Green Mountain Power meets deadline for $40 million wind tax credits, must pay $10 million to ISO-New England

Editor’s note: This story by Robin Smith was first published in The Caledonian-Record, the state’s third largest daily newspaper.

LOWELL — The 21st and final turbine of the Lowell wind project was “commissioned” Tuesday evening when it was brought online to produce electricity for the grid.

That means Montreal-based Gaz Metro’s subsidiary Green Mountain Power will receive a federal production tax credit for wind energy worth more than $40 million.

“It’s an important thing that we met the deadline,” GMP spokesman Robert Dostis said on Wednesday.

The tax credit for wind energy is slated to expire Dec. 31, and GMP has been working hard to get the turbines operational before the end of the year.

The 21 turbines will continue to be tested over the next two weeks, Dostis said. That means that some will be operating while others will be offline for inspections.

All of the wind towers will be generating electricity for the grid before the end of the year, he said.

The commissioning of the Kingdom Community Wind project on the Lowell ridgeline ends a monumental year for the Orleans-Essex counties area.

Turbine parts began to roll through the region by truck and rail in July to the Lowell wind site and protesters climbed the mountain and blocked the main road in Lowell. GMP has won all of the appeals of the project so far; the remaining appeals are over stormwater runoff permits.

Also this week, state utility regulators approved a federal requirement that GMP pay up to $10 million to the area electricity grid operator, ISO-New England, for the installation of a dynamic reactive device in order to connect to the grid.

The device is the least expensive alternative, according to the Vermont Public Service Board, and therefore is allowed as part of the Lowell wind project’s certificate of public good. The three members of the quasi-judicial board issued the ruling on Monday. Dostis said the payment to ISO-New England won’t impact the cost of electricity generated by the wind project.

Dostis said that GMP will pay less than $10 million to ISO-New England, under an agreement the state’s largest utility has worked out with the grid operator.

Power from the Lowell wind project will cost between 9 cents and 10 cents per kilowatt hour, Dostis said.

The Kingdom Community Wind project in Lowell is in Vermont Electric Cooperative territory. Co-op members voted to support the project. GMP will sell some of the electricity generated by the wind project to VEC at cost.

Once the wind project generates electricity and the amount and value is known, then GMP will begin to know what it will pay annually in taxes to the host town of Lowell.

Comments

  1. Craig Kneeland :

    Reactive devices were already installed as part of recent Vermont Electric Cooperative Substation upgrades. Since reactive devices are most efficiently located near the source of reactive current, ratepayers should not be buying another $10M worth of capacitors for loction elsewhere. We should have the money spent locally to automate the capacitors. If the recently installed capacitors were not adequately specified by VELCO, and the wind turbine output needs more reactive adjusting, VELCO should be the entity responsible for correcting the problem. Our PSB should not be agreeing to have Vermont ratepayers paying twice!

  2. Craig,
    It is more complicated. Shumlin, the PSB and GMP all hang together. Whatever the extra costs for wind energy, GMP just rolls them into rate schedules, per PSB approval.

    ISO-NE goes by the principle of “the disturber pays”, as did the VT-DPS under David O’Brian, the previous head.

    Here is a little write up regarding IWTs on ridge lines in Maine not being as economically-viable as touted.

    Industrial wind turbine facility developers usually use estimated capacity factors, CFs, of 0.32 – 0.38 for IWTs on 2000-ft high ridge lines to obtain financing from banks and investors, and approval from government regulators, and “selling” the project to legislators and the public.

    The estimated CFs are based on proprietary wind testing reports that are sometimes given to the PSB, if requested, but not to ordinary, tax-paying citizens, which serves to keep people ignorant regarding wind energy. The US is not a signatory to the Aarhus Convention, and thus this information is not provided to the US public.

    Real world experience shows, these CFs are overestimated, not just in Maine and Vermont, but elsewhere as well. See below.

    However, BY LAW, the quarterly production data must be reported by IWT facility owners to the Federal Regulatory Energy Commission, FERC.

    Below is a URL with quarterly production data reported by the IWT facility owners in Maine. The results are dismal, much less than the estimated CFs used for “selling’ the project.

    It is clear, these heavily-subsidized IWT facilities on 2000-ft high ridge lines are not economically viable, not even with the present huge subsidies.

    http://www.windtaskforce.org/profiles/blog/show?id=4401701%3ABlogPost%3A43514

    Maine is not the only entity with such poor results. I have a spreadsheet showing the 2006 – 2011 average CFs for Germany (0.187), Denmark (0.251), the Netherlands (0.228), the US (0.289), Texas (0.225), Ireland (0.283), New York State (0.249).

    HOW IS THIS RELEVANT TO VERMONT?

    GMP will likely NOT rue the day it spent $160 million to put 63 MW of these IWTs on the Lowell Mountain ridge line, plus up to $10 million for a dynamic-reactive device, required by the grid operator ISO-NE, to integrate the variable wind energy to the grid. Initially, GMP was going to place the burden on the other energy suppliers to the grid, but the ISO-NE follows the “USER PAYS” rule, well familiar to all utilities, including GMP. Not a problem for GMP; it just rolls its extra cost into rate schedules.

    GMP will charge ALL of its additional costs to the captive rate payers in its service area, 70% of Vermont households and businesses, which are already stressed, because of the Great Recession, AND rising prices of goods and service, AND stagnant/declining real household incomes since 2007, AND a near-zero-growth economy, AND financing heavily-subsidized RE follies.

    Whereas, GMP may have been grossly misled and engaged in self-deception, it certainly had the resources to determine the facts BEFORE proceeding, unlike legislators and lay-public.

    Independent energy systems analysts, with decades of experience, had advised against the Lowell Mountain IWT facility, but were shoved aside, ignored, even belittled.

    GMP COULD have started with one 3 MW IWT to see how it would perform, but that was not impressive enough, as multi-millionaire Governor Shumlin wanted to proceed as quickly as possible, build as many IWTs as possible, destroy as many ridge lines as possible, to get as much state and federal subsidies as possible for Vermont’s wind energy oligarchy, which consists mostly of multi-millionaires in the top 1%. It appears the Northest Kingdom area of Vermont has been targeted for several new IWT facilities, in addition to the ones on the Sheffield and Lowell Mountains.

    New England annual average grid prices are about 5 c/kWh, nearly unchanged for the past 3 years, and likely to stay that way, because of a LONG-TERM, abundant, DOMESTIC supply of natural gas.

    Hydro-Quebec energy is available under long-term contract at about 6 c/kWh. It is STEADY, CO2-free, available 24/7/365, rain or shine, windy or not windy.

    Vermont Yankee’s energy is available under long-term contract at about 5 – 6 c/kWh. It is STEADY, CO2-free, available 24/7/365, rain or shine, windy or not windy.

    Lowell Mountain energy, heavily-subsidized with state and federal subsidies, is available at about 10 c/kWh, per GMP. Its cost would be about 15 c/kWh, unsubsidized, per US-DOE, not counting the extra costs of grid modifications and wind energy integration to the grid. GMP will just roll its extra cost into the rate schedules of already-stressed households and businesses.

    In New England, with fair-to-good wind conditions only on 2,000-ft or higher ridge lines, about 30 percent of the hours of the year, near-zero wind energy is produced, because wind speeds are insufficient (less than 7.5 mph) to turn the rotors, or too great for safety, as during stronger weather fronts or tropical storms, such as Sandy and Irene, passing over the ridge lines.

    About 60% of the wind energy is produced during about 30% of the hours of the year, mostly at night, and mostly during winter. During summer, with peak demands, almost no wind energy is produced. When IWTs produce near-zero energy, they DRAW energy from the grid.

    Wind energy is variable and intermittent and requires quick-ramping gas turbines to operate in part-load-ramping mode, i.e., ramp down with wind energy surges and ramp up with wind energy ebbs to maintain a stable grid. This requires extra fuel/kWh and emits extra CO2/kWh, AND causes extra wear and tear on equipment.

    At greater annual wind energy percentages on the grid, these extras mostly offset what wind energy was meant to reduce, i.e., wind energy is NOT a viable CO2 reduction technology, AND it acts as a disturber of the grid which makes the grid less efficient and less stable, AND it is very expensive.

    The above indicates, there are many hours during a year when near-zero wind energy is produced. Therefore, almost all conventional generator units would still need to be kept in good operating condition, AND staffed 24/7/365, AND fueled, to serve the daily demand when near-zero wind energy is produced. 

    See below URLs which have had about 10,000 views till now.

    http://theenergycollective.com/willem-post/61309/lowell-mountain-wind-turbine-facility-vermont
    http://theenergycollective.com/willem-post/71771/energy-efficiency-first-renewables-later
    http://theenergycollective.com/willem-post/84293/wind-turbine-noise-and-air-pressure-pulses
    http://theenergycollective.com/willem-post/89476/wind-energy-co2-emissions-are-overstated

  3. craig david :

    Drove by the Lowell site the other day and the turbines are an awesome sight! Glad to see Shumlin following through on renewables…that’s why I voted for him.

    • Lance Hagen :

      Craig,

      Maybe you should contact Shumlin’s office. I am sure he would gladly place one of these turbines in your backyard. In that way, you wouldn’t have to drive at all, plus save gasoline, to gather in its awesome beauty!

      • craig david :

        Lance, I see them on my way to Jay Peak, and I suggest we keep them on top of the ridgelines where the wind is.

  4. Robin Smith,

    Thank you for writing this article. As you know, ice and snow build up on rotors of IWTs yields less energy production, and causes excessive noise, and numerous complaints from nearby residents.

    The German solution, well-known to Vestas, et al, is to heat the rotor blades with warm air. It is described below and in these URLs.

    http://theenergycollective.com/willem-post/53258/examples-wind-power-learn
    http://theenergycollective.com/willem-post/84293/wind-turbine-noise-and-air-pressure-pulses

    Snow/ice build up on turbine blades during windy conditions cause roaring sounds that drew complaints about the Lowell wind turbines on Nov. 3 and 4. The noise, which at least 21 neighbors described as unbearable, began early in the morning of Saturday, Nov. 3, and continued into the next evening, i.e., at least 36 hours.

    Mike Nelson of Albany described the sound, at three and a half miles away, as a cross between a helicopter and high winds blowing through the trees. Others called it “unbearable,” loud enough to be heard inside of homes up to two miles away.

    The neighbors wrote a letter of complaint to the Vermont Department of Public Service, which acts as the electricity consumer “advocate” for the state.

    The Germans, as usual, have a better solution:

    Their wind turbines have a fan with an electric heater and duct system in EACH blade to circulate warm air through the uninsulated, hollow blade to keep it warm in winter to prevent icing that impairs blade aerodynamics, as on an airplane wing, and to prevent excessive noise.

    Total power draw of the blade heating system is about 60 kW, plus about 50 kW for other parasitic loads.
    http://www.slideshare.net/WinterwindConference/further-development-of-enercons-deicing-system-christoffer-jonsson-enercon 

    Germany is very marginal for wind power, especially in the south. its national average wind power CF is 0.187, lower than the Netherlands (0.228) and Denmark (0.251).

    A solution is to have wind turbines with very tall masts and oversized rotors. One such unit is the Enercon-82, capacity 2 MW, hub height 138 m (460 ft), rotor diameter 82 m (273 ft), for a total height of about 600 ft. The unit requires a substantial foundation. The installed cost is about $2,600/kW. 

    Five of them are located on a flat hill in the Hof District of Bavaria, Germany. Total project cost about 18 million euros, or $26 million. A 25-year mortgage at 5%/yr to pay off the capital would have annual payments of $26 million/amortization factor of 14.09 = $1,845,280/yr.

    However, an investor may want to make a profit, not just pay off the mortgage. Say 8%/yr for taking the risk to borrow the money, create the project and pay the borrowed money back over 25 years from risky future cash flows.

    The gross capacity factor is 22,500 MWh/yr/(10 MW x 8,760 hr/yr) = 0.257 
    The net CF is 10 – 15 % less, say 10% less, due to parasitic power. 

    Unit power cost = $1,845,280/(22,500,000 kWh/yr x 0.90) = 0.091/kWh, excludes O&M of about 0.015/kWh and insurance and risk premium, i.e., making a profit.

    The cost of baseload power in Germany is about $0.055/kWh, which means the Hof District wind power in Bavaria is at least $0.106/$0.055 x 100 = 93% greater than grid prices; if making a profit is included the percentage will be higher.    

    A technical success? Maybe. An economic success? No. 

  5. Brian Buckley :

    It blows my mind that some people respond with comments to every one of these stories. Its like they don’t have jobs to keep them busy… Or their job is running a propaganda campaign and they simply omit the fact someone is paying them to write their one-sided, fact-picking posts.

  6. Willem Post :

    Some people are retired, have knowledge and experience, are not being paid by any entity, want the best for Vermont; wind turbines on ridge lines are poor choice in Vermont.

    A better place would be the Great Plains

  7. Ed Duggan :

    Willim:

    Do you really think that First Wind would still be investing tens of millions of dollars installing projects in Maine if they were not making a profit for them?

    I have worked in the wind energy industry for over 30 years and know that the economics work well on most projects in the US. And those projects would still be competitive with other technologies if government subsidies were removed from ALL types of energy and environmental costs were properly assessed.

    What are your alternatives? More subsidized and potentially dangerous nuclear? More generation from natural gas obtained through fracking? Or, would you rather we burn the trees from those ridgelines for power generation and continue to contribute to global warming?

    Is global warming real? Do you like to breath clean air. Do you want those trees you like to burn for firewood to still grow? Just what is your suggested solution to our continued and growing need for clean energy?! Parroting one-sided anti-wind arguments straight from National Wind Watch and similar sources is not constructive.

    • Lance Hagen :

      Ed, your statement of “projects would still be competitive with other technologies if government subsidies were removed from ALL types of energy and environmental costs were properly assessed” is questionable.

      According to 2010 data (latest year published) from Dept of Energy on subsidies, Wind received $52M/billion kwh of power generated. Compare that to Coal at $0.64M/billion kwh, Natural Gas at $0.63M/billion kwh and Nuclear at $3.1M/ billion kwh.

      For your statement to be true, your environmental costs factor must be enormous to offset the difference in subsidies

      • John Greenberg :

        You need to look at 50+ years of direct AND indirect government subsidies, not just one. You also need to look at the multiple tax code subsidies, and indirect subsidies like the Price-Anderson insurance plan for the nuclear industry, most of which I suspect are not included in the DOE data you’re citing.

        One example. The government did ALL of the research and development for what became the civilian nuclear industry in the 1940s and 1950s. Without that, the nuclear industry wouldn’t exist at all. Your oversimplified analysis would completely overlook that fact.

        • Lance Hagen :

          No, Mr Greenberg …… my analysis is pertinent, since Mr. Duggen is claiming that Wind would be competitive TODAY with removal of all subsides. He is not talking about the cum over the last 50+ years.

          So from the data I showed, removing subsides TODAY is not going to make Wind competitive!

          • Ed Duggan :

            Mr. Hagen:

            There are several early projects utilizing “1st generation turbines” (under 200kW, utilizing 3-bladed, upwind design) located in California that are still running and profitable after nearly 30 years. Yes, they benefited from some rate support and tax incentives at their startup but they have continued to run reliably and competitively year after year for at least 20 years beyond those tax incentives and over 15 years beyond any rate support. If they were such bad performers, wouldn’t they all be replaced by now?

            As far as competitiveness of new Wind Projects without tax subsidies goes, let’s be clear that for the field to be truly level, we should factor into the cost of oil, natural gas and nuclear generated power the cost for any environmental damage or risk they cause, the cost of any military action required to sustain them, and the cost of guarantees needed for their financing.

            What will the continued subsidy to fossil fuel by our military actions in the mid-east cost next year and shouldn’t that be added to the cost? Could you even build a nuclear plant without government guarantees? What is the real risk to the environment of fracking and how do we put a dollar value on it?

            Your narrow focus blinds you to the big picture.

  8. Willem Post :

    First Wind invests because on the spreadsheets it shows wind energy Is profitable.
    This is only because about 50% of the 25year levelized costs are offset by various subsidies and write offs
    The VT-DPS has the spreadsheets, but they are not made available for
    “proprietory reasons”

  9. MJ Farmer :

    The Bolton Wind Turbine has been operating since 2009. It was supposed to produce 300,000kWh/yr. As of today (Dec2012) it has produced approx 500,000kWh total.

    http://www.boltonvalley.com/about-us/environmental-initiatives/wind-turbine

    If we are really passionate about Global Warming, we would be building a new nuclear power plant at Vermont Yankee’s site, where the infrastructure and workers are already in place. The new nuclear plant would be capable of recycling up to 95% OF THE EXISTING WASTE. Plus produce power at a fraction of the cost of the renewables. Then with low cost, clean power, we can have our electric vehicles and afford to expand our population.

  10. john burton :

    thrivemovement.com

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