Renewable Energy Memo

August 31, 2009

Renewable Energy Around the Web: August 31, 2009

Our weekly compilation of renewable energy news and information from around the Web.

Sixteen Days and Counting

Interested taxpayers have sixteen days to submit their preliminary applications for Section 48C tax credits for qualified advanced energy projects.

The American Recovery and Reinvestment Act allocated approximately $2.3 billion in tax credits for qualified advanced energy projects, defined to include projects that are intended to manufactured advanced energy property.    (Refer to our white paper for details on the application process or register for our free webinar on the topic on September 2, 2009).

Although the preliminary application is only two pages long and permits a summary of the project in no more than 300 words, the formal application (due October 16, 2009) is quite lengthy.  The formal application requires a “project information memorandum” of not more than 30 pages (12 point font, single-spaced) excluding appendices.

One of the more challenging aspects of the formal applicable is the requirement that the applicant calculate the “attributable annual manufacturing capacity” (or “AAMC”) to the proposed QAEP.  The theory behind this calcualtion is that each project be rated to determine how much “bang for the buck” society will receive for the dollars of tax credit extended.  So, to make this rating possible, DOE wants to know the dollar value of energy to be produced by the devices produced by the QAEP so that it can compare that value (the AAMC) against the dollars of tax credits for which the applicant is seeking certification.  In theory, the DOE will be able to rank all of the applicant projects by AAMC per dollar of tax credit, giving priority to those projects producing the highest quantity of value per dollar of tax credit.

That’s a great theory but the quantity and variety of variables that contribute to the calculation of AAMC are extreme and there is relatively little time in which to complete the process.  In addition, because no one has ever done this before, there will likely be great variation in the methods and data employed by applicants to justify their respective projects. 

Under the DOE’s guidance, released on August 15, 2009, the DOE will take the applications submitted by October 16th and produce a ranking of qualifying projects to the Treasury by December 16, 2009.  That’s only 60 days to review, validate and prioritize what could be hundreds or even thousands of projects.  (In its OMB estimate of the hours of paperwork required the DOE estimated that it would receive 1,000 complete applications). 

Project developers need to be actively engaged with their accountants, lawyers and advisors if the hope to participate in this initial round of applications for Section 48C credits.

The California Reverse-Auction Proposal

California is proposing to implement a reverse-auction process to determine the price investor-owned utilities will pay for new solar projects in that state.  The proposal is believed to be the first of its kind and has the merit of implementing a market process to determine price while simultaneously acting to stimulate new investment in a renewable sector.

Xtreme Power Plans Plant in Michigan

Texas-based Xtreme Power is planning to convert a deserted Ford Motor Company plant in Wixom, Michigan into a manufacturing facility for its energy-storage systems. 

Xtreme Power says it will build a manufacturing plant for its power-storage systems in Wixom, Michigan, northwest of Detroit, with the help of a state incentives package estimated to be worth more than $200 million.  Michigan officials say Xtreme might hire as many as 2,500 workers between late 2011 and 2014 and generate another 10,000 supplier-related jobs in the area.

Xtreme Power, which employs about 90 people, makes battery-based energy storage systems for power utilities, wind farms and large manufacturing companies.  Its systems, which rely on lead-acid batteries, recharge overnight, creating energy that can be used during the day, when demand for power is higher.

Clairvoyant Energy of Santa Barbara, California, also will receive incentives to use part of the Wixom plant to produce solar panels. Overall, the companies could invest up to $725 million in the project and create 4,300 direct jobs.  “The Wixom project has the potential to make Michigan a national destination for renewable energy products,” said a spokeswoman for Michigan Governor Jennifer Granholm.

PECO Proposal to Buy Solar RECs Approved

The Pennsylvania Public Service Commission approved a proposal by PECO Energy Co. to begin purchasing renewable energy certificates from developers of solar power facilities. 

The ruling allows the Philadelphia utility to begin buying alternative-energy credits to comply with a law that forces utilities to derive a gradually increasing portion of their power from renewable-energy sources.

PUC chairman James H. Cawley commended Peco “for taking the initiative to kick-start the process.” The state’s Alternative Energy Portfolio Standards Act requires electrical utilities to buy 18 percent of their power from alternative-energy sources by 2020.

The market for solar alternative-energy credits has been “very thin and very illiquid” because the laws requiring utilities to buy solar power are only starting to kick in, according to Mike Freeman, senior originator of Exelon Generation Co. L.L.C., the wholesale power arm of Peco’s parent company, Exelon Corp.

Peco’s planned purchase of 80,000 credits over 10 years – each credit represents one megawatt-hour of power, or about as much as a residential customer would consume in a summer – should provide a strong signal to solar builders about the value of their projects, which will assist long-term financing.

First Michigan Biomass-Powered Gasification Plant

Biomass Magazine reported on what is believed to be the first biomass-powered gasification plant in the State of Michigan. 

The report indicated that Heat Transfer International has nearly completed the installation of a gassification plant in Howard City, Michigan, that will become the state’s first gasification plant and the world’s first hot air turbine powered by biomass, according to Pat Dickinson, a business developer for HTI.

The plant will convert turkey litter at Sietsema Farm Feeds into a syngas that will be used to provide the heat and electricity needed to produce turkey feed.

HTI is a designer and manufacturer of SALT retorts, which Dickinson explained are starved-air/low-temperature biomass gasification systems. “We have a technology that converts biomass, through a thermal process, into synthesis gas,” he said. “The syngas is sent to a chamber where it is combusted—much like natural gas or propane—and is then used to make heat, which can be converted into steam, power or hot water; any commodity that is desired.”

Dickinson said unique aspect of the soon-to-be commissioned system at Sietsema Farm is that the air turbine will produce power from poultry litter without the use of steam or an internal combustion engine. “We don’t have to worry about trying to clean the gas to run it through a reciprocating engine,” he said. “The heat we produce off the gasification process is sent through our patented high-temperature ceramic heat exchanger technology, which sends clean, hot air to the turbine. So many times people are looking for—especially for smaller power systems—a half megawatt or a megawatt of power. If they want to make power, they have to make high-pressure steam and use a steam turbine. We don’t have to go through that process, or have a high-pressure boiler to make power.”

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