The word in the House: The economics of renewable energy

Mike Yantachka
Mike Yantachka

By Rep. Mike Yantachka

I have been following the debate in the Charlotte Front Porch Forum over the suitability of solar power for Vermont and the economic implications of renewable energy in general. While I have already written about the Energy RESET bill (H.40), which was just passed overwhelmingly on a tri-partisan vote in the House and is on its way to the Senate, I think it is important to address the economics of energy generation, too. It is important to remember that the primary reason for encouraging renewable energy development is to reduce the use of fossil fuels which contribute to climate change.

There seems to be three issues for consideration:

1) Is renewable energy in general and solar in particular too expensive compared to fossil fuel generated electricity?

2) Is solar appropriate for “cloudy” Vermont?

3) Are solar projects being appropriately sited?

One criticism is that the price for renewable electricity is far above market prices. Actually, the price for renewable energy projects is competitive with conventional generation. Under Vermont’s Standard Offer program, for example, prices for wind and solar electricity generation were set at 24 to 30 cents per kilowatt-hour. Since 2010, prices have decreased by 60 percent, and the latest bids for standard offer solar contracts came in under 12 cents/kWh. Other types of renewable energy include Green Mountain Power’s Hydro-Quebec contract which costs around 6 cents/kWh, and in-state utility-owned hydro power projects produce power at less than four cents/kWh.

Compare all of that with regional wholesale market prices, which are largely tied to the price of distant centralized natural gas power plants. Those prices on the New England power grid rose 55 percent in 2013 and another 18 percent in 2014, whereas Green Mountain Power plans no increase for the next two years after asking for a small rate decrease last year. While the annual average cost of New England conventional generation is 7.5 cents/kWh, spot market prices regularly spike to $1/kWh or more during the summer when there is peak demand due to air conditioning and gas-fired power plants are used. These costs do not account for the price to transmit it to Vermont, the fees utilities pay to ensure reliability, or the price for utilities to distribute the power. For electricity being generated by a fossil fuel power plant in southern New England, more than 15 percent of power is lost in transmitting that electricity to Vermont. This means that if a Vermont utility buys 100 megawatts (MW) of electricity from a Connecticut utility at peak prices in the summer, it is only getting about 85 MW. Fortunately, Vermont’s energy policies have encouraged power generation distributed throughout the grid so that the electricity that flows to our homes when we turn on a light is coming from sources close to us. This distributed generation is a significant factor in reducing power costs.

So, is Vermont too “cloudy” for solar to be cost effective? Well, it’s pretty clear that we don’t see as much sunshine as Arizona, but we can’t get electricity from Arizona anyway. However, the sun does shine in Vermont and produces a significant amount of electricity when we need it most, during the summer. Just from the Standard Offer solar projects online today we have an estimated annual output of over 50,000 megawatt hours per year, enough to power 7,000 homes. We also have 75 megawatts of net metered solar capacity either installed or in the process of being permitted. Based on my own 4 kW solar tracker which produces about 6,500 kWh of electricity per year, net metered solar conservatively produces another 93,000 MWh. Also, since this electricity comes from distributed generation, $400 million in transmission projects have been avoided according to VELCO because of Vermont’s investments in solar and efficiency projects. That directly saved Vermont ratepayers $16 million since we pay about 4 percent of the cost of all regional transmission projects as part of the New England grid.

Finally, we come to the issue of siting. Some people dislike the sight of solar farms on the landscape while others see them as making use of the free energy that nature provides. The Section 248 process that governs the Public Service Board decisions in permitting electric generation facilities was established before the concept of small-scale distributed generation was conceived. It seems that it is time to review this process and the effect it is having on our landscape. The House Natural Resources and Energy Committee plans to review this process during this session with respect to how it affects municipal Planning and Zoning regulations. To this end there will be a public hearing in Montpelier on Tuesday, March 24, from 6 to 8pm at the Statehouse, and the public is invited to testify. I invite you to email me with your comments if you can’t be there in person.

I can be reached by phone (802) 233-5238) or by email at myantachka.dfa@gmail.com, and you can find my website at www.mikeyantachka.com.