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three_in_row_hi_mediumWave farm developers must overcome more hurdles to get their projects approved under an agreement signed Thursday ending a feud between two federal agencies that warred over the regulation of offshore wind and wave farms.

A jurisdictional dispute between the U.S. Department of the Interior and the Federal Energy Regulatory Commission had left in limbo a number of wave energy projects planned for the outer continental shelf, particularly applications from Grays Harbor Ocean Energy of Seattle to build half a dozen combined wave-and-wind farms from New Jersey to Hawaii. The Interior Department’s Minerals Management Service had challenged FERC’s right to approve approve projects on the outer continental shelf. Last month the agencies agreed to end the water fight but offered few specifics on how offshore wind and wave farms would be regulated.

On Thursday, Interior Secretary Ken Salazar and FERC chairman Jon Wellinghoff signed an accord detailing how their agencies will deal with such projects. FERC will license the construction and operation of wave farms on the outer continental shelf but the Minerals Management Service will issue leases and rights-of-way for those projects. The Minerals Management Service also will be the sole agency to license wind and solar projects on the outer continental shelf.

Previously, a wave energy developer applied to FERC for a preliminary permit to explore the feasibility of a project in a particular stretch of ocean. As such permits award developers first rights to build a project in a given locale, there’s been something of an offshore land rush over the past couple of years to stake claims on the best sites. (The city of San Francisco and Grays Harbor Ocean Energy, for instance, are feuding over competing claims.)

Under Thursday’s agreement, FERC will no longer issue such preliminary permits for wave farms on the outer continental shelf and will not license any projects until developers first secure a lease or right-of-way from the Interior Department.

That should slow the land rush as developers will now be dealing with two federal agencies when it comes to floating their projects.

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Infighting among U.S. federal agencies over regulation of wind and wave energy development on the outer continental shelf ended Tuesday with an accord that gives the Department of the Interior oversight of offshore wind farms while the Federal Energy Regulatory Commission gets jurisdiction over wave and tidal projects.

While the deal brokered by Interior Secretary Ken Salazar and acting FERC chairman Jon Wellinghoff will allow wind and wave projects to proceed, it’s still unclear what the impact will be on proposals to build combined offshore wind-and-wave farms.

As Green Wombat wrote earlier this month, a Seattle company called Grays Harbor Ocean Energy has filed applications with FERC to build such combo plants off several states. Among them, California, where the city of San Francisco is attempting to scuttle Grays’ proposed 100 megawatt project that would be located in a marine sanctuary in favor of its own 30 megawatt wave farm that would be built closer to shore.

Environmentalists, surfers and sailors also have objected to the Grays Harbor wave farm and the Department of the Interior’s Minerals Management Service had challenged FERC’s right to approve combined wind-wave projects.

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three_in_row_hi_medium

San Francisco on Friday made a bid to rule the waves, filing an application to build a 30-megawatt wave energy farm off its coast in a move to sink a Seattle company’s claim on a nearby patch of ocean.

The company, Grays Harbor Ocean Energy, has filed applications with the Federal Energy Regulatory Commission, or FERC, for wave projects to be built from New Jersey to Hawaii. Wave energy technology remains in its infancy but there’s been something of a land – or sea – rush to secure rights to the most promising ocean sites to produce clean green electricity.

Last October, Grays Harbor filed for a preliminary permit to test technology for a 100-megawatt wave park to be floated 20 to 25 miles off the San Francisco coast.  Grays’ San Francisco Ocean Energy Project “may also generate power from wind turbines” placed on the wave-energy converters, according to the company’s application.

So far the project has generated heated opposition from a coalition of environmental groups, surfers and commercial fishing organizations that have intervened in the case.  They argue that the wave farm’s location in federally protected marine sanctuaries near the Farallon Islands could harm endangered whales, turtles and seabirds as well as interfere with surfers, sailors and pose a navigation hazard for oil tankers and other ships.

“Wave energy projects raise many potential environmental concerns, including elevated hydrocarbon concentrations, electromagnetic field effects, interruption of migratory patterns, toxic releases from leaks or spills, impacts to sensitive spawning areas,” wrote the coalition, which includes the Natural Resources Defense Council, in a Jan. 26 letter to FERC.

The next day, the city of San Francisco moved to intervene in the Grays case, saying it would file a competing application. On Friday, the city did so, asking federal regulators to give priority to its Oceanside Wave Energy Project, arguing there’s only room for one wave farm off the San Francisco coast.

The city’s project would be located eight miles offshore, outside the marine sanctuaries. As San Francisco Mayor Gavin Newsom – a Democratic gubernatorial candidate for 2010 – blogged about the municipal wave farm on Friday, the city filed an affidavit from its consultant stating that the Grays project would “impact the nature, quality and direction of the waves” to be used by the Oceanside wave energy plant.

It’s not the first time that San Francisco has tried to scuttle other wave projects. In June 2007, the city unsuccessfully petitioned FERC to deny utility PG&E’s (PCG) application for wave farms hundreds of miles up the coast from San Francisco, contending companies were trying to lock up choice sites.

Despite the rush to file claims, there’s no guarantee that any wave farm will be built. The preliminary permit that San Francisco has applied for would give it the ability to conduct a feasibility study and test wave energy technology with first rights to secure a license build a full-scale wave energy plant.

Although a range of wave technologies are being developed, they generally involve devices that float or are anchored to the seabed that that transform the motion of waves into mechanical energy which drives an electricty generating turbine. The electricity is transmitted through undersea cables to an onshore substation.

In its application, San Francisco said it was considering a number of technologies but anticipates floating between ten and 30 1-megawatt wave energy converters.  The city estimates it would spend between $1 million and $3 million on the feasibility study over the next three years.

San Francisco’s green scheme isn’t the only headache for Grays. Like the company’s other proposed wave energy projects, the San Francisco wave farm would sit on the outer continental shelf. The U.S. Department of the Interior’s Minerals Management Service claims jurisdiction over projects on the outer continental shelf and a fight has broken out between the agency and FERC over who gets to issue permits for OCS wave projects. On Jan. 26, the agency filed a challenge to FERC’s right to license eight of Grays wave farms that would also feature wind turbines.

Wrote Interior Department attorneys: “Some believe the preliminary permit application is part of an attempt to stake a claim to certain areas through the FERC process with the objective of siting wind energy projects, over which FERC does not claim jurisdiction, or then, according to press accounts, selling those rights.”

image: Pelamis Wave Power

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“Years ago we came to the conclusion that global warming was a problem, it was an urgent problem and the need for action is now. The problem appears to be worse and more imminent today, and the need to take action sooner and take more significant action is greater than ever before” — PG&E Chairman and CEO Peter Darbee

The head of one of the nation’s largest utilities seemed to be channeling Al Gore on Tuesday when he met with a half-dozen environmental business writers, including Green Wombat, in the PG&E (PCG) boardroom in downtown San Francisco. While a lot of top executives talk green these days, for Darbee green has become the business model, one that represents the future of the utility industry in a carbon-constrained age.

As Katherine Ellison wrote in a feature story on PG&E that appeared in the final issue of Business 2.0 magazine last September, California’s large utilities — including Southern California Edison (EIX) and San Diego Gas & Electric (SRE) — are uniquely positioned to make the transition to renewable energy and profit from green power.

First of all, they have no choice. State regulators have mandated that California’s investor-owned utilities obtain 20 percent of their electricity from renewable sources by 2010 with a 33 percent target by 2020. Regulators have also prohibited the utilities from signing long-term contracts for dirty power – i.e. with the out-of-state coal-fired plants that currently supply 20 percent of California’s electricity. Second, PG&E and other California utilities profit when they sells less energy and thus emit fewer greenhouse gases. That’s because California regulators “decouple” utility profits from sales, setting their rate of return based on things like how well they encourage energy efficiency or promote green power.

Still, few utility CEOs have made green a corporate crusade like Darbee has since taking the top job in 2005. And the idea of a staid regulated monopoly embracing technological change and collaborating with the likes of Google (GOOG) and electric car company Tesla Motors on green tech initiatives still seems strange, if not slightly suspicious, to some Northern Californians, especially in left-leaning San Francisco where PG&E-bashing is local sport.

In a wide-ranging conversation, Darbee, 54, sketched sketched a future where being a successful utility is less about building big centralized power plants that sit idle until demand spikes and more about data management – tapping diverse sources of energy — from solar, wind and waves to electric cars — and balancing supply and demand through a smart grid that monitors everything from your home appliances to where you plugged in your car. “I love change, I love innovation,” says Darbee, who came to PG&E after a career in telecommunications and investment banking.

Renewable energy

“On renewable energy what we’ve seen is the market is thin,” says Darbee. “Demand just from ourselves is greater than supply in terms of reliable, well-funded companies that can provide the service.”

PG&E so far has signed power purchase agreements with three solar startups — Ausra, BrightSource Energy and Solel — for up to 1.6 gigawatts of electricity to be produced by massive solar power plants. Each company is deploying a different solar thermal technology and uncertainty over whether the billion-dollar solar power stations will ultimately be built has prompted PG&E to consider jumping into the Big Solar game itself.

“We’re looking hard at the question of whether we can get into the business ourselves in order to do solar and other forms of renewables on a larger scale,” Darbee says. “Let’s take some of the work that’s been done around solar thermal and see if we can partner with one of the vendors and own larger solar installations on a farm rather than on a rooftop.”

“I like the idea of bringing the balance sheet of a utility, $35 billion in assets, to bear on this problem,” he adds.

It’s an approach taken by the renewable energy arm of Florida-based utility FPL (FPL), which has applied to build a 250-megawatt solar power plant on the edge of the Mojave Desert in California.

For now, PG&E is placing its biggest green bets on solar and wind. The utility has also signed a 2-megawatt deal with Finavera Renewables for a pilot wave energy project off the Northern California coast. Given the power unleashed by the ocean 24/7, wave energy holds great promise, Darbee noted, but the technology is in its infancy. “How does this technology hold up against the tremendous power of the of the Pacific Ocean?”

Electric cars

Darbee is an auto enthusiast and is especially enthusiastic about electric vehicles and their potential to change the business models of both the utility and car industries. (At Fortune’s recent Brainstorm Green conference, Darbee took Think Global’s all-electric Think City coupe for a spin and participated in panels on solar energy and the electric car.)

California utilities look at electric cars and plug-in hybrids as mobile generators whose batteries can be tapped to supply electricity during peak demand to avoid firing up expensive and carbon-spewing power plants. If thousands of electric cars are charged at night they also offer a possible solution to the conundrum of wind power in California, where the breeze blows most strongly in the late evenings when electricity demand falls, leaving electrons twisting in the wind as it were.

“If these cars are plugged in we would be able to shift the load from wind at night to using wind energy during the day through batteries in the car,” Darbee says.

The car owner, in other words, uses wind power to “fill up” at night and then plugs back into the grid during the day at work so PG&E can tap the battery when temperatures rise and everyone cranks up their air conditioners.

Darbee envisions an electricity auction market emerging when demand spikes. “You might plug your car in and say, ‘I’m available and I’m watching the market and you bid me on the spot-market and I’ll punch in I’m ready to sell at 17 cents a kilowatt-hour,” he says. “PG&E would take all the information into its computers and then as temperatures come up there would be a type of Dutch auction and we start to draw upon the power that is most economical.”

That presents a tremendous data management challenge, of course, as every car would need a unique ID so it can be tracked and the driver appropriately charged or credited wherever the vehicle is plugged in. Which is one reason PG&E is working with Google on vehicle-to-grid technology.

“One of the beneficiaries of really having substantial numbers of plug-in hybrid cars is that the cost for electric utility users could go down,” says Darbee. “We have a lot of plants out there standing by for much of the year, sort of like the Maytag repairman, waiting to be called on for those super peak days. And so it’s a large investment of fixed capital not being utilized.” In other words, more electric and plug-in cars on the road mean fewer fossil-fuel peaking power plants would need to be built. (And to answer a question that always comes up, studies show that California currently has electric generating capacity to charge millions of electric cars.)

Nuclear power

Nuclear power is one of the hotter hot-button issues in the global warming debate. Left for dead following the Three Mile Island and Chernobyl disasters, the nuclear power industry got a new lease on life as proponents pushed its ability to produce huge amounts of carbon-free electricity.

“The most pressing problem that we have in the United States and across the globe is global warming and I think for the United States as a whole, nuclear needs to be on the table to be evaluated,” says Darbee.

That’s unlikely to happen, however in California. The state in the late 1970s banned new nuclear power plant construction until a solution to the disposal of radioactive waste is found. PG&E operates the Diablo Canyon nuclear plant, a project that was mired in controversy for years in the ’70s as the anti-nuke movement protested its location near several earthquake faults.

“It’s a treasure for the state of California – It’s producing electricity at about 4 cents a kilowatt hour,” Darbee says of Diablo Canyon. “I have concerns about the lack of consensus in California around nuclear and therefore even if the California Energy Commission said, `Okay, we feel nuclear should play a role,’ I’m not sure we ought to move ahead. I’d rather push on energy efficiency and renewables in California.”

The utility industry

No surprise that Darbee’s peers among coal-dependent utilities haven’t quite embraced the green way. “I spent Saturday in Chicago meeting with utility executives from around the country and we’re trying to see if we can come to consensus on this very issue,” he says diplomatically. “There’s a genuine concern on the part of the industry about this issue but there are undoubtedly different views about how to proceed and what time frames to proceed on.”

For Darbee one of the keys to reducing utility carbon emissions is not so much green technology as green policy that replicates the California approach of decoupling utility profits from sales. “If you’re a utility CEO you’ve got to deliver earnings per share and you’ve got to grow them,” he says. “But if selling less energy is contradictory to that you’re not going to get a lot of performance on energy efficiency out of utilities.”

“This is a war,” Darbee adds, “In fact, some people describe [global warming] as the greatest challenge mankind has ever faced — therefore what we ought to do is look at what are the most cost-effective solutions.”

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Waves
photo: Jakanori 

The first wave energy power plant has yet to be built off the California coast but a skirmish over who will control the seas has already broken out in Washington between utility PG&E and the city of San Francisco. Last February, PG&E (PCG) filed an application with the Federal Energy Regulatory Commission, or FERC, for preliminary permits to develop two 40-megawatt wave farms off the Northern California coast. Now the city of San Francisco – PG&E’s hometown – has asked FERC to deny the utility the wave energy permits. "While specifically not referring to this application, San Francisco believes the risk of sparking a ‘gold rush’ by ill  prepared applicants with ill-conceived projects is too high and the drain on Commission  resources in reviewing such applications would be too great," wrote San Francisco Deputy City Attorney Stephen A. S. Morrison in June 15 letter. Preliminary permits such as those PG&E are seeking give the holder three years to conduct a feasiblity study for a wave farm and then first dibs on obtaining a license for any resulting project. San Francisco, which Morrison stressed "is keenly interested in supporting the development of
local, clean, renewable energy, such as that anticipated in the
PG&E projects," fears that companies will "site bank," or lock up choice wave energy spots.

FERC is currently considering whether to change its wave energy permitting process. San Francisco supports scuttling the preliminary permit process and allowing all applicants to apply once they have a project ready for licensing. PG&E, on the other hand, believes the way to discourage site banking is to apply "strict scrutiny" to preliminary permit applications to ensure only legitimate projects proceed. "PG&E does not think FERC should prematurely reject pending new technology preliminary permit applications," wrote PG&E attorney Annette Faraglia. 

So far San Francisco has not made any moves to oppose a proposed Chevron (CVX) wave farm that would be located adjacent to PG&E’s project off Fort Bragg in Mendocino County. The city and PG&E have long had a contentious relationship. Even as the two are currently cooperating on exploring the possibility of developing tidal power in San Francisco Bay, the city is considering dumping PG&E as its power provider in favor of securing its electricity elsewhere.

Some more details of the PG&E wave farms have emerged from federal filings. The utility is considering a number of wave energy technologies but currently anticipates that there will be between eight and 200 wave generators at each wave farm. PG&E plans to deploy and test several different types of wave generators at each site. But there will be numerous environmental hurdles to overcome before such projects can be built. In a letter to FERC, an Interior Department official said that PG&E’s Humboldt County project could affect at least three protected ocean-going bird species: the California brown pelican, the marbled murrelet and short-tailed albatross.

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Op_illus_web
There’s gold in them there waves. Five months after California utility giant PG&E filed plans to develop two 40-megawatt wave farms off the Northern California coast, oil behemoth Chevron is hitting the water with its own wave energy project in the same patch of ocean, according to an application filed with the Federal Energy Regulatory Commission. (Thanks to environmental reporter Frank Hartzell of the Mendocino Beacon for the tip.) Chevron (CVX) intends to initially deploy Scottish firm Ocean Power Delivery’s Pelamis wave generators off the small Mendocino County town of Fort Bragg. The wave farm will produce between two and 60 megawatts of green energy that Chevron plans to sell to PG&E (PCG) or other electricity providers. "The proposed project will be a new source of clean, renewable ocean energy to generate power for commercial and industrial purposes that currently consume natural gas or other combustible fuels," states the application filed by Chevron Renewable Energy, which is based in Houston of all places. "The proposed project is designed to displace electricity generated from a typical coal-fired generation resource, thereby avoiding the [greenhouse gas] emissions that would otherwise be released into the atmosphere."

Chevron estimates its project would eliminate 308,000 metric tons of carbon dioxide that would otherwise be produced by coal-fired power plants. California, of course, has virtually no such plants but it does import about 20 percent of its electricity from out-of-state coal-fired power stations. Under California’s global warming law, regulators have banned utilities from signing long-term contracts for such dirty electricity and that’s creating opportunities for renewable energy producers to fill the void.

Chevron’s move is a boon to Ocean Power Delivery, which has become one of the leading wave energy producers with projects in Portugal and the U.K. (Green Wombat happened to just finish editing a story on the company that will appear in the August issue of Business 2.0.) OPD’s Pelamis "sea snakes" float semi-submerged on the ocean. As waves move the long articulated cylinders, oil is pumped through motors that drive generators that produce electricity. Chevron expects each 600-foot, 13-foot diameter sea snake to generate about 1.4 megawatts of electricity. The company will also consider other wave energy technologies. It will spend up to $2 million over the next two years conducting field studies and an environmental impact assessment of the project, according to the application.

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Mendocino_waves
originally uploaded by kayjay88

California utility PG&E (PCG) wants to have two 40-megawatt wave farms up and running off the state’s north coasts within a few years, according to documents it has filed with the Federal Energy Regulatory Commission, or FERC. "It is PG&E’s intention to take advantage of economies of scale and scope across the projects, with the intent to maximize the projects’ potential generation output in the shortest time possible," an utility executive wrote in a letter to FERC. The utility hopes to have the WaveConnect projects ready for full licensing within two to three years. Other details on WaveConnect: The Mendocino County wave farm will be located off Fort Bragg in open ocean a half mile to 4.5 miles offshore. A 68-square-mile area will be assessed. PG&E essentially will turn the zone into a wave-energy testing ground, spending up to $3 million to try out various technologies from up to four manufacturers. "A number of different device concepts are being pursued by independent device manufacturers, and there is no industry consensus at this time on the optimal energy conversion technology," PG&E execs wrote in an application for a preliminary permit for the project. "The initial … devices to be used will be selected from device manufacturers who have sufficiently mature technologies available for deployment." PG&E is in preliminary discussions with Ocean Power Technologies of New Jersey, the U.K’s Ocean Power Delivery and Ireland’s Finavera Renewables. While wave energy technologies vary, they essentially involve a device that floats on the ocean’s surface and that harnesses the power produced by the surf to drive a turbine that generates greenhouse gas-free electricity. PG&E will deploy multiple wave-energy devices in an array moored to the ocean’s floor and connected to the shore by a transmission cable.  The Humboldt WaveConnect project will be located between two and 10 miles off the coastal town of Eureka. The test area will be 136 square miles. Both locales have good surf. Average monthly wave height between 6 and 10 feet.

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