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Alternative Uses of Highway Right-of-Way

4 Observations and Findings

Several state transportation agencies are currently working to accommodate renewable energy technologies and alternative fuel facilities in highway ROW. The project team held a series of telephone interviews with staff from California, Ohio, Oregon, Massachusetts, and North Carolina DOTs and their partner organizations to learn more about the current state of the practice and discuss the challenges faced and lessons learned in doing so. The following section offers a summary of these states' experiences, focusing on their valuable insights into the issues that may arise and the topics that need to be considered when designing, developing, and implementing highway renewable energy and alternative fuels projects. The findings presented below are based on a synthesis and analysis of insights collected during the interviews and peer exchange convened March 30-31, 2011. Complete case studies are included in Appendix C.

A Supportive Institutional Environment is Critical
The approach to developing renewable energy technology and alternative fuel facility projects in highway ROW will differ from state to state based on the statutory, geographic, climatic, cultural, and political contexts. A supportive institutional environment is critical for the success of renewable energy projects in the ROW. Many of the projects analyzed in the case studies are located in states that have strong renewable energy generation and GHG emission reduction goals.54 In the case study examples, state and state agency leadership were receptive to pursuing renewable energy projects in the ROW as a strategy to meeting the established target and goals.

However, even in agencies that are committed to generating renewable energy and reducing its carbon emissions, securing internal leadership support for these projects typically required a great deal of persistence from a project champion. Renewable energy projects are not typical to the DOTs' day-to-day activities; and over the course of the project, challenges and potential obstacles will inevitably arise. In the cases reviewed, a committed project champion was vital in working with the parties involved to overcome these potential barriers and keep the project moving forward.

Siting Concerns and Requirements for Renewable Energy Projects in Highway ROW are a Principal Issue
Transportation agencies must provide safe and efficient transportation systems for the public; any project in the ROW must not compromise a transportation agency's ability to meet this mission. As such, when siting renewable energy projects, project proponents must adequately address specific transportation issues and concerns, primarily safety, as well as reliability, durability, security, and avoidance of traffic flow disruptions.

Criteria that the DOTs and project partners have used to site solar and wind power projects include:

Producing biocrops in the highway ROW appears to raise fewer safety issues for transportation agencies as compared to solar and wind projects. Safety issues associated with growing biocrops in the ROW are generally the same as they would be for managing existing roadside vegetation. State DOTs would still need to locate areas of biocrop production in ways that minimize potential safety issues involved with harvesting the crops. NCDOT, for example, planted crops 10 feet from the road and included a grass buffer to further separate the crops from the roadway. By planting the crops at that distance from the road, it is not necessary for NCDOT to close a travel lane for a mobile operation of equipment when harvesting the biocrops.

Criteria that DOTs have used to assessing locations for bioenergy projects include:

Projects Can Be Implemented Through a Variety of Public-Private Partnership Models
Although DOTs can appropriate their own funds for developing alternative energy resources within the ROW, the availability of Federal tax credits and potential public-private partnerships can help to minimize capital and operating costs. Each of the renewable energy projects that the project team examined utilized a different business model, which, in turn, influenced the permitting process and contracting mechanism involved.

Solar and Wind Business Models
Developing a "business model" requires innovation and will likely be unique to each project. The four business models used to date for solar and wind energy projects are:

In the first model, the DOT allows a utility or private developer to install and operate a renewable energy facility in the ROW (through a utility permit, airspace lease, or special use permit); and the DOT purchases the electricity produced by the system. This business model involves two contractual agreements, a lease or license agreement, which allows the third-party developer to site the renewable energy facility on DOT land, and a Power Purchase Agreement (PPA). A PPA is a long-term contract between an energy provider and a customer (in this case a DOT) to purchase the renewable energy for a fixed price over the length of the agreement. Because the PPA clearly defines the revenue stream over the life of the contract, typically 20 to 25 years, it is a central document in helping the PPA provider secure financing for its project. Investors front the capital development costs for the system in exchange for state and/or Federal tax credits or other renewable energy development incentives, and the fixed-term power purchase contract with the customer. This model allows the investor to recoup costs along with a modest rate of return over the life of the tax credits (typically five to six years), and further provides a revenue stream from the energy for the project owner over the life of the project. ODOT's Solar Highway Demonstration Project followed this cost-neutral model; ODOT signed a solar license agreement (SLA) with SunWay 1, LLC to install, maintain, and operate a solar PV system and a PPA with the company to purchase the electrical energy generated by the PV system. Both contracts are for 20 years with options to renew for up to 35 years.

In other cases, DOTs might choose not to purchase the electricity that the renewable energy project generates. Instead, the public utility partner or another public agency could use the electricity generated. When the DOT is not using the electricity, the agency may utilize an airspace lease or a special use permit to permit the project. In this model, the DOT leases the site to the third-party and receives rent but would not enter into a PPA. MassDOT's proposed solar and wind power examples and Caltrans' proposed solar projects are each following this business model.

In a third business model being explored, the DOT could acquire the RECs associated with the renewable energy generated, but not the electricity. When a renewable energy facility operates, it creates two products: the electricity that is delivered into the grid and an REC, which represents the environmental attributes of the power produced. One REC is equivalent to 1 MW hour of electricity generated. The renewable electricity and the REC can be "unbundled" and sold separately. The REC product conveys the attributes and benefits of the renewable electricity, not the electricity itself; and the electricity that is unbundled from the REC is no longer considered renewable. The user of the renewable energy system's electrical output cannot make the claim that it is using renewable electricity unless the user also holds the RECs associated with the electricity.58,59

There are two different market types in which RECs are purchased and sold: compliance and voluntary markets. Compliance markets are created when a state passes a Renewable Portfolio Standard (RPS) requiring that retail power suppliers obtain a percentage of the electricity it sells from renewable sources. Some states permit compliance with the RPS, in whole or in part, through the purchase of RECs. Voluntary markets allow public and private entities to purchase RECs to support renewable energy production. The price of an REC is typically higher on the compliance market than on the voluntary market. ODOT is currently working with PGE on a second solar highway project in which ODOT will receive a portion of the RECs the facility produces while PGE will retain the electricity. ODOT will enter into a site license agreement with the utility, but it will not be a party in the PPA.60 ODOT will receive a token annual site license fee, with the idea of creating a framework for future projects with higher fees. By holding a portion of the RECs produced, ODOT will be able to claim them as contributing toward the agency's sustainability and carbon reduction goals as defined in the Oregon Transportation Plan and other state policy documents.

In the fourth business model, the DOT would not enter into a public-private partnership but would instead own and operate the system itself. The Ohio DOT followed this business model in its current solar array and maintenance facility wind turbine. However, the Ohio DOT has determined that owning the renewable energy facilities is not a sustainable business model, as the cost of alternative energy generating equipment is often high and prohibitive for DOTs. In future projects, Ohio DOT would advocate for a utility or private partner to own and operate the facilities with Ohio DOT purchasing the renewable energy through a PPA; the DOT plans to hire the services of an "energy broker" professional to help it buy energy in bulk, reducing the per kW rates. The lower rates could be achieved through tools such as reverse on-line auctions where suppliers bid on the right to supply energy to the DOT. The costs of developing renewable energy projects can also be lowered if private entities develop them, as they are able to take advantage of tax credits and other incentives, such as accelerated depreciation unavailable to the DOT. When the DOT fully capitalizes renewable energy projects, the costs can be higher; and the agency is less likely to experience a return of investment over the life of the project.

Bioenergy Business Models
Bioenergy projects also may utilize various business models. In NCDOT's current model, the DOT grows and cultivates the biocrop feedstock in the ROW and then pays a biorefinery to convert the feedstock grown into biofuel that the DOT later uses. It has been envisioned that a state DOT could also either sell the feedstock or sell permits to farmers to allow them to grow, harvest, and then use or sell the biocrops as they desired. Finally, USU evaluated another business model where the DOT performs both the farming and refining functions. It was determined that this model was not economically viable since the DOT would have to purchase and operate refining equipment that may already be available and operated more efficiently locally.

Permitting Processes Vary Based on Project Details
Each of the solar and wind energy cases the project team reviewed utilized a different permitting process to approve the use of the highway ROW: the utility permitting process, an airspace lease, a special use permit, and an easement.

Oregon's I-5 solar highway demonstration project was approved under the DOT's UAP. ODOT, in consultation with the Oregon Department of Justice (DOJ) and the FHWA Division Office determined that since the project would supply electricity for ODOT's direct use (thereby a "public" use), the project would be permissible on ODOT's ROW through the utility permit process. The proposed Massachusetts projects will utilize airspace lease and easements. (California's proposed solar highway project would have also utilized an airspace lease). In these cases, the state DOT is not the end user of the electricity generated by the renewable energy project. Under Federal regulation (23 CFR 710.405), a state DOT may receive fair market income from airspace leases. MassDOT will require the developer of the wind turbine to pay an annual rental fee for use of the land. The rent will be tied to the total revenue generated by the facility with the rent equal to 3.5 percent of power sales with a minimum of $15,000 a year. Similarly, MassDOT is collecting fair market income at the rate of $880 a year from Carver for use of the 1.26 acres of highway ROW for its solar installation.

Developing the Lease Agreements is a Multifaceted Process
Whether a project is permitted through the utility permit process, airspace lease, or special use permit, the DOT and the project partner will enter in a written agreement that outlines the applicable terms and conditions for the use of the ROW. A DOT must ensure that the written agreement used to permit renewable energy facilities in the ROW is adequate to protect the transportation facility and clearly defines the responsibilities of the parties regardless of the permitting process used. An effective lease agreement must reflect legal, planning, environmental, design, construction, maintenance, insurance, safety, warranty, and security requirements. Developing a lease agreement that is acceptable to both the DOT and the lessee can be a complex, lengthy, and expensive process.

The interviewed DOTs identified the following items as some of the major issues that need to be considered in developing a lease agreement for solar and wind facilities:

DOTs May Require Outside Assistance in Developing Complex Contract Agreements When a DOT purchases the renewable electricity generated, it typically does so through a PPA. PPAs are complex legal documents that DOTs may not be able to develop given current areas of in-house expertise. Therefore, the DOT may need to utilize outside legal counsel or consultants to help guide the development process of these agreements.

ODOT was the first Oregon state agency to enter into a solar site license agreement or a PPA. Legal staff at ODOT and the state's DOJ worked with an outside legal team to help draft the documents. The legal fees associated with developing these agreements constituted a large percentage of the overall project costs for the state. Similarly, the Town of Carver, Massachusetts is utilizing a $50,000 technical assistance grant it received from the Massachusetts Department of Energy Resources' Energy Efficiency and Conservation Block Grant program to retain consultants to support the town with developing its PPA.

Responsibility for Environmental Clearance Varies by State and Project Type
Renewable energy and alternative fuel facility projects in the highway ROW must meet all applicable Federal and state environmental regulations (e.g., NEPA, Endangered Species Act compliance, etc.). Each of the projects reviewed has conducted or is conducting detailed environmental analyses on common issues such as water quality, air quality, biological and cultural resources impacts, hazardous materials, and noise. However, responsibility for conducting such analysis varied across projects. In the Oregon demonstration project, ODOT was responsible for the environmental analysis and for the costs of mitigating or rehabilitating the impacts. In contrast, in both California and Massachusetts, the project proponents are responsible for complying with the state's environmental protection regulations.61

Each renewable energy technology also has its own set of unique environmental, health, and safety considerations. According to those interviewed, some of the primary considerations associated with solar energy projects in highway ROW to date have included:

Primary environmental considerations associated with wind energy projects in highway ROW are less apparent than for solar energy projects. DOT experience with wind power technologies in the ROW has not progressed far enough to have produced lessons learned. According to the literature, one of the primary environmental concerns in wind energy is the potential for bird and bat mortality; however, impacts vary widely by region and species66; and, overall, some studies have found no evidence of significant impacts on bird populations.67 The Ohio DOT is working with the U.S. Fish and Wildlife Service to monitor the impacts to birds for its wind turbine project. Additional environmental concerns associated with proposed wind turbines include aesthetics and noise.68

Considerations in the physical environment associated with bioenergy projects in highway ROW are related chiefly to soil and seeding factors. According to those interviewed, environmental considerations associated with bioenergy projects in highway ROW include:

State and Federal Tax Credits and Grants Are Currently Needed to Make Projects Economically Viable
Renewable projects in the ROW generally rely on public-private partnerships. As a public entity, state transportation agencies cannot benefit directly from Federal or state tax incentives because they are tax-exempt entities. However, the private partners in these projects can benefit greatly from state and Federal tax credits and grants to finance the renewable energy projects.

Renewable energy facilities require high upfront costs. Tax credits and grants help to make renewable energy cost competitive with fossil fuel-based energy. Due to the comparable costs of renewable energy, private partners would likely find renewable energy projects in highway ROW difficult to finance without the availability of Federal and state tax credits. DOTs and project partners indicated that without ARRA funding or available Federal and state tax credits, renewable energy projects in the ROW may not be feasible. Current information on Federal and state incentives for renewable energy can be found at: www.dsireusa.org/incentives/index.cfm?state=us&re=1&EE=1.

Carbon Offsets and RECs Could Be Used to Finance Renewable Resource Development on the Highway System
Carbon offsets enable an organization to reduce its GHG emissions by paying others to undertake activities that reduce, avoid, or sequester GHGs. In the U.S., the voluntary carbon offset market is large and diverse; over 600 organizations develop, market, or sell offsets, and the market involves a wide range of participants, prices, transaction types, and projects.70 The carbon offset markets or the REC markets highlighted above could provide a possible source of funding for renewable energy projects in the ROW. However, involvement in such markets carries with it additional verification and monitoring requirements to ensure the credibility of the offset or REC. Additionally, once the offset or REC is sold, the owner of the renewable energy facility and the user of the associated electricity can no longer claim the renewable energy benefits associated with the project. See www1.eere.energy.gov/femp/pdfs/rec_webinar_062311.pdf for more information on RECs.

Patent Issues May Increase Project Costs and Timeline
The systems that produce, collect, and transmit renewable energy are usually patented. Patent holders are entitled to collect license fees for use of the methodologies and techniques their patents cover.

There have been instances where a public entity paid for licenses for a renewable energy technology in the ROW when it was not clear that such licenses were required. This uncertainty, along with the fact that costs are being added to already expensive projects with little or no added value might, be a deterrent to a DOT considering the implementation of renewable energy projects in the ROW. Highway owners are encouraged to consult with a patent or intellectual properties attorney who can help determine the applicability of a particular patent given the legal complexities involved.

Renewable Energy Projects May Require Zoning Changes at the Local Level
Renewable energy projects in the ROW may be subject to local approval and, as a result, may require conditional or special use permits, variances, zoning changes, or waivers in order to meet regulatory or statutory requirements. For example, the town of Blandford, Massachusetts, in which MassDOT's proposed wind energy project would be located, does not currently have zoning standards for wind facilities. Before the proposed project could be approved, the Town first needed to adopt a wind power zoning by-law. In May 2011, registered voters at a Blandford open town meeting defeated the zoning bylaw that would have allowed the development of the proposed turbine, putting the future of this project in question. The Massachusetts Department of Energy Resources and Executive Office of Environmental Affairs have developed a model by-law71 to assist cities and town in establishing reasonable standards for wind development and are currently working with the town of Blandford to help establish a similar by-law. Similarly, one of the solar projects currently under development in Oregon is located on land zoned exclusively for farm use; ODOT obtained the necessary conditional use permit from the local jurisdiction without any controversy or appeal.

Renewable Energy Projects Require Effective Public Involvement
Public support of renewable energy development in the ROW is a decisive factor to the success of these projects. Several of the renewable energy projects analyzed as part of this study conducted extensive public outreach efforts as part of the project development process. For example, as part of the scoping process for the environmental analysis, SMUD held four public workshops. SMUD had developed visualizations, including conceptual drawings, realistic photo renderings, and 3D animations, to help the public understand what the projects would entail. The visualizations were used during the public meetings to set the context for each project location and to help generate feedback from the public on the preliminary design. ODOT hired a local firm to manage the public involvement activities related to its solar demonstration project. The firm was able to conduct research describing when the solar highway would become "carbon positive," or beneficial to the atmosphere.72 The research has been an effective public relations tool.

Several of the interviewed DOTs have continued their public involvement efforts after project implementation. PGE and ODOT have created a website where the public can get real-time information on the amount of electricity being produced at the I-5 demonstration site.73 Ohio DOT maintains a similar project website that displays the total electricity production for its solar field demonstration project.74 MassDOT would require the selected developer of its proposed wind project to install an information kiosk at the adjacent Blandford Service Area if the turbine is built. The kiosk would provide a written description of the wind turbine project and real-time information on its operation.


Footnotes

54 For example, MassDOT's GreenDOT initiative aims to incorporate sustainability into all of its activities; from strategic planning to project design and construction to system operation. The initiative includes GHG reduction targets mandated under the Global Warming Solutions Act, signed by Governor Patrick in 2008. This law requires an 80 percent GHG reduction by 2050.

55 Blade flicker is the alternating light intensity that can occur as a turbine's moving rotors cast shadows on the ground and stationary objects.

56 Lavsund, S. and F. Sandegren. Moose-Vehicle Relations in Sweden: A Review. Alces, Volume 27, 1991, pp. 118 to 126., and Jaren, V., et al. Moose-Train Collisions: The Effects of Vegetation Removal with a Cost-Benefit Analysis. Alces, Volume 27, 1991, pp. 93 to 99.

57 Barnum, Sarah, et al. 2007. Habitat, Highway Features, and Animal-Vehicle Collision Locations as Indicators or Wildlife Crossing Hotspots.

58 Center for Resource Solutions. 2010. Best Practices in Public Claims for Solar Photovoltaic Systems.

59 The Federal Trade Commission (FTC) has issued guidelines for the use of environmental marketing claims: www.ftc.gov/bcp/grnrule/guides980427.htm. In October 2010, the FTC issued proposed updates to the environmental marketing claims guidance: http://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/guides-use-environmental-marketing-claims

60 Additional information on state-driven approaches to financing clean energy projects is available from the National Governors Association Center for Best Practices. See: www.nga.org/Files/pdf/1101CLEANENERGYFINANCING.PDF

61 The California Environmental Quality Act (CEQA) applies to all discretionary projects proposed to be conducted or approved by a California public agency. The Massachusetts Environmental Policy Act (MEPA) applies to projects that meet certain review thresholds and that require state agency action, i.e. a permit, financial assistance or land transfer from state agencies.

62 FAA's Technical Guidance for Evaluating Selected Solar Technologies on Airports: www.faa.gov/airports/environmental/policy_guidance/media/airport_solar_guide_print.pdf

63 More information on the potential glare impacts from one of ODOT's proposed solar highway projects is available at: www.oregon.gov/ODOT/HWY/OIPP/docs/Solar_GlarePotentialWL.pdf

64 Good Company. Scaling Public Concerns of Electromagnetic Fields Produced by Solar Photovoltaic Arrays. www.oregon.gov/ODOT/HWY/OIPP/docs/EMFconcerns.pdf

65 Department of Energy. November 12, 2009. Health effects of electromagnetic fields from solar photovoltaic arrays. www.oregon.gov/ODOT/HWY/OIPP/docs/solar_USDOEmemo.pdf

66 U.S. Government Accountability Office. September 2005. Wind Power: Impacts on Wildlife and Government Responsibilities for Regulating Development and Protecting Wildlife. www.gao.gov/new.items/d05906.pdf

67 Committee on Environmental Impacts of Wind-Energy Projects, 2007. Environmental Impacts of Wind-Energy Projects.

68 For additional information see www.awea.org/issues/siting/index.cfm.

69 For example, see Effective Planting Techniques to Minimize Erosion: Plug Planting, Sod Strips, Hydroseeding, Compost, Jute Netting (2004) by the California Department of Transportation and the California Storm Water Management Program: http://trid.trb.org/view.aspx?id=771549

70 GAO. August 2008. Carbon Offsets: The U.S. Voluntary Market is Growing but Quality Assurance Poses Challenges for Market Participants. www.gao.gov/new.items/d081048.pdf

71 Massachusetts Department of Energy Resources. March 2012. Model As-of-Right Zoning Ordinance or Bylaw: Allowing Use of Wind Energy Facilities. http://www.mass.gov/eea/docs/doer/green-communities/grant-program/wind-model-bylaw-mar-2012.pdf

72 Good Company. August 2008. Avoided Carbon Emissions from Solar Panel Systems and Sequestered Carbon Emissions from Tree Growth www.oregon.gov/ODOT/HWY/OIPP/docs/treesvsolar.pdf

73 See www.live.deckmonitoring.com/?id=solarhighway

74 See www.buildingdashboard.com/clients/odot/

Updated: 09/05/2014
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