PORTLAND – One of the biggest and broadest challenges ahead in the electricity world is how to pay for the grid upgrades expected to cost about $1.5 trillion nationally between 2010 and 2030, an estimate developed by consultants at The Brattle Group.
Bruce Williamson, the economist that Maine Public Utilities Commission Chairman Mark Vannoy recommended Gov. Paul LePage nominate to fill a vacancy on the three-person regulatory panel, said that’s one of his largest concerns.
“It all has to make sense for the economics,” Williamson said in a phone interview Monday. “As soon as you start draining money off to pay utilities, you have less to do other things.”
That is, Williamson views the grid upgrade challenge and other regulatory questions as matters of economics. The LePage administration’s pick comes from a different arena than most recent PUC commissioners and with few connections to Maine, an apparent effort to cool some of the political heat on the PUC.
The pick could be a second chance at a first impression. LePage’s previous PUC appointee Carlisle McLean – who was nominated in January to fill the unexpired term of former Chairman Tom Welch – cast a controversial vote in her first meeting, deciding to re-evaluate two long-term contracts with wind power developers.
That the commission was even contemplating the move generated political criticism, enough for McLean to address directly during deliberations, stating that her vote had nothing to do with the governor’s influence. On Monday, bidder SunEdison decided to shop its long-term power deal around to other states instead, which it said was in response to the commission’s decision.
A second controversial vote came with the same 2-1 majority, McLean and Vannoy voting in favor of a strict interpretation of one sentence that cut possible funding for the Efficiency Maine Trust in half.
McLean came directly from the governor’s office, where she was his chief legal counsel. Picking a candidate with no immediate ties to Maine has the benefit of reducing chances for conflicts of interest in specific cases, and appears an effort to diffuse allegations of LePage’s meddling in the work of the independent commission.
Williamson shares LePage’s concerns about the cost of renewables, but is skeptical of some LePage proposals. Speaking generally about small, modular nuclear power plants and state subsidies for natural gas capacity, Williamson said he’s skeptical.
The PUC is considering whether it should put a fee on electricity ratepayers totaling up to $75 million a year to expand natural gas capacity, with the idea that it would reduce heating costs for major manufacturers and fuel costs for power generators, eventually reducing power prices.
About that specific proposal, Williamson said he still has to examine the details, but the idea of building a subsidy for natural gas capacity into electricity rates “just sounds risky and is something that has to be really carefully thought out.”
“As an economist, I look at cross-subsidies with a lot of skepticism,” he said. “When you bury the pricing for something else in another bill, it raises rates, but people also forget why it’s there and it can create distortions in the market. The ideal thing is for private companies to see the market potential and invest.”
The LePage administration also has put forward a bill that would free smaller, “modular” nuclear power plants from the requirement of a statewide vote in order to be built. On nuclear, Williamson said he’s generally wary.
“The days of being crazy about nuclear power are gone,” said Williamson, whose work as senior economist for the University of Tennessee’s Institute for Nuclear Security deals with nuclear nonproliferation and not nuclear power. “If we had this conversation before Three Mile Island, it would be different.”
In addition to safety concerns, he said he would need to be convinced that the infrastructure costs for those projects are worthwhile, reflecting a general concern he has about making a shift from centralized power generation to what’s called “distributed generation.”
Particularly, he said there are big challenges ahead in justifying the cost of integrating intermittent electricity generation from sources such as wind, solar and nascent tidal projects with the rest of the grid. But being able to “literally plug in individual houses to generate supply intermittently,” he said, “that’s the next leap.”
In that regard, Maine has just the project on which Williamson can ply his cost-benefit trade. Hurricanes Irene and Sandy put more attention on increasing local power generation, on what are called microgrids, as a means of making power delivery more reliable.
Regulators in Maine have been contemplating whether local power generation could save electricity customers money. Williamson said he was not aware of the related cases before the PUC, but he’s interested in just the kind of information a pilot project in Boothbay has been producing for the state commission.
“I’d like to see the investment cost and operating costs for those systems under various scenarios,” said Williamson, who’s originally from Long Island, New York. “What if there are ice storms?”
If solar or wind or tidal resources are on that microgrid, what happens if the wind stops blowing or clouds cover the sun?
Williamson said he thinks the transition to distributed generation and development of a “smart grid” that brings together small- and large-scale power generators is possible, but costly enough and complex enough to require small-scale testing first.
“We’ve seen many cases where just jumping to full-scale deployment is very risky for ratepayers,” Williamson said. “And it’s better to be safe than sorry.”
The company running the project in Boothbay, GridSolar, has been making its case to the PUC that using off-peak air conditioning units, battery storage, solar power and diesel generators can back down peak summer power demand on the grid at a lower cost than a new transmission line. It wants to do the same in the midcoast and the Portland area and to be designated the state’s “smart grid coordinator.”
The commission recently rejected the company’s bid for that designation in a 2-1 vote, again with McLean and Vannoy in the majority. They are seeking to open that possible designation to other parties, including the state’s investor-owned utilities, Central Maine Power Co. and Emera Maine.
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