It’s not every day that a decision by the United States Supreme Court has the potential to impact the construction industry. But the Court handed down a decision last month that could hinder the pace of power plant construction around the country. In Hughes v. Talen Energy Marketing, LLC, the Court unanimously struck down a Maryland regulatory program that provided subsidies to incentivize new power plant construction in the state. According to the Court, the program intruded on the federal government’s authority to regulate the interstate wholesale market for electricity. Because several other states have similar programs, more cases challenging state power plant construction incentives could be on the horizon.
By: Lori Wisniewski Azzara and Robert G. Ruggieri
Philadelphia City Counsel recently passed Bill No. 120428-A, which amends Chapter 9-3400 of The Philadelphia Code, to establish a system of benchmarking and reporting energy and water usage data for certain commercial buildings and mixed-use buildings.
The Mayor’s Office of Sustainability is responsible for administering the Ordinance, which applies to “Covered Buildings,” which include commercial buildings with an indoor floor space of 50,000 square feet or greater and commercial portions of mixed-use buildings where a total of at least 50,000 square feet of indoor floor space is devoted to any commercial use.
Under the Ordinance, Covered Buildings must annually report their energy usage (electricity, natural gas, steam and heating oil), water usage and building characteristics through an internet-based data system known as “Portfolio Manager.” Building owners can arrange for their energy and water usage information to be electronically reported directly by the utility/energy supplier. However, building owners must still annually report their building’s characteristics, including, among other statistics, the age of the building, type of use, operating hours, portion of the building that is heated and/or air conditioned, and the number of computers and refrigerators used in the building.
Tenants occupying space in a Covered Building do not have a separate reporting requirement. However, if the tenant’s space is separately metered by a utility company, the tenant must timely provide the required reporting data to the owner.
Failure to comply with the reporting requirements within thirty (30) days of the reporting deadline will result in a $300 fine, plus $100 each day thereafter.
Most notable is the Ordinance’s disclosure requirement. The data reported on a Covered Building is to be provided, upon request, to prospective buyers or lessees. In addition, the Ordinance contemplates having the data available online so that property owners, tenants, prospective purchasers and the public at large can view and compare energy and water usage among buildings. The disclosure will be especially beneficial to prospective tenants and/or buyers who have unique or specific energy needs or goals. It will also allow property owners to see how their buildings perform in comparison to other similar buildings, thereby allowing owners to make their buildings more energy efficient to keep up with market demands.
“Step by step, we are taking action to make Philadelphia the Greenest City in America,” said Councilwoman Reynolds Brown, co-sponsor of the Ordinance and Chair of City Council’s Committee on the Environment. Philadelphia now joins Austin, New York, San Francisco, Seattle and the District of Columbia as cities that have passed energy benchmarking laws.
Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Ms. Azzara practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.
Robert Ruggieri is a Senior Associate at Cohen Seglias Pallas Greenhall & Furman PC and practices in the area of complex construction litigation.
By: Christopher Soper and Lane Kelman
Recently New Jersey State Senator, Bob Smith (D., Middlesex), chairman of the Senate Environment and Energy Committee, explained that New Jersey has “done such a good job at stimulating solar that the market is now crashing.”
In order to address this problem, Smith sponsored Senate Bill S2371 (Bill S2371) that would accelerate by one year the state requirements for how much renewable energy must be produced and consequently how many Solar Renewable Energy Credits (SRECs) power companies are required to purchase.
The Purpose of Senate Bill S2371
The goal of Bill S2371 is to increase the demand for SRECs in order to stabilize their price – a price that has decreased in past months due to fears of the expected oversupply. With the proposed increase in renewable energy requirements and the consequential increase in renewable energy credits, it is hoped that the SREC market will be able to transition to a balanced supply-demand scenario.
New Jersey had previously established a schedule for the amount of SRECs power companies would be required to purchase for each energy year through 2026. Bill S2371 proposes to remove the requirements previously established for energy year 2013 and instead use the requirements established for energy year 2014. This would result in the requirements for energy year 2013 increasing from 596,000 to 772,000. The balance of the established schedule would remain the same, just moved ahead one year. This would allow the solar industry to continue to grow at a controlled rate through 2025.
Next Steps for Senate Bill S2371
Bill S2371 was passed by the Senate, received in the Assembly, and referred to the Assembly Telecommunications and Utilities Committee on June 29, 2011. It is anticipated that Governor Christie’s administration will not accept Bill S2371 as is, but will agree to a compromise that addresses the cost of solar for ratepayers. Cohen Seglias will continue to monitor the development of Bill S2371.
Over the past couple of years the solar industry has thrived in Pennsylvania and New Jersey due to federal and state programs that have provided hundreds of millions of dollars in incentives. These programs are necessary for solar energy to compete in electrical markets. One program, utilized by both Pennsylvania and New Jersey, is a program in which producers of solar electricity receive certificates for solar power produced. In Pennsylvania the certificates are called “Alternative Energy Credits” or AECs, and in New Jersey they are called “Solar Renewable Energy Certificates” or SRECs. The certificates are earned as the electricity is produced and can be sold or traded. The certificates are purchased by electricity suppliers in order to meet minimum required levels of sustainable energy in each state and to avoid penalties resulting from noncompliance. The demand for the certificates is created by state programs requiring electricity suppliers to use renewable energy. However, since the certificates are traded on the open market the value of the certificates fluctuates based on supply and demand at any given time. Solar developers’ increased production of solar projects has resulted in an increase in the issuance of certificates.
Revenue generated from the sale of certificates is in addition to revenues or electrical savings resulting from the electricity that producers are feeding back into the grid. This allows producers of solar electricity two avenues to recover the initial installation costs of the solar panels.
Oversupply of Solar Certificates
The problem that has arisen in Pennsylvania and New Jersey is that solar developers in recent years have built such a large number of projects that there is an oversupply of certificates. In Pennsylvania, this oversupply is exacerbated by the fact that out-of-state solar energy producers are eligible to receive energy certificates. Most states, including New Jersey, only permit in state solar energy producers to receive, trade and sell certificates. Currently, Pennsylvania is projected to generate four times the amount of solar energy needed in 2011-12 to satisfy the state requirements.
Because New Jersey, on the other hand, has a protected market for its certificates (i.e. it does not allow out of state producers to participate) they have not decreased in value to the same extent as those in Pennsylvania. That being said, certificates in New Jersey have experienced a decline in price based on the expectation of an oversupply of certificates in the next 12 months. Current projected estimates show that New Jersey will have a substantial oversupply of certificates for Energy Year 2012. If the projections hold true, certificates in New Jersey will continue to decrease in value (assuming the state requirements are not increased).
An Issue that Needs to be Addressed or Left to Market Regulation?
The oversupply has caused the certificates in Pennsylvania to lose as much as 75 percent of their value in the last year. Certificates in New Jersey have also seen a decrease in value, but to a much lesser extent. Since the demand for the certificates is created by established state requirements, the certificates will either continue to lose value as more projects are built or the state is going to have to increase the amount of certificates electricity suppliers are required to purchase. There are arguments on both sides regarding whether an increase to the state requirements is appropriate. Those in the solar industry are lobbying for an increase in the state requirements. This is because solar developers rely on revenue generated by certificates to recover initial installation costs. If the certificates decrease in value then it will take solar developers significantly longer to recoup their costs. Solar developers will have to consider if it is still cost effective to move forward with solar projects in Pennsylvania and New Jersey in the future.
Those opposing increases to the state requirements argue that an increase in the requirements will raise the cost of electricity for the average consumer because solar energy is more expensive. They also argue that the devaluation of the certificates is a function of supply and demand and is properly moderating solar development. According to those opposing an increase to state requirements there is no current problem in the solar industry, instead the market is functioning as capitalism intended.
The State of New Jersey, in conjunction with the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), is exploring the possibility of leasing portions of the continental shelf to wind power developers and studying the feasibility of large scale, offshore wind farms.
BOEMRE is a federal agency within the Department of the Interior that is charged with the oversight of offshore energy and mineral projects. BOEMRE worked with the New Jersey Department of Environmental Protection (NJDEP) to identify an area that would be suitable for offshore wind development, and concluded that a 418 square nautical mile area between Avalon, New Jersey and Barnegat Light, New Jersey would be appropriate. The boundary of the potential development area runs for a distance of 45 nautical miles between Barnegat Light to Avalon, and begins 7 nautical miles from the coastline and extends 23 nautical miles seaward.
On April 20, 2011, BOEMRE issued a Call for Nominations, which sought responses from companies interested in leasing portions of the identified development area for the purposes of developing and constructing wind farms.
On June 10, 2011, the NJDEP announced that 11 companies responded to the Call for Nominations. The responding companies set forth potential wind farm development projects that ranged in size from 350 megawatts to 3,000 megawatts. The companies responding to the Call for Nominations included Offshore MW, LLC; Neptune Wind, LLC, Garden State Offshore Wind Energy I, LLC; Bluewater Wind New Jersey Energy, LLC; TCI Renewables, Inc.; Mainstream Renewable Power; enXco Development Corp.; US Wind, Inc.; New Jersey Offshore Wind, LLC; Fishermen’s Energy of New Jersey, LLC and Iberdrola Renewables, Inc.
BOEMRE will evaluate the qualifications of the 11 responsive companies and review the proposed wind farm developments in order to reach a final decision as to whether to lease portions of the continental shelf for development. If BOEMRE determines that leasing will go forward, it will employ a competitive bidding system to award the leases.
The potential offshore wind development projects in New Jersey would be large scale and could provide significant work opportunities for local contractors. We will continue to monitor the evaluation process and update you on the decisions.
The study performed by the Green Building Alliance, and funded by the Sports & Exhibition Authority (SEA) and The Heinz Endowments, found that the electrical system in the DLCC has resulted in $70,000 to $100,000 in wasted-power penalties each year since 2003- a cost that has been passed on to taxpayers. While taxpayer-funded power penalties are undesirable on any public building, it is particularly egregious in this case because the DLCC is a LEED Gold rated building that was designed to be energy efficient.
Upon a review of the extra electrical charges from Duquesne Light Company, it was determined that the 1.5 million square foot DLCC was not running as efficiently as possible and that six to eight percent of the annual bill, or $1.27 million was for wasted electricity. Mary Conturo, Executive Director of the SEA, which owns DLCC, explained that the SEA was aware of the problem and undertook a study to cost-effectively address the waste. The eventual solution was to purchase two large capacitors. The capacitors get rid of inactive energy in order to make the electrical system more efficient. Conturo explained that “[l]arger buildings routinely have these power factor penalties unless they have these capacitors“. Of course, the solution begs the question as to why the capacitors were not included in the initial design of the electrical system. Once installed, it will only take approximately three years of power savings for the capacitors to pay for themselves.
The study of the DLCC raises far-reaching questions related to the LEED rating system: what is the correlation between a LEED rated building and an energy efficient building and whether operation and maintenance testing should be required in order for buildings to maintain their LEED rating.
Cohen Seglias Partner Lane F. Kelman contributed to this post.
International Energy Conservation Code Upgrades
The 2012 International Energy Conservation Code (IECC) has been upgraded to require that newly constructed and renovated residential and commercial buildings achieve energy savings 30% higher than the IECC’s 2006 predecessor. The revisions represent the largest single-step efficiency increase in the history of the national model energy code. A majority of state and local jurisdictions around the country have adopted energy codes modeled after the IECC standards, and the recent 2012 revisions represent a significant step forward for efficiency gains. It is anticipated that the changes will be widely adopted by various jurisdictions.
Approximately 500 state, county and city building and fire code officials from across the country voted, by overwhelming majority, to pass a series of energy-saving changes to the IECC. The most notable changes to residential buildings include:
- An increase in stringency for insulation efficiency requirements;
- A mandatory air infiltration test in all homes to reduce heating and cooling loss;
- A requirement that ducts be tested to a tighter duct leakage standard to reduce wasted energy; and
- A set of options to improve hot-water distribution systems and reduce wasted energy and water.
As for commercial buildings, changes include:
- More efficient air leakage requirements by mandating continuous air barriers;
- The option to choose between renewable power generation;
- Improved lighting systems or more efficient HVAC equipment; and
- A commissioning requirement for HVAC systems, mandatory automatic daylighting controls, and increased HVAC piping insulation provisions.
Pennsylvania’s Uniform Construction Code, which is mandatory statewide and applies to residential and commercial buildings, is based on the 2009 IECC. With the publication of the 2012 IECC, it is anticipated that Pennsylvania’s next code change will occur sometime in late 2011 with a tentative effective date of December 31, 2011. We will keep you posted on any updates regarding the Construction Code.
Philadelphia Among the Nation’s Leaders in Green Roofs
Green Roofs for Healthy Cities (GRHC) recently announced the results of its 2011 Annual Industry Survey, which revealed that the green roof industry grew by 28.5% over the course of 2010. This growth is a significant increase from the 16% growth recorded in 2009.
The GRHC Survey lists the top 10 U.S. cities leading the way for green roofs installed in 2010. Chicago topped the list for the seventh year in a row with more than 500,000 square feet of green roofs installed. Philadelphia ranked fourth with nearly 150,000 square feet of green roofs installed. Notable green roofs in Philadelphia include the Free Library of Philadelphia, PECO’s headquarters, Comcast Center, the Friends Center of Philadelphia and Morris Arboretum of the University of Pennsylvania.
The government’s investment in green roofs for their stormwater, air quality, green space and city cooling, largely fuels the growth of the green roof industry, according to Steven W. Peck, Founder and President of GRHC. “Cities such as Chicago, Washington, New York, Portland, Seattle and Philadelphia continue to lead the way with incentives and regulations that recognize the many benefits from green roofs, including much needed green jobs in their communities.”
The Green building industry continues to grow each year, with new technologies and green building ideas coming into play every day. Contractors need to stay on top of all these changes and advancements, and be able to offer clients the newest and most cost effective options. We will continue to report on new green building advancements as they occur.
Cohen Seglias Partner Lane F. Kelman contributed to this post.
On April 8, 2011, the Commonwealth Financing Authority announced its approval of $6.5 million in new alternative and clean energy grants. According to C. Alan Walker, acting Secretary of the Department of Community and Economic Development, these grants will help fund the utilization, development, and construction of 13 new alternative and clean energy projects in 10 counties throughout the Commonwealth.
Texas-based Accelergy Corp. will receive a $1.3 million grant towards a $5.5M coal liquefaction validation unit, coal and bio-liquids unit and photo bioreactors at the Pittsburgh Applied Research Center in Harmar Township, Allegheny County.
Power Source, LLC, located in Wayne County, will be issued a $2 million grant for the research and development of a sodium sulfur battery that will have six times the energy storage capacity and eight times the lifespan of a standard lead acid battery.
- Pennsylvania State University for the design, procurement and installation of Smart Grid research and development facilities at the Philadelphia Navy Yard in Philadelphia County;
- The Tamaqua Area School District for the purchase and installation of a geothermal system at three school buildings in Tamaqua Borough and West Penn Township, and for future energy efficient upgrades for five school buildings in Tamaqua Borough, Rush Township and West Penn Township;
- Apple Shamrock Dairy Farm LLC for the purchase and installation of a 750 kW wind turbine in Steuben Township, Erie County; and
- Clean Green Hydro, LLC for the installation of 25 kilowatt in-line turbines at three Greene County mine water treatment plants:AMD Reclamation Inc. and Dana Mining Company of Pennsylvania LLC., both in Dunkard Township, and Duquesne Light Co.’s Warwick Mine in Monongahela Township.
In total, these alternative and clean energy program grants are intended to yield about $40 million in private investments in the Commonwealth, and will help citizens, businesses and local governments save nearly $127,000 each year on their energy bills.
For further details on the 13 alternative and clean energy and renewable energy approved projects, or for information on how to obtain funding through the Commonwealth Financing Authority, visit www.newpa.com.
Cohen Seglias Partner Lane F. Kelman contributed to this post.
Two weeks ago, April 3-5, the 2011 PV America conference was held in Philadelphia. More than 3,000 attendees, including PV manufacturers, distributors and installers, industry financiers and project developers, converged upon the Pennsylvania Convention Center to receive the latest updates on PV technology, industry trends and business opportunities. Co-presented by the Solar Energy Industries Association (SEIA) and Solar Electric Power Association (SEPA), PV America is the premier solar photovoltaic (PV) industry conference and trade show in the United States.
According to the U.S. Solar Market Insight™ Year-in-Review 2010, released by SEIA and GTM Research in March 2011, the solar industry’s total market value grew 67% from $3.6 billion in 2009 to $6 billion in 2010. The report’s executive summary can be downloaded for free, or the full report can be purchased. Both are available here.
I am thrilled to announce that the solar energy industry is now the fastest growing industry in America. Let me repeat that. The solar energy industry is the fastest growing industry in America. We are growing faster than wind energy, faster than telecommunications, and, thank goodness, we are even growing faster than the mortgage foreclosure industry.
To capitalize on the networking opportunities that PV America provided, Cohen Seglias co-hosted with Independence Solar a post-conference reception on April 4 at the Le Meridien in Center City. The event offered a chance for conference attendees and non-attendees alike to make new connections and discuss information learned at the conference. Attended by more than 100 people, the reception was an expanded version of the regularly scheduled quarterly Philadelphia Solar Happy Hour which the Firm also hosts in conjunction with Independence Solar .
The Philadelphia Solar Happy Hour is a complimentary event to provide networking opportunities and strengthen the ties of the solar community in the Mid-Atlantic region.
If you would like to receive notification of the next Philadelphia Solar Happy Hour, please send an email to email@example.com.
Update: Christie Signs NJ Power Plant Bill
New Jersey Governor Chris Christie signed into law last Friday the controversial power plant bill (S-2381) that, among other things, is aimed to lower energy rates by increasing the energy generated in-state and create construction jobs.
The new law enables LS Power Systems to build a power plant in West Deptford, NJ, and provides an incentive for companies such as Competitive Power Ventures to build at least three additional plants in the state, with long-term, ratepayer subsidized energy contracts. Proponents of the bill believe that the long term capacity agreements (LCAPP) will reduce the cost of energy for ratepayers, thereby reducing the state’s reliance on out-of-sate generation and will create jobs in the construction and energy industries.
Opposition to the bill remains strong. Critics say that it locks ratepayers into 15 years of subsidies for some power suppliers and that the new bill does not guarantee lower tax rates for the public.
We will continue to monitor the controversial law, and report on its effectiveness.
$261 million tax reimbursement for Revel casino
Governor Chris Christie announced on February 1 that the half finished Revel Casino project can resume construction, beginning as early as next week. Through the Economic Development Authority, and the Atlantic City Rescue Package, Christie has authorized the state to provide $261 million to the casino. With this agreement, Revel will share 20 percent of its profits (up to $261 million) with the state and the state will hold a minority ownership in the casino. Revel lined up an additional $1.5 billion in private financing needed to complete the project. Christie’s administration cited the prospect of thousands of jobs and billions in future tax revenue as an incentive to back the project.
The project is on schedule to be completed in June 2012 and will create about 2,000 construction jobs. When fully operational, Revel will employ 5,500 people. Additionally, the casino plans to build 1,100 hotel rooms, as opposed to the 1,800 rooms originally planned.
Christie commented on the renewed project by saying that, “This is a landmark day for Atlantic City, and the beginning of its transformation”.