By Grace Kurdian

McCarter & English, New York Office

While states like New Jersey face worsening economic conditions and some commentators have been calling into question government’s continuing support for renewable energy and commitments to fight climate change, NJ Governor Corzine on October 22, 2008 released NJ’s long-awaited Energy Master Plan (“EMP”) that pledges the state’s commitment to these priorities and others designed to increase energy efficiency and reduce energy consumption.

Following two years of working group, stakeholder, and public meetings and opportunities for comment, the newly-released EMP sets forth the following cornerstones: (1) conservation and energy efficiency; (2) reducing peak demand; (3) creating more incentives for renewable and alternative technologies; (4) developing an energy infrastructure that allows for energy from various sources (including cogeneration and perhaps nuclear) to meet the State’s needs; and (5) investing in clean energy technologies and businesses to stimulate growth and jobs in this sector.

While recognizing the interplay of other state and regional entities, the EMP suggests actions on a local level to further the goal of attaining “reliable, competitively priced electricity” and heating fuels that are “consistent with the State’s environmental goals.”  Because the EMP establishes the policy for meeting the State’s energy needs through 2020, it affects everyone who resides or does business in New Jersey including: all energy providers in New Jersey, both regulated and unregulated, the commercial/industrial and manufacturing sector, the construction industry, financers of energy and renewable energy projects, as well as all business and residential customers.

The four goals of the EMP will be implanted through targeted action items, many of which require the assistance of the Legislature.  Perhaps the most ambitious of the goals: NJ will increase its use of energy from renewable sources even beyond the Renewable Portfolio Standards (“RPS”) that are currently in effect and draw 30% of its electricity needs from renewable sources by 2020 rather than 22.5% by renewables as would be required by the existing RPS. The EMP concludes that this provides opportunities for those in the renewable energy industry as well as those interested in investing in or implementing in such projects to carefully consider renewable projects in New Jersey. 

By 2020, NJ seeks to receive 2,120 GWh of energy from solar energy.  Wind resources will also be a ripe opportunity because the State ambitiously seeks to increase its wind resources to at least 1,000 MW of offshore wind to be installed by 2012 and at least 3,000 MW of offshore wind and 200 MW of onshore wind by 2020.  Moreover, for those interested in biofuels, the State seeks to develop 900 MW of biofuels and biomass as part of the 2020 RPS.  The EMP anticipates that the impact of the combined renewable incentives will be to spur the development of 50 MW of renewable technologies per year through 2020. 

As for the other goals, energy conservation and energy efficiency programs will be  implemented by the electric and gas utilities, and codes or standards for energy efficient new construction and for new appliance use will reduce energy consumption by at least 20% by 2020.  Specific demand response actions, including the development of demand response programs to be implemented by the utilities and finding different means of achieving reduction in peak demand for commercial (as compared to residential) customers, will reduce peak demand for electricity by 5,700 MW by 2020, according to the EMP.  Ensuring the reliable updating of energy infrastructure in coordination with regional authorities, developing additional cogeneration and investing in clean energy technologies and businesses round out the goals of the EMP.

The bottom line is that the EMP will affect everyone who conducts business in New Jersey.  Particularly for those in the energy, renewable energy, energy efficiency, construction, finance, manufacturing and commercial/ industrial sectors, now is the perfect time to consider the impact of the EMP on business and to take advantage of the opportunities raised by its stated goals and action plans.

By Rebecca Brenia

McCarter & English, Hartford Office

After a robust introductory auction of carbon dioxide emission allowances that raised more than $38 million for participating states, the Regional Greenhouse Gas Initiative (RGGI) has opened the bidding process for a second auction to be held on December 17, 2008.  All ten RGGI states will participate, with auction proceeds to be used by the states for investments in energy efficiency, renewable energy and consumer energy efficiency programs in the manner specified by the applicable state laws.  The auction is open to the public, but potential bidders must apply and be qualified to participate.

The RGGI program is the first market-based mandatory CO2 cap-and-trade program operating in the United States.  The auction format was designed by the Northeast and Mid-Atlantic states in an effort to stabilize and ultimately decrease CO2 emissions from 233 power plants in the region by ten percent before 2018. Each of the regulated power plants, or "compliance entities" in RGGI parlance, are major sources of air emissions covered by Title V of the Clean Air Act and are either major electric utility facilities or large industrial boilers.

Beginning January 1, 2009, regulated power plants in Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont will be required to hold allowances equal to their CO2 emissions.  Each allowance grants its holder the right to emit a ton of carbon dioxide.

The December 2008 auction is the final opportunity to purchase allowances before program compliance becomes mandatory.  RGGI plans to hold quarterly auctions for CO2 emissions allowances beginning in January 2009.

RGGI conducted a similar auction on September 25, 2008 and sold the first traunch of emissions allowances, about 12.5 million allowances at the clearing price of $3.07 per allowance.  Although RGGI has not released the identities of the winning bidders, according to a report of the RGGI market monitor, 80% of the purchased allowances were purchased by compliance entities themselves.  The rest of the allowances were purchased by entities that have no compliance obligations, which means they are likely intending to transact the allowances in the market as investment vehicles.

Now that all 10 states will be participating and the compliance period is about to begin, this next auction will be one to watch closely to see whether the clearing price rises and if investor interest in emissions allowances grows or wanes.

The New Massachusetts Green Communities Act

by Leigh Gilligan, Esq.

The blogosphere has been filled with commentary on RGGI’s auction of the first U.S. greenhouse gas allowances - the first in the nation - on September 25.  Unsurprisingly, state authorities are delighted.  Today Massachusetts Department of Environmental Protection (DEP) Commissioner Laurie Burt noted the robust reception of the first auction of CO₂ allowances.  About 12.5 million allowances were available; they sold at $3.07 each.  Massachusetts received $13.5 million from this effort; all of which will be used for energy efficiency and energy conservation efforts pursuant to the Green Communities Act,  signed by Massachusetts Governor Deval Patrick last summer.  Under the Act, the DEP and Department of Energy Resources were directed to coordinate participation in RGGI.

The Act is  a law intended to promote energy cost savings and renewable and clean energy technology development throughout Massachusetts.  Described by the State as a “comprehensive energy reform bill” that “puts Massachusetts in the lead nationally,” the law is intended to lead to a reduction in electric bills, increase the use of renewable energy and stimulate the clean energy industry currently being cultivated in Massachusetts.

Some highlights of the Green Communities Act include:

·        Green Communities Program.  A program to provide $10,000,000 per year (statewide) in technical/financial assistance to cities and towns to promote creation of renewable and alternative energy facilities and to promote energy efficiency generally.

·        Increasing Utilities’ Renewable Energy Purchases.  Utilities and other electric suppliers are required by the Act to obtain renewable power equal to 25% of sales by 2030 (4% by 2009, 15% by 2020).

·        Benefits from RGGI Implementation.  The law directs Massachusetts continued participation in RGGI and provides for the use of at least 80% of auction proceeds (revenues from the regional power plant CO₂  cap and trade program) for use in promotion of utility energy efficiency programs (like home energy audits).

·        Expanding Utility Investment in Energy Efficiency.  The Act sets out measures intended to increase utilities’ investments in energy efficiency measures to meet increased demands, with a goal to reduce electricity demand and pass cost savings on to rate payers.

·        Energy Efficient Buildings.  New buildings will be required to meet an updated energy efficiency code (the International Energy Conservation Code or IECC), with specific directives for state buildings and substantial renovation projects.

·        Energy Efficient Vehicles.  The Act calls for the state government vehicle fleet to contain at least 50% hybrid or alternative fuel vehicles by 2018.

The RGGI auction produced $5 million to jump-start the Act through funding of grants and technical assistance programs.  This is a good start and we will be watching closely to see if the promise of the Act is met.