Future of clean energy investment fund uncertain

A conveyor belt at Norwich University's new $6.2 million heating plant carries wood chips up from a giant bin to two massive furnaces whose steam production provides 97 percent of the entire campus' heat and hot water needs. Photo by Andrew Nemethy

Conveyor belts carry wood chips into a heating plant in Vermont. File photo by Andrew Nemethy

A fund meant to spur small-scale renewable energy developments will expire by 2018 unless legislators choose to find another source of revenue, according to a legislative report published this month.

The fund’s fiscal year 2017 budget anticipates around $230,000 in revenue, but that’s primarily from loan principal, interest repayments and federal grants.

Until 2014, the fund took in as much as $7 million a year, primarily from payments Vermont Yankee made in return for storing used nuclear fuel. That source of funding ceased after the nuclear plant was shuttered in December 2014. The fund now has more than $5 million available.

Without a new funding source, the fund will be spent entirely by 2018, the report says.

From the clean energy fund report

From the clean energy fund report

The fund’s board members plan to press the Legislature this year for continued funding, said the board’s co-chair, Sam Swanson. Board members hope to spend the money in upcoming years in support of wood-based heat and electricity, Swanson said. Further investment in biomass projects could accelerate Vermont’s flagging forestry industry, officials said.

“We’re going to be gathering material that would support (legislators) who want to talk about it in a meaningful way,” Swanson said. The fund “did a lot for moving the solar market forward and building a pretty robust solar industry in Vermont. It certainly didn’t do it alone, but we think it played an important role.”

“We’re hoping funds can be deployed in a similar way … to nurture and sustain a vibrant biomass-based industry in Vermont,” Swanson said.

Despite having no identified funding source, the fund’s board members this year crafted their budget around an assumption that it would receive at least $2 million each year.

Board members felt strongly that the fund has accomplished a great deal and should continue operating, so they chose “to plan on the basis of the Legislature eventually providing funding,” Swanson said.

Board members have for years expected funding to run out, Swanson said. They’ve sought recently to identify new funding sources, but that question has remained an open and pressing one for years, he said.

Supporters say the fund represents a good investment. It boasts in recent years of having spurred $5 to $6 of private investment for every $1 the fund invests, according to the last two annual reports.

The fund awarded $1.87 million in 2016 in grants, incentives and contracts, and the clean energy projects this money supports cost a total of $11.79 million, according to the report.

While the fund’s cash position diminishes, its support has increased for wood as a source of electricity and heat.

The fund is most effective when its resources are channeled into a single energy sector or technology, the fund’s five-year 2013 strategic plan found. In 2015, the fund’s managers spent more than $1.5 million on wood-energy projects.

Skeptics sometimes say that burning wood isn’t a “clean” way to produce electricity, said fund manager Andrew Perchlik, but administrators have embraced wood energy because it dovetails with the fund’s goals.

Clean energy is often defined as renewable energy in concert with energy conservation efforts, Perchlik said, and the Legislature has defined wood heat and wood-produced electricity as renewable forms of energy.

Wood-fired stoves have advanced to the point that they’re highly efficient and they produce relatively little pollution, Perchlik said.

Furthermore, investment in wood-fired heating is a good use of the fund’s limited remaining money, because it would have the added benefit of reviving the state’s forestry industry, supporters say.

This year, Vermont’s clean energy fund paid nearly $1 million for projects relating to wood heat, according to the report.

The CEDF awarded $903,054 in 2016 to 16 different entities for what fund administrators call “advanced wood heating.” These awards were split almost evenly between infrastructure for wood pellet delivery (trucks, pellet mills and storage) and installation of wood-fired heating systems.

The $428,976 awarded for wood-heat systems went to schools and affordable housing projects, which contributed an additional $3.7 million to the projects.

Of the $474,068 that went to pellet infrastructure, the largest CEDF award totaled $250,000 for a new pellet mill in Lunenburg that is expected to cost between $4 million and $5 million.

At the same time as the fund ramped up support for wood energy, the fund contributed almost nothing to the development of solar power in the state. Solar incentives from the fund aren’t needed any longer because the solar industry is thriving in Vermont, officials say.

From the clean energy fund report

From the clean energy fund report

In 2014, the Clean Energy Development Fund gave incentives for 1,000 solar projects, and awarded monies to only 20 solar power projects in 2016. Developers nevertheless sought nearly twice as many solar project permits in 2016 as they did in 2014.

With the fund’s aid, Vermont’s solar-power industry grew to the point “where we were confident the market would continue to escalate without our incentives,” Perchlik said.

The fund has sufficient money for 2017 and 2018, and the governor will give further consideration to its budget in his state budget for 2019, said Rebecca Kelley, Gov. Phil Scott’s communications director.

A $1.2 billion power cable that Transmission Developers Inc.-New England has won approval to sink beneath Lake Champlain would pay $5 million to the fund annually, according to the terms of its approval by state agencies. But that money will materialize only if the cable is built.

The cable will “absolutely” be built, TDI co-founder and CEO Don Jessome said through a spokesman. TDI is competing with several other companies for a contract to supply Massachusetts with 1,200 megawatts of clean energy, and bids are due April 1.

The Clean Energy Development Fund boosts local economies and makes the benefits of renewable energy more affordable for Vermonters, said Public Service Commissioner June Tierney. Tierney said she and other members of the Scott administration are “committed to continuing the important work of the clean energy fund.”

Mike Polhamus

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