Vermont: Administration produces renewable portfolio standard proposal

Two months into the legislative process, the Vermont Department of Public Service weighed in this week with a proposal for the renewable portfolio standard bill that has ping-ponged back and forth in the House Committee on Natural Resources and Energy.
The department proposes a goal for the state of 75 percent renewable energy by 2032, including 35 percent “new renewable” and 10 percent small-scale generation.

The committee has seen multiple drafts, some more stringent than others in moving Vermont toward a law that would require utilities to provide a percentage of their electricity portfolio from renewable sources.
The department’s proposal is less aggressive than the original bill introduced by Rep. Tony Klein, D-East Montpelier, who chairs the committee. Klein’s bill would have required each electric utility to own the “environmental attributes” for 80 percent of its power by 2025.
Klein says the differences in the proposals are not significant, and either proposal would promote the local renewable energy industry.
“For me, and I think the committee, the most important part of any of the drafts and proposals we’ve seen are what can keep our industries vibrant,” Klein said. “That’s the ‘standard offer’. There are differences of how you get there, but the end result is basically the same.”
The “standard offer” is a state program that guarantees long-term contracts at set rates for small clean-energy distribution projects. The department’s proposal and Klein’s bill would both set up a new standard offer through which developers could apply for the favorable long-term contracts.
Klein said that no matter how you slice it, the goal is promoting renewable generation projects in the state.
“The goal is [reducing] greenhouse gas emissions. That’s numero uno,” Klein said. “The goal is building renewable energy in the state of Vermont. Keep the industry here; keep the tax money here.”
The state projects that it will not meet its renewable energy goal of 20 percent electricity from in-state energy sources that use renewable fuels by 2017. At the current rate, with proposed projects with certificates of public good and standard offer contracts, the state would only have 16 percent of its power from renewable energy generation by that date.
Ben Walsh, of the Vermont Public Interest Research Group, said the renewable “goal” is not aggressive enough.
“If we’re talking about renewable energy, that’s what we should be doing is actual renewable energy, and the current proposal isn’t that,” Walsh said.
Even with the 75 percent renewable goal, Walsh said, utilities will only have to own the environmental attributes of 35 percent of their energy. These attributes, or renewable energy credits, come with renewable power. Utilities can buy and sell them on a regional market, thereby allowing the region to keep track of renewable energy. For example, a utility in Connecticut can buy “RECs” from a Vermont utility to meet its renewable portfolio standard requirements.
Currently, Vermont utilities sell most of the renewable energy credits from projects like wind farms to utilities in other states which then technically own the “greenness” of that power. Critics of the Sustainably Priced Energy Development program say since Vermont utilities are selling the renewable attributes, the electricity that Vermont customers buy is technically “brown” power. Arguably, this could encourage other states to not build their own renewable energy projects. On the flip side, it has kept the costs down in Vermont and allowed the state to build more clean energy projects.
Some renewable energy advocates argue the credits should be retired when Vermonters use the electricity rather than selling them to other states.
If Vermont does not retire the credits, Walsh says, it’s not really renewable energy.
Walsh said mandating 75 percent renewables (as opposed to a goal) by 2032 is not unreasonable, especially considering the fact that large-scale hydro power could be factored into that equation. Power from Hydro-Quebec currently accounts for about 30 percent of the state’s electricity, according to the state’s Comprehensive Energy Plan, and Vermont law considers it “renewable.”
Gabrielle Stebbins, executive director of Renewable Energy Vermont, expressed similar concerns that the voluntary nature of the proposal could stifle renewable energy development.
Stebbins said she is concerned that since a large part of the administration’s proposal is just a goal, utilities looking to renew contracts could shift from a contract with a renewable generation facility to a fossil fuel source.
“REV’s goal is really to see real projects developed,” she said.
“For me the biggest issue is cost,” Stebbins said. “No matter what, we’re going to pay. We can pay to upgrade transmission and distribution lines, or we can pay to build more renewable energy projects in state.”
Building more small renewable electric generation projects near the homes and businesses that will use the electricity makes more sense than investing in infrastructure to carry the power from large power plants to rural towns, Stebbins said.
An industry group and utilities say the DPS proposal goes too far and will cause a spike in electric rates. The administration’s proposal of 35 percent “renewable” energy would be more aggressive than any other renewable portfolio standard in New England that currently exists.
Robert Dostis, a spokesman for Green Mountain Power, said an overly aggressive renewable portfolio standard could put Vermont at a competitive disadvantage in New England. Other states buy a majority of their power off the “spot market” where electric prices are falling, he said. Requiring lots of long-term contracts with renewable sources could mean Vermont would not be able to take advantage of those low market prices to the extent other states would.
“Historically, Vermont has had the lowest electric rates in the region,” Dostis said. “That’s going to change.”
An overly aggressive renewable portfolio standard could result in a “double whammy,” Dostis said, where Vermont adds more expensive power while losing out on the opportunity to take advantage of low prices on the open market.
Bill Driscoll, vice president of Associated Industries of Vermont, said the most recent proposal from the Department of Public Service will create unnecessary costs for Vermont industries through increased electric rates. Driscoll said the committee has been paying lip service to the negative economic impacts of an renewable portfolio standard without doing real analysis.
“Frankly, they need to start putting some hard numbers behind the rate impacts and the job impacts,” Driscoll said. “They need to provide some clear explanation on how they reached those numbers so we know whether or not they’re credible.”
Requiring utilities to retain the renewable energy credits for their power can make a big financial difference in the cost of doing business, particularly for the manufacturing industry, which represents a large chunk of Driscoll’s clients, he said. Driscoll said the proposal and its predecessors would make projects more expensive than they need to be.
“We are already far greener, far cleaner and far more renewable than any of the states around us are even trying to be,” Driscoll said. “People shouldn’t be forced to pay more just because of this ideological concept that’s disconnected from the welfare of Vermonters.”
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