Vermont utilities could lose millions of dollars in energy credits

The Legislature next session will decide whether electric utilities should be required to sell renewable energy to customers, rekindling a debate over the price Vermont consumers will pay to reduce greenhouse gas emissions.

The creation of a renewable portfolio standard would establish by law how much electricity generated from wind, solar and other renewable resources utilities must be sold to customers.

Under the state’s current voluntary goal, utilities are allowed to sell renewable power credits out of state to reduce electric rates.

Renewable Energy Credits

The credits can be sold and purchased in a marketplace, and the price of the credits can fluctuate based on supply and demand. Power producers purchase these RECs to meet state statutory requirements or goals; meanwhile, others sell the credits to reduce the cost of the renewable power they sell to customers.

SPEED Program

Sustainably Priced Energy Enterprise Development (SPEED) is a voluntary program designed to give renewable energy developers long-term price certainty for the power their projects produce and therefore encourage the development of in-state generation. Vermont will not count this power as renewable until 2017, at which point it hopes to meet 20 percent of its electricity supply with renewables.

Renewable Portfolio Standards

An RPS requires utilities to keep, or “retire,” RECs to meet statutory percentages of renewable power in their portfolio. Power producers trade RECs to meet these requirements, and pay fines if they fail to do so. States decide the value of each type of renewable energy generation and assign them to a certain “class,” which trade for different values.

But state energy regulators in Connecticut are now questioning the worth of Vermont’s renewable energy credits, or RECs. These credits, equal to one megawatt-hour of renewable energy, are traded among power producers like commodities.

The Connecticut Public Utilities Regulatory Authority will decide soon whether any Vermont RECs should count toward their state’s renewable energy requirements, official say.

Traders of these credits are also hesitant to deal in the renewable power Vermont generates though its SPEED program, which critics say will allow Vermont utilities to also apply the credits they sell toward the state’s goal, starting in 2017.

And now, some Vermont utilities fear other states, such as Massachusetts, will follow suit — creating uncertainty for the tens of million of dollars Vermont utilities save customers annually through the sale of RECs.

Twenty-nine other states and Washington, D.C., have renewable portfolio standards that require power providers to keep a certain percentage of renewable power in their portfolio. A renewable portfolio standard could create more certainty in the marketplace for RECs, utilities say.

And if done right, it might be a cost-effective way to achieve the state’s long-term goal of meeting 90 percent of its energy needs with renewables by 2050, a state official said.

On the other hand, renewable electricity currently sells for a premium and requiring its use could cost Vermont ratepayers more in the short term, critics point out.

“Dirty power is cheap. So if you’re going to address climate change, it’s going to cost money,” said David Hallquist, CEO of Vermont Electric Cooperative.

He said VEC stopped selling renewable energy credits from the Kingdom Community Wind and Sheffield Wind farms to Connecticut last year following changes to that state’s RPS. Now, he said the co-op sells nearly all its RECs to Massachusetts.

Hallquist said the co-op is not having trouble selling RECs to Massachusetts, and in 2013, sold 37,000 megawatt-hours of renewable electricity. But, he said, at some point Vermont’s ability to sell RECs will no longer exist because people will lose faith in their value.

“There is a fear that Massachusetts may reject those RECs as well,” he said.

Ken Nolan, the manager of power resources for Burlington Electric Department, said Vermont should adopt an RPS. He said Vermont’s SPEED program has outlived its usefulness and has led to confusion in the market.

“Like any financial institution, you really need clarity for the financial markets to work well. And we are in a period right now where we lack that clarity,” he said about the REC trading market.

He said the utility still has not yet sold any RECs for 2014. He said BED is waiting for the outcome of the Connecticut regulatory proceeding, but expects to sell the RECs before the year’s trading ends. In previous years, he said the utility sold RECs as they were produced.

Green Mountain Power, the state’s largest utility, sells up to 600,000 megawatt-hours of renewable energy credits annually, averaging about $30 million per year in sales that are used to reduce rates, said Doug Smith, a power planner for GMP.

The utility has not taken a position on an RPS. Company CEO Mary Powell told a crowd at a renewable energy conference last week that Vermont’s existing SPEED program did exactly what it was supposed to do.

“It accelerated the development of local renewable generation,” she said, “and it did it in a way that’s cost effective for Vermonters.”

Powell said she is confident the Department of Public Service will find a creative solution that moves the state forward on renewable energy generation in a cost-effective way.

Darren Springer, deputy commissioner of the Department of Public Service, said the state is drafting a report on an RPS to be released before the next legislative session. He said the report will outline the environmental and economic impacts of the program.

Rep. Tony Klein, D-East Montpelier, who chairs the Natural Resources and Energy Committee, said lawmakers are going to work on an RPS next session.

Klein said Vermont will be the first state in the nation to adopt an RPS that provides credit for thermal efficiency. He said the program would encourage residents to weatherize their homes and install air source heat pumps that are powered by net-metered renewable energy projects.

Though the details of the program are far from fleshed out, he expects to gain universal support for a renewable portfolio standard. He said all renewable portfolio programs allow utilities to buy and sell RECs and said the program will not have an impact on rates.

“I think that we will adopt an RPS before 2017. But I don’t see it stopping the completion of the SPEED program. And I don’t see it being a steep lift for a while. I think it will be gradual transformation,” he said.

The House in 2012 passed a renewable portfolio standard along party lines, but the bill stalled in the Senate. House Republicans this time want to make sure the RPS proposal does not affect rates.

Minority Leader Don Turner, R-Milton, said rising electricity prices are a concern for residents and the manufacturing industry. Vermont’s electricity prices, though relatively stable, are among the highest in the country, according to the U.S. Energy Information Administration.

Vermont utilities sold more than $46 million in credits, according to state documents obtained by VTDigger that show the sale of renewable energy credits in 2013. Utilities say sales vary each year based on energy output.

Turner said a renewable portfolio standard would require utilities to keep some of the renewable energy credits they currently sell.

“We may see the burden of those energy credits fall back onto the utilities,” he said. “We support renewable energy, but there has got to be a balance.”

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  • Don Peterson

    The sale of these REC is the driver that has been bringing developers from all over the world to Vermont to develop our landscape. It hasnt been our wind resource or our solar exposure either. There are better places to do both.

    When Vermont aligns itself with other states’ policies, a more rational market will ensue. Currently it is nothing more than a “gold rush”.

    • Don,

      The PSB SPEED feed-in max. of 25.7 c/kWh for solar energy is grossly excessive, as proven by the recent auction held by the PSB which had bids as low as 13 c/kWh.

      Why not do more of those auctions, instead of shoveling money to in-state and out-of-state multi-millionaires with tax shelters?

      • John Greenberg

        Willem Post blatantly misrepresents the SPEED program, and not for the first time. For details, please see the comments at this link:

        • John,

          The PSB listens to its handpicked consultant to set SPEED solar feed-in tariffs.

          He uses some convoluted method to conjure up 25.7 c/kWh as a cap. The PSB accepts!

          To-date very few projects are operating under that cap.

          As a result the AVERAGE feed-in tariff of all SPEED solar energy projects is about 27 c/kWh.

          That will go down, but VERRRRRY slowly, i.e., already-struggling households and businesses will get hosed for the extra energy costs above New England on-peak rates, which have an annual average of $0.0777/kWh.

          Divide ($97.792/yr)/(1258 kWh/yr) = $0.0777/kWh. This is the solar-energy-weighted, annual-average, on-peak, wholesale price. You came up with a simple average of the monthly on-peak prices of $0.0814 c/kWh, which, as I pointed out to you, is in error. All is explained in this article. See URL.

          The SPEED value of 25.7 c/kWh is at least 10.4 c/kWh too high! According to David Hallquist, CEO of VEC, it should be 15.3 c/kWh for systems 1,000 kW and up; the recent PSB auctions had even lesser values, as you pointed out!

          That 25.7 value is of great benefit for the risk-free tax shelters of multi-millionaires owners of large PV solar systems that are defacing Vermont landscapes, but it will excessively increase the electric rates of already-struggling households and businesses.

          The only reason for such a high feed-in tariff is POLITICAL.

          It is to attract in-state and out-of-state multi-millionaire investors, build many PV solar projects, and then crow about the “success” of the SPEED program. How much the additional burden will be on already-struggling households and business is carefully finessed with glowing PR releases.

          Hallquist, you and I are not to blame, it is the PSB which is obstinately refusing to admit its overcompensating errors!!

          You defending the PSB’s approach in ad hominem, sliming, slurring manner (“Willem Post blatantly misrepresents”) is not of merit to you.

          Did Hallquist misrepresent as well?

          Did the multi-millionaires who bid at the PSB auction misrepresent as well?

          All of them are conspiring to expose the truth?

  • Annette Smith

    You can read the filings in the CT PUC docket here

    A meeting was held in mid-July, attended by representatives of the Department of Public Service, GMP and BED. Ed McNamara of DPS said by way of introduction “we work for the governor”.

    Throughout the meeting, Vermont’s utilities and DPS argued that Vermont has no renewable energy goals.

    There was a court reporter in the room, so a transcript is available if anyone wants to pay for it. Couldn’t make this stuff up.

    • Lance Hagen


      I thought it was the DPS who set the goal of 90% renewable energy by 2050? Do they speak with ‘forked tongue’?

  • Vermont utilities have long claimed that big wind lowers energy prices. That’s only true when you can lay the bulk of the cost on ratepayers in other states. BED says they’re holding on to their RECs until the CT proceeding is done. The fact is that no one will buy their RECs which is creating a cash flow problem. Next stop — the PSB for a rate increase.

  • Mark Bowen

    I come away from this article no less confused about rpses, speeds, double counting, and the economics of energy in this state than I was before I read it. It would be very helpful if VTDigger could clarify all this for us.

    • Jeff Noordsy

      My read? We are getting screwed as both ratepayers and landowners.

    • Mark,

      This VPR article by John Dillon might be helpful to you:


      • Thanks, Scott. You’re right, the VPR article is a lot clearer.

        Bottom line to me, as those of us who have been paying attention have known for a while, is that Vermont HAS been double dipping, and the unfortunate headlong rush into industrial wind power will soon be seen as the tragic mistake that it is. I have written two books on global warming and am fully in favor of renewable energy, but this is a tough problem and demands the kind of deep thinking that the Shumlin Administration and the rest of Vermont’s liberal elite, including the icons McKibben and Bernie, can’t seem to muster. It is also complicated by the entirely too cosy relationship between state officials and the developers–money in politics, the usual problem–as we’re also seeing with Stenger and Quiros’s EB-5 project in the Northeast Kingdom.

        Ben Luce’s arguments make the most sense to me: Wind is demonstrating that it doesn’t work in mountainous New England. Solar is the way to go. It’s less expensive, has much less of an environmental footprint, and there’s a lot more of it.

        • Annette Smith

          And now we have a governor who is actively promoting wind development in the Green Mountain National Forest.

          See in which Gov. Shumlin is quoted saying “Wind projects should be built in national forests, including Iberdrola Renewables’ proposal to build a 15-turbine project on the ridge that divides Searsburg and Readsboro.”

          Iberdrola has evaluated the GMNF and identified 35 possible sites for wind turbines. If the governor gets his way, Bill McKibben’s dream of having wind turbines on the mountains behind his home in Ripton — in the Breadloaf Wilderness — could come true.

    • Mark,
      The more politicians and other know nothings get involved in energy, the worse it gets.

      The same is true with education and healthcare.

  • Kevin Jones

    There are a lot of misperceptions that have been created in Vermont in regards to our fundamentally flawed renewable energy policy. First Diggers description of RECs is not accurate. Once RECs are sold the power sold to Vermont customers is no longer renewable. Second we should not allow SPEED to continue for even another year since it does not provide for a net increase in Renewables, even with REC sales it has raised our electric rates and it is increasing Vermont’s greenhouse gas emissions. Economically and environmentally it is one of the most flawed energy policies in the nation. Our legislators and the Shumlin administration should end this sham policy that actually increases Vermont’s carbon footprint. While GMP may now say they are undecided on an RPS they are one of the primary promoters of the current sham renewable policies and a historic lead opponent to an RPS. The thousands of Vermonters who marched in NYC for Climate Justice (and the many thousands who stand with us) should demand that GMP and our legislature end the SPEED sham now and put in place a meaningful RPS and other pro-climate policies. The time for action is now not years later.

    • Kevin,

      “Once RECs are sold the power sold to Vermont customers is no longer renewable.”

      You are a professor at a law school. That statement is pure nonsense, and you know it, because I have pointed it out to you before. If that is what you “teach” the law students, I feel sorry for them.

      Repeat after me: The selling of RECs transfers the right of claiming the RE for yourself.

      The RE remains RE!!! and does reduce CO2!!! in Vermont!!!

      SPEED is NOT increasing CO2 emissions in Vermont, even with the RECs being sold to out of state entities. Only the right for Vermont to claim the RE is given up.

      When will you finally separate the physical from the bookkeeping?

      The RPS would be an adverse development for Vermont. States with an RPS and many wind turbines saw their rates increase at a greater percentage than states without an RPS.

      Do your research before mouthing off. Your off the wall statements will get Vermont’s economy in further trouble.

      Whereas, they may impress some or all of your gullible students, and some of the rest of the public, but not so with energy systems engineers, i.e., people in the know.

  • Paul Denton

    Eventually the high cost of intermittent power sources such as wind and solar are going to filter through to the ratepayers. Us. I assume there will be some kind of special deal made to placate Global Foundries, because if there isn’t, Vermont is simply noncompetitive when it comes to electric power costs and in the long term we can kiss those 4,000 jobs goodbye. The governor and the legislature should be doing things that will bring down the fixed cost of our power infrastructure, not increasing it. We are already among the most expensive states in the country for electric power.

  • Vermont electricity that is bundled with REC’s and then sold cannot be considered “Green” power as Kevin Jones reports above. Even though this increases the financial incentives to Vermonters to go solar, the cost of solar panels continues to drop by double digits for the last two years making it imminently more affordable as we go forward.