May 1, 2012
Opinions, Vermont

Hallquist: Legislators need deeper understanding of renewable energy credits

David Hallquist, 27 April 2012

As CEO of Vermont Electric Cooperative, I am concerned that the Vermont Legislature is heading down a road to create mandates for renewable power adoption without understanding the physics of the power grid and while ignoring the market realities.

Those who understand the operation of the electric grid know that high levels of intermittent resources, such as wind and solar, have serious negative impacts in terms of reliability. The grid has been designed to use spinning generators that help to maintain stability. As generation increases or decreases rapidly, the inertia of these spinning generators helps to keep things stable. Wind-powered generators do not have that inertia. When the wind drops, the blades stop. Solar generators have no moving parts, so when a cloud passes, the generation stops immediately as well.

Recognizing the seriousness of the situation, U.S. Department of Energy has placed a top priority on solving this problem. At the present time, a cost-effective solution does not exist to enable high levels of penetration of intermittent sources of energy.

In terms of cost, natural gas is so inexpensive right now that no other source comes close in terms of cost and economics. While I fully appreciate the importance of moving to a renewable portfolio, the economics of natural gas prices will prevent this shift from happening, regardless of what legislative mandates are issued. Current proposals would have utilities purchasing renewable energy credits (RECs) if they are unable to meet the renewable portfolio goals established by the state of Vermont. In the end, this will not move our state forward to adopt higher levels of renewable energy, and it will add to the cost burden of the end ratepayer.

This is because we can purchase natural gas-fired electricity for less than four cents per kilowatt-hour today. If RECs are purchased by utilities, this may add about three cents for a total cost of seven cents per kilowatt-hour. By way of comparison, the cheapest form of renewable power comes from industrial wind on ridge lines, at about 10 cents. To meet the current legislative proposal given current market conditions, utilities will simply buy power from gas-fired sources and RECs from other states like Connecticut or Massachusetts instead of more expensive in-state renewable energy. While this may make Connecticut or Massachusetts richer, it does not achieve the legislative goal of encouraging development of renewable energy in Vermont.

If Vermont Electric Cooperative had been subject to the new, proposed rules and legislation a few years ago, it is unlikely that we would have chosen to support the construction of the Kingdom Community Wind project. Instead, the purchase of RECs in combination with non-renewable market power would have been less costly option to fill our power supply portfolio while meeting state renewable requirements.

The bottom line is that the current thinking in the Legislature in terms of a renewable portfolio standard is flawed. Physics and economic reality will prevail. Before creating a more serious problem, legislators should wait until next year so that this issue can get the higher level of research and attention it requires. Right now our electricity portfolio is only 4 percent of the carbon footprint in Vermont. Vermont legislators do not need to rush this.

David Hallquist is CEO of Vermont Electric Cooperative.

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