Federal Appeals Court Reverses CFIUS Veto of Chinese Investment in U.S. Wind Farms

Posted by on Aug 7, 2014 in Direct Investment from China, Renewable Energy and Sustainability |

By: Henry T. Chou, Esq.

Ralls Corp – a Chinese-owned renewable energy company – has won a significant victory over the Committee on Foreign Investment in the U.S. (CFIUS), the interagency government body responsible for reviewing national security concerns implicated by “transactions that could result in control of a U.S. business by a foreign person.”

CFIUS, which is a part of the executive branch and is directly supervised by the President, has broad power to veto all or parts of international transactions involving the acquisition of U.S. businesses by foreign entities. In 2012, President Obama, relying on CFIUS’ advice, signed an order blocking Ralls Corp from acquiring wind farms in Oregon, citing a threat to national security based on the proximity of the wind farms to a U.S. Navy weapons training facility. The order stated that “there is credible evidence” indicating that Ralls Corp and its owners “might take action that threatens to impair the national security of the United States,” even though it provided no actual evidence of such threats.

Ralls Corp filed suit, claiming that its due process rights had been violated because President Obama’ order offered no “evidence or explanation” for its decision and that Ralls Corp had not been given an opportunity to respond to the administration’s concerns. The U.S. Court of Appeals for the District of Columbia has now ruled in favor of Ralls Corp, finding that due process requires foreign companies to be given access to unclassified evidence used in the decision-making process, as well an opportunity to rebut that evidence.

Historically, the courts have granted broad discretion to the executive branch concerning national security matters. Using its broad discretion, CFIUS has heavily scrutinized business transactions involving Chinese companies in recent years, including a prolonged review of Shuanghui International’s bid to acquire Smithfield Foods in 2013. The Smithfield transaction, which CFIUS ultimately approved after a long delay, prompted concerns that political considerations, rather than national security concerns, was the driver of CFIUS decisions. The circus involving the Smithfield transaction, including Congressional hearings on whether Chinese control of pork supplies posed a threat to national security, sparked complaints of discrimination by many.

Until now, foreign companies seemed to have little recourse against decisions by CFIUS. Moving forward, the Ralls Corp decision should have the effect of eliminating political and other arbitrary considerations from CFIUS’ decision-making process. The decision is likely to stimulate Chinese investment in more U.S. industries, including hi-tech sectors that Chinese companies have previously avoided due to CFIUS concerns.

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Legislature Poised to Boost Struggling Solar Industry

Posted by on Nov 11, 2011 in Renewable Energy and Sustainability |

By: Henry T. Chou, Esq.

The New Jersey Legislature is set to introduce a bill that aims to stablize the state’s solar industry, which has been in free fall since early summer. Assemblyman Upendra Chivakula (D-Middlesex) expects to introduce a bill in the lame duck session that would halt the precipitous drop of prices for solar renewable energy certificates (SRECs), which is a major mechanism for financing photovoltaic (PV) systems in New Jersey.

In recent years, New Jersey’s SREC program was a major driver of solar projects, propelling New Jersey to the nation’s number two position for solar capacity, behind only California. However, the rush to develop solar projects has also led to an oversupply of SRECs, which has caused SRECs to lose half their value since June 2011. As a result of the SREC market crash, many domestic and foreign investors have abandoned their solar projects and/or agreements to pursue solar projects.

Chivakula’s bill proposes to increase the Renewable Energy Portfolio Standard (RPS), which is the percentage of total electricity that power companies must generate from renewable energy sources. An increase in the RPS would compel power companies to buy more SRECs, a move that would address the current oversupply and increase SREC prices to levels that will once again spur solar development.

The proposed bill has the backing many stakeholders, including the solar industry and an advisory group to the New Jersey Board of Public Utilities. Chivakula anticipates introducing the bill in mid-November 2011.

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Bill Prohibiting Municipal Regulation of Solar Panels is Vetoed by Governor Christie

Posted by on Jun 29, 2011 in Renewable Energy and Sustainability |

By: Henry T. Chou, Esq.

On June 23, 2011, Governor Christie conditionally vetoed S-2006/A-3125, which would have amended the Municipal Land Use Law (“MLUL”) to generally prohibit municipalities from regulating the installation of solar panels on residential properties and to limit the amount of fees municipalities may charge for applications pertaining to solar panel installations. The bill was business-friendly insofar it would have made it easier and cheaper for homeowners to install solar panels.

Governor Christie’s conditional veto message recommended the full preservation of a municipality’s zoning powers, while seeking to strike a balance between it and the State’s policy of promoting renewable energy sources. Specifically, the Governor recommended the removal of Section 1 of the bill, which would have restricted municipal zoning powers pertaining to solar panel installations, and proposed new language to clarify that municipalities may charge reasonable fees consistent with the MLUL and to clarify the definition of a “photovoltaic solar panel.”

By way of the conditional veto, the bill is now returned to the Legislature for consideration of the Governor’s recommendations.

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Princeton to Explore Solar Project via Power Purchase Agreement

Posted by on Mar 16, 2011 in Renewable Energy and Sustainability |

By: Michael J. Lipari, Esq.

Princeton Borough, Princeton Township and Princeton Regional Schools have contracted with the New Jersey consulting firm Gabel Associates to provide a feasibility study to explore the potential for solar installations throughout the municipalities. If all goes well, the entities will enter into a power purchase agreement (“PPA”) with a solar developer to implement the plan.

According to the Princeton Packet, the study will focus on ground and roof mounted solar systems at several locations throughout the municipalities including the Sewer Operating Committee landfill site on River Road. The current proposal provides that, “a solar developer would finance, own, design, install, commission, operate and maintain the solar facilities.” The municipalities and School District would benefit from reduced energy costs through a long-term PPA with the solar developer.

A PPA is a contract between an electricity generator/provider and a power purchaser for the purchase of electricity generated from a facility. PPAs are most commonly used in the generation and sale of solar and wind energy. These agreements typically range from 15 to 25 years, at which time the project may be renewed, modified or abandoned. The PPA is critical to a solar project because it secures a long-term revenue stream to the seller through the sale of energy to the purchaser, which is often the host of the facility. The PPA sets forth the terms of the electricity rates to be paid to the seller, which may be flat or escalate over time.

Once the seller can determine its revenue stream, it can obtain the necessary financing to move forward with construction of the infrastructure. Currently, there are federal tax credits available that will make the investment worthwhile for the seller. Qualifying tax credits obtained as a result of the Emergency Economic Stabilization Act of 2008 and the American Recovery and Reinvestment Act of 2009 can be combined with certain tax exempt financing to reduce the investment required to develop the project.

This exciting news for the Princeton community comes just one month after Princeton University announced its plan to develop a 27-acre solar installation system that could produce 8 million kilowatt-hours per year.

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Princeton University to Develop Solar Field

Posted by on Feb 4, 2011 in Renewable Energy and Sustainability |

By: Michael J. Lipari, Esq.

Renewable energy projects continue their emergence throughout New Jersey as the beneficial aspects of these projects are being realized by property owners. New Jersey is currently ranked second in the United States for solar installations largely in part to the emergence of solar fields being constructed on farms and otherwise vacant land. Recent state and federal legislative initiatives have made these types of projects economically feasible.

This week, Princeton University announced that it will be developing a solar collector field on 27-acres of land in West Windsor, New Jersey. The project is expected to be one of the largest at any U.S. college or university. The photovoltaic (“PV”) system will consist of 16,500 PV panels and should generate 8 million kilowatt-hours per year. This installment will be enough energy to meet 5.5 percent of the total annual electric needs for the University.

The system, which will be owned by Key Equipment Finance, will be partially funded with the use of grants available through the American Recovery and Reinvestment Act. Sun Power Corp. is responsible for the design and construction of the project. Princeton University will host the system and finance the lease from revenue realized through New Jersey’s Solar Renewable Energy Certificate program (“SREC”).

New Jersey’s SREC program awards managers of solar energy installations with one credit per 1,000 kilowatt hours of solar electricity generated. Princeton University will sell these credits to utility or energy companies to help those companies offset statutory requirements for renewable energy production. At the expiration of the lease term, the University plans to retire the credits and prevent the emission of approximately 3,090 metric tons of carbon dioxide per year.

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Pinelands Commission Approves Solar Farm on Former Landfill in Stafford

Posted by on Oct 22, 2010 in Renewable Energy and Sustainability |

By: Henry T. Chou, Esq.

The Pinelands Commission has approved a solar farm project on top of a closed landfill in Stafford Township. Recognizing the benefits of the solar farm and its consistency with the goals of the Pinelands Master Plan, the Commission granted a waiver from the conservation easement requiring the former landfill to be maintained as open space.

The solar farm, which will consist of 24,624 solar panels to be set in 1,026 arrays on top of the 1.6-acre capped landfill, will generate approximately six megawatts of DC power.

Like other solar farm developers, the Walters Group was attracted to New Jersey’s innovative solar-renewable energy certificate program, where energy companies generating power from non-renewable energy sources purchase certificates from producers of renewable energy to offset carbon emissions and avoid fines associated with carbon emissions.

The certificates, which are traded on the open market, currently sell for $400-$500. It is estimated that the solar farm will generate approximately 5,000-6,000 certificates per year, which means that in addition to the energy it sells, the developer can make up to an additional $3 million in certificate sales.

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