Utility Scale Solar Update March 5, 2019 Andrew C. Hanson Perkins - - PowerPoint PPT Presentation

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Utility Scale Solar Update March 5, 2019 Andrew C. Hanson Perkins - - PowerPoint PPT Presentation

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Wisconsin Public Utility Institute Utility Scale Solar Update March 5, 2019 Andrew C. Hanson Perkins Coie LLP Overview Status of Utility-Scale Solar in the Midwest Transmission Project Development and Construction

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Perkins Coie LLP

Utility Scale Solar Update

Wisconsin Public Utility Institute March 5, 2019 Andrew C. Hanson

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Perkins Coie LLP | PerkinsCoie.com

Overview

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  • Status of Utility-Scale Solar in the Midwest
  • Transmission
  • Project Development and Construction
  • Regulatory Considerations
  • Recent Tariffs
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Strategic

Energy Assessment: 2016

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Strategic

Energy Assessment: 2018

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Transmission

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Perkins Coie LLP | PerkinsCoie.com 7 https://api.misoenergy.org/PublicGiQueueMap/index.html

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Strategic

Energy Assessment: 2018

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Transmission and Interconnection  Interconnection Studies  Deposits/Refunds  Costs  Network upgrades  Timing  Network upgrades  E&P, FCA and MFCA

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MISO Interconnection Study Process

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  • DPP1 ~ 140 days
  • DPP2 ~ 80 days
  • DPP3 ~ 135 days
  • GIA ~ 150 days
  • Total process ~ 505 days
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MISO DPP Schedule – East (ATC)

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Source: https://cdn.misoenergy.org/Definitive%20Planning%20Phase%20Estimated%20Schedule106547.pdf

  • Reflects all generation (not just solar)
  • 2,200 MW - DPP2 – mostly solar
  • 3,725 MW - DPP start on April 2, 2019 – mostly solar
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Project Development and Construction

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What is the Target Project?

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Solar Projects – Ideal Characteristics

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  • Significant amounts of cleared land;
  • Flat topography to reduce construction

cost and risk;

  • Geology sufficient to support mounting

systems (e.g., embedment depth for driven piles);

  • Near transmission with an existing

substation suitable for interconnection, with no or minimal network upgrades needed, or where the cost of upgrades is largely known;

  • Local landowner and community

support;

  • No or minimal sensitive environmental

resources in or near the project (e.g., parks, wetlands, waters, habitats).

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What is the Deal Structure?

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Power Purchase Agreement

 Creditworthiness of off-taker  Minimum output guarantee and replacement costs for curtailments  Conditions precedent – fully developed interconnected project with milestones and completion date  Develop-Transfer  Asset Purchase - transfer of identified Project assets  Assume only identified Project liabilities  Consider contract assignability  Purchase of Project Company (Equity Purchase) - acquire all assets of Project company  Assume all liabilities of Project company  Dissolution of entity post-closing

Build-Transfer

 Developer develops, constructs, and transfers project to new owner

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Federal Investment Tax Credit (ITC)

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 ITC is a tax credit based on a % of the project tangible asset cost.

 The project owner claims the ITC in the year the project is placed into service.  The ITC vests linearly over a 5 year period. If the project owner sells the project before the end

  • f its 5th year of operation, the unvested portion of the credit will be recaptured by the IRS.

Solar Energy Project – IRC Section 48(a)(3)(A)(1)

 To qualify for ITC at a level greater than 10%, project construction commences before 1/1/2022 and is placed in service by 12/31/2024.  ITC % is based on the year the project construction commences: 2019 – 30%; 2020 – 26%; 2021 - 22%; and 2022 or later - 10%.  Two methods to determine "commence-construction" date: (1) start physical work of a significant nature or (2) meet "5% safe harbor test" by incurring 5% or more of the total cost of the facility.

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Project Development  What does a “developed” project look like?

 Land Rights  Permits  Studies and Reports  Contracts (Generator Interconnection Agreement, etc.)  Site Plan  Interconnection and Transmission  Solar Data  Environmental Attributes  Intellectual Property (project name, data, reports)

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Land Rights

 Leased Land  Lease Terms and Conditions  Duration/Termination Rights  Prior Encumbrances (SNDA)  Estoppel Certificates  Owned (“Fee Simple”) Land  Substation and O&M facility  Rights of Way; Easements; Shared Rights  Public and Private Preliminary Title Commitment Survey Title Insurance – Endorsements Recording

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Project Assets: Permits, Contracts, Studies and Reports

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Permits

 Conditional Use Permit  Environmental (e.g. stormwater)  Others  Non-appealable status

Contracts

 Generator Interconnection Agreement  Other interconnection related agreements  Consultant agreements for reports and studies  Assignability Studies and Reports

 Avian, Wildlife Assessment  Congestion and Curtailment Assessment  Cultural Resource Study  Decommissioning Cost Analysis and Plan  Interconnection Studies  Phase I Environmental Site Assessment  Preliminary Geotech Report  Reactive Power Study  Stability Analysis  Wetlands Assessment/Field Delineation  Solar Analysis/Capacity/Net Capacity Factor Report  Depreciable Life Studies and Degradation Analysis

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Project Construction

 Responsible Party - Buyer vs. Developer  EPC vs. BOP - selection of contractor and price  Solar Panel/Equipment supply  Schedule: mechanical completion, substantial completion and final completion  ITC Requirements  Warranty Period

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Regulatory Considerations

Certificate of Public Convenience and Necessity (CPCN) (Wis. Stat. 196.491(3) and PSC Ch. 111

  • Required for large electric generating facilities > 100 MW
  • Application submitted at least six mos. prior to stating construction
  • Engineering Plan submitted at least 60 days prior to application
  • Application Filing Requirements
  • Not all requirements apply to wholesale merchant generators, but
  • Design and location must be in public interest
  • No undue adverse impact on environmental values
  • No interference with orderly land use and development plans
  • No adverse impact on competition in the relevant wholesale market
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Regulatory Considerations

  • Certificate of Authority (CA) - Wis. Stat. 196.49(3) and PSCW
  • Ch. 112
  • Applies to public utilities
  • PSCW can decline to issue if the project will:
  • Substantially impair the efficiency of the service of the public

utility.

  • Provide facilities unreasonably in excess of the probable future

requirements.

  • When placed in operation, add to the cost of service without

proportionately increasing the value or available quantity of service.

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Recent Utility Tariffs

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Recent Utility Tariffs

  • WEPCO – Solar Now
  • Designed for commercial and industrial customers who want to host a solar PV system on their

property

  • 2.25 MW nameplate capacity limit on each hosted solar PV system installation;
  • Total participation cap of 35 MW, with 10 MW reserved for nonprofit or government entities;
  • Monthly lease payment based on the value of capacity from the resource, in turn based on MISO’s

CONE for the relevant Resource Adequacy Planning Year;

  • WEC to retain ownership and responsibility for operation of each resource;
  • All energy generated will be delivered to the distribution system;
  • One of the purposes is to “[i]dentify characteristics of optimal sites that can utilize distributed

generating assets to avoid or defer future investments in the Company’s distribution system…”

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Recent Utility Tariffs

  • WEPCO - Dedicated Renewable Energy Resource Pilot
  • Designed for customers wishing to purchase a portion of a large-scale renewable energy project

located in Wisconsin;

  • 150 MW nameplate capacity limit of total customer participation;
  • WEC will retain responsibility for operation of the resource
  • Participating customer will pay all costs associated with the new resource subject to a service

agreement, including depreciation, return on invested capital and O&M

  • Participating customers will receive:
  • Monthly market value of energy
  • Monthly capacity credit based on CONE or MISO zone 2 PRA auction, depending on WEC’s

capacity position during the MISO Resource Adequacy Planning Year at the time the agreement is executed

  • Rights to all renewable energy attributes
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Wisconsin Community Solar Initiatives

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  • Dairyland Power Cooperative
  • Madison Gas and Electric Company – PSC Docket No. 3270-TE-101
  • Northern States Power Company – PSC Docket No. 4220-TE-101
  • New Richmond Municipal Electric – PSC Docket No. 4139-TE-102
  • River Falls Municipal Utility – PSC Docket No. 5110-TE-102
  • Wisconsin Power and Light Co. – PSC Docket No. 6680-TE-104

(filed Feb. 18, 2019)

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Andrew Hanson | Perkins Coie LLP

SENIOR COUNSEL

33 East Main Street Suite 201 Madison, WI 53703-3095

  • D. +1.608.663.7498
  • F. +1.608.663.7499
  • E. AHanson@perkinscoie.com

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