Friday, November 20, 2015

Artificial Photosynthesis: Developing New Technology to Use a Very Old Process

Credit: Joint Center for Artificial Photosynthesis
By Andrea Lang, Energy Fellow

By far the most abundant source of potential renewable energy is the Sun, which puts out roughly enough energy in one hour to power all human activity on earth for one year, if only we could efficiently harvest it in large enough amounts. Although the most popular way to convert solar radiation into electricity right now is through the use of solar photovoltaics (PV), a good long-term solution may be to use artificial photosynthesis to produce some kind of solar fuel.

Why aren’t  photovoltaics up currently up to the challenge?

The growth of solar PV in recent years has been tremendous for getting the United States  to start transitioning off of fossil fuels; there is now over 22,700 MW of installed solar capacity in the U.S., or enough to power 4.6 million homes.  However, while we have certainly made huge strides in actively converting solar energy into electricity using solar PV, this existing solar technology is not without its problems. First, photovoltaic cells are not very efficient at turning solar energy to electricity. Even with recent advances in efficiency, the very best cells are less than 50% efficient (meaning that less than 50% of the solar energy hitting the panel is actually turned into electrical energy), while most are far less efficient.

Credit: Lawrence Berkeley National Laboratory
Second, and perhaps most significantly, solar energy is highly intermittent, or variable. When there are clouds in the sky or it is nighttime, solar PV panels cannot produce electricity. This intermittency presents real problems for grid operators as more solar power comes online, because as solar output declines in the evening hours of the day, more traditional sources of energy must quickly “ramp up” production to compensate for that loss of electricity production (illustrated left in the so-called “duck” curve). It can take a long time to ramp up production at traditional natural gas and coal-fired power plants, so depending on how steep the curve gets (how much solar is put on the grid), it may be difficult  for grid operators to manage higher penetrations of solar PV absent new technology. What is truly needed to prevent this issue is the ability to store large amounts of solar-generated electricity  at an affordable cost. Finally, largely due to the issues just discussed (intermittency and a lack of affordable large-scale storage), solar is not currently a great option for vehicles.

Why might artificial photosynthesis be a good long-term alternative for harvesting the sun’s energy?

For billions of years, plants and some bacteria on Earth have been harvesting sunlight to make chemical energy through photosynthesis. Essentially, plants use sunlight, water, and carbon dioxide to make glucose (a form of usable and storable chemical energy) and oxygen. Researchers are currently developing methods of artificial photosynthesis that play on this idea and are trying to turn sun energy (called photons) into some other kind of storable solar fuel that could then be used at will to generate electricity or run cars. The most obvious benefit of artificial photosynthesis is that its end product is not direct electrical current as it is for solar PV, but rather a physical product: solar fuel. This would essentially do away with the intermittency problem with solar energy, enabling it to serve as a source of electric power or transportation fuel whenever it is needed. However, more research is needed before artificial photosynthesis technology can be useable.

Fortunately, this technology has been receiving increased attention from policymakers. President Obama even mentioned artificial photosynthesis in his 2011 State of the Union: “At the California Institute of Technology, they’re developing a way to turn sunlight and water into fuel for our cars….We need to get behind this innovation.”And just a few months ago, the U.S. Department of Energy agreed to provide $75 million in funding to the Joint Center for Artificial Photosynthesis (JCAP).

Solar fuels produced through artificial photosynthesis need not displace solar PV, especially since advancements in battery storage technology may eventually reduce the intermittency problem. At the same time, however, artificial photosynthesis is an attractive alternative. The  potential for artificial photosynthetic processes to create a storable solar fuel may make it a good long-term solar energy option. Hopefully policymakers will continue to increasingly recognize the potential of this technology so that it can eventually be deployed on a broad scale.

Tuesday, November 17, 2015

On ExxonMobil: When is a Company Liable for What it Says (or Doesn’t Say) About Climate Change Risks?

By Brandon Kline, Energy Law Fellow

The dust continues to settle from New York Attorney General Eric Schneiderman’s recent announcement that Exxon Mobil Corporation was subpoenaed in an investigation as to whether it intentionally downplayed the risks of climate change. Speaking to PBS Newshour, the Attorney General confirmed, “We have been looking at the energy sector generally for a number of years, and have had several investigations that relate to the phenomenon of global warming, climate change, and the human contribution to it.” 
Prosecuting financial fraud in connection with climate change is seemingly beyond the jurisdiction of most state regulators. However, under the Martin Act, New York’s attorneys general have regularly taken the lead on sweeping enforcement actions with global importance. For example, in May 2005 New York’s AG took action against AIG for misleading regulators and investors in the run-up to the global financial crisis, and in November 2012 took action against Credit-Suisse for misrepresenting the risks of mortgage-backed securities. 

Accordingly, public companies with substantial economic activity in New York are subject to dual-jurisdiction: the New York Attorney General and the federal government (i.e., the Securities and Exchange Commission and the U.S. Department of Justice).
The sweeping provisions of the Martin Act (New York General Business Law Article 23-A, §352) gives New York's top prosecutor wide latitude to pursue corporations engaging in “fraud, deception, concealment” of material information in connection with the advertisement, purchase or sale of any security transaction arising in New York. 

To be sure, ExxonMobil does not owe a duty to share information the company gathers about climate change. On the other hand, the overwhelming majority of liability provisions in securities law (criminal and civil) focus on truthful disclosure requirements. [1] In other words, if the marketplace is to function properly, corporations must tell the truth in light of the information on hand.

Disclosure is the sine quo non of securities regulation. To avert both informational scarcity and overload, the federal securities laws draw the boundary of mandatory disclosure with the concept of “materiality.” Investors must be able to rely upon representations from corporations regarding “material” information – including historical data and forward-looking information – before deciding whether to buy or sell a security. To that end, reports that ExxonMobil made misrepresentations to investors about the risks of climate change have led several lawmakers and others to call on the U.S. Securities and Exchange Commission and the U.S. Department of Justice to open an investigation.

Why is so little known about ExxonMobil's potential liability?
For one thing, we know very little about what ExxonMobil did or didn't say to trigger the Martin Act. That's by design. A Legal Affairs Magazine piece sheds light on how key provisions of the Act operate in practice: “it empowers [New York’s Attorney General] to subpoena any document...from anyone doing business in the state; to keep an investigation totally secret or to make it totally public…” Indeed, since the Martin Act empowers the Attorney General to conduct the investigation almost entirely in secret, little is known about the precise theory of liability. 
Speculation abounds. Some have compared ExxonMobil’s climate travails to those faced by big tobacco companies misleading the public about the risks of cigarettes (i.e. the “tobacco strategy”), causing others to refer to the prosecution as a “witch hunt.” Forbes columnist Daniel Fisher has referred to the action as a display of “creative lawyering.” 
Recent news about Peabody Energy only adds to the speculation. Last week, New York reached an agreement with energy giant Peabody Energy Corporation, upon building a case alleging that the largest publicly traded coal company in the world had violated “New York laws prohibiting false and misleading conduct in the company’s statements to the public and investors regarding financial risks associated with climate change and potential regulatory responses.”  
As part of the agreement concluding the investigation, Peabody will file revised SEC shareholder disclosures that accurately characterize Peabody’s potential exposure from climate-change related risks.  The disclosures affirm that “concerns about the environmental impacts of coal combustion…could significantly affect demand for our products or our securities.”  Peabody has agreed that all future statements to shareholders and the public will be consistent with the terms of its agreement with the Attorney General’s office and the disclosures it will file with the SEC.  The agreement, which is the form of an Assurance of Discontinuance, can be found here.
Although Peabody did not stipulate to any wrongdoing or monetary settlement, the long term problem remains. As the New York Times reports: "Its impact will surely pale in comparison with the other problems Peabody faces as demand for coal plummets, replaced by cleaner-burning natural gas. Shares of Peabody, which is based in St. Louis, have lost more than 90 percent of their value over the last year as the entire industry has been overwhelmed by crippling debts and more stringent regulations on coal burning by electric utilities.” 

In this respect, Peabody and Exxon pose similar risks to investors: the inherent value of the company is being undermined by changing market dynamics and regulatory responses to greenhouse gas emissions. For these reasons, the SEC has released guidance regarding disclosure of climate change risks. 

It remains to be seen what ExxonMobil did or did not know about potential risks. “We unequivocally reject the allegations that Exxon Mobil has suppressed climate-change research,” a company spokesman has asserted to the New York Times. Meanwhile, under New York law, the defendant has 20 days to ponder about responding to the subpoena. 

Two things are clear. First, any agreement that is reached between New York regulators and energy companies is not likely to be the last word on the matter. Because the Martin Act only applies to claims arising under New York law, further liability could loom at the federal level. Second, the next few years are going to be a bumpy ride for energy companies and their investors. No doubt energy executives will be parsing their words in the meantime.

[1] A quick legal note about securities law: Securities fraud may be prosecuted under 18 U.S.C. § 1348, the failure of corporate officers to certify financial reports (18 U.S.C. § 1350), and violations of provisions in 15 U.S.C. § 78c(a)(47) and SEC rules, regulations and orders, including the Securities and Exchange Act Fraud in violation of 15 U.S.C. § 78j(b), § 78ff, and 17 C.F.R. § 240.10b-5. It may also be prosecuted under other statutes such as bank fraud, mortgage fraud, wire fraud, FCPA and conspiracy.

Wednesday, November 11, 2015

Last Week’s Message Is Clear Locally as well as Nationally: No New Oil Transportation Projects

By Andrea Lang, Energy Fellow
Credit: Pipeline and Hazardous Materials Safety Administration
Last week was a big one for rejecting crude oil transport. In addition to the Obama Administration’s rejection of the Keystone XL pipeline, the City of Portland unanimously passed a resolution opposing the Tesoro Savage Vancouver Energy Distribution Terminal (Tesoro Savage Project), a proposed oil-by-rail terminal in Vancouver, Washington.

The Tesoro Savage Project would receive a staggering 360,000 barrels (15 million gallons) of oil per day from train cars, then load and ship the oil on ocean-going vessels down the Columbia River and into the Pacific Ocean. In addition to the obvious climate concerns posed by the huge amount of oil the project would help get to market, the project also poses significant health and environmental concerns. For example, when an oil train derailed in Lac-Megantic Quebec, 47 people died and 26,000 gallons of oil were spilled into a nearby river.  

Based on the many issues posed by the project, a series of government decisions have delayed the companies’ plan to be operational by 2014, and could eventually defeat the project altogether. After entering into a controversial lease with the Port of Vancouver, the companies filed the required application with Washington’s Energy Facility Site Evaluation Council, which must certify all large energy projects. Perhaps even more significantly, because the project would entail some in-water construction, it requires permits from the U.S. Army Corps of Engineers (Corps) under section 404 of the Clean Water Act and section 10 of the Rivers and Harbors Act. Although project proponents had initially hoped to avoid a complicated federal permitting process by arguing that the project fit into an existing general nationwide permit, the Corps decided last June that the project would require a federal permit specific to the project. This means that the Corps must decide under the National Environmental Policy Act whether the project will have significant environmental effects. Further, EPA and the National Parks Service have weighed in, expressing concern about the effects of the project, and urging the Corps to take a close look at the effects of the project on the region as a whole. The fact that these agencies are taking such a careful look at the large-scale effects of this project is certainly a victory against oil transport.

Finally, the City of Vancouver passed a resolution in 2014 opposing oil-by-rail transport in the region, similar to Portland’s resolution last week. Thus, Portland’s decision to oppose “all project proposals that would increase the amount of crude oil being transported by rail through the City of Portland and the City of Vancouver, Washington” is only the most recent in a series of government decisions that amount to victories against the Tesoro Savage project.

The debate over the Tesoro Savage project and other oil-by-rail projects like it could increase in the wake of the Keystone XL project. Some argue that not building the pipeline will mean that much more oil will need to be transported by rail (although others argue that is not the case). But I think that the massive Keystone XL victory and the incremental Tesoro Savage victories add up to show increasing acceptance of the fact that it’s time for this country to rely less on fossil fuels. Building massive new oil transportation projects simply does not make sense, and last week shows that politicians are starting to realize that.

Tuesday, November 10, 2015

While Nevada’s Largest Utility Aims to Replace Coal with Natural Gas, its Customers Seek Other Options

By Amelia Schlusser, Staff Attorney

Next month, the Nevada Public Utilities Commission (PUC) will issue a decision on NV Energy’s long-term plan for supplying electricity to Nevada ratepayers. NV Energy’s most recent integrated resource plan (IRP) is nearly 5,000 pages, and includes a number of proposals that will impact the type and cost of electricity in Nevada for many years. The PUC’s decision may ultimately lay the foundation for the state’s energy future by indicating whether the largest utility in Nevada should continue to invest millions of dollars in fossil fuel resources, or should instead develop a plan for investing in new renewable energy.

Over the next four years, NV Energy plans to retire 512 megawatts of coal-fired capacity. However, the utility proposes to replace much of this coal-fired capacity with natural gas-fired power. According to the utility’s 2016 IRP, NV Energy is considering constructing a billion dollar natural gas-fired power plant to replace its coal-fired generation and expiring power purchase agreements. The utility recently asked the Nevada PUC to approve spending $2.4 million to “maintain optionality and flexibility” to construct the plant in 2020, if the new plant is “needed.”

This billion-dollar plant would provide significant profits for NV Energy’s shareholders, who stand to earn a 9.8% rate of return on the investment—roughly $100 million—from the utility’s ratepayers. NV Energy’s investments in natural gas will also expose Nevada ratepayers to significant risk and uncertainty related to future natural gas price volatility and carbon regulations. According to the Las Vegas Sun, NV Energy may invest in an additional 2,253 megawatts of natural gas capacity over the next fifteen years, which would provide nearly 80% of the utility’s power in 2030. (Renewable energy, meanwhile, would represent a mere 16% of NV Energy’s resource capacity in 2030.) The company’s ratepayers already pay the highest electricity rates in the Mountain West, and NV Energy’s preference for natural gas over renewable energy may expose the utility’s ratepayers to additional and disproportionate risks over the coming decades.

Jumping Ship

Some of NV Energy’s largest customers, including Wynn Resorts, Las Vegas Sands, MGM Resorts, and Switch (a large data storage company), oppose the utility’s investment strategies. The companies all filed applications with the PUC seeking authorization to generate and purchase power from sources other than NV Energy. These applications were motivated by concerns over the utility’s meager renewable energy offerings and NV Energy’s tendency to make large capital investments that earn substantial profits for shareholders at ratepayers’ expense. For example, MGM’s application to leave the utility stated that between 2012 and 2015, NV Energy earned at least $84 million over its allowable rate of return, which it is not required to reimburse to ratepayers.

Changing Tides?

According to the Las Vegas Sun, Switch’s attempt to leave NV Energy was motivated by the utility’s refusal to provide it with electricity entirely from renewable sources. In November 2014, Switch filed an application to leave NV Energy. In May of this year, the PUC determined that Switch would need to pay NV Energy $27 million to cancel service from the utility. (This “exit fee” would purportedly help protect ratepayers from cost increases resulting from the industrial customer’s departure.) Switch and NV Energy then started developing a compromise solution that would enable the company to purchase renewable energy directly from the utility. In July, Switch announced that it would stay with NV Energy. Under the companies’ new agreement, NV Energy will serve 100% of Switch’s load with renewable energy from a new 100-megawatt solar array constructed by First Solar.

The new Switch–NV Energy agreement may be a sign of changing tides in the energy world. Large industrial customers—and tech companies in particular—are becoming increasingly attracted to renewable energy. Companies like Facebook and Amazon Web Services have made commitments to use 100% renewable energy (for example, Facebook’s new data center in Forth Worth, Texas, will be entirely powered from a nearby wind farm). 

Rather than fight consumer desire for renewable energy, utilities like NV Energy should work with regulators and industrial customers to develop alternative tariff or service structures that enable large customers to purchase renewable energy. As more and more customers choose renewable power, investments in new natural gas plants and related infrastructure will become increasingly unnecessary.  

Monday, November 9, 2015

White House Rejection of Keystone Embraces U.S. Leadership Role in Tackling Climate Change

When is a Pipe Just a Pipe?

By Brandon Kline, Energy Law Fellow

Late last week, President Obama rejected the proposed Keystone XL Pipeline Presidential Permit application, even as project sponsor TransCanada requested the U.S. Department of State to suspend review of its application just days earlier.

Had the application been approved, the pipeline would have stretched 875 miles, from Western Canada and parts of Montana and North Dakota to the existing Keystone Pipeline system at Steele City, Nebraska. There it would have transported approximately 800,000 barrels a day of petroleum to existing refineries in the Texas-Gulf Coast area.

Because TransCanada’s project crosses international borders, the company was required to file an application for a Presidential Permit. The legal standard for approval of permits of this sort lies with whether the project will serve the U.S. national interest. See generally Executive Order 11423 on Pipelines (Aug. 1968); also see Executive Order 13337 on Issuance of Permits With Respect to Certain Energy-Related Facilities and Land Transportation Crossings on the Inter-national Boundaries of the United States (April 2004) (directing the Secretary of State to authorize those border crossing facilities that the Secretary has determined would “serve the national interest.").

The Obama Administration concluded that one more pipeline project would not serve American interests because it would not significantly boost our economy and strengthen energy security, nor would it decrease gas prices. In other words, “sometimes a pipe is just a pipe” (apologies to Dr. Freud).

Proponents of TransCanada’s application asserted the national interest threshold was met because the new pipeline would provide a secure, reliable source of Canadian crude oil to meet the demand from U.S. refineries and markets, supplying “critically important market access” to developing domestic oil supplies in Montana and North Dakota, and “reducing U.S. reliance on crude oil supplies from Venezuela, Mexico, the Middle East and Africa.” In writ, the Keystone XL Pipeline would have expanded the current system, and increased production of Alberta’s oil sands (a mixture of sand, water, clay and bitumen). Bitumen is oil that is too heavy or thick to flow or be pumped without being diluted or applying new steam extraction technologies.

As Keystone underwent review pursuant to the National Environmental Policy Act, interagency comments were submitted by eight federal departments and agencies, including the U.S. Environmental Protection Agency. EPA noted that the "foundational facts from which analysis of Keystone XL proceeds is that oil sands crudes have significantly higher lifecycle greenhouse gas emissions than other crudes. If GHG intensity of oil sands crude is not reduced, over a 50 year period the additional CO2 from oil sands crude transported by the pipeline could be as much as 935 million metric tons.” Keystone would have produced 17% more pollutants than conventional oil extraction. This is the equivalent of seven coal-fired power plants operating around the clock, or having 6.2 million cars on the road for 50 years, according to the National Resources Defense Council.

The nearly 1,700 mile-long project came to symbolize the partisan fervor over fossil fuels. “And all of this obscured the fact that this pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster proclaimed by others,” Obama said.

At bottom, the political struggle over Keystone is a climate policy debate about what is the smartest way to invest in job creation and economic growth. To be sure, a construction project of continental scope results in near-term job gains. However, State Department analysis concludes that Keystone comes up short on long-term economic potential, ultimately creating only 35 permanent jobs once completed.

Meanwhile, a new study indicates global emission controls could save the U.S. economy trillions of dollars. Chelsea Harvey writes in the Washington Post that there is “a strong economic reason for the United States to support a strong international agreement to curb carbon emissions.”

The comprehensive report conducted by New York University School of Law’s Institute for Policy Integrity finds that “there are trillions of dollars to be gained at home from other countries’ climate mitigation efforts.” The report says “that other nations’ existing climate policies, by lessening the impacts of climate change, have already benefited the United States to the tune of more than $200 billion, and additional pledges” could save the U.S. $10 trillion more by the middle of the century.

America needs to invest in sustainable, clean jobs created from a clean, renewable energy foundation. Building this foundation requires taking steps to cut greenhouse gas emissions. We’ll never get there by constructing one more pipeline and continuing along the old-school path of a fossil fuel economy.