What The FERC? (In Which The Planet Explores Dade's Future in Renewable Energy)

June 14, 2019

 

Last week, an article in The Chattanooga Times Free Press started a flurry of excitement in Dade County with the announcement that a renewable energy company had applied with the Federal Energy Regulatory Commission (FERC) for a preliminary permit to build a massive two-dam, two-lake hydroelectric pump storage facility in the most remote corner of the county. It could be a great thing for Dade, said County Executive Chairman Ted Rumley at the June 6 county commission meeting. Not only would it create jobs and stimulate the local economy, if the county could somehow get a penny per kilowatt generated by the facility, the local property tax could be abolished.

 

But Rumley had said something very similar about piping water through Dade to Atlanta the last time state legislators resuscitated the idea of wresting Georgia's rightful access to the Tennessee River back from Tennessee, a consummation that each time it arises and is shot down--again!--seems yet unlikelier to materialize. And however chirpy he sounded about it during the commission meeting, the county boss during an interview last week was not that optimistic about the hydroelectric project ever coming to fruition, either. "They haven’t even talked to the landowners," he said. "It seems an odd way to go about something.”

 

Not only had the renewable energy company not consulted the county government, said Rumley, it hadn't even asked the owners of the parcels it was telling the regulatory agency it would build on if they were willing to sell. One of them had called him to ask, as it were, What the FERC?

 

The Planet has repeatedly called and emailed the company that applied for the FERC permit to build in Dade, Renewable Energy Aggregators. Renewable Energy Aggregators has repeatedly not responded. And when The Planet checked out the company's website, what was immediately apparent was that the company did not boast of projects it had executed but of having obtained 14 preliminary FERC permits for projects. 

 

The Planet asked Celeste Miller, a spokeswoman for FERC, why a company might want to obtain FERC permits for projects it didn't intend to complete. She could not comment or would not speculate on that question. But she explained that a FERC preliminary permit was only the first step of a longer permitting process for renewable energy initiatives like this. The next step is applying for an actual license for the project. She furnished a list of companies that had obtained the 1,045 licenses FERC has issued so far for renewable energy projects. Renewable Energy Aggregators was not on the list.

 

So why obtain FERC preliminary permits for projects there were no realistic plans for building? Renewable Energy Aggregators' website itself might give a clue to that with this large-print, highlighted, italicized quote:  

 

“RECs have been an important part of reducing our footprint, but the opportunity now exists – because of reduced costs and financial mechanisms like PPA’s – to implement renewable efforts on-site or closer to our sites. This allows us to reduce our emissions and save money.” -- Curtis Ravenel, Global Head of Sustainable Business and Finance, Bloomberg L.P.

 

So what's a REC? What's a PPA? Let's start with PPA, because that's easy--at first, anyway. The initials stand for power purchase agreement, one company buying power from another. But to complicate matters, there are two types, a physical PPA and a financial PPA. The following definitions and excerpts are from the EPA (Environmental Protection Agency) website.

 

"A Physical Power Purchase Agreement (Physical PPA) for renewable electricity is a contract for the purchase of power and associated RECs [more on those in a sec] from a specific renewable energy generator (the seller) to a purchaser of renewable electricity (the buyer)...

 

"In a Physical PPA, an organization signs a long-term contract with a third-party seller who agrees to build, maintain, and operate a renewable energy system either on the customer's property (on-site) or off-site."

 

Which is what the FERC permit application might lead us to believe was planned for the Cole City site. But then we come to the financial PPA, which is a little less straightforward. Here's how the EPA explains those:

 

"A financial PPA (Financial PPA) is a financial arrangement between a renewable electricity generator (the seller) and a customer, that enables both parties to hedge against electricity market price volatility. Unlike with a physical power purchase agreement (PPPA), there is no physical delivery of power from the seller to the customer. Rather, it is a hedge arrangement that offers buyers cost predictability for their electricity use and promotes growth in the renewable energy sector by offering project developers long-term contracts with predictable revenues — a key element to attracting project financing and investment."

 

Yeah, yeah, The Planet didn't quite understand all of that, either, except for three key points: (a) The renewable energy generator is the seller; (b) there is no physical delivery of power; and (c) and that it is a "key element to attracting project financing and investment." A five-year-old company like Renewable Energy Aggregators might well profit from selling something it doesn't have to deliver in order to "attract financing and investment."

 

Which brings us to this matter of the REC. A REC--pronounced "wreck"--stands for "renewable energy certificate," and it is a tradeable financial commodity. How the EPA explains it is that: "RECs are the instrument that electricity consumers must use to substantiate renewable electricity use claims." 

 

The face value of REC is one megawatt-hour (MWh) of electricity generated through a renewable energy resource, but it is not so much an energy unit as a financial unit a company buys that entitles it to say it has reduced its carbon footprint. Companies buy and sell them through a process called REC Arbitage. Here's how EPA explains that:

 

REC Arbitage is a green power procurement strategy used by electricity consumers to simultaneously meet two objectives:  1) decrease the cost of their renewable electricity use and 2) substantiate renewable electricity use and carbon footprint reduction claims. The strategy is used by consumers installing self-financed renewable electricity projects or consumers who purchase renewable electricity directly from a renewable electricity project, such as through a power purchase agreement (PPA).

 

All of this may seem a little too rarefied and industry-specific for us country bumpkins to wrap our bucolic little brains around, but the gist of it is that renewable energy is not all that a renewable energy company has to sell. It can sell RECs. These have value to companies that want to claim they've gone green--instead of actually, like, going green, they can buy RECs entitling them to say they have. As a Green Power Partnership documents explains:

 

"...the developer is able to use the project RECs as another source of revenue. By purchasing replacement RECs, consumers can characterize their power as renewable or make renewable electricity use claims based on the renewable electricity attributes of the replacement RECs."

 

If the whole system sounds like a cynical gaming of honest citizens' sincere desire to save their planet, it is not, anyway, illegal. You'll have noticed that most of the quotes and definitions above are from the EPA itself, which sets the rules for "REC arbitage." 

 

And anyway, that's not really the point here. The point is that this monetization of environmentalism may well explain why a start-up company like Renewable Energy Aggregators might want to build its renewable-energy cred by racking up FERC preliminary permits. And siting a proposed project in an obscure rural area like the most remote pocket of Dade might reasonably be interpreted as indicative of a hope that no one will notice it.   

 

Readers will please note the preponderance of "may" and "might" in the preceding paragraph. The Planet does not specifically allege that Renewable Energy Aggregators has submitted a FERC application for a project in Dade that it has no intention to build. The Planet only notes that Renewable Energy Aggregators has been repeatedly asked to elucidate its intentions and has pointedly declined to do so. 

 

Otherwise, The Planet hereby supplies readers the results of its research into the renewable energy sector, invites them to make of it what they will, and counsels those hoping for the end of the property tax not to hold their breath. 

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