On Wednesday, June 8, Foley Hoag hosted the Energy Bar Association’s (EBA) Northeast Chapter Annual Meeting at the firm’s Boston offices. The event featured three panels, which explored the changing laws, technologies, and industry dynamics at play in the battery storage sector, Environmental, Social, and Corporate Governance (ESG), and electric transmission planning respectively.
Carol Holahan, partner at Foley Hoag and co-chair of the firm’s energy and climate practice group, gave opening remarks alongside Jason Marshall, general counsel for the New England States’ Committee on Electricity and current EBA Northeast Chapter president, and Delia Patterson, senior vice president of advocacy and communications and general counsel for the American Public Power Association and current EBA national president. Jigar Shah, director of the Loans Program Office at the U.S. Department of Energy, was the featured speaker. Jon Chesto, reporter at the Boston Globe, spoke on the business outlook for the energy sector in the Northeast. Alicia Barton, former partner and energy and climate practice co-chair at Foley Hoag and current president and CEO of Massachusetts-based clean power producer FirstLight Power, gave the keynote address. U.S. Senator Ed Markey addressed the audience with a pre-recorded message.
The first panel of the day, which concerned battery storage, comprised Liz Delaney, senior director of wholesale market development at Borrego; Robert Fares, Ph.D., energy industry analyst at the Federal Energy Regulatory Commission (FERC); Willis Geffert, associate director at NERA Economic Consulting; and Ted Wiley, co-founder, president, and COO at Form Energy. Jenna McGrath, of counsel at Paul Hastings, moderated.
As participants noted at the beginning of the panel, the battery storage sector is still in its infancy; despite significant investment and innovation in recent years, batteries still contribute just 0.01% of electricity consumed by grid end-users, a percentage which is likely to greatly increase. Panelists accordingly discussed the remarkable growth prospects for the battery storage sector, while acknowledging the serious challenges—in market design, in production, and in grid integration—that threaten to stifle that growth.
Some of the obstacles to increased battery deployment are rooted in the laws and regulations that shape electricity markets and divide authority between the federal government and the states. In order to enable the adoption of battery storage at meaningful scale, panelists said, lawmakers and regulators must definitively answer questions about the nature of batteries’ contributions to the grid, which don’t fit neatly into traditional categories like generation and transmission. (For example, when discharging at moments of high demand, do batteries peak-shave or load-shift?) Panelists emphasized that answers to these technical legal questions will determine how batteries are ultimately deployed and compensated, a key factor in creating investor incentives and confidence. In addition, panelists also discussed difficulties around interconnecting batteries to the grid, an issue explored in further detail during the later panel on electric transmission.
New England state regulators also desire legal clarity about batteries’ status, so that they can design incentive programs for battery storage effectively and confidently in order to reach their decarbonization goals. Panelists pointed out that state programs aimed at encouraging deployment of storage, like provisions of the Massachusetts SMART program, may infringe on jurisdiction claimed by FERC over transactions involving batteries in both wholesale and retail markets. The threat of federal preemption not only works to chill industry enthusiasm for such programs, but also inhibits the design of effective and durable incentives by state governments.
In addition to the regulatory and policy challenges discussed above, battery manufacturers face challenges related to the supply chain and availability of raw, and sometime rare, materials, panel participants said. Many battery technologies rely on lithium, a much-sought-after mineral which the United States produces in minimal quantities and which manufacturers must therefore import. Innovative technologies are, however, helping manufacturers to sidestep the lithium bottleneck. For example, panelist Ted Wiley explained how the Somerville, Massachusetts firm Form Energy is already deploying batteries that store power not with lithium-ion technology, but by oxidizing iron pellets. Storage technologies that rely on commonly-available materials, rather than rare minerals, may be well-positioned to scale up and meet future demand.
Environmental, Social, and Corporate Governance
The panel on ESG featured Melanie Dubin, manager of sustainable finance, sustainability and ESG services at Deloitte; Macky McCleary, director of energy, sustainability and infrastructure at Guidehouse; Shailesh Sahay, counsel at Foley Hoag; and Nora Wittstruck, senior director of ESG and sector leader at S&P Global. Serena Rwejuna, partner at White & Case LLP, moderated.
Across all industries, companies are paying increased attention to the impact that their long-term business goals and day-to-day practices have on the environment and on society. Driving this shift are both investors, expressing personal or institutional preferences, and regulators, enforcing regulations that directly restrict environmental impacts like emissions, or implementing disclosure standards that aim to make environmental impacts more transparent and more easily comprehensible to the public.
ESG panelists discussed the potential effects of the Securities and Exchange Commission’s recent proposed rule concerning climate risks. The rule would require public disclosure of greenhouse gas emissions created not only by companies themselves, but also by their upstream and downstream partners. Panelists observed that this would likely require companies to significantly ramp up their internal resources devoted to ESG accounting and to direct increased scrutiny to their supply chains and distributors. The SEC is also contemplating requiring disclosures by so-called “ESG funds,” funds which advertise themselves as engaged in environmentally-responsible investing but whose investment activities are not currently subjected to scrutiny as to their actual environmental or climate-related effects. These additional disclosures would clarify for investors which ESG firms invest in a manner that aligns with their preferences, and prevent firms from improperly claiming the ESG mantle.
Panelists emphasized that now is always the best time for firms to devote more resources and consideration to their ESG practices. The panelists noted that ESG is not a passing fad, but a growing focal point for regulation, investing, marketing, and business planning. Firms would do well to anticipate increasing interest in environmental impacts from investors and the imposition of additional regulatory requirements by regulators, and seek to become industry leaders, rather than stragglers, in institutionalizing and practicing ESG principles and procedures.
The final panel of the day concerned electric transmission, and featured Susan Bruce, a member of the energy and environmental law and renewable energy and corporate sustainability groups at McNees Wallace & Nurck LLC; William Keyser, partner at Steptoe & Johnson; the Honorable Matthew Nelson, chair of the Massachusetts Department of Public Utilities; and Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School’s Environmental and Energy Law Program. The Honorable Cheryl LaFleur, chair of the ISO-New England board of directors and former chair of FERC, moderated.
Electric transmission is an element of grid planning and development with significant consequences for generators, investors, and advocates of decarbonization. Since 2011, when FERC issued Order No. 1000, its last major rule on transmission planning and development, a number of issues related to inadequate transmission facilities have arisen in the electricity sector, including the backlog in interconnection queues; unnecessarily and unpredictably high-cost power due to limited transmission capacity; and insufficient transmission development to support the high-demand, high-renewable generation grid of tomorrow anticipated by policymakers and industry observers. In April 2022, FERC issued a Notice of Proposed Rulemaking (NOPR) that set out new and significant changes to transmission planning, including requirements that Regional Transmission Organizations (RTOs) and non-RTO transmission-owning electric utilities engage in long-term regional and interregional transmission planning, and that planning be keyed to needs driven by anticipated changes in the resource mix and in demand. Panelist Ari Peskoe summarized the contents of the NOPR and explained where and how, if implemented, they would alter existing FERC policy and regulatory practices.
While panelists disagreed as to the extent to which current federal transmission regulations as a whole are in need of reform, panelists agreed with FERC’s admission that the interconnection process is not functioning as it should, and indicated that they would welcome changes that would streamline the process. Procedural simplicity, and clarity as to how generators will be treated in the interconnection process, will reduce gaming behavior by generators trying to navigate interconnection queues and help to bring new generation assets online as quickly as possible, which itself will facilitate increased investor confidence. Panelists also observed that in order to effectuate FERC’s planning requirements, RTOs and non-RTO transmission-owning utilities will likely need to increase their staffing and simplify the modeling they use to project future demand, supply, and grid conditions as they develop transmission plans. Finally, as this NOPR is likely only one component of a set of rulemakings to be conducted by FERC concerning transmission planning, development, and cost allocation, panelists noted that it may still be too soon to see how the new federal regulatory regime will function and whether it will succeed in prompting the transmission investments that federal regulators desire.