3 Residents Challenge Climate Change Rules at Delaware’s High Court

Delaware regulators have imposed costly and unlawful climate change regulations on industry in violation of legislative directives, according to three citizen activists who took their case to the state’s highest court.

But before the Delaware Supreme Court can address the substantive questions raised in the residents’ lawsuit, it first must resolve a lower court ruling that “failed to apply the correct legal test for standing,” Richard Abbott, their lawyer, said in an interview with The Daily Signal.

The Superior Court of Delaware ruled in June that residents David T. Stevenson, R. Christian Hudson, and John A. Moore did not have legal standing to challenge the state’s participation in a regional climate change agreement.

The trial court judge “applied the wrong legal standard,” their lawyer told The Daily Signal.

The three men had argued that the agreement’s regulatory restrictions on greenhouse gas emissions would raise their electricity bills. But Judge Richard Stokes decided that they failed to demonstrate this would be the case, and therefore did not have standing.

The Regional Greenhouse Gas Initiative, or RGGI, is a multistate agreement that currently includes Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont.

State government officials who have joined the initiative argue that greenhouse gases such as carbon dioxide are responsible for dangerous levels of climate change, also known as global warming.

The gases enter the atmosphere during the industrial burning of fossil fuels such as coal, natural gas, and oil. However, a growing number of scientists question theories that link human activity to significant climate change, and instead point to natural forces.

States that are parties to the agreement must impose a “cap and trade” arrangement in which government officials set an upper limit on carbon dioxide emissions from fossil fuel plants. Companies subject to the caps may trade “allowances,” however.

Delaware became part of RGGI when it entered a memorandum of understanding with other states in December 2005. The memorandum of understanding provided the framework for cap-and-trade regulations in each participating state, built around a “model rule.”

Since there will be fewer carbon dioxide permits available for electricity generators to purchase under the regulations, the three plaintiffs argue, the price of the permits will rise in response to the realities of supply and demand, and that these higher costs will be passed along to consumers.

‘Probable Injury’

At the heart of the case is the authority of Delaware’s Department of Natural Resources and Environmental Control. Gov. John Carney, a Democrat who took office in 2017, supports the initiative.

When the lawsuit initially was filed in December 2013, the agency’s regulations had not gone into effect. For Delaware residents to have standing to sue, they needed to show there was a “probable injury” and not an “actual injury,” Abbott, the plaintiffs’ attorney, said in the phone interview.

Abbott argued that the trial court judge, Stokes, should have considered only facts that were relevant when the suit was filed, instead of relying on “postfiling facts.”

The precedent in Delaware, and in other states with cases involving energy consumers who dispute government policies, says that standing must be “broadly and liberally applied,” he told The Daily Signal.

“When making this determination about standing, it’s not supposed to be a stringent straitjacket like this judge wants to make it out to be,” Abbott said, adding:

One reason for the confusion, I think, is that it took more than four years for the court to dispose of the case, and these cases are typically done in a 12- to 18-month time period.

But it’s difficult because DNREC [Department of Natural Resources and Environmental Control] filed all kind of frivolous motions at the beginning of the case, which they always do because the government gets away with filing frivolous motions without being held accountable.

The Superior Court judge identified three methods the plaintiffs could use to establish standing: produce electric bills showing rate increases that can be attributed directly to the regulations; show proof that energy companies pursued rate increases in response to the regulations; or get “expert witness testimony” establishing a connection between the regulations and increased energy costs.

“You can’t show your electricity bills went up at the beginning of a case before the regulations even took effect, and the electricity providers can’t apply for a rate increase before they’ve had an increase in costs,” Abbott said. “This is impossible. Once again, the correct test for standing is what’s happening at the time of filing.”

Challenging Changes to the Cap

In November 2013, the Department of Natural Resources and Environmental Control altered the “size and structure” of the cap on carbon dioxide emissions. The cap became substantially lower and more restrictive than what the Delaware General Assembly approved through the memorandum of understanding with other states, the three plaintiffs say in their brief to the Delaware Supreme Court.

The three residents’ brief says the memo of understanding doesn’t permit “any changes” related to caps on carbon dioxide, requiring the agreement to be “formally amended by all signatory states” before adoption of any regulations reducing the caps from 2014 through 2018.

The caps on CO2 established in the agreement “are mandatory, static, and not expressly permitted to be changed by DNREC’s unilateral regulatory action,” their brief argues.

Delaware regulators routinely file “frivolous motions” and “play the game about standing,” Abbott said, because they want to avoid answering substantive questions about their modifications to the caps on carbon emissions without the approval of elected officials.

Officials at the Department of Natural Resources and Environmental Control “know that if the case ever gets to the merits, they are dead,” Abbott said, adding:

The state legislature said you can adopt regulations that are consistent with the MOU [memorandum of understanding], but they essentially cut the cap in half. There is no question that the regulations are illegal and inconsistent with what was authorized by statute.

I’ve litigated many cases against DNREC and have won every single case because they just ignore the law. This has gone on for decades. There is an institutional problem with this agency, where they have just gotten into the habit of doing whatever they feel like.

The Daily Signal sought comment from the agency’s public affairs department, but officials had not responded by publication time.

Virginia Set to Join Climate Pact

As The Daily Signal previously reported, Virginia Gov. Ralph Northam, a Democrat, has advanced his own regulatory proposal to make his state part of the Regional Greenhouse Gas Initiative.

The Virginia proposal, which could go into effect in December, has attracted criticism from lawmakers, policy analysts, and citizen activists who say the state should not enter the climate pact without the approval of the Virginia General Assembly.

Related: Virginia Governor Set to Bypass Legislature to Join State-Based Climate Agreement

“Gov. Northam is sadly encumbering the state of Virginia with a regulatory monster that will have no impact on the climate even if you believed every claim made by Al Gore or the United Nations,” Marc Morano, a prominent climate change skeptic, told The Daily Signal in an email. “RGGI will do nothing but saddle Virginia with meaningless climate change inspired regulations on Virginia industry.”

Morano, executive editor and chief correspondent of the Climate Depot website and author of the bestseller “The Politically Incorrect Guide to Climate Change,” has been critical of state policymakers who implement climate change regulations without popular support.

“RGGI will make states like Delaware and Virginia less competitive with other states wise enough to avoid this virtue-signaling nonsense,” Morano said. “If Gov. Northam bypasses the legislature to impose these economically strangling regulations, it will prove once again that the governor lacks the support of the people and the legislature to impose this monstrosity on the state of Virginia.”

“The same is true in Delaware, where stringent regulations are imposed without legislative approval,” he said.

New Jersey also is set to join the climate pact. Gov. Philip Murphy, a Democrat, issued an executive order in January reversing a decision by his Republican predecessor, Chris Christie, to keep New Jersey out of RGGI.

California has its own cap-and-trade program covering power plants, factories, and oil refineries.

In Washington state, voters were set to vote Tuesday on a ballot question,Initiative 1631, which would impose the nation’s first tax on carbon dioxide emissions. Gov. Jay Inslee, a Democrat, long has been a proponent of the carbon tax and cap-and-trade proposals.

Report by Kevin Mooney. Originally published at The Daily Signal.

Green Energy Mandates Could Double Your Electric Bills

Business and homeowner utility costs could double in many states if environmental groups succeed in enacting draconian solar and wind power mandates in states across the country.

Yet these mandates will have almost no impact in cleaning the air or reducing greenhouse gas emissions.

In Arizona and Nevada, voters will decide on Nov. 6 whether to adopt renewable mandates requiring local utilities to buy at least 50 percent of their electric power from green energy—mostly, wind and solar power.

At least a dozen other states are set to ramp up their mandatory standards (also called “renewable portfolio standards”) in 2019. California is set to move to 60 percent legally mandated renewable energy by 2030 and 100 percent by 2045.

These mandates come with a steep price to American families and businesses. Residents in states with existing high mandates must often pay between 50 percent and 100 percent more on their electric bills than residents of states where utilities are free to rely on the market and purchase electric power from the lowest-cost sources—often coal, natural gas, or nuclear power.

Because lower-income households spend five to 10 times more as a share of their incomes on energy than do high-income households, high renewable portfolio standards are a regressive—and unduly burdensome—tax on the poor.

Ironically, these green initiatives are usually sponsored by billionaire liberal funders, such as investor Tom Steyer of California.

While the natural growth of renewable energy sources is a positive development, mandates are an economically disastrous method that crowds out the market for affordable electricity.

Today, the United States produces more than 75 percent of its electricity from natural gas, coal, and nuclear power. Less than 10 percent comes from solar and wind power.

Given the massive federal subsidies of more than $150 billion between 2009 and 2014 to the wind and solar industries, that is an amazingly small percentage.

Comparing the states with the most stringent renewable portfolio standards (25 percent or more) with the states with low ones (10 percent or less), and then with states with none, reveals a pattern.

States with high renewable portfolio standards have electric power rates that are about 27 percent per kilowatt hour more expensive than states with low ones, and about 50 percent higher than states without them.

The Heartland Institute estimates costs could total an extra $1,000 per year per household, compared with current electricity costs, at the proposed rate increase in Arizona.

This could mean tens of thousands of dollars of higher costs for a business, depending on energy usage. For manufacturers, it could mean $100,000 or more of extra costs.

Lower-income families would be most adversely affected by stricter green energy requirements. This is because poorer households typically pay about seven times more as a share of their income in energy costs than do wealthier families.

Middle-class families pay at least twice as high a share of their income in energy bills than do the rich.

One of the critical flaws of renewable energy requirements is that they almost all squeeze out two of the most dominant and cleanest forms of energy used across the country—natural gas and nuclear power.

But from an environmental and clean air standpoint, and for the purposes of reducing greenhouse gases that may be linked to climate change, this distinction makes no sense.

It appears simply to be a multibillion-dollar corporate welfare giveaway to the solar and wind industries at the expense of ratepayers.

Even coal that is burned in Arizona, Nevada, and other states is much cleanertoday than it was 20 or 30 years ago. All of this is evidenced by the dramatic improvement in air quality nationally over the past 35 years.

Only a small percentage of this clean air progress is due to renewable energy, because over most of this period, wind and solar power have been fairly inconsequential sources of U.S. energy production.

Since 1980, total emissions of the six principal air pollutants have fallen by 67 percent.

To put that in perspective: That reduction occurred amid a dramatic expansion of the U.S. economy. Gross domestic product increased by 165 percent, vehicle miles traveled increased 110 percent, the U.S. population grew by 44 percent, and energy consumption increased by 25 percent.

For these reasons, the “clean energy” initiative is best thought of as a regressive tax imposed on those who can least afford it.

Again, this “tax” could cost middle-income and lower-income American families about $1,000 more per year in utility prices. These mandates could also negatively affect business productivity and move jobs to areas with more energy choices.

Americans deserve affordable, abundant, and reliable energy. Renewable energy mandates are a “green tax” on homeowners and small businesses that can least afford it.

Commentary by Stephen Moore and Andy Vanderplas. Originally published at The Daily Signal.

Ratepayers Get Cold Shoulder as Green Energy Gets ‘Preferential Treatment’ in Delaware

Delaware residents are the victims of deceptive business practices associated with a green energy scheme resulting from elected officials’ sweetheart deal with a fuel cell company, policy analysts and academics argue.

Bloom Energy had pledged to create 900 full-time jobs in Delaware by Sept. 30, 2016, and to continue employing these workers for at least seven years.

But a filing with the U.S. Securities and Exchange Commission from Bloom Energy’s initial public offering in June shows that as of March, it had only 277 full-time employees.

“Bloom has been able to milk Delaware taxpayers and ratepayers for massive subsidies, gain preferential treatment on multiple fronts, and avoid rules that are rigorously applied to other industries,” energy researcher Paul Driessen said during an event Friday at The Heritage Foundation’s headquarters on Capitol Hill.

The Delaware General Assembly extended financial inducements to Bloom Energy through legislation in 2012, a major topic during the panel discussion at Heritage, as was what Driessen and other speakers called preferential treatment from state regulators and other government officials.

The Sunnyvale, California-based company manufactures solid oxide fuel cells that use an electrochemical reaction to transform natural gas into electricity.

Bloom Energy traces its roots to 2002, when a Silicon Valley venture firm, Kleiner Perkins Caufield and Byers, invested in the green energy company. (That firm is now known as Kleiner Perkins.)

In April 2012, Bloom Energy opened a manufacturing facility in Newark, Delaware, on a site owned by the University of Delaware that previously was occupied by a Chrysler assembly plant.

David Legates, a professor of climatology at the University of Delaware, told the Heritage audience that Bloom Energy isn’t a genuine green energy company because its fuel cells use fossil fuels and release more carbon dioxide than traditional natural gas plants.

Bloom Energy’s fuel cells also run on methane gas, which produces hazardous waste, he said.

Even so, the company qualifies for renewable energy credits under Delaware’sRenewable Energy Portfolio Standards Act, which calls on utilities to draw 25 percent of their energy from renewable sources by 2025. The company also is exempt from the state’s hazardous waste rules.

“Bloom Energy asserts that nothing on either side of the chemical equation is hazardous material, which technically is true,” Legates said. “However, no clean commercial source of methane exists. Thus, it contains many hazardous products that must be removed from the methane before it can be added to the fuel cell to avoid contamination … These compounds must be removed in sulfur canisters.”

A Sweetheart Deal

Legates’ slide presentation quoted Bloom Energy’s permit application as saying its manufacturing process “neither uses nor produces hazardous waste.”

The statement is misleading because it “ignores the presence of hazardous waste in the methane source,” he said.

But because Delaware officials accepted the company’s description of its manufacturing process, state rules governing hazardous waste aren’t applicable, he said.

In 2012 legislation amending Delaware’s Renewable Energy Portfolio Standards Act to allow fuel cells to be used as a renewable energy source, several provisions worked to the disadvantage of state residents, Legates said.

The law calls for a mandated surcharge, described as a tariff, on the bills of every Delmarva Power ratepayer that state lawmakers guaranteed to Bloom Energy for 21  years. The law also includes a clause that says Bloom Energy is entitled to all of the 21-year tariff if the law ever is repealed.

Legates described the arrangement between the state government and Bloom Energy as a sweetheart deal.

Delaware government officials charge Bloom Energy annual rent of $1 for its Newark manufacturing plant, and pledged to spend more than $16 million to upgrade the facility, he said.

“To date, Delmarva Power ratepayers have paid Bloom Energy approximately $200 million, and the total take by Bloom Energy from the state has been $300 million,” Legates said. “Moreover, the energy produced by Bloom Energy was more than three times as expensive [as traditional natural gas sources] in 2012, and now estimates place [it] as much as six times more expensive than traditional natural gas sources.”

Newark-based Delmarva Power, a subsidiary of Exelon Corp., provides electricity and natural gas to customers on portions of the Delmarva Peninsula in Delaware and Maryland.

The Daily Signal sought comment from Bloom Energy, but had not received a response by publication time.

Citizen Activist Denied Standing

John Nichols, a retired financial planner from Middletown, Delaware, who filed two lawsuits challenging Bloom Energy’s business practices and government policies that facilitate those practices, also spoke during the Heritage event.

In June 2012, Nichols sued then-Gov. Jack Markell, a Democrat, and members of the state Public Service Commission. Nichols argued that the state’s deal with Bloom Energy is unconstitutional.

In January 2013, Nichols appealed a decision by the state Coastal Zone Industrial Control Board that he didn’t have standing to challenge the permit issued to Bloom Energy by the state Department of Natural Resources and Environmental Control.

Nichols argued that the permit violated Delaware’s Coastal Zone Act, which regulates industrial activity in specific areas.

The courts ruled that he did not have standing in either his state or federal lawsuit.

“To violate both the spirit and intent of the Delaware Coastal Act took failure on a massive scale,” Nichols said during the Heritage event. “Ironically, these failures may serve a valuable public purpose.”

That’s because government agencies are responsible for  consequences to ratepayers and taxpayers that are beginning to gain attention, he said.

“The notion that all these failures are a coincidence strains credulity to the breaking point,” Nichols said. “These failures demand accountability for Delawareans, Delmarva ratepayers, taxpayers, Bloom investors, and everyone who values the beauty of the Delaware coastline.”

‘Duped Investors’

Although the state’s favoritism to Bloom Energy deserves further exposure and investigation, the company also benefits from “deep state” relationships at the national level with government and corporate figures, chemical engineer Lindsay Leveen told the Heritage audience by telephone.

Leveen, who is a consultant to corporations on energy deregulation and writes for the website Green Explored, reviewed the history of Bloom Energy and what he called its “collusion” with the internet company Google.

John Doerr, chairman of Kleiner Perkins in 1999, invested in Google and sits on the tech giant’s board. Doerr helped to organize financial support for Bloom Energy on behalf of Kleiner Perkins in 2002, Leveen said.

In July 2008, Google became Bloom Energy’s first commercial customer. Three months earlier, the American Society of Mechanical Engineers had released a report funded by the Department of Energy concluding that Bloom Energy “had by far the worst fuel cell on market,” Leveen said in his own slide presentation.

Bloom Energy installed four “Bloom Boxes”—devices used to convert natural gas to electricity—at Google headquarters, but only one of them had to operate at limited capacity for 30 days to be deemed a commercial success, Leveen said.

“The performance test at Google simply duped investors,” he said. “We also know from the S-1 [the Securities and Exchange Commission filing] that many of the Bloom Boxes failed and were decommissioned, and that Bloom took a major financial loss on the decommissioning of those boxes.”

Leveen called for executive branch agencies to investigate Bloom Energy, including the Federal Trade Commission, the Securities and Exchange Commission, and the Environmental Protection Agency.

Say the Magic Words, Answer No Questions

Despite financial setbacks, Bloom Energy remains afloat because it received government subsidies, tax breaks, and other favors from high-ranking government officials, Driessen, a senior fellow with the Washington-based Committee for a Constructive Tomorrow, said during his presentation. CFACT advocates free market solutions in energy policy.

“Bloom has been able to milk Delaware taxpayers and ratepayers for massive subsidies, gain preferential treatment on multiple fronts, and avoid rules that are rigorously applied to other industries,” Driessen said, adding:

The Delaware state legislature has allowed Bloom to operate under a unique definition of renewable energy that lets it qualify for special treatment and subsidies by claiming that its equipment could run on biofuels like methane from cows or landfills even if they never have done so, and even if they’ve always run solely on natural gas and even if they generate hazardous waste in the process.

Bloom Energy’s federal investment tax credit was eliminated in 2016, but Senate Minority Leader Chuck Schumer, D-N.Y., worked to restore the tax credit and make it retroactive to the date it ended, Driessen said. Sens. Tom Carper, D-Del., and Richard Blumenthal, D-Conn., helped Schumer revive the tax credit, he said.

Driessen cited figures showing state and federal officials have given fuel cell makers $3 billion in subsidies over the past decade, with $1.5 billion going to Bloom Energy. Even with this assistance, fuel cell companies lost $6 billion and Bloom lost $2.4 billion, he said.

“Bloom clearly appears to have made questionable statements and outright misrepresentations of material fact to legislatures, regulators, investors, and journalists,” he said, adding:

You might ask how do they get away with this? Actually, the formula for success is pretty simple. Invoke the magical, infinitely malleable terms climate change, renewable energy, sustainability, and environmental protection, and you can pretty much deceive, exaggerate, fabricate, and manipulate all you want. Few difficult questions will be raised, little transparency will be required, and no accountability demanded.

Report by Kevin Mooney. Originally published at The Daily Signal.

Is Green Energy Competitive?

The declining cost of solar panels and the widespread adoption of rooftop solar in California lead to many cocktail party discussions about the competitiveness of green energy. While at first glance it may seem that solar power and other renewable energy sources are able to compete with conventional resources, a closer examination of the characteristics and costs of electricity systems demonstrates that current renewable technologies are not economically competitive.

The fixed costs of electricity systems, the capital costs of transmission and distribution systems, are large. Actual electricity tariffs do not typically recover fixed costs explicitly and separately from electricity use. Instead they recover them through use charges per kWh. If electricity pricing were more efficient, customers would pay a large fee for the use of the transmission and distribution systems disconnected from the amount of electricity they use and would be charged a separate variable fee based on actual consumption. (See this article by Ahmad Faruqui and Mariko Geronimo Aydin in the Fall 2017 issue of Regulation for a more thorough discussion of electricity pricing.) Thus, current bills do not inform consumers about how high the fixed costs of the system really are.

Understanding the significance and recovery of fixed costs is important because of the manner through which customers with solar panels on their roof are reimbursed for the power they generate.  Solar production in many states, especially California, is reimbursed at full retail rates. But when a household produces solar power and reduces the use of system-generated electricity, the system saves only the marginal costs of the power that it did not have to produce, which is usually much less than the retail rate. None of the large fixed costs are saved.

In California, because of its tiered retail rate structure, the discrepancy between the retail rate and the amount the system saves because of rooftop solar production is large. The marginal cost of power generation is about 6-10 cents per kWh, but customers are reimbursed at full retail rates (many at over 30 cents per kWh) rather than the lower marginal costs of system generation. Reimbursement at full retail rates shifts the fixed costs of the electric system from solar panel households to other users. Without the excessive payments, decentralized solar would not be competitive.

Other renewable generation sources would appear to be competitive with natural gas generation. According to estimates of the total costs of various generation technologies over their operating lifetime, large-scale centralized solar generation in the deserts of the American southwest and large-scale onshore wind generation both have costs that are competitive with new natural gas generation. (Offshore wind is much more costly. See my blog on Cape Wind, a failed plan to build a wind farm off the coast of Massachusetts.)

However, even if the lifetime average costs of wind and solar are the same as coal or natural gas, the equivalence needs to be qualified. Different electricity generation technologies are very imperfect substitutes. The marginal value of electricity varies across time because demand varies by time of day and space because of transmission constraints. For example, wind power supply is greatest during winter nights, when demand is low, and lowest during summer when demand is highest. Wind is also most plentiful far from where people live and consume electricity, meaning it incurs additional costs to transport the electricity to people. At least solar output is large during the summer afternoon peak demand period. But both solar and wind are not dispatchable. That is, their output cannot be made to vary up or down.

Until cost-competitive green energy that is dispatchable is available, renewable sources of electricity require backup conventional generation. Because the sun eventually sets, and the wind stops blowing, natural gas generation whose output can be varied (sometimes quickly) must be available as backup. The fixed and variable costs of the backup must be paid by someone. These hidden costs need to be considered in any calculation of “cost competitiveness.”

Future technological breakthroughs, such as more efficient batteries to store electricity and more cost effective dispatchable solar power sources, may make green energy a better substitute for conventional generators. But for the time being, without governments putting their thumbs on the scale, green energy is not competitive. 

Written with research assistance from David Kemp.

Article by Peter Van Doren. Originally published at Cato At Liberty.

So-called clean energy is fueled by rape, arson and child labor

A new report reveals the dirty truth about so-called “clean energy.”

The toxic heavy metals used to build electric car batteries are mined by child slave labor, who are often raped and die agonizing early deaths.

The Daily Mail reports:

Dorsen, just eight, is one of 40,000 children working daily in the mines of the Democratic Republic of Congo (DRC). The terrible price they will pay for our clean air is ruined health and a likely early death.

Almost every big motor manufacturer striving to produce millions of electric vehicles buys its cobalt from the impoverished central African state. It is the world’s biggest producer, with 60 per cent of the planet’s reserves.

The cobalt is mined by unregulated labour and transported to Asia where battery manufacturers use it to make their products lighter, longer-lasting and rechargeable.

The planned switch to clean energy vehicles has led to an extraordinary surge in demand. While a smartphone battery uses no more than 10 grams of refined cobalt, an electric car needs 15kg (33lb)…

…Cobalt is such a health hazard that it has a respiratory disease named after it – cobalt lung, a form of pneumonia which causes coughing and leads to permanent incapacity and even death.

Even simply eating vegetables grown in local soil can cause vomiting and diarrhoea, thyroid damage and fatal lung diseases, while birds and fish cannot survive in the area.

No one knows quite how many children have died mining cobalt in the Katanga region in the south-east of the country. The UN estimates 80 a year, but many more deaths go unregistered, with the bodies buried in the rubble of collapsed tunnels. Others survive but with chronic diseases which destroy their young lives. Girls as young as ten in the mines are subjected to sexual attacks and many become pregnant.

And, as The New York Times once reported:

According to the company’s proposal to join a United Nations clean-air program, the settlers living in this area left in a “peaceful” and “voluntary” manner.

People here remember it quite differently.

“I heard people being beaten, so I ran outside,” said Emmanuel Cyicyima, 33. “The houses were being burnt down.”

Other villagers described gun-toting soldiers and an 8-year-old child burning to death when his home was set ablaze by security officers.

“They said if we hesitated they would shoot us,” said William Bakeshisha, adding that he hid in his coffee plantation, watching his house burn down. “Smoke and fire.”…

…the government and the company said the settlers were illegal and evicted for a good cause: to protect the environment and help fight global warming.

The case twists around an emerging multibillion-dollar market trading carbon-credits under the Kyoto Protocol, which contains mechanisms for outsourcing environmental protection to developing nations.

The company involved, New Forests Company, grows forests in African countries with the purpose of selling credits from the carbon-dioxide its trees soak up to polluters abroad.

Who will save the Earth from environmentalists?

US solar inefficiency means prices are about to rise

By Tom Miles

GENEVA (Reuters) – The United States has notified the other 163 members of the World Trade Organization that it is considering putting emergency “safeguard” tariffs on imported solar cells, according to a WTO filing published on Monday.

The move raises the stakes in a global battle to dominate the solar power industry, which has grown explosively in the past five years. As production has increased, prices have tumbled, favoring producers who can take advantage of economies of scale.

The United States, China and India are vying to be the market leader, and are looking out for any perceived breach of the international trade rules by their rivals.

Last September, the WTO ruled that India was illegally discriminating against U.S. solar exports, while India launched its own WTO complaint about solar subsidies in eight U.S. states.

The United States’ ability to attract renewable energy investment has been tarnished by the shift in energy policy under U.S. President Donald Trump, putting China and India on top, a report by British accountancy firm Ernst & Young said earlier this month.

The U.S. decision to consider safeguard tariffs follows a petition to the U.S. International Trade Commission (ITC) by Suniva, Inc, the filing said.

Under WTO rules, such temporary tariffs may be used to shield an industry from a sudden, unforeseen and damaging surge in imports. They can be challenged by other WTO members.

The ITC will decide by Sept. 22 whether the U.S. industry has suffered “serious injury”, and if that is the case it will submit its report to Trump by Nov. 13, the filing said.

Suniva’s petition said the volume of imports rose by 51.6 percent between 2012 and 2016, while the value of those imports grew by 62.8 percent from $5.1 billion to $8.3 billion.

“The petition alleges that increasing imports have taken market share from domestic producers and have led to bankruptcies, plant shutdowns, layoffs, and a severe deterioration of the financial performance of the domestic industry,” the U.S. filing said.

Suniva itself filed for Chapter 11 bankruptcy on April 17.

While imports have risen, U.S. producers have seen business shrivel, with 1,200 manufacturing jobs lost and a 27 percent wage decline in the four years to 2016. U.S. solar cell plants went from running at 81.7 percent of capacity in 2014 to 28.9 percent in 2016, the filing said.

“Data in the petition also indicates that (U.S. producers’)domestic market share fell from 21.0 percent in 2012 to 11.0 percent in 2016, despite a $4 billion growth of the U.S. market over the same period.”

(Reporting by Tom Miles, editing by Larry King and Jane Merriman)

US taxpayers may lose $890 million in Chilean ‘green energy’ debacle

By Gram Slattery

SANTIAGO (Reuters) – The U.S. government is auditing a foreign aid program that loaned almost $1 billion to renewable energy projects in Chile – including solar farms in such deep financial trouble that the loans may never be fully repaid, according to people familiar with the matter.

The Office of Inspector General for the U.S. Agency for International Development (USAID OIG) is examining approximately $890 million of loans approved by the Overseas Private Investment Corporation (OPIC), it confirmed in an emailed statement after inquiries by Reuters.

The audit, which began in 2016 and has not been previously reported, is centered on OPIC’s decision to fund five Chilean solar farms and a hydroelectric project in 2013 and 2014.

OPIC, which aims to advance U.S. interests by lending to overseas business ventures, has come under fire from critics who say private banks are best suited to make investment decisions and that it places too much emphasis on renewable energy. U.S. President Donald Trump proposed cutting funding for any new OPIC projects in his 2018 budget outline released last week.

If OPIC’s funding is cut, it will be due in part to questions about investments such as its loans to the Chilean solar projects. At least three of its five solar projects have started restructuring their debt, according to two people familiar with the projects’ finances. They said OPIC’s losses on the solar deals are likely to exceed $160 million.

OPIC in a statement said it was confident it would recover the loans over the coming decades, but acknowledged its original timeline for repayments had changed. The agency, which emphasized that most of its worldwide projects are on firm financial footing, added that it would assess the OIG’s recommendations once the audit is complete.

Such audits of specific OPIC investments are relatively rare – the last was issued in 2015 – and can stem from a number of considerations such as “the level of U.S. funding involved” and “reported concerns over the management or performance of a program,” the OIG said.

The Chile audit, which will result in a public report, will examine “the factors OPIC used to assess and approve its energy projects in Chile,” among several other issues, the OIG said. It expects to finish the audit later this year.

“Development banks get the ball rolling in the industry,” Carlos St. James, senior renewable energy advisor at Wood Group, said of OPIC’s investments in Chile. “Unfortunately, they bet on the wrong kind of projects.”

A BIG BET

In 2013 and 2014, according to public OPIC reports, the agency loaned about $2.5 billion to 32 projects throughout Latin America, with over a third of those funds going to Chilean energy projects.

That included loans to five solar farms, four of which were constructed within 70 miles (113 km) of one another in the Atacama Desert. Three of those, known as Salvador, Luz del Norte and San Andres, are now facing severe financial issues, according to interviews with eight people involved in the loans and internal documents viewed by Reuters.

OPIC approved $449 million in loans to the projects despite their reliance on an unusual income structure, one that had never been tried on such a large scale. Instead of contracting to provide power to a third party at a fixed price, the typical arrangement, the projects inject at least half their power into the public grid at the going market rate, which changes hourly.

While several commercial banks examined financing the projects, according to two sources, they largely deemed the so-called merchant pricing scheme too risky.

But OPIC’s internal analysts considered the merchant market a manageable hazard, according to three internal reports from 2013 and 2014 obtained by Reuters, as well as two people involved in the projects.

OPIC expected local power prices of over $100 per megawatt-hour, the people said, a rate that would be more than twice average U.S. power prices. OPIC declined to comment on their expectations.

That view has proven too optimistic. By the middle of 2015, falling demand from nearby mines and slow construction of transmission lines, among other factors, began to severely depress prices. (For a graphic see http://tmsnrt.rs/2rldTim)

When OPIC’s solar projects, along with several others, began producing electricity, they further depressed prices by flooding the local market with power. This spring, prices have regularly touched zero during daylight hours, according to grid data.

OPIC said it expected power prices to rise in the coming years and that the loans were structured to ensure solvency in the long term.

But most analysts are forecasting prices well below the original assumptions made by OPIC. In a November filing, Etrion Corp <ETRN.ST>, a Swiss company that owns the Salvador solar plant, said it was expecting long-term power prices of $38 per megawatt-hour.

Etrion also said in its fourth quarter results that the value of Salvador’s “fixed assets pledged as collateral” to OPIC had almost halved to $87.9 million in 2016 from $166.2 million in 2015. It added that it has reached a restructuring agreement with OPIC, delaying all repayments for a year and leaving open the possibility of further delays.

Etrion Chief Executive Marco Northland did not respond to questions about loan repayments and the audit, but said he was confident market conditions would improve. The Luz del Norte project, owned by First Solar Inc. <FSLR.O>, and the San Andres project, now-owned by private equity firm Ameris Capital, are also being restructured, according to two sources with knowledge of the process.

Javier Contreras, the CEO of Ameris Capital, declined to comment on the audit, but said if both parties remained committed to the projects, the loans would likely be repaid in full. First Solar declined to comment.

Two sources with direct knowledge of the projects’ financing said OPIC would likely need to forgive 40 to 60 percent of the loans given to the three solar projects. That would result in OPIC forfeiting roughly $160 million to $240 million.

The other OPIC projects being audited in Chile are the Maria Elena solar park, constructed by SunEdison Inc <SUNEQ.PK>, and the Amanecer solar park owned by Terraform Power Inc <TERP.O>. The OIG is also auditing the Alto Maipo hydroelectric project controlled by AES Gener <ASG.SN>. In a statement, AES said the “auditors had the opportunity to see the physical works, access to documentary material and elements that, in the opinion of Alto Maipo, demonstrate a positive balance for the project’s implementation.” Terraform Power declined to comment. Now-bankrupt SunEdison did not respond to requests for comment.

(Reporting by Gram Slattery; Editing by Christian Plumb and Paul Thomasch)