The Measured Move to Renewables in Vermont
By Meredith Angwin
Valley News Editorial, May 20, 2012
|Neil Daniels and Chuck Theall |
Springfield Biomass Plant
Just before adjourning, the Vermont Legislature passed a heavily-debated renewable portfolio standards bill. They passed it at the last minute, only after stripping out the renewable portfolio standards component. Is this good news or bad news? Should Vermont residents worry that the stripped bill implies bad things for the future of Vermont renewables?
I don’t think it’s a cause for worry. Actually, I think the lawmakers have deftly crafted a bill that promotes green energy while simultaneously moderating the increased cost of purchasing renewable energy.
The Springfield Biomass Plant
The concept of a “renewable portfolio” might best be illustrated by examining the finances of the biomass plant in Springfield, NH-- an operation familiar to many Upper Valley residents who see its tall stack from Interstate 89 in Georges Mills. The plant makes 19 megawatts of electricity by burning trees and wood chips. It has the latest pollution- control equipment, including electrostatic precipitators to catch the fly-ash and selective catalytic reduction to control nitrogen oxides. The plant sells fly-ash as a soil amendment and sells tree-bark to landscapers.
It’s a good thing the Springfield plant sells all these byproducts, because it sells its electricity for about one cent per kilowatt-hour more than it pays for the wood fuel to produce it. That margin doesn’t sound like enough money to keep the plant staffed 24/7, buy anhydrous ammonia for the nitrogen oxide control and so forth. (Details of the pricing are proprietary, of course.) When I visited the plant in the fall, the plant manager said that the plant would probably not be profitable, except that it also sells RECs.
|Log Piles at the Springfield Plant|
RECs are Renewable Energy Certificates. A state with a Renewable Portfolio Standards (RPS) requires RECs. Programs vary from state to state, but basically, when a renewable energy provider places a kWh of power onto the grid, it also generates a REC for one kWh. In states with an RPS, the utilities must buy a prescribed portion of their power from renewable sources. How do the utilities prove they have purchased the right amount of renewables? They use RECs to prove their purchases to their regulators.
However, the regulations have another twist. A power plant can sell RECs separately from selling the power. So a renewable-energy plant can sell power to the grid, and separately sell RECs to a utility that needs to present them to its regulators. This is what the Springfield plant does. As a matter of fact, there’s an interstate auction site for RECs.
No RECs Needed in Vermont
Vermont does not have an RPS, but it does have other incentives for renewables. The two major incentives are the “standard offer” program for small scale renewable producers, and the SPEED program for bigger producers. Both these programs require utilities to buy renewable power, but neither program requires RECs. Vermont renewable suppliers can sell their RECs to out-of-state utilities. Therefore, Vermont renewable providers can add to their profits with out-of-state money.
When the long-debated Vermont RPS bill had the portfolio standard stripped from it, it meant that Vermont utilities were still not required to buy RECs. The bill did not change the SPEED program for large generation sources. It did expand the standard offer program for small-scale sources. Instead of requiring Vermont utilities to buy up to 50 MW of small-scale renewables, they are now required to buy up to 127 MW.
Mixed Feelings Toward RECs
Not everyone was happy with the final bill the legislature passed. Some environmentalists complained that allowing Vermont utilities to sell RECs discourages the development of renewable projects in other states. Other states can burn fossil fuels while meeting their own RPS goals by purchasing RECs from Vermont. These environmentalists call Vermont’s renewables program “brown power” ¬- a step down from “green power.”
Meanwhile, utility managers take a more pragmatic view. David Hallquist, CEO of Vermont Electric Co-operative, says that if Vermont had had REC requirements, he might have used RECs instead of buying renewables directly: this choice would have been more cost-effective for his utility. As he wrote: “Utilities will simply buy power from gas-fired sources and RECs from other states… (With RECs available, we would not have been likely) to support the Kingdom Community Wind project.”
Hallquist implicitly acknowledged that renewables are more costly than conventional power. Vermont’s current programs increase consumer power costs, and a Renewable Portfolio Standard would add to that cost. Power runs 4 to 6 cents per kWh(wholesale) on the grid. The Vermont standard offer program requires utilities to pay 9 cents to 27 cents per kWh for renewables, according to the charts on the program website.
|Vesta Wind Turbine|
Are people willing to pay more for renewables? The evidence is mixed. Higher electricity costs have negative effects on Vermont businesses. Meanwhile, many people say they are willing to pay more for renewable power, but few actually choose to pay more. Only 2 percent of CVPS customers - 3,300 customers out of 160,000 - have chosen to purchase more expensive, renewable “Cow Power”--power produced by methane from waste digesters on dairy farms.
Considering the costs and issues with renewable development, Vermont legislators ended up passing a good bill. It expands the standard offer for small producers, which will definitely cost money, but it isn’t an RPS law. Therefore, some Vermont renewable costs can be met by out-of-state money from selling RECs. Rep. Margaret Cheney, D-Norwich and vice chair of the House Committee on Natural Resources and Energy, summed up the change in the bill: “The major concerns were the cost impact of a renewable portfolio standard.”
Cost is an important concern, and the Legislature deserves credit for addressing it. Meanwhile, the RPS laws of other states will help underwrite the costs of renewables in Vermont.
More about the Springfield Power Plant: Photo of Chuck Theall (plant manager) and Neil Daniels (local engineer) at the Springfield power plant. My visit was part of an ILEAD class that toured seven local power plants. Robert Hargraves and I led the class. My blog posts about the Springfield visit are here and here. Hargraves blog post about it is here. For more information on the course, see Energy Safari.
Alan Panebaker articles about RPS energy bill, in Vermont Digger.
David Hallquist Op-Ed in Vermont Digger
Note: Vermont Digger site seems to be down now. I hope these links work later...
Standard Offer Rates in Vermont
Percentage paying for cow power from two sources: Cow Power Seeks New Customers (3,300 customers) January 2012, and CVPS at a glance (160,000 customers)