KINGSTON – Going green is not only good for the environment but good for the municipal bottom line, the town of Kingston is discovering.
Kingston is plunging into the renewable-energy business, partnering with private firms to put up giant wind turbines and a large-scale solar installation. Tapping existing state and federal subsidies and using political muscle on Beacon Hill, Kingston has figured out a way to transform the state’s enthusiasm for all things green into an income stream that could approach $1 million a year.
The town is leasing space at its former municipal landfill to two companies that are putting up a large wind turbine and a solar installation. The town is also orchestrating the construction of three wind turbines on private property next to the landfill. In all, the projects are expected to generate 10 megawatts of clean, carbon-free electricity – enough to power 8,000 to 10,000 homes. Kingston has 4,550 households and a population of 12,500.
Kingston plans to buy all of the electricity produced by the three projects. Some of the power will be used to lower the town’s electric bill, but most of it will be resold at a hefty profit. The town, which is operating under a $33.3 million budget this year, expects to collect at least $750,000, and possibly as much as $1 million, in annual lease payments, new tax revenues and sales of electricity. The pot of money is so big that town residents are already fighting over how to spend it.
“Kingston’s on the cutting edge,” says Mark Beaton, a Kingston selectman, chairman of the town’s green energy committee and operator of the Charlie Horse pub in town. “If Kingston can pull this off, any town can.”
But that’s what has some people worried. With little regulatory oversight, towns are rushing to put up high-cost green energy projects that nevertheless make them money because of a host of state and federal subsidies. Kingston, for example, is exploiting a state subsidy program in a way that was never intended. The program was designed to help homeowners and municipalities reduce the size of their electric bills, but Kingston has transformed it from a money-saver to a money-making project.
The program requires NStar Corp., which supplies Kingston with electricity, to buy the town’s green power at very high prices. But NStar won’t end up paying the tab; it will pass the cost on to its 1.1 million electricity customers, who live in Greater Boston, the western suburbs, the South Shore and Cape Cod and the islands. Those customers will pay slightly higher electric bills to cover the cost of Kingston’s green profits. If other communities follow Kingston’s lead, which is likely because of the profit potential, NStar estimates its customers will end up shouldering $30 million a year in additional costs.
One key to what Kingston is doing is net metering. With solar panels or a wind turbine, a homeowner generates his or her own electricity when the sun shines or winds blow, and sells any surplus to the electric grid. When it’s nighttime or the wind is still, the homeowner draws power from the grid. At the end of each month, the customer is billed for his or her net consumption.
A law passed three years ago requires utilities to pay far more for net-metered electricity, particularly when it is produced by government entities. Instead of paying the wholesale rate for electricity – now about 5 cents a kilowatt hour – electric companies must pay producers of net-metered electricity the retail rate they charge customers. Under these rules, NStar would be paying Kingston 15 cents a kilowatt hour now. The payment to a private developer is 11 cents per kilowatt hour.
Another change in state law was guided through last fall by state Rep. Thomas Calter, D-Kingston, and Senate President Therese Murray, D-Plymouth, whose district includes Kingston. It raised the cap on how much electricity utilities could buy from net-metered producers, and said two-thirds of that had to come from government projects.
The legislation made one other significant change. It said electricity from private renewable-energy projects could qualify for the higher government net-metered rate if 100 percent of the electricity was sold to a government entity and then resold by that government unit to an electric company.
That was just fine for Kingston and local businesswoman Mary O’Donnell, who wanted to put up three wind turbines on her former sand-and-gravel pit next to the town landfill and sell the power through the town at the 15-cent rate paid to government entities.
Kingston now has three energy projects under development: a 2-megawatt wind turbine and a 2.3-megawatt solar installation at the former landfill, and the three wind turbines on Mary O’Donnell’s property. Federal grants are paying 30 percent of the cost on all three projects, and the state is kicking in $2.6 million more on the wind project at the landfill.
The town will get $253,500 a year in lease payments from the developers of the two projects at the landfill.
The town will pay 11 cents a kilowatt hour for the solar power and 11.5 cents for the wind power. At those rates, Kingston will save an estimated $171,000 a year powering town buildings. It will sell the rest to NStar at the municipal net-metered rate of 15 cents a kilowatt hour, bringing in another $150,000 a year.
“When the sun shines and the turbines spin, it’s going to make money for us,” says Beaton, the energy-savvy selectman. “We have taken a used landfill and turned it into a cash cow.”
The town will get $150,000 to $180,000 a year in additional property-tax revenue when the three big wind turbines go up on O’Donnell’s property. It will buy her power at 11 cents a kilowatt hour, resell it at 15 cents and keep 1 percent of the markup for the town.
A change in direction
Two public policy issues have come to the fore with the Kingston projects.
Kevin Fox is a San Francisco lawyer who monitors state net-metering laws for the Interstate Renewable Energy Council. He says he is not aware of any state other than Massachusetts that allows a net-metered customer to be paid for electricity generation that greatly exceeds that customer’s electricity needs. He worries that municipal projects like the one in Kingston could eat up the cap space available for net-metered power.
“It would be unfortunate if providing incentives for municipalities to get into the renewable-energy business to turn a profit crowded out the ability of utility customers in Massachusetts to use net metering to meet their own electricity needs,” he says.
And the cost to consumers from these projects may be bigger than it first appears. In addition to Kingston getting about 15 cents a kilowatt-hour for its electricity, the renewable-energy developers working with Kingston will receive renewable-energy credits for each kilowatt-hour of power they produce. They can be sold to electricity suppliers, who have to demonstrate that 5 percent of their power is coming from renewable sources. The cost of the renewable-energy credits will be passed on to consumers and add another 2 to 4 cents a kilowatt-hour to the final cost of electricity.
Combined, the 15-cent net-metered price and 2 to 4 cents for renewable-energy credits means the total cost of Kingston electricity will be in the 17- to 19-cent range, on par with the price of power from Cape Wind, which has drawn criticism for its high-cost power. Cape Wind is charging 18.7 cents a kilowatt hour, a price that includes renewable-energy credits.
Eleanor Tillinghast, the president of Green Berkshires, an environmental advocacy group that has opposed wind projects in Western Massachusetts, says what’s happening in Kingston is going to fuel a gold rush mentality.
“This really isn’t net metering anymore,” she says. “It’s become quite an amazing subsidy that will benefit the few towns that manage to get projects going before the 3 percent cap is reached, and everyone else will pay. Once other towns see the bonanza, they’ll pressure legislators to expand the program, adding even more costs to ratepayers’ electricity bills.”
None of these public policy concerns were on the minds of Kingston residents in early December when selectmen held a meeting to discuss what should be done with all the money expected to flow the town’s way.
The green energy committee wants the money to go into a revolving fund that could be tapped for low-interest or no-interest loans to town residents for projects that would reduce their energy consumption. The town’s finance committee, meanwhile, wants at least a portion of the money to go for more pressing, immediate needs, including ice and snow removal, capital projects or the town’s unfunded pension liability.
The discussion got heated at times as some speakers warned about the dangers of climate change and others extolled the need for tax relief. No vote was taken, but the board seemed to be leaning toward using the money to plug holes in the town budget.
On one point, everyone agreed: The town’s green energy committee had done a great job in making green power pay.
Mary O’Donnell, a beneficiary of those efforts, offered heartfelt praise to the committee members.
“They taught us all how to make money and do a public service at the same time,” she said.
This article was first published in The Patriot Ledger on Jan. 27, 2011. Bruce Mohl is editor of CommonWealth magazine, published by the nonpartisan public policy think tank MassINC. This is an excerpted and condensed version of his story in the current issue of the magazine. The full story, with significant additional information, is available at www.commonwealthmagazine.org.
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