Friday, April 28, 2017

Stories from the NewsWire: Solar and Wind Curtailments

Oversupply and the duck curve are of increasing concern as renewables make up more of the energy mix. In this article from the April 2017 Newswire, Keith Martin, partner in Chadbourne's project finance group, discusses solar and wind curtailments resulting from heavy solar penetration in California and the effects that these curtailments are having on the negotiation of power purchase agreements. 

Whether curtailment payments are excused in power purchase agreements can vary depending on the cause of the curtailments. If the curtailments are due to system operating problems, the offtaker usually does not have to pay. While economic causes of curtailments generally do not excuse payment by offtakers, a new trend is emerging in regions of the United States with higher curtailment risks.  In these regions, such as California, offtaker payments are being excused up to a certain capped monetary value or number of hours before the offtaker's payment obligations begin. Including such terms in power purchase agreements will likely continue as more renewables are added to the grid and lenders, generators and offtakers adjust to this new reality. The full article can be found here.

Tuesday, April 25, 2017

The Effect of FERC's Quorum Issue on Natural Gas Projects

Based on campaign pronouncements, the Trump administration was widely expected to be a proponent of oil and gas infrastructure projects.  This has turned out to be the case for oil pipeline projects such as the Keystone and Dakota Access pipelines. However, an unexpected turn of events has stalled gas pipeline and liquefied natural gas (LNG) projects.  

The Federal Energy Regulatory Commission (FERC or Commission) has final approval authority over interstate natural gas pipelines and LNG export terminals. To give final approval, FERC requires a quorum, which consists of at least three of the five commissioners being present. Since February 3rd, when demoted Chairman Norman Bay resigned, FERC's Commission consists of only two commissioners, thus lacking a quorum and the ability to approve gas pipeline and LNG projects. Until FERC regains a quorum with a third commissioner, many natural gas infrastructure projects will be stalled. Rumors continue to circulate with respect to names of potential appointees and the Senate Energy and Natural Resources Committee has indicated that it is poised for quick action. Nevertheless, the White House has yet to nominate a commissioner, leaving the natural gas industry in limbo.

Thursday, April 20, 2017

Oklahoma Ends Eligibility for State Wind PTC

Oklahoma Governor Mary Fallin signed legislation that ends the eligibility of new wind projects for the state’s production tax credit.  On April 17, 2017, the Governor signed House Bill 2298, which limits the eligibility of the tax credit to wind projects that are placed in to service no later than July 1, 2017.

The tax credit had been scheduled to expire on January 1, 2021. The credit is worth one-half of one cent per kilowatt hour of production. Plants currently in operation will continue to be eligible for the tax credit.