Utility companies in Vermont are preparing to meet the state’s new renewable energy standard by hoarding cheap hydro-energy credits and selling premium solar and wind certificates to neighboring states that don’t recognize hydro power as renewable.
With the passage of Act 56 this year, Vermont can claim to have a renewable energy standard on par with other New England states.
But as utility companies prepare to meet the state requirement of being 55 percent renewable by 2017, some are doing so by stocking up on hydro-based renewable energy credits not honored in neighboring states.
“We have 55 percent renewables coming from Tier 1, and the new requirement is we have to have RECs to back those up. … The way we’re handling that, of course, is we’re buying the cheapest hydro RECs and selling the more expensive solar and wind RECs,” Dave Hallquist, CEO of Vermont Electric Cooperative, told Vermont Watchdog.
Along with several other states in the Northeast, Vermonters agreed to limit carbon emissions that some blame for global climate change. The goal is to encourage alternative energy production that doesn’t depend on fossil fuels, such as wind and solar.
To track the environmental benefits of alternative sources, utilities across New England buy and hold a certain number of renewable energy credits to meet state standards, as tracked by the New England Generation Information System (NE-GIS). Companies with credits to spare have the option to sell them to other states. In Vermont, REC selling is a $50 million dollar enterprise that helps subsidize expensive wind and solar energy.
However, critics say Vermont’s embrace of hydro-based RECs unfairly tilts the balance of trade in its favor.
“Now instead of having no requirement, we have a requirement that can easily be met with second-string RECs from Hydro Quebec, just so we can say we have a standard,” said John McClaughry, vice president of the Ethan Allen Institute. “But some smart guy in Connecticut, or wherever the broker is, is going to say, ‘Wait a minute, you’re still not playing square with us. You’re selling us the good stuff and using junk paper to satisfy your own requirement.’”
According to McClaughry, meeting state requirements with RECs not recognized in neighboring states amounts to playing by different rules.
“(Vermont’s new standard) satisfies the complaints in Connecticut, at least at first impression: ‘All right now, Vermont’s done what we have done, Vermont has passed a renewable energy standard, and we have a renewable energy standard. So all’s fair and square,’” he said.
“Except when they look in the fine print, they’re going to find out we’re satisfying ours with el-cheapo hydro RECs that they wouldn’t except. Then we have left over all the high quality premium RECs from wind and solar, which we’re selling.”
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Hallquist says as long as hydro power counts as renewable in Vermont, utilities are wise to count those RECs toward state goals while selling high-priced solar and wind RECs to neighboring states.
“Hydro RECs are available out there on the market, and the reason for that is because Vermont recognizes hydro as a renewable power source. So if those are available, why wouldn’t we buy those and sell the more expensive solar and wind ones? The market’s out there for solar and wind. We’re still renewable,” he said.
Since Vermont Electric Cooperative sells about 450,000 megawatt hours of power a year, meeting the 55 percent renewable target by 2017 means the company will have to stockpile about 247,000 RECs to back the renewables in its portfolio. Asked the company could meet all or most of its REC requirements using hydro RECs, Hallquist replied, “Yeah, we think so.”
Annette Smith, director of Vermonters for a Clean Environment, called Vermont’s REC selling fraudulent.
“I think it’s outrageous. … This is basically a shell game,” Smith told Vermont Watchdog.
“A few years ago there was a discussion in Vermont about a legitimate renewable portfolio standard. At that time, it was always assumed that there would be a schedule for retiring the RECs (in state) for the existing projects. … And then along comes this H.40 bill, and I learned that the primary difference in it was that, previously with SPEED, Hydro Quebec non-RECs couldn’t be used for compliance, and now they’re going to make it so virtually all the renewable goals of the state can be met with Hydro Quebec low-value environmental attributes that have no value elsewhere in New England,” she said.
Smith, who has lived off the grid for decades and is a staunch supporter of small-scale renewables, said most REC selling is scandalous, since RECs sold out of state preclude Vermont’s solar and wind farms from counting toward Vermont’s renewable energy targets.
“What it means now is these big projects — like the Bennington project or like the Windham-Grafton 100 megawatt project — those projects are being built in Vermont using our landscape without doing anything to meet our renewable energy goals. I don’t think anybody in Vermont would support it if they really understood it,” she said.
“It enables all these utilities to contract for more power that comes from wind and solar, and then sell the renewable energy attributes out of state, which they claim keeps the cost down. But you can never point to any of these big solar and big wind projects and say that’s renewable energy for Vermonters.”