by jboullion | Jun 11, 2013 | Uncategorized
Collaboration between the City of Milwaukee’s Office of Environmental Sustainability and the Port of Milwaukee to install a Northern Power 100-kilowatt wind turbine with funding from the American Recovery and Reinvestment Act, We Energies and Focus on Energy reports success.
The
City of Milwaukee’s Office of Environmental Sustainability and the Port
of Milwaukee partnered to install a Northern Power 100-kilowatt (kW) wind turbine
at the Port administration building near the shore of Lake Michigan.
Commissioned in February 2012, the wind turbine provides more than 100%
of the electricity needs of the administration building with its excess
energy sold to We Energies.
In its first 9 months of operation, the project resulted in more than
$5,000 in net revenue for the port after all electric expenses were
paid. The estimated annual savings to the city are $14,000 to $20,000
(at 2011 rates, revenue included). Estimated annual production is
109,000 to 152,000 kilowatt-hours.
The turbine was manufactured in the United States, and many parts,
including the tower, were made in Wisconsin. The $587,000 project
received the bulk of its funding from the American Recovery and
Reinvestment Act ($400,000) and $100,000 each from We Energies and the
statewide Focus on Energy program.
[READ MORE]
by jboullion | Jun 10, 2013 | Uncategorized
In Midwest Energy News John Ferrell comments on the potential expansion of Master Limited Partnerships (MLPs) to cover wind and solar energy providers. Ferrell asserts that including wind and solar companies in MLPs and thus allowing them to avoid paying corporate income tax would simply provide another tax loophole to big business rather than evening the playing field between renewable and conventional energy sources. In the counterpoint below Attorney Michael Allen of Energy Law Wisconsin identifies three primary reasons why the extension of MLPs to include wind and solar business will encourage more investment dollars to come into the renewables marketplace.
I write in response to
John Farrell’s recent commentary on Master Limited Partnerships (MLPs)
in Midwest Energy News. Bottom Line: I don’t entirely agree with Mr.
Farrell’s pessimistic point of view. Here are a few areas where I
respectfully disagree.
The
first is while it is technically correct for Farrell to say that MLPs
don’t pay corporate income tax, this statement is somewhat misleading,
as it suggests that that the income generated by Master Limited
Partnerships avoids taxation. It does not. MLPs, just like the LLCs
who comprise many of the members of the Midwest Renewable Energy
Association, do not escape income taxation on the money they earn.
Rather, their income flows through to their owners who pay the tax on
this income at their own tax rates. Renewable Energy MLPs would offer
an advantage to persons who wanted to raise large amounts of money for
renewable energy because the entities would get the best of both the
partnership and corporate forms of doing business. Like corporations
they are publicly-traded, so many people, even small investors, would be
able to invest and with a broader potential owner base they should be
able to raise funds at more favorable rates. In addition, they get the
same favorable pass through tax treatment as an LLC because, unlike
publicly traded corporations, their profits would not be taxed twice —
first at the corporate level and again when dividends or profits are
distributed to the shareholders.
Farrell
may have a valid criticism of the FERC regulation of Master Limited
Partnerships in the oil and gas industry in that FERC may be allowing
them overly generous rate recovery –treating them as if they were
subject to “double taxation” of profits and dividends when they are
not. However, if true, this is a criticism of FERC regulation that
should be corrected at the FERC and avoided if Renewable Energy MLPs
become a reality. It is not an inherent defect with the MLP form of
doing business. It is unclear to me to what extent this would be an
issue for renewable energy MLPs. FERC regulation would apply if they
were selling electricity in interstate commerce. However one can
imagine an MLP that would not be regulated by FERC because it focused on
developing PV systems or micro grids serving business parks or
subdivisions within states.
Farrell
raises two other concerns with MLPs. First, he claims they will enable
large regulated utilities to get to the tax-saving “trough”. Second, he
believes MLPs will reinforce centralized control of the energy system,
and counter the trend of distributed local generation on rooftops,
thereby taking ownership of the renewable energy system away from the
“little guy”, who is unlikely to be an investor in a renewable energy
MLP.
I think Mr. Farrell’s view that these features make MLPs lousy policy for renewables is debatable.
First,
plenty of “little guys” hold shares in regulated utilities, so I don’t
know what would prevent them from being investors in renewable energy
MLPs should they be utilized by utilities (For example — my 84 year old
mother holds units in Cedar Fair, the amusement park MLP). Locally if
you go to an MGE annual meeting you will see thousands of small
investors. In addition, if individual investors want to buy stock
cheaply, they can do so in just about any utility and many other
publicly-traded corporations and existing MLPs through low cost services
that allow shareholders to buy as little as one share and reinvest
their dividends or make additional modest investments through Dividend
Reinvestment Plans and Direct Investment Plans. Renewable Energy MLPs
actually have the potential to open up ownership of renewables to people
who, like the small investors who have flocked to Solar Mosaic, can’t
afford to put a PV system on their own home and don’t have sufficient
taxable income to be a major investor in a renewable energy project to
get the tax credits, but can afford to invest a $1,000 or less in a
renewable energy project.
Second,
if utilities or other big industry players really want to get into
renewables in a big way, they already can – they don’t need the MLP.
Look at Warren Buffett, or Duke Energy or MEMC, which purchased Sun
Edison and just adopted its name. They just need to find the right
renewable investments in the right markets. I think it is unlikely that
it is the lack of the MLP form of doing business that is holding them
back.
Finally,
it is not cheap to set up an MLP and utilities can already raise money
through their existing corporate structure (assuming the local state
regulatory commission lets them do so). I don’t think it is a certainty
that they will be the ones to jump into the MLP game. If you want to
anticipate which financial heavyweights might use the MLP renewables
structure, my sense it would be more likely to be the major oil
companies (as Farrell notes) or the investment banks, who underwrote the
fossil fuel and pipeline MLPs.
Ultimately,
I think Mr. Farrell is making an argument that renewables are done best
with local control and not by large centralized owners. There are
certainly benefits to the local approach, including increased
responsiveness to local community concerns and perhaps, in some
circumstances, even local grid security. However, there are drawbacks
too, including loss of potential economies of scale making renewables
development more expensive than it needs to be and risk of inadequate
depth of expertise to serve the needs of customers. In addition, as
noted above, one could even argue that MLPs, by offering an opportunity
for small investors to invest in renewables via MLP unit ownership, may
have a democratizing effect on renewables by opening up greater
opportunity of ownership to small investors, even if ownership of
renewable energy assets are concentrated in larger companies.
Nothing
is black and white, but I come down on the side of favoring MLPs,
because I believe they will encourage more investment dollars to come
into the renewables marketplace. And the clinching consideration that
sways me in this direction is that if the Earth’s atmosphere obtains
relief from GHG emissions due to increased development of renewables, I
think the atmosphere doesn’t care much whether these renewables are
locally or centrally owned.
Regards,
Michael
Michael J. Allen
Energy Law Wisconsin
1500 West Main Street, Suite 300
P.O. Box 27
Sun Prairie, WI 53590
by RENEW Wisconsin | May 30, 2013 | Uncategorized
A unique partnership will soon turn cow waste from farms into renewable energy in the Dane County area thanks to a unique partnership between Dane County and Gunderson Health System. Read the press release below for more information.
Three-Farm Community Manure Digester Will Produce Cleaner Energy, Keep Twice the Amount of Phosphorus Out of Area Lakes
DANE COUNTY, WI — Construction of the county’s second Cow Power project has begun, paving the way for cleaner lakes and enough clean electricity to power 2,500 homes, Dane County Executive Joe Parisi announced at a groundbreaking ceremony today.
Surrounded by rolling hills, happy cows, and with construction equipment poised to begin work, County Executive Parisi was joined for the historic event by Gundersen Health System executives, dairy farmers, and state and local officials at the Ziegler Dairy Farm west of Middleton.
“Today is an exciting day for Dane County that was made possible through years of hard work and a historic partnership between government, the private sector, and local farmers,” said Parisi. “Our second Cow Power digester will help clean up our lakes, generate home-grown renewable energy, and keep our farm families farming for generations to come.”
[READ MORE]
by RENEW Wisconsin | May 24, 2013 | Uncategorized
by Don Wichert
As part of a US DOE Sunshot grant, MREA subcontracted with RENEW to investigate whether Wisconsin’s interconnection rules were up-to-date or needed amending.
RENEW led a team that conducted an installer interconnection survey, assessed Wisconsin’s current interconnection rules, compared Wisconsin’s rules to national best practices, and had 6 meetings with an interconnection workgroup to consider all relevant information and make recommendations, if warranted.
The PSC is now conducting an investigation to get stakeholder input on the need to open an interconnection rules amendment docket. Comments are due by Monday, June 17, at noon.
It is very important that members of the renewable energy supply chain businesses and other stakeholders urge the PSC to open a docket on this topic. These comments have to be filed as described in the linked PDF or here:
ALL filed documents related to docket can be found in WI Public Service Commission’s Electronic Regulatory Filing (ERF) system by following these simple steps.
- Go to Search ERF @ http://psc.wi.gov/apps35/ERF_search/default.aspx
- Type in docket number 5-gf-233 in docket search box and then click on {GO} button.
These rules only get evaluated about every ten years or so. If you ever had an issue with interconnection or would like to see the process get easier, faster, and cheaper without reducing safety, now is the time to make your comments heard.
Please let us know if RENEW can be of additional assistance in submitting comments.
by RENEW Wisconsin | May 24, 2013 | Uncategorized
A new project in Turtle Lake, WI aims to use a cheese plant’s wastewater to produce electricity, heat and fertilizer. Read the article at Agri-view.
By Jane Fyksen Crops Editor
TURTLE LAKE — A $28 million renewable energy project underway in Turtle Lake will convert cheesemaking byproducts into electricity, heat and a new fertilizer. The aim is to provide an alternative to land-spreading of cheese plant wastewater (high in organic content and phosphorus), while at the same time generate electrical power for nearby homes and businesses, while at the same time, cheaper heat for dairy plants.
Instead of being a liability for the cheese industry, dairy wastewater will be transformed into valuable commodities, thanks to pioneers at GreenWhey Energy in Turtle Lake.
[READ MORE]
by RENEW Wisconsin | May 22, 2013 | Uncategorized
Mark Redstein’s new opinion piece in the Milwaukee Journal Sentinel makes a strong case for clean energy in the state.
Over the past few years, Wisconsin’s wind industry has faced an unreasonable number of obstacles, more than any other form of energy production, nearly grinding the job- and energy-creating potential of this critical sector to a halt. If Wisconsin is going to move its economy forward, it needs to stop pushing back and open the door to clean, renewable wind energy.
Fortunately, the door has started to creak open.
On April 29, the Brown County Circuit Court dismissed a lawsuit filed by the Wisconsin Realtors Association that claimed the state’s wind siting rule, PSC 128, was improperly enacted. The judge disagreed and ruled that the Public Service Commission lawfully enacted a balanced and comprehensive wind siting rule. …
[READ MORE]
by RENEW Wisconsin | May 9, 2013 | Uncategorized
by Michael Vickerman
Though equipped
with a license to operate for an additional 20 years, the Kewaunee nuclear power
station rode into the sunset this week, having generated its final
kilowatt-hour. Dominion Resources, the Virginia-based company that owns the 550
MW facility along Lake Michigan, plans to spend nearly $1 billion to
decommission the facility and transform the acreage back to its former status
as farm fields. The process could take as long as 60 years.
It’s more
than a little odd to see a 39-year-old nuclear plant taken offline in a state
that’s replete with middle-aged fossil units. But in this story, age and fuel
type matter less than the extremely unfavorable market structure confronting an
independently owned baseload plant in the Upper Midwest, especially one lacking
a power purchase agreement.
Back in
2005, when the Kewaunee plant was sold to Dominion, the prevailing expectation
among Wisconsin electricity stakeholders was that sales and revenues would
never stop growing. They were convinced then that there would be room for every
new power station on the drawing boards or under construction. But when reality
intruded in the form of a nasty economic contraction, electricity loads headed
downward.
Just
after the peaking of electricity sales in 2007, an unusually large wave of new
generating units came online, including a mammoth 1,235 megawatt (MW)
coal-fired plant just south of Milwaukee. (More about the Elm Road station
later.) In a flash, the once roomy environment for power plants vanished,
leaving in its wake a glutted field of generators trying to stay afloat in a
shrinking pool of revenues.
Wholesale
electricity prices in the Upper Midwest are set in accordance with a
generator’s marginal cost of energy. Without a captive rate base to underwrite
safety upgrades and relicensing expenses, Dominion desperately needed a power
purchase agreement to have any chance to operate Kewaunee at a profit.
But the
utilities, who have their own middle-aged generators plants to protect, were
not about to throw a lifeline to Kewaunee. Recognizing an opportunity to thin
the generation herd without having to write down one of their own assets, they
decided to let brute economics administer the coup de grace to an unwanted
competitor.
As a
baseload plant, Kewaunee was poorly adapted to compete in a depressed market.
Nuclear power plants operate pretty much at one speed–full throttle—and end up
producing the same quantity of electricity at 2:00 AM, when the wholesale price
of electricity in the Upper Midwest is often below the cost of production, as
they do at 2:00 PM, when the prevailing price is at or above production cost.
Unfortunately
for a generator like Kewaunee, there are more off-peak hours than on-peak hours
in a year. When baseload plants compete in a market that does not cover the
marginal cost of operations, they tend to hemorrhage money.
Ten years
ago, baseload generators were touted as the firewall that would protect
ratepayers against price gouging orchestrated by unscrupulous power marketers
like Enron. Today, we have a diametrically opposed dynamic. In a chronically
depressed market, baseload generators are the ones in greatest need of
additional ratepayer outlays to sustain them.
This
point merits much more discussion than can be squeezed into this column, as it
signals the emerging obsolescence of the traditional utility business model.
Suffice it to say that we can now appreciate baseload generation as a luxury
made affordable by rapid load growth rates that allow the investment in
capacity expansion to be spread over a larger population of ratepayers. Sustained load growth encouraged utilities to
capture economies of scale by building centralized power plants and running
them flat out over many decades. This growth was essential for driving power
prices lower through much of the previous century.
But when
loads stop growing, the operational inflexibility of a large coal or nuclear
plant becomes a liability. Unlike a gas-fired turbine, a baseload coal plant
cannot be ramped up and down without incurring wear and tear. And, unlike a
solar electric array, a baseload generator cannot turn itself off at night,
when wholesale energy prices fall through the floor.
Nowhere
is this situation more evident than with Elm Road, the aforementioned coal
plant owned mostly by Milwaukee-based We Energies. With a price tag of $2.3 billion, this twin-unit
leviathan was the most expensive construction project in Wisconsin’s history.
And how
has it performed to date? In 2012 , its first full year of operation, Elm Road
produced only 18% of its rated capacity, roughly one quarter of its projected
output for that period. By comparison, We Energies’ newest wind power
installation, Glacier Hills, logged a capacity factor of 27% in 2012.
In March
2013, the most recent month in which utilities have reported their production
data, Elm Road’s capacity factor dropped to an abysmal 8%, the lowest
percentage among We Energies’ mainstay generators. Indeed, a hypothetical 1,235
MW solar farm in We Energies territory would likely have outproduced Elm Road
that month, recurring spells of cloudy weather notwithstanding.
Now, if a
new building was unable to achieve a 20% occupancy factor in its first year,
the building owner would face a stark choice: find more tenants or let the
banks take over. Similarly, if an airline found itself struggling to fill more
than one of every five seats in a given route, it wouldn’t take long for management
to cut back on the number of flights or cancel service between those airports altogether.
Unlike
the hypothetical airline or building owner, the parent companies that own Elm
Road are sitting pretty, because they can count on receiving monthly lease
payments that will, over a 30-year period, recover the capital sunk into that
plant, along with a tidy double-digit return on investment. Those lease
payments are now embedded in utility rates, whether Elm Road is cranking out
the kilowatt-hours or gathering dust.
The same
market conditions—low natural gas prices and depressed demand–that hastened
Kewanee’s retirement are partially responsible for Elm Road’s breathtakingly
poor performance to date. But the plant’s difficulties are exacerbated by its massive
size and its operational inflexibility.
There are
likely a few hours in every weekday when market prices rise high enough to
bring an Elm Road unit online. The trouble is, Elm Road is not equipped to
cycle like a gas-fired plant just to cover a few afternoon hours. When those
situations arise, the system operator dispatches a smaller, more flexible
generator that can do the job, even if Elm Road’s unit energy cost is nominally
lower. So Elm Road just sits there, consuming electricity instead of producing
it.
There is
simply not enough market space right now in Wisconsin to accommodate a large
newcomer like Elm Road at anywhere near its rated capacity, even after
Kewaunee’s departure. Until the generation herd thins out some more, Elm Road’s
utility to the ratepayers who are picking up the tab for this monumental
misallocation of investment capital will remain virtually nonexistent.
The
lessons from Kewaunee and Elm Road are clear: building baseload plants belongs
to a bygone era. The older ones are fraught with legacy costs, while the newer
ones carry burdensome financial risks. Those states that manage to avoid the
choking levels of overcapacity we have in Wisconsin have plenty of room to
stake out an aggressive clean energy development program going forward.
