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The Year in Review

Environment, Energy, and Resources Law: The Year in Review 2022

Renewable, Alternative, and Distributed Energy Resources Committee Report


  • The Renewable, Alternative, and Distributed Energy Resources Committee Report for YIR 2022.
  • Summarizes significant judicial and administrative legal developments in 2022 in the areas of renewable, alternative, and distributed energy.
Renewable, Alternative, and Distributed Energy Resources Committee Report
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Developments in Renewable, Alternative and Distributed Energy Resources

A. Several Factors Affecting the Location of Renewable Energy Projects

Renewable assets can be located in bulk power or retail electricity markets. Modest and small assets are generally tied into a utility distribution system. Large solar and wind power farms are typically tied into a utility transmission system. Each has different sets of utilities, regulators, and regulations. Each faces unique locational challenges.

In 2022, state regulators faced various challenges in identifying appropriate sites for renewable energy investments. Two cases are highlighted to illustrate the diversity of technical and economic challenges presented to federal and state regulators in Virginia and California.

State regulators oversee projects like Dominion Energy’s $10 billion Coastal Virginia Offshore Wind project. This 176-turbine wind farm was approved in 2022 by Virginia’s State Corporation Commission and will be placed in Virginia’s rate base so that Dominion can recover its costs. The state’s approval did not require operating performance guarantees, but set limits on Dominion’s capital costs. The state regulator issued a warning to Dominion’s customers:

The magnitude of this project is so great that it will likely be the costliest project being undertaken by any regulated utility in the United States. And the electricity produced by this [p]roject will be among the most expensive sources of power—on both a per kilowatt of firm capacity and a per megawatt-hour basis—in the entire United States.

The issue for Dominion’s wind turbines appears to be location. Coastal Virginia is not the ideal place to position wind turbines because wind resources are fewer than in other areas. The Wind Energy Technology Office, within the U.S. Department of Energy, publishes wind energy maps. These maps report wind energy resource potential, from which wind turbine capacity factors can be conceptualized. Capacity factors are used to help determine annual energy production and levelized costs.

A very different locational issue faced California regulators in 2022. State regulators faced retail consumers’ growing interest in using renewable energy sources to self-generate energy. In particular, net metering emerged as a top challenge as consumers sought to use their energy to offset the full range of retail charges imposed by regulators and utilities. At the same time, utilities sought to limit consumers’ offsets and avoid cost-shifting utility expenses to those who can least afford solar investments.

In 2022, California changed its net metering rules for interconnection applications on or after April 15, 2023. By themselves, these new rules cut payments from utilities to retail customers for their excess power and cause rooftop solar to become less attractive. But those same rules make batteries more attractive because they help homeowners store their excess power for use later when hourly rates for electricity peak. With time-of-day metering widely used in California, the economics of avoided costs surpass net metering. Consequently, it appears solar plus batteries will become the choice of most homeowners. That choice will likely reduce net utility sales and exacerbate cost-shifting challenges.

B. Refreshed Interest in Mining

In 2020, the United States saw renewed interest in mining lithium and rare earth metals. Contrary to their designation, some of these metals are not so rare. In January 2021, the Department of Interior’s Bureau of Land Management (BLM) approved a Canadian firm’s bid to start operations of a two-square-mile open-pit lithium mine in Nevada. Enabling the use of new mining technologies reduced federal regulations and expedited approvals. Specifically, Title 41 of Fixing America’s Surface Transportation Act, or FAST-41, enables covered projects to access new coordination and oversight procedures. While FAST-41 may have accelerated mining approvals, a substantial area of potential mining sites is located on or near tribal lands. Specifically, tribal leaders oppose open-pit mining in the Thacker Pass area and have asked the Biden Administration to stop development.

Arizona, Texas, and Wyoming discovered substantial deposits of rare earth elements. Also, green metals in the Mountain West are needed for wind turbines and electric vehicles.

The Biden Administration supported domestic mining and announced partnerships and investments to “onshoring the industry” and reduce dependence on foreign sources. For example, President Biden passed Executive Order 14017, “America’s Supply Chains,” and announced “Securing a Made in America Supply Chain for Critical Minerals.” Further, the Biden Administration announced programs to reform domestic mining, including developing new standards, establishing sustainable supplies of critical minerals, prioritizing recycling, protecting special places, and proposing improvements to the General Mining Act of 1872.

C. Global Factors Affecting the Development of the Bridge Fuel: Liquefied Natural Gas

The year 2022 saw a dramatic change in global natural gas markets. As Europe and other nations reexamined their sources of natural gas from the Russian Federation, consuming economies decided it prudent to seek other sources. The only practical alternative was Liquefied Natural Gas (LNG) delivered from remote regions by ship. As demand shifted, wholesale hub, LNG, and global citygate prices increased. For the past year, the Department of Energy reported that U.S. hub prices increased from $3.67 per MMBtu in January to $9.85 in August, settling at about $6.00 in November. At the same time, the World Bank reported that European prices increased from $28.26 per MMBtu in January to $70.04 in August and settled at $35.72 in November. While prices are seasonal, the price differences between the U.S. and E.U. wholesale markets motivate the private sector to export as much natural gas to Europe and other markets as possible.

For the U.S., there is a surge in building LNG export facilities. According to the U.S. Federal Energy Regulatory Commission (FERC), eight LNG export facilities are currently exporting about 14 Bcfd. As of December 13, 2022, five new export facilities are under construction and are expected to export an additional 12 Bcfd. Also, under the Natural Gas Policy Act (NGPA) and Title 41 of the Fixing America’s Surface Transportation Act (FAST-41), FERC approved eleven additional export facilities that could export another 17 Bcfd. If all export facilities become operational, FERC estimates the U.S. could be exporting about 43 Bcfd. An emerging question is whether these new facilities are in the public interest as described in 18 CFR § 153.7.

Natural gas is a bridging fuel needed to help nations meet their greenhouse gas reduction targets. Not only does Europe seek new sources of natural gas, but so do Asia-Pacific countries like China, Japan, South Korea, and India. All are expected to import more significant volumes of LNG. Meeting that demand are ten major producing countries, with the United States, Australia, Qatar, Malaysia, and Algeria as the top five global LNG exporters.

A beneficiary of those high prices were owners of local wind, solar, and nuclear power assets. Their power production costs remained fixed as local market prices increased. That dynamic created substantial profit margins and an unexpected windfall for non-fossil fuel power plants.

In 2022, when retail consumers faced higher costs, windfall profits became an issue, and calls for government assistance grew. As Reuters reported, “…in September, E.U. members agreed to limit revenues from non-fossil fuel power plants to 180 euros/MWh from December until the end of June but also allowed national governments to impose lower revenue caps provided they are higher than the cost of generation.” As more natural gas enters the global markets, prices should decline. As prices decline, so should windfall profit taxes.

But high natural gas, LNG, and other fossil fuel prices stimulate global investments in low-cost renewable energy assets. As more wind, solar, and storage projects enter commercial operations, average daily power prices should begin to decouple from natural gas and decline. The so-called California “Duck Curve” illustrates the principle.

The Hurdles Faced by the Ongoing Development of Renewable,

Alternative, and Distributed Energy Resources

Following the Infrastructure Investment and Jobs Act of 2021, a five-year, $1.2 trillion federal infrastructure bill, Congress passed the Inflation Reduction Act (the IRA). The IRA authorizes nearly $400 billion in federal funding for tax incentives, grants and loan guarantees for clean energy deployment. The IRA also seeks to substantially lower the nation’s carbon emissions by the end of this decade. Among one of the anticipated benefits of the IRA is reducing the cost of debt incurred by utilities – and others developing renewable energy projects – that implement targeted technologies. If the provisions are carried out as intended, greenhouse gas emissions in the U.S. could be reduced by about forty percent by 2030.

However, accomplishing the intent of the measure is largely dependent upon how state and local governments respond to the clean energy incentives in the bill. Some states share the goals outlined in the IRA to dramatically increase the use of renewable energy technologies in reducing the use of fossil fuels to generate electricity through the implementation of clean energy standards. Other states, however, do not. Some thirty states have adopted mandatory renewable energy portfolio standards. Seven have not. The rest have voluntary standards.

Even in states that have strong policy support for renewable energy, the regulatory processes established to bring these new sources of power into operation have become cumbersome to the point that many projects have been withdrawn. The U.S. Department of Energy has created a new program, Interconnection Innovation e-Xchange (i2X), to convene stakeholder working sessions to address these interconnection queue issues. DOE expects the program to run for five years with periodic reports. The Federal Energy Regulatory Commission is also looking at rule changes to alleviate the delays in interconnection queues.

There is also the issue of modernizing the electric grid. Increasing renewable energy penetration requires building new transmission lines, and yet states continue to wield veto power over transmission line location. While the effort to increase the use of renewable energy has both advocates and skeptics, the results of implementing the IRA will be closely examined in the coming years. Successful implementation could encourage broader nationwide adoption of renewable energy technologies.

A. Issues Relating to Oncoming Decommissioning Practices and Obligations

Most renewable energy assets have relatively short technical and economic lifespans. End-of-life expectations fall into three general categories: solar, wind, and batteries. Solar and wind assets can last about twenty to twenty-five years, though technological advancements have expanded the lifespan of these assets through re-powering initiatives. Nonetheless, batteries may last half as long, depending on their design. Decommissioning each type of said assets presents different challenges.

Decommissioning solar farms are mostly about glass. According to the U.S. Environmental Protection Agency (EPA), seventy-five percent of a solar panel’s weight is glass. The remaining components are comprised of aluminum, copper, polymer layers, silicon, and a plastic junction box. Most panel components can be recycled. Several companies are currently buying, refurbishing, and recycling used solar panels and parts, though many are being sent to landfills due to insufficient recycling infrastructure.

In 2022, new technologies were introduced for decommissioning wind turbines and blades. The U.S. Department of Energy’s (DOE), Wind Energy Technology Office funded wind turbine recycling technologies. DOE says wind blades are typically fifty percent glass or carbon fiber by weight. They also report that technology currently exists to upcycle all blade components.

DOE has worked with Carbon Rivers and the University of Tennessee, Knoxville. Carbon River is building a facility to upcycle 50,000 metric tons of turbine blades annually. In addition, Windfall, Inc, a spinoff from Carbon Rivers, is planning a facility with capacity to process approximately 200 metric tons, or about 6,000 wind turbine blades annually.

Historically, decommissioning batteries has been challenging. The volume of used batteries is expected to grow as the electric vehicle (EV) industry matures. The potential impact on the environment for improper disposal of EV batteries could be significant.

But in 2022, substantial progress was made recycling lithium-ion batteries used in electronic devices and electric vehicles. Tesla, the nation’s largest electric vehicle manufacturer, works in-house and with third-party recyclers to ensure their used batteries are not buried in landfills. Tesla claims their new recycling process recovers over ninety percent of battery cell material.

Third-party recyclers formed teaming relationships with Tesla, Ford, and other EV manufacturers. In their Nevada facility, one recycling activity backs into Tesla’s manufacturing facilities and feeds Tesla with recycled metals needed for new batteries. This arrangement eliminates waste, minimizes mining, and reduces reliance on foreign sources.

Previously in 2019, DOE announced its lithium-ion battery recycling research and development center (ReCell Center). It is a public-private partnership between national laboratories, universities, and the private sector. ReCell Center’s goal is to improve national security by reducing foreign reliance on supplies of critical battery materials, consistent with Executive Order 13817. That order addresses ​“developing critical minerals recycling and reprocessing technologies.” Then in 2022, DOE expanded programs that advance domestic battery recycling and reuse. It announced $74 million to fund advanced recycling technologies under the Infrastructure Investment and Jobs Act (IIJA). Funded projects will “lead to second-use scale-up demonstrations that integrate end-of-life EV batteries into secondary applications,” according to DOE. Additional funding opportunities may be available to reduce the nation’s dependence on foreign materials through recycling from the Inflation Reduction Act (IRA) and Defense Production Act.

B. The Distribution and Allocation of Costs relating to Renewable Energy Projects

Utility-scale renewable energy assets have become cost leaders in the power generation industry. Renewable assets’ capital, operations, and maintenance costs for new facilities are consistently lower than most alternative investments. Their production costs are so low that their operations should be placed early in economic dispatch orders.

Some states require their utility-scale renewables to be placed in their rate base. In these situations, renewable owners are treated like all other generators and earn a prudent return on their assets. Like owners of regulated nuclear, coal, and gas generators, regulated renewables are exposed to minimal construction, operational, and gross profit risks. All risks, costs, and benefits are uniformly allocated across the utility’s customers.

Deregulated states treat utility-scale renewables differently. Developers must accept all construction risks. Only when the asset is producing power will owners have access to limited government benefits and possible hedging opportunities. Unlike their regulated counterparts, owners are at financial risk and have no guarantee that they will earn a return on their investment.

Few investors are willing to speculate on costly assets with unpredictable revenues. As a rule, most regulated investments are hedged against a rate base. That option is not available for deregulated investments. Consequently, investors of deregulated energy projects seek parties willing to accept a hedge position. These risk-taking parties are typically large organizations looking to reduce their carbon footprint and lock in long-term utility costs. They include organizations like Apple, Google, Microsoft, Facebook, Dropbox, government contractors, and non-profits. They also include deregulated electric utilities. In this situation, capital costs are allocated between the developer and the risk-taking parties.

Long-term contracts are structured between producers and off-takers. Consequently, costs are allocated to those parties. Nearby utility consumers benefit without any costs assigned to them because the assets’ operations reduce their locational marginal price of power.

Non-utility assets are also treated differently. When substantial amounts of low-cost energy appear behind customers’ meters, cost allocation challenges occur for utility infrastructure (wires and substations). The question for regulators is how to avoid stranded costs and allocate utility infrastructure costs equitably amongst two groups.

The first group represents wealthier customers that once needed utility infrastructure but reduced their use. The second group represents customers who cannot self-generate, which includes low and middle-income families and those living in high-density regions. For both groups, utility infrastructure continues to benefit all customers by doing nothing, but its costs shift to low- and middle-income customers.

Some stakeholders advocate community solar as a partial solution. Community solar allows people of all types to share access to the benefits of renewable energy, including carbon reduction, reduced energy costs, ownership, and wealth building. The U.S. Department of Energy (DOE) Office of Economic Impact and Diversity, the National Community Solar Partnership (NCSP), and individual states accelerated opportunities in 2022 for communities to own shared energy facilities.

Other stakeholders advocate using the Biden administration’s Justice Solar Initiative as another partial solution. According to DOE, “Section 223 of EO 14008 established the Justice40 Initiative, which directs 40% of the overall benefits of certain federal investments—including investments in clean energy and energy efficiency…to flow to disadvantaged communities.”

Neither program resolves the cost-shifting problem. State regulators may need to reallocate local distribution infrastructure costs back to those parties who use renewable energy to self-generate, even as wealthier customers use less service. Any decision in this direction is likely to be controversial.

C. Two Different Approaches to Developing an Improved Grid

The need for increased investment in electric infrastructure is being driven not only by requirements in some areas to replace fossil fuels with renewables, but also the need to address decreasing reserve margins throughout the nation’s power system. Reserve margins throughout America’s bulk power system have been decreasing to levels that are causing concerns about system reliability.

Various – and in some cases conflicting – strategies to address the need for more investment are emerging. One strategy is whether utilities, regional reliability organizations, and regulators at federal and state levels will seek to build a nationally connected high voltage transmission system. Advocates of such a “macro grid” initiative assert that such an initiative would facilitate the transfer of renewables-generated power in areas of the country with optimal conditions to other areas of greater need.

Another strategy is to rely on more “micro grid” programs, where load centers will form their own power supply systems that can disconnect from larger grids in times of wide area power disturbances to ensure continuous power supply service. Micro grids are advocated to serve hospitals, military installations, education systems, etc.

Advocates of macro and micro grids say their initiatives will benefit system reliability and the growth of power from renewable resources. Utilities, states, agencies, and communities will continue to assess these and other strategies to determine their benefits from economic, environmental, safety, and national security perspectives.

This section was edited by Deborah E. Ransom, J.D. Candidate, University of Houston Law Center; Melissa Mercedes Douglas, Attorney, Conrad Douglas & Associates Limited, Kingston Jamaica; Aaron Levine, Attorney, National Renewable Energy Laboratory, Denver, Colorado; Victor B. Flatt, Attorney and Professor at Case Western Reserve University School of Law; Atanasio “Tacho” Fernandez, Attorney, Lewis Brisbois Bisgaard & Smith, LLP, Houston, Texas; and Mahdi Saeiddanesh, J.D. Candidate, University of Houston Law Center. The section was written by John A. Howes, Attorney, Redland Energy Group, Washington, D.C.; and Glen S. K. Williams, Attorney, FMI Energy Holdings LLC, McLean, Virginia.