FERC, CFTC, and State Energy Law Developments
The US Department of Energy’s (DOE’s) Office of Energy Efficiency and Renewable Energy (EERE) issued a funding opportunity announcement (FOA) on January 27, 2023, on behalf of the Hydrogen and Fuel Cell Technologies Office that makes available $47 million to support the research, development, and demonstration of affordable hydrogen and fuel cell technologies. The FOA further advances the Biden administration’s goals to achieve carbon pollution-free electricity by 2035 and to achieve net-zero emissions by 2050. It also supports the goals of the H2@Scale Initiative, which aims to advance affordable hydrogen production, transport, storage, and utilization, and aligns with DOE’s Hydrogen Shot, which targets affordable clean hydrogen production at $1/kg within the decade.
While no one has a crystal ball for what 2023 will hold for the energy industry, the seemingly widespread support for green technology and clean energy is expected to carry through this year. In our industry outlook, “The Trends—and Traps—That Will Shape 2023,” we highlight some of the major green energy tax credit trends.
On January 1, 2023, newly constructed standalone energy storage facilities became eligible for an investment tax credit (ITC) under Section 48 of the Internal Code of 1986, as amended (Code), pursuant to provisions of the recently enacted Inflation Reduction Act (IRA). Storage facilities placed in service before 2023 generally were only eligible for an ITC when constructed as part of a combined renewable generation (typically solar) plus storage facility and the storage system was charged by the paired renewable generation system at least for the 5-year initial operating period. Storage developers and owners will now be able to take advantage of new and significant tax credit opportunities, whether or not the storage system is paired with a renewable generation energy facility.
Later this month, the US Department of Energy’s (DOE) Office of Energy Efficiency and Renewable Energy (EERE) intends to issue, on behalf of the Hydrogen and Fuel Cell Technologies Office, a funding opportunity announcement (FOA) to support the research, development, and demonstration (RD&D) of affordable hydrogen and fuel cell technologies. EERE’s notice stated that the FOA will focus on key hydrogen delivery and storage technologies and durable fuel cell technologies, particularly for heavy-duty trucks to reduce carbon dioxide emissions and eliminate pollution from the tailpipe.
On December 13, 2022, the Department of Energy’s Office of Fossil Energy and Carbon Management released a Funding Opportunity Announcement (FOA) to make available up to $1.236 billion of funding to promote the development of four Regional Direct Air Capture (DAC) Hubs. This FOA is intended to accelerate the commercialization of, and demonstrate the processing, transport, geologic storage, and conversion of carbon dioxide (CO2) captured from the atmosphere.
In an article published in Project Finance International, partners Levi McAllister and Pam Wu discuss some of the most relevant and pressing issues concerning carbon offsets and raise considerations as environmental, social, and governance (ESG), net-zero goals, and carbon sequestration issues continue into 2023.
On December 1, 2022, the Environmental Protection Agency (EPA) published its proposed “set” rule for the Renewable Fuel Standard (RFS) Program. In addition to setting the volume and percentage standards for renewable fuels for 2023 through 2025, EPA proposed several regulatory changes to the RFS Program, the most notable of which was its proposal to create a new program to govern the Renewable Identification Numbers (RINs) for renewable electricity, which are known as “eRINs.”
The energy industry and market participants have provided a variety of comments on what role the Commodity Futures Trading Commission (CFTC) should play in the voluntary carbon markets, in response to a June 2022 request for information on how the CFTC can help enhance the integrity and transparency of the voluntary carbon markets and what aspects of the voluntary carbon markets are susceptible to fraud and manipulation.
In an article featured in our global energy industry newsletter, Empowered, partners Pam Wu and Levi McAllister discuss the factors preventing purchasers of carbon credits from having full confidence in the voluntary carbon markets. They also analyze efforts to establish standards to spur additional participation in these markets.
Hydrogen will play a key role in addressing the climate crisis, supporting a transition to net zero, and achieving a sustainable clean energy future. As a versatile energy carrier and chemical feedstock, hydrogen offers many advantages and an ability to leverage renewables, nuclear, and fossil fuels with carbon capture and storage. It can also be used as a fuel or feedstock for applications that do not have competitive and efficient clean alternatives.