Critic says utilities sell renewable energy credits out of state, double count value of "green" electricity

Critic says utilities sell renewable energy credits out of state, double count value of “green” electricity

South Burlington's new twenty-five acre solar farm promises to generate a reported 2.2 megawatts of electricity for the state, enough to power roughly 450 homes. VTD/Eric Blokland

South Burlington's new twenty-five acre solar farm promises to generate a reported 2.2 megawatts of electricity for the state, enough to power roughly 450 homes. VTD/Eric Blokland

In legislative committees on natural resources and energy this session all the buzz is about two bills that would require mandatory renewable portfolio standards. Until now, Vermont utilities have voluntarily purchased renewable energy; the utilities receive credits verifying that the power is renewable and then they sell most of those renewable energy credits to other utilities out of state.

Under several new bills before the legislature utilities would no longer be allowed to sell as many renewable energy credits to other utilities out of state. Other New England states mandate that utilities to show they have a certain amount of these renewable energy credits. Vermont doesn’t require that utilities retain the credits.

A renewable portfolio standard is a mechanism that requires electric utilities to supply customers with a certain amount of “renewable” power. If utilities do not produce a set percentage of renewable power in their total load, or “portfolio,” they are required to pay a fine essentially known as an alternative compliance payment.

According to the Federal Energy Regulatory Commission, 29 states and the District of Columbia have renewable portfolio standards and goals. Vermont is the only New England state without one.

Although a statute has been on the books since 2005, utilities have not been required to purchase “renewable” energy per se. Instead, the state set goals, and if utilities do not meet them, a mandatory renewable portfolio standard kicks in in 2013 if utilities did not meet these goals.

Vermont’s approach encourages developers to build renewable energy projects like wind and solar farms without requiring utilities to keep what are called Renewable Energy Certificates, or “RECs.”

When a renewable electric generation project sells electricity, it sells the juice — and it sells the value of the credits separately. These “green” credits are basically a label that utilities buy with the power to verify it meets “renewable” standards set by a state.

The proposed Vermont legislation is slated to shake up the whole system by requiring utilities to keep some of the credits, which they currently sell to other states.

Paul Belval is an attorney in Connecticut whose firm Day Pitney is counsel to the New England Power Pool, the organization that owns and operates the renewable energy credit system in the region.

Belval compares the regional transmission grid to a bucket of water. You can poke a bunch of holes in the bottom of the bucket and drain it into cups, but you cannot pinpoint the exact hole the water came from. In a similar fashion, it is essentially impossible to determine where power comes from once it reaches the grid. Enter the RECs. When someone buys power from a generator, they also buy the RECs. This is a way of accounting for how much renewable energy there is out there.

“The whole issue here is in an integrated transmission system, it is not possible to know which electrons come from which generator,” Belval says.

This is where Vermont comes in. The state’s Sustainably Priced Energy Enterprise Development program encourages utilities to obtain a percentage of their power from qualifying renewable energy projects in the state. The utilities can then sell the credits to other states, and in the majority of situations, this is what happens. The energy counts toward the SPEED program, and utilities can sell the RECs for cash to other states.

Everyone wins, right? Not quite.

Kevin Jones, Smart Grid project leader for the Institute for Energy and the Environment at Vermont Law School, says this double counting is a sham.

“The fundamental problem with the SPEED program is it’s a brown power program, not a green power program because it encourages utilities to sign contracts with renewable energy developers, then it allows them to sell the RECs out of state rather than to keep them for their customers’ benefit,” Jones says.

Jones, who said he does not represent the law school’s position, has been an outspoken critic of the program.

“Traditionally what states have tried to do is to allow their customers to purchase clean renewable energy,” he says. “In order to do that, the RECs must be procured and retired for the benefit of customers.”

Allowing renewable energy to be counted once for SPEED and once for a renewable portfolio standard undermines the confidence of Vermont consumers who think they are buying green power, when it is technically “brown” power from the grid — meaning it comes from coal, nuclear or some other nonrenewable source, according to Jones. If Vermont is going to allow utilities to sell RECs to Massachusetts and Connecticut (where the majority end up), it should not call the SPEED program a renewable energy program, he says.

“If the goal of the SPEED program is to procure renewable energy for use by Vermonters, that goal is not achieved, given sale of Renewable Energy Credits out of state,” Jones said. “If the goal is to procure brown power for Vermonters at high rates but provide cash payments to in-state renewable developers, then the SPEED program is very successful.”

If Vermont really wants to procure renewable energy for its residents, it needs an renewable portfolio standard, Jones says.

The Costs and the Compromises

Despite its critics, for utilities, like Green Mountain Power, the Vermont system has been successful, says spokesman Robert Dostis.

The SPEED program requires utilities to enter contracts with developers who are building renewable projects, providing them some level of certainty that they will be able to pay off the costs of construction.

“SPEED is working,” Dostis says. “If the goal of a renewable portfolio standard is to promote more renewable generation, SPEED has worked very effectively to do that.”

Selling the credits out of state also helps keep rates down for Green Mountain Power customers, Dostis says. If the goal is to claim renewable energy credits, he says, there are cost implications.

The value of the Renewable Energy Credits is not chump change. Dostis says value RECs for projects that will go online in 2013 are worth about $10 million in today’s market. If the utility had to retire those RECs, it would represent a 4 percent rate increase for customers, according to calculations from the utility.

The catch for utilities is that once they sell the RECs, they cannot call the power renewable any more under Federal Trade Commission rules called Green Guides. Once they are sold, even though the power might be bought from a wind farm, it is technically “brown” power off the grid made up of some amalgamation of fossil fuels and nuclear. It is also cheaper.

If the state implements a renewable portfolio standard, power from new projects like the controversial Kingdom Community Wind project in Lowell and the Granite Reliable Power Windpark in New Hampshire would be more expensive since the utility could not sell the credits, Dostis says.

Some power in the state is technically “renewable” already. For example, Green Mountain Power has a program where customers can opt to pay more and retire the RECs. Otherwise, they are sold to other New England states.

John Spencer facilitates the SPEED program under an appointment from the Public Service Board. He gave testimony last week along with many others. Spencer says most, but not all, credits from SPEED projects like Sheffield Wind are sold to Massachusetts or Connecticut.

Spencer emphasizes that he is neutral on whether the state should shift to a mandatory RPS. One advantage that it will lose, he says, is the ratepayer cost savings.

“I think as a theoretical policy issue, people like a renewable portfolio standard,” Spencer said. “It’s complex. It’s global. It’s very enticing to them for those reasons. From a practical standpoint, the State of Vermont is already doing a good job of incentivizing development of renewable power.”

After all, utilities could choose to retire the RECs in state to retain the environmental attributes. The just don’t.

The Vermont Department of Public Service and the Public Service Board have weighed in as well.

In the Comprehensive Energy Plan, released in December, the department recommended a renewable portfolio standard with a 75 percent renewable goal by the end of a 20-year period.

Department of Public Service Commissioner Liz Miller said including all “renewable” sources in the 20-year target rather then making distinctions between different types (for example large versus small or new versus old) would help smooth the rate trajectory.

“It’s an all-in suggestion by the department in the energy plan that rather than creating a number of carve-outs or technology preferences or age preferences that the Legislature instead focus on what we heard Vermonters wanted in the energy planning process,” Miller said. “That was clean energy that helps reduce greenhouse gas emissions that relies on our natural resources, rather than the system we have now where renewable energy can be built here even though the renewable credit attributes can be sold out of state.”

A renewable portfolio standard does not come cheap. In the Public Service Board report to the Legislature, it estimated a proposed RPS would cost between $311 million and $435 million above the status quo — a number highlighted by some conservative politicians and business groups as a reason not to implement an RPS.

For now, the two committees begin the process of grinding through the muck to create legislation.

Sen. Ginny Lyons, D-Chittenden, is the chair of the Senate Natural Resources and Energy Committee. She introduced renewable portfolio standard legislation this session.

During a break between committee presentations, Lyons said the challenge is achieving a balance between steady electricity rates and ensuring Vermont does its share of reducing its carbon footprint.

“We want to make sure that both ratepayers and utilities are protected economically,” Lyons said. “Allowing for RECs to be used at will by the utilities may not be in the best interests long term for ratepayers, and i think that’s what we’re hearing, that we need to make adjustments.”

The critical issue, Lyons said, will be offsetting environmental effects. This means possibly redefining Hydro-Quebec as a separate tier from other renewable sources and clarifying differences between large and small projects in state as well.

Lyons said the House will most likely take the lead on introducing a renewable energy bill to the floor.

Alan Panebaker

Leave a Reply

27 Comments on "Critic says utilities sell renewable energy credits out of state, double count value of “green” electricity"


Comment Policy requires that all commenters identify themselves by their authentic first and last names. Initials, pseudonyms or screen names are not permissible.

No personal harassment, abuse, or hate speech is permitted. Be succinct and to the point. If your comment is over 500 words, consider sending a commentary instead.

We personally review and moderate every comment that is posted here. This takes a lot of time; please consider donating to keep the conversation productive and informative.

The purpose of this policy is to encourage a civil discourse among readers who are willing to stand behind their identities and their comments. VTDigger has created a safe zone for readers who wish to engage in a thoughtful discussion on a range of subjects. We hope you join the conversation.

Privacy policy
Sort by:   newest | oldest | most voted
Randy Koch
5 years 12 days ago

This article is incomprehensible! The bureaucratese needs to be translated, in particular the blob-like term, “renewable portfolio standards”

It’s such an important subject and there were no apparent space constraints. Please do a re-write for the benefit of those not baptized into the jargon-laden cult of energy pricing.

5 years 12 days ago

Hi Randy,
Thanks for your comment.
We took a stab at making this very complicated topic a little more comprehensive.

5 years 12 days ago
The more the state gets involved in energy, the more expensive it gets per kWh. There must be hundreds of state employees, legislators, consultants, lobbyists, vendors, tax shelter specialists, project developers, etc., spending several hundred thousand hours per year “doing something about energy and global warming and climate change.” The above article is all about government programs producing expensive energy and not a word about energy efficiency. A much more economically-viable and environmentally-beneficial measure to reduce CO2 would be increased energy efficiency. A 60% reduction in Btu/$ of GDP is entirely possible with existing technologies. Such a reduction would merely… Read more »
Doug Hoffer
5 years 12 days ago

I guess you missed the fact that Efficiency Vermont spends $40 million per year on electric efficiency.

And that the Leg. passed S.94 five years that would have created the all fuels efficiency program ($490m in savings; 1.8 million tons of avoided CO2; tens of thousands of homes & businesses retrofitted; etc.). Jim Douglas vetoed that bill.

The point is that the legislature has been supporting efficiency for years.

5 years 12 days ago

No doubt Robert Dostis of Green Mountain Power likes the current program. He was chair of the House Natural Resources and Energy Committee when it passed the SPEED legislation that allows utilities to get away with telling customers that projects like “Kingdom Community Wind” are renewable energy for Vermonters even though GMP is selling the RECs. After getting the legislation through, Dostis went to work for GMP. Very cozy, the revolving door is alive and well in Vermont.

5 years 12 days ago

You miss the fact that the EV way of energy efficiency is inefficient, that 65% of the $40 million/yr is spent on salaries, benefits, office expenses, printing fancy reports that are, in my opinion, not worth the paper they are printed on. That leaves about $15 million to do EE projects.
The state should provide DIRECT cash grants to LOWER income households to make THEIR houses more energy efficient, say 20% of the cost of a project. About $100 million of EE projects would be the result each year.
Would that not be better than a measly $15 million?

Doug Hoffer
5 years 11 days ago
Not exactly. Read more closely. Table 2.1.3 of the latest report shows the following for 2010 (total est. expenditures of $32.9 million): $14.5 million for Incentives $6.9 million for Technical Assistance (key for businesses) $4.4 million for “Services & Initiatives” (supports program delivery) $415 thousand for “ISO-New England” (cost of EVT’s participation in the forward capacity market, which brings revenue back into the state to reinvest in more energy efficiency) Once adjusted, all operating costs, including marketing, business development, admin., IT, etc. were $6.7 million (20%), which is half of what you asserted. As for whether EV is efficient, I’m… Read more »
5 years 12 days ago

The article IS comprehensible for those who are familiar with the issues.
There is indeed double counting, which sounds benign, whereas, it is a sham.
It was done by the “wise” ones in the legislature by DESIGN, not by accident.
All this takes place more or less behind closed doors.
The people who elected those folks never were involved in a meaningful way. Only people in the know understand the implications. Crony-capitalism-energy policy at its messiest finally revealed.
That is why government should get out of the energy business a.s.a.p., before more damage is done to Vermont’s economy.

Avram Patt
5 years 11 days ago
I’ll try to be brief: 1. WEC has been selling Renewable Energy Certificates, primarily from our Coventry landfill methane plant, since it began generating. We not only disclose that, but we informed our members regularly about that. We do not double count. Whether Vermont begins to require utilities to retire (not sell) some portion of their RECs or not, there is no secret and no sham. 2. Revenue from RECs sales goes to ratepayers. It reduces what WEC otherwise needs to collect in rates. 3. Regarding energy efficiency in low income homes, readers including Mr. Post should be aware of… Read more »
Avram Patt
5 years 11 days ago

I meant to include the Weatherization link:

Steve Wright
5 years 11 days ago
And we need to continue our quest for efficiency since the cheapest kwh is the one not used. No argument there. With regard to the proposed RPS legislation, until the PSB includes the environmental costs of each proposal there will never be an informed choice. We must know the losses as well as the gains. What is a mountain worth? What is the cost of an increased flooding risk? The roads and bridges along tributaries originating from the Lowell Mountains are primarily those of Albany, Craftsbury and Eden, not Lowell, with some exceptions on the west side of the mountain.… Read more »
5 years 11 days ago

Burlington Electric Department sells RECs but absolutely does not double count. We make it very clear to our customers that we are unable to claim certain power as renewable because the RECs have been sold elsewhere, which means we have sold the right to claim the power as renewable. Because of the REC sales and therefore lower rates to our customers we are able to pursue more renewable energy projects. And in the meantime our efficiency efforts continue at a very brisk pace!

5 years 11 days ago
Avram, I am aware of the Vermont measly weatherization program. The $40 million of EV should be rolled into it, 20% cash subsidies should be granted to lower income households, say with incomes less than $50,000/yr. It will cause $200 million of EE projects per year for the households and businesses most vulnerable to rising heating and electricity costs, not due to OPEC, but due to legislators doing “constituent service” for renewables vendors, project developers and financial types setting up tax shelter LLCs, etc., by promoting inefficient renewable energy projects at the cost of higher electric rates for already strapped… Read more »
Kevin Jones
5 years 11 days ago
Avram is correct that there is nothing inherently wrong with a utility selling Renewable Energy Certificates if they do not claim that their customers are receiving renewable or low carbon energy from that resource. WEC’s treatment of the Coventry landfill project is an example of transparent communication with customers regarding a sale of RECs. The fundamental problem is with the Vermont Speed program which creates the illusion that Vermonters are purchasing renewable energy from these resources when the Renewable Energy Certificates are largely sold to meet the renewable goals of the Massachusetts and Connecticut Renewable Portfolio Standards. The same MWH… Read more »
5 years 11 days ago
Doug, Here are the number from an earlier report. According to its audited financial statement of 2009, Efficiency Vermont spent $25.6 of our electricity surcharges that year; $8.6 million went for salary related expense; $0.5 million went for conferences; $0.6 million for copying and printing. $9.5 million went for “incentive payments and rebates”. It seems $6.4 million is not accounted for! The 2011 budget was about $40 million. Prorate 40/25.6 x 8.6 = $13.5 million salary related. A mentioned 65% for salary and office expenses, or $26 million, leaving $14 million for “incentive payments and rebates”. Prorate 40/25.6 x 9.5… Read more »
5 years 11 days ago
Doug, Another way to calculate salary related expenses is as follow: VEIC, including EV, has about 180 people on the payroll. Payroll cost = 180 x assumed average salary plus benefits $75,000/person = $13.5 million/yr Various other estimated expenses for offices, travel, rent, supplies, etc. =$12 million. Incentives payments and rebates = 40 (approximate 2011 Budget) – 25.5 (approximate 2011 expenses) = $14.5 million. There are energy efficiency consulting engineers in Vermont who perform about the same services as EV. They don’t work in a vacuum; they often communicate with each other to provide the best services to their clients.… Read more »
Doug Hoffer
5 years 11 days ago
Among other odd statements, you said BED was not successful. In fact, BED’s efficiency efforts have been very successful. It would appear that your unwarranted animus toward Efficiency Vermont has bled over to BED. You might consider getting the facts before you spout off. As for EV’s budget, you appear to have ignored the information I presented above. It seems clear that you really don’t understand the challenge and complexity of actually delivering effective services in this area. If you did, you wouldn’t argue that we don’t need Efficiency Vermont. Try this: If it’s not necessary, then why has no… Read more »
5 years 11 days ago
Doug, My engineering standards for evaluating BED’s success are likely different from yours. I did read your numbers. I think my numbers are better. May be you should verify your EV personnel cost numbers with those of private consulting engineering firms; “trust, but verify”.. I do understand challenge and complexity and delivering engineering consulting services, as I have done so for about 30 years. Do you have any such experience to use as a basis for judging the experience of others? Other states have smart people who have set up EE programs; it is not easy to judge if Vermont’s… Read more »
Doug Hoffer
5 years 10 days ago

You may like your standards (whatever they are) but I’ll settle for those of the Public Service Board and ACEEE, which ranks VT 5th in the country overall and 1st for energy efficiency (see page vi)

btw – your comment about “houses with icicles hanging off their eaves” raises questions about your knowledge of the issue; Efficiency Vermont does not deal with heating fuels, only electricity (nor does it have anything to do with enforcing energy codes, what few we have)

5 years 10 days ago

It is good EV does not deal with heating fuels; one 5% charge on monthly electric bills with practically no benefit to most homeowners and businesses, is already too much.
Households and businesses, already strapped because of too high taxes, slow economic growth, slow income growth, flood damage, etc., would have another 5% or greater charge added to their monthly heating bills.

Doug Hoffer
5 years 10 days ago
I guess you never read the report by GDS for the DPS on the all fuels efficiency bill. The program would have saved $490 million for businesses and homeowners; avoided 1.8 millions tons of CO2; created almost 200 jobs; and resulted in improvements to tens of thousands of homes. If you don’t think that makes sense, then you’re just like Jim Douglas who vetoed the bill. We really could have used those savings. So how come the market hasn’t delivered those savings? I guess you know better… BTW – love your “practically no benefit” comment; it shows once again that… Read more »
5 years 10 days ago
Doug, EV reduces energy at a higher cost per kWh than if that same $40 million were used to provide 20% cash grants directly to lower income households (say less than $50,000/yr) and small businesses. That $40 million would lead to $200 million of EE projects per year. Assuming an initial average payback of 5 years (some projects would pay in a few months, others in, say, 10 years), then average savings would be $40 million/yr. Doing things as efficiently as possible, including increased EE, is a virtue. A much more economically-viable and environmentally-beneficial measure to reduce CO2 would be… Read more »
Randy Koch
5 years 7 days ago
Thanks for the skillful re-write, Anne. I think I understand now: This thing called a REC is really just a right to pollute. Mass or Conn mandate a minimum amount of renewable energy their utilities must provide. But instead of meeting their entire mandate, their utilities buy these rights to pollute and get a pass. It’s sort of like when in Act 250 a developer is allowed to trash wildlife habitat or prime agricultural soils provided that he provide an “offset” by buying conservations easements on other habitat or soils and thus supposedly “protecting” these from some hypothetical development they… Read more »
5 years 7 days ago

Your comments are right on the mark. That is why Vermont’s oligarchs hire expensive PR firms, to help sell their wares and projects, to get a bill passed. Politicians participate by “selling” those bills to the voters, or get reelected.
These PR firms have university-trained psychology majors who are experts at strategizing the message, playing mind games, befuddling people, keeping things fluid, having them think up is down and down is up. The tobacco companies became experts at it.

Kevin Jones
5 years 6 days ago
Randy, Renewable Energy Certificates/Credits are definitely not rights to pollute. They are the documented rights to the output of renewable generation. The entity that holds the RECs pays the market premium for the cost of renewables over conventional power and thus is the entity with right to claim that they purchased renewable energy. A utility that has a SPEED power contract without renewable energy certificates actually holds a brown power contract (or in New England the residual mix of generation less the renewable energy e.g. oil, coal, gas and nuclear generation). This is why customers of Vermont utilities with state… Read more »
4 years 11 months ago

It was reported that Al Gore was living in an energy hog mansion.
Instead of redoing the mansion (he is a big-time multi-millionaire who could afford to showcase his greenness), he took the easy way out and bought RECs. He proudly proclaimed the fact.

Kevin Jones
4 years 11 months ago


While i would always recommend investing in cost effective efficiency first and then supporting renewables I am not sure what serious point you are making. If purchasing renewable energy credits is such an easy way out why would you not support ending the illusion of a SPEED program and implementing a more credible renewable portfolio standard?

Thanks for reporting an error with the story, "Critic says utilities sell renewable energy credits out of state, dou..."