Massachusetts SMART Solar Program Opens

On November 26, 2018 the Solar Massachusetts Renewable Target (SMART) Program opened for applications.

SMART is a new renewable incentive program established to support development of 1600 MW of new solar projects in Massachusetts. The program provides renewable energy project owners with a tariff based incentive that is paid directly by the utility company to the project owner, plus additional location- and customer-based incentives.

To qualify for the program you must file an application with the State Solar Program Administrator. Eligible projects will need to be interconnected to one of the three investor owned utility companies in Massachusetts: Eversource, National Grid, and Unitil. Each utility has established capacity blocks that decline in incentives with each block. The blocks are filled on a first-come, first-served basis.

The initial application period opened on November 26 and will continue through November 30, 2018. All applications received before midnight November 30, 2018 will be

IRS Issues Investment Tax Credit Guidance for Solar Projects

On Friday, June 22, 2018, the Internal Revenue Service issued guidance clarifying when construction commences for purposes of qualifying for the investment tax credit (“ITC”) for solar photovoltaic facilities. The ITC is a dollar-for-dollar reduction in federal income tax due by the taxpayer equal to a specified percentage of the eligible basis (generally the cost) of an energy project originally placed in service by the taxpayer.  The percentage of the ITC depends on when construction begins on the eligible project, and hence the guidance received by the IRS is critical.

As a result of the PATH Act, the ITC percentage for solar facilities, which traditionally has been 30 percent of the eligible basis, phases out as follows:

  • 30% for projects that begin construction by the end of 2019
  • 26% for projects that begin construction in 2020
  • 22% for projects that begin construction in 2021
  • 10% for projects that begin construction in 2022 or after

The

Powering America Hearing on Transmission Infrastructure Development: FERC Isn’t Batting 1000

On May 10, 2018, the House Energy Subcommittee held a hearing on the state of electric transmission infrastructure, particularly focusing on transmission planning, the efficacy of Order No. 1000 and the future of the transmission grid.  Important take-aways from the hearing included:

  • Consensus that Order No. 1000 has not worked to incentivize transmission infrastructure development in the way that was intended, and particularly, has not resulted in development of interregional transmission projects.
  • The Commission and Congress should rethink transmission incentives, including considering how to best incentivize new technology and whether performance-based incentives might be appropriate.
  • Significant offshore wind generation is coming to the East Coast; we need to think about how to best support its interconnection.

Six witnesses testified on the state of transmission infrastructure.  Former FERC Commissioner Tony Clark, now a senior advisor at the law firm of Wilkinson Barker Knauer LLP, discussed the white paper he recently issued, considering the status and efficacy of Order No.

Generator Interconnection Final Rule

FERC Substantively Revises Generator Interconnection Rules, Eases Rules For New Developers of Generation and Storage Facilities

On Thursday, April 19, 2018, the Federal Energy Regulatory Commission (FERC or “Commission”) issued a Final Rule revising its Large Generator Interconnection Procedures (LGIP) and Large Generator Interconnection Agreement (LGIA), which apply to generators over 20 MW.[1] The order, labeled Order No. 845, is the first comprehensive review of FERC’s generator interconnection policy in about 15 years, since Order No. 2003 and its progeny in 2003.

Order No. 845 is prospective only, applying to generators which are not yet in a queue.  Transmission providers, including independent system operators and regional transmission organizations (ISO/RT) must file changes to their tariffs by August 7, 2018. Note that on May 17, 2018, the ISO/RTO Council filed a motion for extension, asking that the compliance date be extended by 70 days to October 16, 2018.

The changes that FERC proposes will be beneficial

FERC Commissioners Testify on Energy Infrastructure, Resiliency, State-Federal Tensions

On April 17, 2018, the five Commissioners of the Federal Energy Regulatory Commission (“FERC”) testified before the House Energy Subcommittee in a hearing titled “Oversight of the Federal Energy Regulatory Commission and FY2019 Budget.”  Chairman Kevin McIntyre, along with Commissioners Cheryl LaFleur, Neil Chatterjee, Robert Powelson and Richard Glick discussed a number of topics ranging from cyber security and grid resiliency to baseload resources, removing barriers to entry for energy storage, review of the pipeline approval process, as well as potential modifications to the Public Utility Regulatory Policies Act (“PURPA”) and the Federal Power Act (“FPA”).

Key topics and takeaways included:

  • Tension between state energy policies and wholesale electricity markets.  Chairman McIntyre commented that finding a balance between state energy policies and FERC’s jurisdiction over the wholesale markets is one of the trickiest areas the Commission faces.  He explained that states have the authority to prefer certain energy resources, and FERC has the obligation to ensure that electricity generated by these resources is

Tax Reform’s Changes to the Treatment of Non-Shareholder Contributions to Capital

The 2017 tax reform act amended Section 118 of the Internal Revenue Code, to dramatically reduce the ability of a corporation to exclude from its gross income grants that the corporation receives from federal, state, or local governments or from civic groups to incentivize corporate investments. Many energy infrastructure projects benefit from exactly these kinds of incentives. Now and in the future, project developers need to be aware of and understand these changes, so that they can work to minimize the adverse consequences of the tax reform act’s amendment.

Before Tax Reform. Before the passage of the tax reform act, Section 118 provided that a corporation’s gross income did not include any contribution to the capital of the corporation. The regulations that accompanied this section explained that this exclusion applied to contributions received from persons other than shareholders (i.e., so-called “non-shareholder contributions to capital”). Thus, for example, if the government or a civic group contributed property to a corporation in order to

Carbon Dioxide Capture Credit Enhanced

The Bipartisan Budget Act of 2018 extended and enhanced a tax credit that incentivized carbon dioxide capture, storage, and utilization.

The enhanced credit, known as the “45Q tax credit,” offers a tax credit of up to $50 per ton for carbon oxide (not just dioxide) that is sequestered and up to $35 per ton for carbon oxide that is reutilized.  The credit amounts began at $22.66 per ton of sequestered carbon oxide and $12.83 per ton of reutilized carbon oxide in 2017, and are set to increase linearly until hitting $50 and $35 per ton of sequestered and reutilized carbon oxide, respectively, in 2026.  Businesses have six years to begin qualifying projects and have twelve years from the time they begin operations to take advantage of the credits.  For sequestered carbon oxide to qualify for the credit, it must be:

  • captured from an industrial source,
  • amounts that would otherwise be released into the atmosphere as an industrial emission,

FERC Approves CASPR, ISO-NE’s New Forward Capacity Auction

On March 9, 2018, the Federal Energy Regulatory Commission (FERC), in a split decision, approved ISO-New England Inc.’s (ISO-NE) proposed tariff revisions to accommodate entry of additional clean energy resources into the Forward Capacity Market (FCM).[1]  ISO-NE’s Competitive Auctions with Sponsored Policy Resources (CASPR) revises the Forward Capacity Auction (FCA) rules to include a secondary auction to “facilitate the transfer of capacity supply obligations (CSOs) from existing capacity resources, which commit to permanently exit ISO-NE’s wholesale markets” to new, state-incentivized clean energy resources known as “Sponsored Policy Resources.”

Existing resources that shed their CSO in the substitution auction will retain a one-time “severance payment” for the difference between the clearing prices in the primary and substitution auctions.  With the exception of approved tariff changes regarding FCM settlements, CASPR takes effect immediately, to coincide with the start of the year-long auction administration cycle for FCA 13.

FERC’s order is an important one, as it approves tariff revisions that reconcile

A New Incentive for Energy Infrastructure?

The Tax Cuts and Jobs Act of 2017 (better known as the tax reform bill) created a significant—and little-discussed—economic development program that encourages long-term investments in so-called “Opportunity Zones” by offering temporary tax deferral for capital gains re-invested in the Opportunity Zone and a permanent exclusion for gains from the Opportunity Zone investment.  This program has the potential to be one of the most significant economic development programs in the country and has broad applicability to a variety of industries.  Any person or business seeking to invest capital, raise capital, or that will recognize significant capital gains in the next few years should be aware of the benefits of this program.

What are Opportunity Zones?  Opportunity Zones are low-income areas (determined on a census tract basis), which are designated by the governor of each state as Opportunity Zones.  Each governor must designate his or her state’s Opportunity Zones from the pool of eligible low-income census tracts and certain contiguous tracts.[1] 

FERC has Options if Court of Appeals Seeks to Shut Down an Operating Interstate Pipeline

Can an interstate natural gas pipeline continue to operate if a court vacates its certificate authorizations?

On January 31, 2018, in Sierra Club v. FERC, No. 16-1329 (D.C. Cir.), the United States Court of Appeals for the District of Columbia Circuit denied rehearing  and rehearing  en banc (before the full court) of petitions for rehearing filed by the Federal Energy Regulatory Commission (“FERC”) and jointly by Duke Energy Florida, Florida Power & Light, Florida Southeast Connection, Sabal Trail Transmission, and Transcontinental Gas Pipe Line (the “Supporting Intervenors”).  The court’s orders raise the possibility that the court will issue its mandate and vacate FERC’s orders granting certificates of public convenience and necessity authorizing the construction and operation of the Florida Southeast Connection pipelines, which are currently transporting natural gas to power plants in Florida. If the court issues the mandate, FERC and the pipeline operators will be faced with whether, and if so how, the pipelines can continue