IRS Boosts Wind PTC’s Value
On April 11, the Internal Revenue Service (IRS) announced an inflation adjustment increase in the production tax credit (PTC) for power sold in 2017 that is generated by wind, closed-loop biomass and geothermal projects to 2.4 cents/kWh from the prior 2.3 cents/kWh.
Such inflation adjustments are welcome news when announced, and they slightly goose the economics of the pertinent projects.
The PTC is available for a qualified project’s first 10 years of its power sales. Therefore, the adjustment applies to qualified 2017 power sales from new projects and also to 2017 power sales from projects placed in service during the prior 10 years.
Unfortunately, for owners of open-loop biomass, small irrigation power, landfill gas, trash, qualified hydropower, and marine and hydrokinetic facilities, the PTC for energy sold from those projects after application of a rounding convention remains at 1.2 cents/kWh.
For a wind project that “starts construction” in 2017 and manages to have energy sales in 2017, the PTC under the extension/phase-out enacted by Congress in December 2015 would be only 80% of the 2.4 cents/kWh (i.e., 1.92 cents/kWh).
However, the developers of most wind projects that will be placed in service in the near term have taken steps to meet the IRS’ guidance as to what was required to “start construction” prior to 2017 in order to qualify for the full PTC (100% or 2.4 cents/kWh, with this inflation adjustment).
Geothermal, biomass (open and closed loop), landfill gas, trash, small irrigation power, qualified hydropower, and marine and hydrokinetic facilities were excluded from the 2015 extension/phase-out. Therefore, in order to qualify for any tax credits, those projects must have started construction prior to the end of 2016. The exclusion was reportedly inadvertent, and in 2016, there were efforts to enact legislation to place such projects on comparable footing with respect to the extension/phase-out of wind projects, but there was insufficient bipartisan support in Congress for such legislation to pass.
In 2017, consideration of such statutory nuances has been off the table, given the legislative agenda of the administration and the majority leaders of each chamber of Congress.
The 30% investment tax credit for solar does not have a comparable inflation adjustment, as it is computed using the project’s tax basis rather than its energy sales. – David K. Burton
David K. Burton is a partner at law firm Mayer Brown. He can be reached at firstname.lastname@example.org.
Duke Energy Plans Renewables Growth
Duke Energy has launched a $13 billion, 10-year initiative to modernize North Carolina’s electric system. Among the goals of the “Power/Forward Carolinas” project is expanding renewable energy in the state.
According to Duke Energy, other plans include hardening the system against storms and outages, making it safer and more resilient against cyber-attacks and physical threats, and generating jobs and stimulating economic growth. The initiative will also give 7 million people in North Carolina more information to manage their energy use, the company says.
“Safely powering the lives of hard-working families and maintaining the vitality of our communities are our most important responsibilities,” says David Fountain, Duke Energy’s North Carolina president. “When we improve our energy infrastructure, we not only improve power quality and reliability for everyone, but we help grow our economy and create jobs while keeping energy at a reasonable price.”
According to Duke Energy, which touts the sixth-largest grid in the U.S., its 10-year modernization plan will result in the following:
Additional bill-lowering tools designed to help customers reduce their energy costs;
An average of 13,900 jobs each year;
$10.4 billion in salaries and wages;
Almost $800 million in state taxes and $550 million in local taxes; and
A total economic output of $21.5 billion over the 10 years.
“We must embrace a forward-thinking approach to building a smarter energy future for North Carolina,” Fountain adds. “We have been working hard to generate cleaner, smarter electricity, and now we must invest to make the system that delivers that energy even smarter.”
The Fortune 125 company’s renewables unit operates a growing renewable energy portfolio across the country, including the 200 MW Frontier Windpower Project in Oklahoma. Last October, Duke Energy Carolinas issued a request for proposals for 750,000 MWh of renewable energy located in its service territory.
Ohio Board Delays Icebreaker Certification
The Ohio Power Siting Board “kicked back” Lake Erie Energy Development Corp.’s (LEEDCo) certification request for construction of the $120 million, 20.7 MW Icebreaker offshore wind project, according to Cleveland.com.
As reported, LEEDCo officials say the decision is only a “bump in the road,” as they are already planning to file updated documents that they expect will be approved, giving the green light to North America’s first freshwater offshore wind project.
In order to achieve certification, the report explains, LEEDCo needs to submit two memoranda of understanding to the Ohio Department of Natural Resources for studying the proposed wind farm’s environmental impact, specifically on animals.
The report cites a letter from siting board Chairman Asim Haque to LEEDCo President Lorry Wagner, stating that the application does not have enough information to “comply with Ohio law.”
Icebreaker Windpower Inc. formally filed applications with the siting board for the Icebreaker wind farm in February.
Utility Plans Massive Renewables Investment
Rocky Mountain Power has laid out a 20-year, $3.5 billion initiative that includes adding more wind and solar and making existing wind turbines more efficient. In addition, the plan incorporates building a segment of a transmission line to facilitate the wind expansion.
The integrated resource plan (IRP), filed with utility regulators, is used as a road map to help Rocky Mountain Power provide reliable electric service to customers at lower costs, the company says. Part of PacifiCorp, Salt Lake City-based Rocky Mountain Power provides electric service to approximately 1.1 million customers in Idaho, Utah and Wyoming.
The 2017 IRP includes upgrading more than 900 MW of existing wind projects with larger blades and newer technology in order to generate 20% more energy in a wider range of wind conditions, as well as capture federal production tax credits, the company says.
Further, the plan calls for beginning construction on a segment of the 500 kV Gateway West transmission line, located between Medicine Bow, Wyo., and the Jim Bridger power plant in the southwestern part of the state. According to Rocky Mountain Power, the 140-mile line would enable additional wind generation, improve efficiency and relieve transmission congestion.
Under the plan, the company would also facilitate the construction of up to 1.1 GW of new wind projects – primarily in Wyoming – by the end of 2020. Likewise, these would also capture federal tax credits for customers.
In addition, up to another 859 MW of new wind would be built between 2028 and 2036: 85 MW in Wyoming and 774 MW in Idaho.
On the solar side, the plan calls for building up to 1.04 GW of new solar between 2028 and 2036. Approximately 77% of the solar would be built in Utah, and 23% would be built in states served by Pacific Power.
Continuing a “cost-conscious transition that adds more energy diversity,” says Rocky Mountain Power, the plan also incorporates the company’s environmental compliance obligations for its coal plants. Energy efficiency will also continue to play a key role in the company’s long-term plans.
“This plan provides more diversity in the energy we use, which helps us keep electricity prices low for customers and improves the economies of our states,” says Cindy A. Crane, Rocky Mountain Power’s president and CEO. “The proposal is also a major investment that will produce more jobs, provide a stronger tax base and build transmission lines that will deliver reliable energy more efficiently for years to come.”
Wyoming Gov. Matt Mead adds, “This ambitious plan – a nearly $3 billion investment in Wyoming – diversifies Wyoming’s economy, expands markets, presents workforce training opportunities, adds jobs and strengthens the tax base in local communities. I look forward to working closely with Rocky Mountain Power. I see great potential for Wyoming workers and ratepayers as this plan is implemented.”
Unearthing Dinosaur Footprints At Meikle Site
When Pattern Development began construction on its 184.6 MW Meikle Wind power project, the largest of its kind in British Columbia, one very observant excavator operator made an unexpected discovery – dinosaur tracks.
What he had uncovered, in fact, were natural casts of a large, quadrupedal ankylosaur in 97 million-year-old rocks of the Dunvegan Formation.
According to Richard McCrea, curator of the Peace Region Palaeontology Research Centre, several dinosaur-track-bearing slabs were found in the Meikle project site, just north of Tumbler Ridge, during the road and platform excavations in 2015.
McCrea says that although this track type is not uncommon in western Canada, it is considered very rare globally. Specifically, he explains that the tracks were significant due to their depth and the number of visible digit impressions. Four-toed ankylosaur tracks had previously been found in Canada, but these new tracks outlined only three.
This find, then, added to the lesser-known representative population of three-toed ankylosaur tracks.
Michael Thompson, Pattern Development’s project manager, explains that the province of British Columbia does not have any specific legislation for fossil protection, so the developer immediately contacted an independent environmental monitor, and the site was cordoned off so as to protect the tracks.
“After the initial shock of the find, the team followed the on-site ‘chance encounter’ protocol developed for cultural finds,” he says. “The discovery was quickly assessed by the local paleontologist and identified as a valuable footprint track of an ankylosaurus.”
Construction work in the area was placed temporarily on hold – only for a couple of days, Thompson notes – so that the rock, which weighed over a ton, could be safely transported and donated to the Peace Region Palaeontology Research Centre.
All in all, Thompson says half a dozen sets of tracks – the majority being similar ankylosaurus finds – were uncovered in the area over the course of Meikle Wind’s construction process.
As the local paleontologist, McCrea says he personally made several site visits during construction and that he was pleased with how Pattern Development handled the rather unusual situation.
“From time to time, I would get called out to the site to identify and assess any finds that were made, usually by one of the supervisors. If the finds were of interest, the company would make arrangements to transport the slabs to our museum.
“I was very impressed by everyone’s attitude and commitment to do the right thing,” he adds. “I have a great respect for all the people I encountered from the Meikle Wind project.”
Although the findings may have been surprising to some, the wind project’s general location had already proven itself to be a hotbed for paleontological discoveries.
According to McCrea, these ankylosaurus tracks are just the latest in a series of similar findings in the Tumbler Ridge area, including the bones of other dinosaurs, marine reptiles and fish – and notably, the most complete thalattosaur skeleton ever found in North America.
Having responsibly handled the archaeological discoveries, Pattern Development says the Meikle Wind project has been up and running since Jan. 31, expanding the province’s total installed wind capacity by 37% to reach 673.6 MW. – Lauren Tyler
Gamesa, Siemens Finalize Merger
With the registration of the combined company in the Mercantile Registry of Biscay in Spain, the big merger between Gamesa and Siemens Wind Power has been completed.
According to the companies, the registration was the last step required to close the transaction, which the European Commission granted anti-trust approvals for in March.
At the start of last year, Gamesa confirmed via regulatory filing that it was in negotiations with Siemens. In June, the companies signed binding agreements to combine their respective businesses.
Now, the combined wind power giant has a presence in 90 countries and an installed base of 75 GW. It also boasts a EUR 21 billion backlog, pro forma revenues of EUR 11 billion, and EUR 1.1 billion of adjusted earnings before interest and taxes in the fiscal year ended December 2016.
The legal domicile and global headquarters of the merged company, as well as its onshore wind offices, will be located in Spain, where it is also trading on the stock market. The offshore headquarters will be located in Hamburg, Germany, and Vejle, Denmark.
Gamesa is absorbing Siemens’ wind power assets in exchange for newly issued shares in Gamesa. Siemens owns 59% of the share capital of the merged company, 8% is held by Iberdrola, and the rest are free-floating shares. In addition, EUR 1.005 billion (EUR 3.601 per share) will be distributed as dividends to Gamesa shareholders.
The first board of directors meeting of the combined company took place on April 4, when the first decisions regarding the composition of the board, committees and top management were expected.
“With the new wind power company, we’ve created a global market leader in the area of renewable energies,” says Joe Kaeser, president and CEO of Siemens, in a press release.