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.
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.”
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.
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.