Utilities want flexibility under renewable portfolio standards

Lawmakers are working on a bill that would change the way utilities buy and sell renewable energy credits.

State officials want to repeal the Vermont’s current energy development program, known as the Sustainably Priced Energy Enterprise Development Program, or SPEED, for economic and environmental reasons and replace it with a new renewable portfolio standard.

If the state doesn’t set new rules for renewable energy generation, ratepayers could face a $50 million increase in electricity rates, a roughly 6 percent rate hike statewide. In Burlington, rates could go up as much as 20 percent.

Officials also say SPEED will not satisfy the state’s greenhouse gas reduction goals.

The so-called Renewable Energy Standard and Energy Transformation or RESET program would replace SPEED. RESET requires utilities to sell power generated from renewables like wind and solar, and make investments in the heating and transportation energy sector to replace fossil fuels.

Under RESET, 55 percent of a utility’s electricity must come from an existing renewable generation plant. By 2032, that number increases to 75 percent. Approximately 40 percent of the state’s electricity now comes from renewables, according to the Department of Public Service.

Robert Dostis

Robert Dostis, director of government affairs at Green Mountain Power, presents lawmakers with a report on the utility’s power supply portfolio during testimony before the House Natural Resources and Energy Committee on Wednesday. Photo by John Herrick/VTDigger

Meanwhile, Vermont’s electric utilities are asking the Legislature for more flexibility in order to comply with the new renewable energy program.

“It’s all very new,” Robert Dostis, director of government affairs at Green Mountain Power, told the House Natural Resources and Energy Committee on Wednesday during testimony on bill H.40.

“The greater flexibility in this, the better, because there are a lot of unknowns,” he said.

Dostis said the utility plans to meet most of its obligation through hydroelectric facilities and a contract with Hydro-Québec. He said about 47 percent of the utility’s electricity supply comes from resources that would qualify under the program.

The company’s contract with Hydro-Québec expires this year. It is entering into a new 20-year contract for the power that will supply up to 30 percent of the utility’s power supply at 5 cents to 7 cents per kilowatt hour.

Green Mountain Power could sell its Hydro Quebéc credits, but other states are unlikely to buy them because, unlike Vermont, most don’t count existing, large-scale hydro toward their top-level renewable energy goals.

To comply with the state’s renewable energy goal, utilities will trade renewable energy credits, or RECs, with power suppliers in New England. The value of the credits vary based on supply and demand, and the type of renewable power they represent.

Under Vermont’s program, all existing renewable energy sources count toward the state’s compliance target. That means utilities can sell high-value credits — largely from wind and solar farms in Vermont — and purchase less expensive credits that other states cannot use to meet compliance goals. Utilities say it will be easy to meet their obligation under the program.

Burlington Electric Department can sell many of the credits from the McNeil biomass plant, as well as other renewables in its portfolio, for $50 per credit on the regional market; in exchange, the utility can purchase second-tier credits for less than $5 per credit, said Ken Nolan, manager of power resources for BED.

“I don’t think it will be too difficult, nor do I think it was intended to be,” Nolan said.

BED currently sells $10 million worth of RECs annually to fund its $50 million budget. Purchasing second-tier RECs, like hydro, would cost the utility $300,000 to $400,000.

Connecticut passed a law that may prohibit utilities from purchasing Vermont renewable energy credits, and other states may follow Connecticut’s lead. If Vermont were unable to sell credits, there would be a 6 percent rate increase statewide, according to the Department of Public Service.

“You take what could be a 20 percent rate increase if we are carved out of the Connecticut market and have no recourse, and you turn it into a half-percent rate impact,” Nolan said.

Sandy Levine of the Conservation Law Foundation has concerns about the RESET program. She said most other states in New England require utilities to purchase credits from new projects that come online. She said Vermont could do more to encourage construction of renewable energy infrastructure.

“It would be very helpful for Vermont to provide additional incentives for new renewable energy,” Levine said. “And if all we are doing is playing with our accounting practices and not actually building and using more renewable power, we fall far short of meeting our renewable energy goals.”

The proposed program would require that utilities meet at least 1 percent of their retail sales with new, in-state renewable energy projects that are less than 5 megawatts in size. This target increases to 10 percent by 2032. If the goal is not achievable, utilities can ask regulators for permission to build larger projects.

Dylan Zwicky of the Vermont Public Interest Research Group supports the RESET program. He said he will work with lawmakers to create incentives that will speed up development of small scale energy generation projects in Vermont.

“One of the goals of a [renewable portfolio standard] is to actually get more renewable energy built,” Zwicky said. “As this proposal is drafted, it’s pretty clear that we are going to continue to build out small-scale renewable at the pace we already do.”

One utility executive said more wind power will be necessary because many alternatives are less cost effective.

David Hallquist

Vermont Electric Coop CEO David Hallquist said part of Vermont’s renewable energy program is risky during testimony before the House Natural Resources and Energy Committee on Wednesday. Photo by John Herrick/VTDigger

“If you don’t have wind you’re not going to make it. … There are no alternatives,” said Vermont Electric Coop CEO David Hallquist. “It’s physics.”

The bill also requires that utilities invest in technologies that replace fossil fuels in the heating and transportation sector with cleaner electricity, a policy dubbed “strategic electrification.” This would mean that utilities would be responsible for installing heat pumps, electric vehicle charging infrastructure and other measures that reduce fossil fuel consumption, for example.

Utilities want more flexibility in how they satisfy this requirement.

Burlington Electric asked lawmakers to revise the bill so that utilities are not entirely financially liable for certain investments in projects that turn out to be less cost effective than predicted. The change the utility is proposing would allow it to recover costs from ratepayers.

Nolan, of BED, said there may be cases when certain investments may be considered cost effective, but it may turn out that some assumptions were not perfect. He said if regulators approve the assumptions, the utility should not be on the hook.

“That’s not something that we are used to doing. So we are going to be making some assumptions and designing programs that are not traditional utility programs,” Nolan said.

The new program is raising questions about the effect added consumption will have on electricity prices. In year one, the investments the utilities would have to make are equal to installing 2,000 air source heat pumps, according to the Department of Public Service.

The department says utilities must encourage customers to run their appliances at times when energy demand is low, and when electricity costs less. Otherwise, consumption will add to the region’s peak, sending up prices and requiring investments in new infrastructure to handle the load.

Utilities are considering ways to deter customers from using electricity when demand is high, and rewarding consumption when rates are low. Equipping electric appliances with smarter technology may allow the utility to dial up and down the appliances to avoid rate shocks.

Dostis said all appliances are going to become smarter so that they can turn off and adjust based on load.

“If you have a dryer and when there is plenty of energy it can fire up on all cylinders and when energy is needed, or the grid just needs more power, it can automatically turn off,” he said.

But some lawmakers say constituents do not want utilities controlling their electricity consumption. Also at issue are privacy concerns about the data utilities would collect to manage demand.

Hallquist said there should be provisions in the bill that would allow regulators to make changes to the program if necessary.

“You are treading into an arena that has a lot of risk,” Hallquist told lawmakers. “And I applaud you for that.”

John Herrick

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27 Comments on "Utilities want flexibility under renewable portfolio standards"

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1 year 7 months ago

The large utilities and electrical developers have had their way for the past decade. It’s time to do the right thing for the citizens of Vermont and destroying our environment and communities should be off the table, as should the continued scam of selling RECs. If by not selling RECs cost the rate payers they should blame and hold accountable the Governor, his “legislators”, the DPS and PSB for this terrible mistake. The utilities and energy developers in Vermont are not “to big to fail”. They just think they are and this needs to be changed.

Bruce Post
1 year 7 months ago
“If you don’t have wind you’re not going to make it. There are not alternatives.” said Vermont Electric Coop CEO David Hallquist. Well, at least David Hallquist is honest … in addition to being repugnant. He is more than willing to sacrifice Vermont’s mountains for his bottom line. Vermont is a captive of the electric utilities. They — along with their sycophants like VPIRG and the renewable energy cartel — celebrate our natural endowment while simultaneously being all too willing to scar, deface and mutilate that environment. Vermont lives in some alternative reality, a Vermont Life virtual world composed of… Read more »
Willem Post
1 year 7 months ago
Bruce, I agree with you. With 459-ft tall wind turbines on many ridgelines, Vermont Life, etc., would have to use pre-wind photographs of Vermont ridgelines to illustrate its magazines. Out with the expensive, underperforming SPEED program, in with the nirvana of an RPS!! There is this fixation about a Renewable Portfolio Standard, RPS, as if it is a foregone conclusion which all must accept a priori. We should find out just how well the RPS has worked in other states, and why the MAJORITY of states do not have an RPS, and why some states diluted or cancelled their RPS.… Read more »
Townsend Peters
1 year 7 months ago

1. The majority of states in the U.S. have an RPS.

http://www.dsireusa.org/documents/summarymaps/RPS_map.pdf

2. An RPS in Vermont means less wind in Vermont, not more, because wind in other states would qualify.

3. Glad to hear you support increasing taxes to fund retrofitting homes to be more energy efficiency. Oh, wait, you don’t.

Annette Smith
1 year 7 months ago

H.40 is not an RPS

Townsend Peters
1 year 7 months ago

Mr. Post stated that the majority of states do not have an RPS. He is wrong.

What is your basis for claiming H.40 is not an RPS?

Willem Post
1 year 7 months ago
Annette, Excerpt from the article: “Under RESET, 55 percent of a utility’s electricity must come from an existing renewable generation plant. By 2032, that number increases to 75 percent. Approximately 40 percent of the state’s electricity now comes from renewables, according to the Department of Public Service.” The implications of RESET are stunning. The RES of H-40 forces utilities to buy expensive renewable energy. Under the RES, utilities would be required to sell 55% of their energy as RE by end 2017, 75% by end 2032. NOTE: Energy sales from distributed RE projects of 1% at end 2017, 10% at… Read more »
Willem Post
1 year 7 months ago
Townsend, 1) You are right, 29 states + Washington DC + 2 territories have an RPS. Several of the states that still have an RPS have watered it down, some are thinking of cancelling it. Just google . The TREND appears to be not towards increasing RPS. 2) Why not be rational and state the obvious? If UNSTEADY, VARIABLE, INTERMITTENT, out-of-state wind energy at 10 – 15 c/kWh is “qualified” (in violation of the RE aficionados’ mantra “keeping money in Vermont”), then much increased STEADY, NOT VARIABLE, NOT INTERMITTENT H-Q energy at 5 – 7 c/kWh (per Dostes, who knows… Read more »
Tom Sullivan
1 year 7 months ago

Yes, I would rather sacrifice our environment in order to preserve the lifestyle to which we have become accustomed.”

I’m not a politician, but I thought it might make you feel better.

Annette Smith
1 year 7 months ago

I suggest a different photo caption: Robert Dostis, ex-chair of the House Natural Resources Committee that created the SPEED program that has been identified as a sham, explains why the legislation written by and for the utilities, developers and renewable energy advocates is necessary to fix the problems he helped create.

Kevin Jones
1 year 7 months ago
Well they certainly got the name right. After a decade of Vermont having the most fundamentally flawed renewable energy program in the country it is time to hit the RESET button and start over. The SPEED program because of the sham REC trading allowed, increased Vermont’s carbon footprint over the last decade and did not result in a net increase in renewables in New England since Vermont’s utilities were really selling our renewables to CT and MA to meet their requirements. The reason that a real renewable portfolio standard would raise GMPs and BEDs electric rates is because these utilities… Read more »
Willem Post
1 year 7 months ago
Kevin, “The SPEED program because of the sham REC trading allowed, increased Vermont’s carbon footprint over the last decade and did not result in a net increase in renewables in New England since Vermont’s utilities were really selling our renewables to CT and MA to meet their requirements.” You keep repeating and spreading the same invalid statement. The energy of the SPEED program does PHYSICALLY reduce CO2 emissions, but on a “who gets credit basis”, i.e., bookkeeping basis, Vermont should not take credit for the SPEED energy, and should not count the SPEED energy towards its RE goals, if it… Read more »
Townsend Peters
1 year 7 months ago

Mr. Jones faults SPEED for double-counting.

He then proposes that Vermont should allow the double-counting of RECs for net metering systems.

LOL.

Kevin Jones
1 year 7 months ago

Townsend you are mistaken. Double counting is when you try to count the same thing twice. What I am suggesting is accurate aggregation of a utilities customers renewables up to the aggregate utility load. Imagine 2 customers served by the same utility. If customer a has 100 kw of solar and customer b has 50 kw of solar. In aggregate the utility load is 150 kw of solar. That is not double counting it is called addition. When you add one plus one do you get two?

Townsend Peters
1 year 7 months ago

Mr. Jones, please be honest about your proposal. You propose that the customer be able to claim the solar power is renewable AND that the utility be able to do so.

Don Peterson
1 year 7 months ago

So let’s review:

A utility can buy renewable energy at 5c from Quebec and sell renewable from Vermont sources at 50c.

I wonder if that kind of state imposed price distortion will result in irrational development decisions?

And I wonder who benefits from this?

Moshe Braner
1 year 7 months ago

I would like to know why some RECs are “worth” 10 times more than others – how do they differ, and when we learn the answer, would we still think that buying the cheaper RECs is meaningful in our effort to actually pollute less? Otherwise, the RPS may be just a new configuration of the old SPEED sham.

1 year 7 months ago

Where are these new wind ‘farms’ to be built? Which towns? Who are the developers, the utilities, the landowners? Name some names.

I had been pondering Rep. Tony Klein’s statement that there would be new wind developments in the Northeast Kingdom, “but not for about 10 or 15 years.” Now it makes sense.

Annette Smith
1 year 7 months ago

On Dec. 22 Iberdrola applied to ISO-NE for interconnection studies for 96.9 MW in Windham/Grafton and 30 MW for the Deerfield Wind project. Curiously, Iberdrola’s application for the Deerfield interconnection preceded the federal judge’s ruling on that project by two days. How does a Spanish company learn of a US federal court judge’s decision before it is issued?

walter moses
1 year 7 months ago

Thank you Bruce Post. In a nutshell, you laid it all out. “Don’t it always seem to go that you don’t know what you got till it’s gone” .

Moshe Braner
1 year 7 months ago
“The department says utilities must encourage customers to run their appliances at times when energy demand is low, and when electricity costs less. Otherwise, consumption will add to the region’s peak, sending up prices and requiring investments in new infrastructure … Equipping electric appliances with smarter technology may allow the utility to dial up and down the appliances to avoid rate shocks.” There is a much simpler way to achieve that: we’ve already spent the money on “smart meters”, and they were touted as providing the ability to bill for electricity at variable rates. Why are we not doing that… Read more »
1 year 7 months ago
What a mess! This is going to turn out bad with the costs dumped on Vermont consumers and a state economy that cannot bear the burden. Going forward, developers will speed up covering our mountains with unreliable wind turbines and roadways and neighborhoods with unreliable industrial solar panels as the impacted homeowners stand helplessly by witnessing the value of their property plummet. But life will be easy for the developers because the state has no meaningful development and siting standards to impede construction or the rubber stamping approval process by the Public Service Board. Of course there will be a… Read more »
John Greenberg
1 year 7 months ago
“Yes, the cash needs to keep flowing ever faster to multi-millionaire investors in towns like Greenwich, CT. Towns where you can be absolutely assured there will be no wind turbines or solar panels to be found.” “Following an application by the Conservation Commission, Greenwich was selected by CEFIA on September 4th 2013 to participate in the Solarize CT program. Solarize Greenwich provides an opportunity for Greenwich homeowners to reduce their electricity bills by installing solar panel systems on their property at a dramatically discounted cost thanks to the power of group purchasing. Solarize Greenwich uses a tiered-pricing structure where the… Read more »
Willem Post
1 year 7 months ago

John,

Greenwich is green in more ways than one.

I have some friends who live in Greenwich. An entirely different, mostly artificial world.

1 year 7 months ago

Let’s see how long it takes Greenwich to clear cut acres and acres of forested land across the street from residences to develop industrial solar as is proposed for Rutland Town.

Maurice Morey
1 year 7 months ago
Vermont already has one of the lowest carbon footprints in the US, and 8% of that low amount comes from electricity generation. We also have one of the highest electricity costs in the US, and our economy and taxpayers can’t afford much more of this overpriced, intermittewnt wind development just to funnel more special rewards into the pockets of foreign developers such as Iberdrola, out of state land lords such as Meadowsend Timberland/ the French family, or “renewable magnates such as David Blittersdorf. Energy developers were in the top 3 political contributors to Gov. Shumlin and Iberdrola has been forced… Read more »
Willem Post
1 year 7 months ago
Anne, I do want to correct my comment to Annette, as it is based on 2011 information, instead of 2014 information that was recently released by the DPS. Here is the comment to Annette: Under the RES, utilities would be required to sell 55% of their energy as RE by end 2017, 75% by end 2032. Energy sales from distributed RE projects of 1% at end 2017, 10% at end 2032, are part of the 55% and 75% requirements. NOTE: The DPS claims, without backup numbers, RE sales were about 2,240,000 MWh in 2014, or 40% of total utility sales.… Read more »
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