Ben Luce: Vermont's REC shell game

Editor's note: This commentary is by Ben Luce, a longtime renewable energy advocate and professor of physics at Lyndon State College, where he conducts research on renewable energy technologies and policies.

Recently, a major player in Northeast power markets, NextEra Energy LLC, announced it will no longer recognize the validity of renewable energy credits, or “RECs,” for projects whose power is also counted towards Vermont’s renewable energy goals under the SPEED Program (Sustainably Priced Energy Enterprise Development (SPEED) Goals). What’s up with this? Is this a potential problem for Vermont?

In fact, this development is a clear sign that many throughout the Northeast are finally realizing that Vermont has grossly bungled its attempt to encourage renewable energy.

Vermont actually bungled renewable energy development in two ways. First, the Legislature created a blatantly fraudulent program whereby utilities in Vermont are allowed to sell their RECs to utilities in other states, while still counting the same renewable energy toward Vermont's renewable energy targets. This double-counting policy presently underlies almost all large-scale renewable energy development in Vermont, but will now likely crumble as people elsewhere realize they’ve been duped.

To be sure, this is not just a small oversight in policy development. Vermont's approach was explicitly developed by the Legislature and defended strongly against critics. Vermont’s policy, though, undermines the entire REC trading system associated with the legitimate Renewable Portfolio Standard (RPS) programs in 29 other states, the main driver of renewable energy in those states. All other states with RPS programs require utilities to retire any and all RECs counted towards compliance. Only Vermont’s does not.

Double counting RECs hides the true costs of certain renewable energy sources, such as ridgeline wind power, giving Vermonters a false impression of the comparative costs of different sources.


Ironically, Vermont’s policy also has the effect of suppressing local renewable energy generation in Vermont, such as residents investing in their own systems, because it gives Vermonters the false impression that they are already being supplied with renewable energy by their utilities. Simultaneously, it suppresses renewable development in states to which Vermont RECs have been sold, because utilities in those states are now off the hook for developing more renewables locally.

Worse, double counting RECs hides the true costs of certain renewable energy sources, such as ridgeline wind power, giving Vermonters a false impression of the comparative costs of different sources. This in turn distorts the choices people make. For example, Vermonters have been given the impression in statements by Vermont utilities that ridgeline wind power is the cheapest option their utilities have, when in fact these statements were largely based on the additional revenue created by RECs. In reality, it is now plain, and was clearly foreseeable years ago, that locally sited solar generation would be more cost effective, especially if transmission line costs for extensive wind development are fully factored in. Solar also has much lower environmental impact and vastly more real potential, by a hundredfold, to reduce emissions in the Northeast. But perception of these truths was precluded deliberately via Vermont’s shell game of double-counting of RECs.

Now that the game is up, though, Green Mountain Power and other utilities will hopefully be required to reimburse other states for the many tens of millions of dollars they have enjoyed in RECs sales. Such an action would indeed force Vermonters to fully pay for their renewable energy, but this would be the honest path forward. Moreover, it will hopefully spur the development of a legitimate renewable portfolio standard in Vermont, and also renewable energy generation that Vermonters truly support.

Vermont also bungled renewable energy development by creating a permitting process for renewable energy projects (to go hand-in-hand with its RECs policy) with essentially no real environmental protections, no real planning process or comparative resource analysis, and one that makes any kind of real community input or control essentially impossible. This process, created by Section 248 of state law, stands in sharp contrast to other Vermont environmental policies such as Act 250. Under Section 248, the Public Service Board can sidestep virtually any environmental standard or community opposition by simply deeming a project to be “in the public good.” The PSB can also greatly suppress public input by simply sharply limiting the kinds of input communities and other concerned parties are allowed to address in their testimony before the board.

This kind of heavy-handed policy may have made more sense in the past when new electrical generation facilities and transmission lines definitely needed to be built to serve this or that community. Renewable energy resources are vast, however, and there are myriad ways to develop renewables, so there is in fact no compelling reason that any particular renewable energy project be built. What is truly needed is a very comprehensive and open vetting and planning process, with maximal environmental protection and community input. Such a comprehensive and open approach might indeed inhibit some projects and even some types of renewable energy generation, but this is actually good, and will actually help and not impede renewable energy development as a whole by ensuring that the best choices for are made.

In Vermont though, vested interests created a system that insulates them from any real community, economic and environmental oversight. This situation is really a disaster for renewable energy development and for Vermont’s environment, economy and social harmony. Instead of becoming a model of renewable energy development for other states, Vermont has become precisely the opposite -- an untrustworthy pariah.

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