap to Renewable Energy - NYTimes.com

http://www.nytimes.com/2010/08/10/science/earth/10portugal.html?pagewanted=1&_r=1&th&emc=th

Metrics for thin-film solar CIGS company comparisons - Photovoltaics World

http://www.electroiq.com/index/display/article-display/4510320637/articles/Photovoltaics-World/thin-film_solar_cells/cis_-cigs/2010/july/metrics-for_thin-film.html

Optimism, supply/demand concerns dominate Intersolar NA - Photovoltaics World

http://www.electroiq.com/index/display/article-display/4140384700/articles/Photovoltaics-World/industry-news/2010/july/optimism_-supply_demand.html

The rise of CIGS -- Finally? - Photovoltaics World

http://www.electroiq.com/index/display/article-display/5772561802/articles/Photovoltaics-World/thin-film_solar_cells/cis_-cigs/2010/july/the-rise_of_cigs_--.html

Solar power subsidies cut by up to 45 per cent in Spain - POWER-GEN WorldWide

http://www.powergenworldwide.com/index/display/articledisplay/5215544045/articles/powergenworldwide/renewables/solar/2010/08/solar-power_subsidies.html

Demand scenarios for US and Canada

 

Increased peak power demand a result of fast economic recovery: NERC - POWER-GEN WorldWide

http://www.powergenworldwide.com/index/display/articledisplay/2969109038/articles/powergenworldwide/Business/financial/2010/08/NERC-recession-study.html

CCS report forecasts new energy policies could create $134B in economic activity in the U.S.

http://www.pennenergy.com/index/power/display/5855752133/articles/pennenergy/power/renewable/2010/07/ccs-report_forecasts.html