VERMONT’S ENERGY FUTURE
A Deliberative Polling® Event November 3-4, 2007 Burlington, VT
Deliberative Polling® is a trade mark of James S. Fishkin. Any fees from the trade mark are used to support research.
State of Vermont FAX: 802-828-2342 112 State Street TTY (VT): 1-800-734-8390 Montpelier, Vermont 05620-2601 E-mail: [email protected] TEL: 802-828-2811 Internet: http://publicservice.vermont.gov
Welcome to Vermont’s Energy Future!
My name is David O’Brien and I am the Commissioner of the Vermont Department of Public Service. I am writing to ask your help with some very important decisions we face with our energy future. In 2012, contracts providing two-thirds of the state’s electric power begin to expire. This leaves the future source of Vermont’s electricity open for discussion and examination. Choices about the future will have to be made and we will have to weigh trade-offs among cost, reliability, environmental impact, large and small scale generation, and in versus out-of-state sources. Vermont needs your help in shaping the future mix of electricity sources for the state.
We understand that giving up a weekend is a significant commitment of time, and we thank you for your participation in this discussion about how Vermont should obtain its future supplies of electricity. At no time in our history has the topic of energy been more important to the future of Vermont and to the future of the United States. It is difficult to pick up a newspaper or watch television news without seeing an article concerning energy. Energy issues affect our budgets, the economy, the environment, and national security. It likely won’t surprise you that Vermont has its own particular approach to energy and electricity issues. Vermont currently imports about half of its electricity.
On the other hand, Vermont has been a leader in biomass-produced electricity for over twenty years and spends more per capita on energy efficiency than any other state. ermontV has the distinction of having the lowest carbon footprint in the nation as a result of many things including the electricity mix currently used by the consumers of Vermont. The Vermont electricity mix may change in the future. Two-thirds of the electricity we consume comes from either the Vermont Yankee Nuclear Plant or from Hydro-Québec. The contracts for the nuclear power will expire in 2012. The hydro contracts decrease substantially in 2015. It is time to begin planning for the future.
We will be using a process called Deliberative Polling, which has been used elsewhere for energy planning decisions. This will be the first application in Vermont and the first in New England. We think you will find the process thought provoking, enjoyable, and informative.After you have a chance to read and think about Vermont’s electricity future and to discuss the issues in small groups and then ask questions of experts from all viewpoints, we will seek your opinions. We will listen carefully to what you have to say and the judgments you provide will form an important input to our planning process as we move forward.
Again, let me thank you for agreeing to participate.
Sincerely,
David O’Brien
David O’Brien Commissioner, Public Service Department
This Is What Happens at a Deliberative Poll
The Deliberative Polling process allows you ou are one of more than 200 Vermonters Y to gather information, discuss the options from all walks of life—all ages, incomes, with fellow Vermonters in small groups, meet and occupations—who have been invited to with the whole sample to ask questions of participate in this Deliberative Polling event competing experts and policymakers with to be held in Burlington, Vermont in early diverse viewpoints, and then give back your November. considered opinions about what you think should be done. The Deliberative Poll is being conducted for the Vermont Department of Public Service by The small groups and the sessions with the Center for Deliberative Opinion Research the experts and policy makers are led by of the University of Texas at Austin. professional moderators, trained to be neutral, to keep the process moving and Citizen involvement in electricity planning is punctual, and to see that everyone gets a important, because it is customers like you chance to participate. who ultimately pay the bills and live with the results of the decisions. Thus, it is very The energy supply choices being discussed important to hear what you think after you do not have right or wrong answers. Different have had the chance to learn, think, and options have advantages and disadvantages. talk about the issues relating to Vermont’s You may come to favor some options, other electricity future. participants to favor others. We believe you’ll find the experience We seek no group decision or consensus; interesting, worthwhile, and enjoyable. we only want to know what you individually think after discussing and considering these You may not think about electric generation issues. from day to day, and you may not think of yourself as an expert on energy; but we are We look forward to seeing you in Burlington not looking for experts. What’s important to on November 3rd and 4th, when the us is that you are a representative member scientifically selected sample will come of the public. together for deliberation. You were selected as a member of a random sample chosen to represent all Vermonters. Collectively, the sample’s opinions will provide a reasonable prediction of what Vermonters as a whole would say if it were possible to invite the whole State to the same event.
Table of Contents
ACKNOWLEDGEMENTS...... iii
BACKGROUND...... 1
CHAPTER 1: Natural Gas, Coal, Nuclear, and Oil...... 21 Natural Gas...... 21 Coal...... 24 Nuclear...... 26 Oil...... 30
CHAPTER 2: bIOMASS, hYDRO, wIND, SOLAR, AND COMBINED HEAT AND POWER...... 31 Biomass...... 33 Hydro...... 37 Wind...... 40 Solar...... 47 Combined Heat and Power...... 49
CHAPTER 3: ENERGY EFFICIENCY AND DEMAND REDUCTION...... 53
CHAPTER 4: CROSS CUTTING ISSUES...... 59
CHAPTER 5: PUTTING IT ALL TOGETHER...... 67 Cost Summary Chart...... 68 Environmental Summary Chart...... 70 Acknowledgements
Advisory Committee
Group Represented Representative Additional Information Utility—investor owned Robert Griffin Mr. Griffin is a power supply (802) 864-5731 x8452 planner for Green Mountain Power, [email protected] Vermont’s second largest electric utility. At large member—regulatory Richard Sedano Mr. Sedano is the Director of the expertise (802) 223-8199 Regulatory Assistance Project [email protected] and previously held the position of Commissioner at the Department of Public Service. Utility—municipal Patricia H. Richards Ms. Richards is a planner with (802) 244-7678 x 235 the Vermont Public Power Supply [email protected] Authority. Interest group James Moore Mr. Moore is a staff member with (802) 223-8421 X 4077 Vermont Public Interest Research [email protected] Group, and deals with energy and environmental issues. Regional planning James Matteau Mr. Matteau is the Director of (802) 345-9591 Regional Planning at the Windham [email protected] Regional Commission. Department of Public Service David Lamont Mr. Lamont is a planner at Vermont (802) 828-4082 Department of Public Service and [email protected] has worked on many projects in his tenure. IBM—large consumer Steve Blair Mr. Blair is Site Energy Manager at (802) 769-9837 IBM, and responsible for Electricity, [email protected] Fuel, and Energy Conservation. Utility—investor-owned Steve Costello Mr. Costello is Director of Public (802) 747-5427 Affairs at Central Vermont Public [email protected] Service.
Resource Panel
Resource Representative Additional Information Efficiency/ODR Patrick Haller Mr. Haller is Efficiency Vermont’s (802) 658-6060 New Residential Construction Market [email protected] Manager. Solar Andrew Perchlik Mr. Perchlik is the head of Renewable (802) 229-0099 Energy Vermont and interacts with solar [email protected] vendors within the state. Wind John Zimmerman Mr. Zimmerman works for the Vermont (802) 244-7522 Environmental Research Association. [email protected] He is a foremost authority on wind resource and siting potential in the State. Nuclear David McElwee Mr. McElwee is a nuclear engineer with (802) 258-4112 Entergy. [email protected] Hydro Sandra Louis Ms. Louis is the Manager of Structured (514) 289-6759 Transactions for Hydro-Québec. [email protected] iii Vermont’s Energy Future Hydro Sylvie Racine Ms. Racine is the Coordinator of (514) 289-6720 Structured Transactions and Wholesale [email protected] Markets for Hydro-Québec. Gas Eileen Simolardes Ms. Simolardes is Vice President, (802) 863-4511 x355 Supply and Regulatory Affairs, at [email protected] Vermont Gas. Transmission Kerrick Johnson Mr. Johnson is the Vice President of (802) 770-6166 Public Affairs with Vermont Electric [email protected] Power Company (VELCO), Vermont’s transmission company for the utilities. Biomass John Irving Mr. Irving is an employee of the (802) 865-7482 Burlington Electric Department at the [email protected] McNeil Generating Plant.
Department of Public Service
Resource Representative Additional Information Project Manager Stephen Wark Director, Consumer Affairs (802) 828-4021 [email protected] Back-up Sharon Allen Coordinator, Consumer Affairs (802) 828-3081 [email protected] Back-up Robert Ide Director, Energy Efficiency (802) 828-4009 [email protected]
Consultants
Group Represented Representative Additional Information Center for Deliberative Opinion Research, Robert C. Luskin Director University of Texas at Austin Nick Hundley Project Coordinator Center for Deliberative Democracy, Jim Fishkin Principal Stanford University Public Decision Partnership Dennis Thomas Principals Will Guild Ron Lehr Raab Associates Jonathan Raab Principal Consensus Building Institute Patrick Field Managing Director
Notes
1. The preparation of these materials was supervised by an Advisory Committee and a Resource Panel made up of diverse interests and viewpoints. Together they spent many hours in review and discussion. The goal was to prepare materials that expose Vermonters to all sides of the issues concerning planning for Vermont’s Electricity Future. Given the diversity of views, not all of the advisors would agree about what Vermont’s energy future should be, but all would concur that Vermonters should have the benefit of hearing from a variety of perspectives. 2. The Vermont Council on Rural Development published a report called the Vermont Energy Digest in April, 2007. The report, authored by Brenda Hausauer, is an inventory of renewable energy and efficiency projects and programs in Vermont and was quoted extensively in Chapter Two on Renewables. 3. The Vermont Department of Public Service published Utility Facts in 2006 and updated it in August 2007. This document is the source of most of the tables and graphics found in the Background Section of this document.
Vermont’s Energy Future ii
Background Information
Introduction: Vermont Needs Over two-thirds of Vermont’s electricity comes to Make Decisions About Future from two large contracts–contracts that are Supplies of Electricity expiring soon. Contracts with Entergy, owner of the Vermont Yankee Nuclear Plant, expire in 2012, and contracts with Hydro-Québec in Thank you for taking part in this Vermont Canada begin to expire in 2012. Department of Public Service effort to gain public involvement in planning for Vermont’s Additionally, a number of contracts with electricity future. Independent Power Producers for in-state hydro-electric and woodchip plants expire This process was authorized in 2006 by in the same timeframe. But the lights will the Legislature (Act 208) and has been stay on—electric utilities in Vermont operate endorsed by the Governor and the Joint under a common system and are part of Energy Committee. The goal of this outreach the New England Grid, enabling them to effort is for Vermonters to examine and make buy electricity on an as-needed basis called recommendations on how to meet Vermont’s system power. future electricity needs over the next 5-10 years. The expiration of these contracts, however, enables Vermont to evaluate its electricity Vermont’s electric utilities, ultimately, have future and to weigh options in energy the responsibility to procure electricity to contracts and sources, which vary widely meet their customers’ needs. Your input will in cost, price stability, and economic and help all parties—the Governor, Legislature, environmental impact. It is an opportunity Department of Public Service, Public for Vermonters to express a preference for Service Board, and the utilities—understand where their energy dollars should go. Vermonter concerns and priorities as they consider the best mix of energy supplies to Figure A shows the changes as contracts serve Vermont in the coming years. expire:
FigureFigure A1.9: Committed Committed ResourcesResources as ofof 20062006 6000
5000 Other Renewables IPP* Wood 4000 Oil IPP* Hydro 3000 Owned Hydro GWh Hydro Quebec 2000 Nuclear
1000
0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Vermont’s Energy Future 1 It would be a significant challenge for any Figure B shows service territories served by state to replace this portion of its electricity Vermont electric utilities. load. Figure C shows relative size of the different Both the Vermont Yankee and Hydro-Québec electric utilities in Vermont in both electricity contracts are relatively inexpensive by sold and in dollars of revenue. today’s standards, costing 4-7¢ per kilowatt- hour compared to current market prices of Electric utilities are responsible for the about 8¢ per kilowatt-hour. following:
Additionally, nuclear and hydro power • Procuring Power (one-half of Vermont’s produce little to no greenhouse gases, unlike electricity is purchased from generation natural gas, oil, or coal. sources located out of state.) • Building and Maintaining Generation As you can see, the decisions we face on Sources (on a limited scale) the future of our electric supply are very • Building and Maintaining important. Transmission and Distribution Lines • Conducting Long-Term Planning • Managing Local System Reliability Some Helpful Information • Metering and Billing for Retail Sales ABout Electric Generation, • Collecting Funds to Support Demand Transmission, and Resource Side Management (DSM) Programs Planning in Vermont Utilities differ in governance (who makes the Electric Utilities decisions) and ownership (who puts up the investment capital, takes the risk, and earns Twenty separate electric companies provide the returns). electricity to homes and business in Vermont. They are one of three types of entities: A municipal electric utility may have more flexibility to develop a localized generation • Investor-Owned Companies - Central mix but may have fewer customers to share Vermont Public Service, Green research costs in new or experimental Mountain Power, and Vermont Marble technologies. • Municipal Electric Departments - Such as Burlington Electric Department Rates for all utilities are approved by the and the Village of Ludlow (there are Vermont Public Service Board. fifteen of these) • Electric Cooperatives - Including Vermont Electric Cooperative and Washington Electric Cooperative
2 Vermont’s Energy Future Figure B: Electric Utilities Franchise Areas
Source: VTDPS
Vermont’s Energy Future 3 Figure C: Vermont Utility Sales and Revenue - 2006 Sales ( kWh) Utility Rate Residential Commercial Industrial Revenue ($) (kWh) (kWh) (kWh) BARTON 14,988,177 $2,182,860 10,859,276 3,127,864 0 BURLINGTON 359,268,266 $42,827,675 91,153,308 193,418,077 71,031,453 CVPS 2,284,465,000 $264,771,621 959,455,000 888,537,000 430,348,000 ENOSBURG FALLS 22,733,653 $2,975,821 12,525,459 1,662,651 6,920,754 GMP 1,961,042,000 $200,441,290 582,284,000 706,093,000 668,522,000 HARDWICK 31,730,312 $5,254,274 23,294,443 4,081,488 4,163,704 HYDE PARK 11,572,065 $1,556,267 8,325,220 2,649,187 0 JACKSONVILLE 5,228,600 $701,100 3,482,256 653,567 1,092,777 JOHNSON 15,007,078 $1,766,820 5,171,756 1,257,592 8,220,639 LUDLOW 48,681,015 $6,139,816 15,536,540 19,738,046 12,935,436 LYNDONVILLE 70,993,531 $9,381,017 31,635,229 11,493,964 27,342,440 MORRISVILLE 45,565,424 $6,122,869 20,732,865 24,609,628 0 NORTHFIELD 28,472,344 $3,315,668 10,639,348 2,760,302 12,914,230 ORLEANS 13,209,071 $1,442,425 4,145,931 1,635,035 6,868,800 READSBORO 2,298,034 $247,024 1,645,766 286,358 281,406 ROCHESTER 4,242,565 $621,013 2,971,683 1,014,821 0 STOWE 66,927,566 $9,167,740 20,989,708 26,420,114 11,970,585 SWANTON 51,312,511 $5,368,475 25,162,263 3,752,380 20,841,642 VEC 468,476,165 $61,495,422 242,369,765 114,005,964 103,873,624 VT.MARBLE 219,234,256 $16,937,290 6,297,222 4,893,698 207,944,936 WEC 68,545,345 $10,760,340 61,792,613 3,353,396 3,391,236 Totals *5,793,992,978 $653,476,827 2,140,469,651 2,015,444,132 1,598,663,662
*Total includes “Public Street and Highway” (17,668,229 KWh) and “Other and Public Authorities” (21,747,304 kWh) sales.
Source: VTDPS
Electric Generation in Vermont Electricity Consumption in Vermont
Vermont purchases about half of its electricity A good way to think about electricity from generation sources in other states or consumption is in terms of fuel type. Different Canada. Other than the Vermont Yankee fuels have advantages and disadvantages, Nuclear Plant, the electricity generated differing in cost, environmental impact, and in Vermont is mostly hydro or wood-fired, other factors. though some hydro stations in Vermont are owned by non-Vermont firms. Figure D shows fuel types used to generate the electricity consumed in Vermont. The wedge Electricity usage in Vermont averages 700- labeled System A represent purchases from 750 MW and peaks at around 1,100 MW in New England’s power market. the summer, 46 % of which is imported. The wedge labeled System B represent While there are advantages and power purchased from the New England disadvantages to importing energy, one market in which the renewable energy question is whether this level of imports attributes were sold. concerns you as customers. For comparative purposes, Figure E shows Vermont also exports energy—55% of power electric use by source in New England and from the Vermont Yankee Nuclear Plant is the U.S. sold to other New England customers.
4 Vermont’s Energy Future Figure D: Vermont Consumption by Source - 2006
Figure E: New England vs. U.S. Generation by Source
New England Generation - 2006 U.S. Generation - 2005
Vermont’s Energy Future 5 One factor not reflected in these charts is VELCO was formed 50 years ago as the that Vermont has one of the most aggressive nation’s first transmission only company—a energy efficiency programs in the U.S. (based company that transports but does not on expenditures and savings per customer). generate electricity—a concept that has spread to many other states. Vermont has created a unique Energy Efficiency Utility for efficiency programs VELCO is controlled by fourteen of the state’s instead of requiring distribution utilities to do utilities with CVPS and Green Mountain so, as is more typical in the U.S. Additionally, Power owning 86%. the Burlington Electric Department has administered its own efficiency programs. Since Vermont is a large importer of electricity, it is important to ensure there is Vermont has spent over $100 million on energy enough capacity in its transmission system efficiency measures over the last decade, to import from New England, New York, and which have saved the state approximately Canada. 5% of its total electricity between 2000-2006. These efficiency investments are paid for by There are many factors that impact customers in a monthly efficiency charge transmission capacity, including the type that is part of their electric bill. of generation source, its distance from customers and existing transmission lines, Efficiency as a resource, new investments in and whether the source is out of state. energy efficiency, and how efficiency helps to control demand will be topics central to When transmission lines meet their maximum the discussions and these materials. capacity, an increase in transfer limits or new lines may be required—although it is difficult Electric Transmission and Distribution in to get permission to build new transmission Vermont lines in Vermont.
The ability to move electric power from the Strain on the transmission system, however, generation source to the point of consumption can be eased if a generation source is is critical in electric resource planning. located close to its customers and through various efficiency programs such as peak The transmission system in Vermont shaving (reducing peak load). is operated by Vermont Electric Power Company (VELCO), which is responsible for You may want to consider the impacts on moving electricity in bulk over large power the transmission system (and the impacts of lines. the system) as you think about the different options to meet consumer demand for The smaller power lines, or distribution lines, electricity. are owned by your local electric utility.
6 Vermont’s Energy Future Types of Customers Customers who normally pay $100 per month may be willing to pay an additional Another challenge in electric resource 10%, or $10, per month for these options, planning is to consider the impact of options valuing their potential benefits. on different customers. The basic customer types include: Such a rate increase, however, may have different implications for a business, an • Residential industrial customer, or an entity such as • Commercial a school than for a residential customer. • Industrial Whether required by law or by the realities of competition, paying additional costs will likely A typical residential household in Vermont be a tougher choice for some customers. uses 600 kilowatt hours (kwh) per month and pays an average bill of $80 per month. Customer willingness to pay more for valued options is the central question of this trade- A typical commercial customer, such as a off process. small restaurant, might use 3600 kwh and pay $400 per month. Energy choices are not always straight- forward. With new investments in efficiency An average industrial customer, however, is programs and technologies, rates may rise difficult to describe, as usage varies greatly to cover fixed costs. However, because you and industrial customers pay on a different use less energy with these efficiencies, your scale. overall bill should decrease.
Take a large industrial customer such as To make a trade-off, customers will weigh IBM. IBM uses approximately 24% of the their feelings on renewables with the risk electricity sold by Green Mountain Power and involved. 8% of the total electricity sold in Vermont.
For some companies, electricity can be a significant portion of their annual costs. Because of their size, the average industrial user pays just over 8¢ per kWh compared to the residential rate of just over 13¢.
Different Customers and Customer Types May Seek Different Values
One of the issues that interests Vermont decision-makers is whether you would pay more for certain electricity generation options, including cleaner and healthier options, or whether you would pay premiums to control future price changes.
Vermont’s Energy Future 7 Usage By Customer Type
Figure F provides background on electricity Figure G shows residential use per customer usage by customer type. The chart compares in Vermont is less than New England and the usage in Vermont, New England, and the U.S. U.S. as a whole. for residential, commercial, and industrial customers.
Figure F: Percentage of Retail Electricity Sales by End-use Sector 2006
Vermont New England United States 18% 27% 37% 28% 37% 38%
44% 35% 36%
Residential Commercial Industrial
FigureUse G: Residential per Residential Per Capita Customer, Use of Electricity 1940-2006 in Kilowatt Hours 12,000
10,000
8,000
6,000 MWh
4,000
2,000
0
0 3 6 9 2 5 8 1 4 7 0 3 6 9 2 5 8 1 4 7 0 3 6 4 4 4 4 5 5 5 6 6 6 7 7 7 7 8 8 8 9 9 9 0 0 0 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2
USA New England Vermont 8 Vermont’s Energy Future Understanding Units of Electrical Energy either kilowatts or megawatts. Costs for constructing capacity are usually The following units of electricity may be thought of as fixed costs, such as thought of in terms of the amount of electricity construction costs. New generating needed for a specific use and duration, such plants being discussed will have a as powering a light: capacity rating that indicates the amount of electricity they could produce at full • Watt – The lowest common unit of output. power, such as a 100-watt bulb (or a 20- • Energy – The amount of power watt CFL - Compact Fluorescent Light). generated and consumed over a period • Kilowatt (kW) – 1,000 watts. It is of time. Energy has a time element the power, or generating capacity, and is measured in kilowatt-hours or necessary to light ten traditional megawatt-hours. Energy production 100‑watt light bulbs (or 50 20-watt costs are usually thought of as variable CFLs). costs, as in the cost to start up and shut • Megawatt (MW) – 1,000 kilowatts. This down plants and the fuel required to measure of electricity is used to discuss generate electricity. resource needs. For example, a typical electrical generating plant burning Operation of the Regional Power Market natural gas would be sized to provide and the New England Grid 50 to 250 MW of capacity. Vermont uses 1100 MW electrical power at the time of That electricity cannot be stored presents the peak demand and consumes 700- additional challenges in energy planning. 750 MW on average. Utilities keep about At any given time, the amount of electricity 15% as a reserve margin to ensure generated and the amount used must reliability in the event that power is match exactly. If not, voltage can fluctuate, unavailable. breakers trip, and the power can go out. We • Kilowatt-hour (kWh) – The electric have grown accustomed to a highly reliable energy consumed to light ten 100‑watt electricity supply in the U.S., having learned light bulbs (or 50 20-watt CFLs) for that larger electrical systems are easier to one hour. A typical home in Vermont balance. averages about 600 kilowatt‑hours of electricity per month, and you can find Electric utilities initially formed small mutual your monthly usage expressed in kWh reliance grids, and these grids have evolved on your electric bill. and merged into an interconnected system • Megawatt-hour (MWh) – The energy in called the New England Power Pool one megawatt of power consumed for (NEPOOL) operated by ISO New England. one hour or the energy consumed when 10,000 100‑watt light bulbs are lit for The ISO (Independent System Operator) one hour. is overseen by federal regulators with state • Capacity – The ability to generate input. The ISO monitors electricity demand electricity. Capacity is usually discussed and instructs generators to start, stop, and in relation to the ability to provide ramp up or down to meet needs exactly—a enough electricity for peak times. process called dispatching. The measurement for capacity is
Vermont’s Energy Future 9 The ISO uses a complex computer program The prices of the spot market are more to dispatch that considers many of the volatile, since electric utilities do not have same attributes you will think about when time to smooth out highs and lows, being considering generation options. subject to fuel availability and transportation risks. The attributes include price, fuel costs, response time, and how quickly the generator At times, spot market electricity is more can ramp (operate at various levels). As expensive than long-term contracts, other you will see, natural gas and certain hydro times cheaper; so electric utilities vary the generators ramp well, while nuclear, wind, amount of spot market purchases in their and other hydro generators do not. portfolio based on price risks, playing the market. The ISO also operates the electricity markets, which closely relate to the dispatching Theoretically, it would be possible for local process. Each electric utility is responsible electric companies to rely mostly on the spot to generate or contract for enough electricity market, but this is rare due to the price risks. to meet demand. There are two ways to At times, prices can grow so high that a utility purchase electricity—through a bilateral relying heavily on the spot market would not contract or from the spot market. be able to pay its bills without an emergency rate increase to its customers. In a bilateral contract, a utility contracts with a generator or a wholesale market seller to This is an outcome most utilities would provide a set amount of energy for a certain avoid despite the opportunity to under price period. Bilateral contracts make up 80-90% the market at other times—it would be a of the electricity that retail electric utilities risk comparable to day-trading in the stock and the New England grid obtains through market with borrowed money. contract. When utilities bid on energy in the spot Both contracts with Hydro-Québec and market, the ISO stacks the bids, or ranks Vermont Yankee are bilateral contracts. them, by price and dispatches electricity starting with the lowest-priced bids until Since demand for electricity is constantly demand is met. The price at which demand changing based on factors such as the is met and the auction clears is called the weather and the amount of outside light, clearing price. there must be a market that balances the difference. All accepted bids receive the clearing price, even those cheaper bids stacked below it. The spot market, or the short-term market, makes up the other 10-20% of the electricity This may seem like an unusual way to accept market. In the spot market, utilities meet bids, but most power markets operate in the demand by paying for energy on an hourly same way. Research has shown this system option based on market prices. produces lower prices overall and stimulates more active bidding over time.
10 Vermont’s Energy Future In fact, most other commodity markets They are fueled by low or no-cost fuels operate in this manner, including the corn such as coal, large scale hydro, wood, market, where producers of similar products or nuclear fuel. are paid the same price regardless of their • Intermediate Load Units – Operate in production costs. times of increased seasonal demand, typically in summer and winter when In New England, this clearing price (also base load units alone cannot meet known as the marginal price or spot market demand. Mostly fueled by natural gas, price) most often is determined by a natural they tend to have moderate fixed costs gas-fired electric generating plant. The and higher variable costs than base load amount of electricity your utility obtains units. Hydro plants, to the extent their from the spot market greatly impacts overall output can be controlled, are considered electricity prices, as most bilateral energy a mix of base load and intermediate contracts use forecasted spot prices as the load. basis for a contract price. • Peaking Load Units – Operate in times of highest demand, such as Understanding Peak Load mid‑afternoon on an extremely hot day. They are dispatched only at peak times Electric systems are designed to meet peak when base load and intermediate load load, the moment when power demand is units cannot meet demand—typically highest. less than 5-10% of the year. Fueled by oil or natural gas, they have lower fixed In order to participate in the ISO power costs but high variable costs. Generally, market, utilities are required to have or they are the most expensive to operate. to contract for the capacity to meet their expected peak demands plus an additional Other types do not fit these categories, such 15% for unexpected generation outages and as run of the river hydro, solar, and wind- severe weather. powered generators. These generate power only when the energy source is available Generators are primarily classified as one of and are not dispatchable. However, they three types of units: displace other forms of generation on the grid—generally, fossil-fueled units. For • Base Load Units - Operate year- this reason, most renewable-fueled plants round except for maintenance. Some benefit a power grid with other variable base load units, except for nuclear, sources, such as natural gas or wood-fired can change output to handle daily load generators. swings but are not cycled on and off. These units tend to have higher fixed The following charts (Figure H and Figure I) costs (construction costs) and lower provide a picture of demand in Vermont on a variable costs (fuel and operating costs) yearly basis and on peak days. and produce large amounts of power.
Vermont’s Energy Future 11 Figure H: Peak Load over the Course of a Year - 2005 1200
1000
800
600
400
200
0 1 15 29 43 57 71 85 99 113 127 141 155 169 183 197 211 225 239 253 267 281 295 309 323 337 351 365
Figure I: Daily Load Curve for Summer and Winter Peak Days - 2005 1200
1000
800
600
400
200
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Winter Summer 12 Vermont’s Energy Future Efficiency can serve as an alternative to such Power Supply Contracts Versus generation sources. Available at all times, Investments in Power Plants efficiency helps to reduce demand. Essentially, there are three ways utilities In demand response programs, for instance, obtain the electricity delivered to customers. customers can respond to periods of A utility can: 1. Build and operate a power high demand by reducing the use of air plant that generates electricity 2. Enter into conditioners or pumps. a contract to purchase the electricity from another utility or 3. Buy the electricity on the Typical Electric Rates in Vermont market as it is consumed—“pay as you go.”
Electric rates in Vermont are regulated and Almost all Vermont utilities do some approved by the Vermont Public Service combination of these. Board. Most surrounding states have competitive energy markets, and consumers The differences between them is less related can choose their electric utility. to the particular fuel source than to the future price certainty desired, as well as the ability In Vermont, each electric utility has a of the utility to borrow, invest, or put up geographically defined service territory and security for long-term contracts. is required to supply power to anyone located in that territory. Some utilities in Vermont do not have the financial strength (the credit rating or Figures J and K compare rates in New investment capital) to consider all options. England for 2005 and 2006. Some electric utilities can only sign short term contracts and others may be unwilling Electric bills are a product of the applicable to enter into long-term construction programs rate and the amount used. While the rate due to the risks inherent in such a venture. is set by the state, consumers can control the amount of electricity they use through We will return to this subject in later sections efficient appliances and wise use. of these materials.
Vermont is a national leader in energy Vermont and Climate Change efficiency, and one issue under consideration is how much Vermont should invest in The combustion of hydrocarbon-based efficiency to meet demand. fuels—including gasoline, natural gas, oil, and coal—is causing a global climate Currently, efficiency funds are collected change. The combustion of these fuels through a system benefit charge and spent releases greenhouse gases, trapping heat in on a wide-range of cost-effective programs the atmosphere and causing temperatures throughout all customer sectors. to rise.
Vermont’s Energy Future 13 Figure 1.15 Average Rates VT v. New England Figure J: Average RatesThrough VT vs. New January England 2007through January 2007 15.00
14.00
13.00
12.00 Cents/kWh
11.00
10.00
9.00 2000 2001 2002 2003 2004 2005 2006 2007
VT New England
Figure K: Average Retail Price of Electricity to Ultimate Customers by End-Use Sector - 2005 and 2006 (Cents per KWh)
Residential Commercial Industrial All Sectors
2006 2005 2006 2005 2006 2005 2006 2005
New England 16.22 13.44 14.58 11.94 11.06 9.10 14.52 11.95
Connecticut 16.79 13.64 13.82 11.53 11.96 9.40 14.74 12.06
Maine 14.47 13.23 12.39 10.63 8.90 7.28 12.24 10.57
Massachusetts 17.01 13.44 15.82 12.42 11.38 9.22 15.40 12.18
New Hampshire 14.85 13.51 13.79 12.06 12.16 11.48 13.90 12.53
Rhode Island 15.09 13.04 13.52 11.71 12.04 10.01 13.90 11.97
Vermont 13.54 12.96 11.7 11.33 8.34 7.77 11.43 10.95
Source: EIA
14 Vermont’s Energy Future Global impacts of climate change could ways to reduce greenhouse gas emissions, include the raising of sea levels, species helping to educate the public about such extinction, and extreme weather events. opportunities, and considering ways to save money, conserve energy, and bolster Those in favor of aggressive climate change Vermont’s economy, natural resources, and action plans say that if preventative measures public health. are not taken, global warming could impact the landscape and economy of Vermont— Ten Northeastern and Mid-Atlantic States from the number of skiing days to the habitat including Vermont have entered into of the sugar maples. an agreement known as the Regional Greenhouse Gas Initiative (RGGI) to They point out that a number of energy establish a regional cap on greenhouse gas sources—solar, wind, geothermal, efficiency, emissions from electricity generation. and nuclear generation—do not create greenhouse gases or contribute to climate Beginning in 2009, carbon dioxide (CO2) change. emissions from fossil fuel-fired power plants in participating states will be capped at While two-thirds of the electricity in Vermont average emission levels from 2000-2004 comes from nuclear and hydro power and its until 2015. Participating states will then vast quantity of trees help Vermont to offset reduce emissions incrementally over a four- its greenhouse gases, a number of actions year period to achieve a 10% reduction of to stabilize global climate change are also CO2 emissions by 2019. underway in the region. RGGI will reduce emissions through a cap- In 2001, New England Governors and Eastern and-trade program, in which power plants in Canadian Premiers signed an agreement to participating states must pay to pollute. In reduce greenhouse gas emissions in the a cap-and-trade program, the state will sell region to 1990 levels by 2010, 10% below “allowances” to power plants. 1990 levels by 2020, and eventually by 75%. These reductions will occur in all sectors— One allowance corresponds to one ton of transportation, electricity, agriculture, and CO2 emissions emitted by a power plant. industry. Each power plant is required to acquire allowances to cover its emissions. In 2005, Governor Douglas issued Executive Order 07-05 establishing a Governor’s While plants may buy or sell allowances, Commission on Climate Change (GCCC), there are a limited number of allowances a broad-based group of six Vermont leaders sold by the state—each state will have an developing a comprehensive Vermont emissions cap. Allowances will be allocated Climate Change Action Plan by Fall 2007. to each state and auctioned annually, and the proceeds generated through the program will The GCCC was to oversee a public effort to be used to build cleaner generation sources, examine climate change impacts on the state. invest in energy efficiency, or reduce rates. This includes securing input from all sectors regarding existing, planned, and potential
Vermont’s Energy Future 15 Coal-fired, oil-fired, and gas-fired electric favorable tax treatment in the form of generating units with a capacity of 25 accelerated depreciation, serving as an megawatts or more will be included in the insurer, and taking responsibility for issues program. Debate on similar programs is taking that cross state lines. As examples: place at the national level in Congress. • Nuclear power has received federal Depending on your point of view, climate support for research and development, change action plans either complicate federal insurance, and the federal level electricity planning or create a market-based is responsible for the long-term solution approach to reducing emissions. for spent nuclear fuel • Wind power has received support from Decisions on this issue will have an impact research and development and receives on generation sources in the future. We are tax credits for each kW produced interested to know what you think. • The production of oil and gas receives accelerated depreciation Renewable Portfolio Standards and • Energy production from landfill gas has System Benefit Charges received tax credits for production
A Renewable Portfolio Standard (RPS) is a Federal energy legislation passed by requirement, usually implemented through Congress extended some of these programs, legislation, for utilities to obtain a percentage including tax credits for wind, and created of their energy from renewable sources. some new programs to encourage new nuclear plants. Utilities unable to secure sufficient supplies must pay default charges into a renewable Additionally, there is pending legislation in energy development fund. All New England Congress that would continue support to states have an RPS, except for Vermont. various kinds of generation as an indication of the importance of energy development However, Vermont does have System Benefit to national security, economic, and Charges, which collect money through utility environmental goals. rates to fund the efficiency program. These programs are a way to collect money through Also under consideration is a national utility rates to fund a common societal goal. renewable portfolio standard similar to what several states have passed. Federal Level Support for Different Types of Generation Putting the Need in Context—How Much Power (Buy or Build) Do We Need to Support for various types of generation has Plan For? been provided at the federal level, because Congress believes it advances public You can now begin to apply some of the terms interests. and concepts this section has introduced.
Federal support includes research and Vermont relies on contract and purchased development, tax credits for production, power, and its needs are often stated in terms
16 Vermont’s Energy Future of megawatt-hours (MWh). Electric sales in This section of the materials provides some Vermont totaled 5.8 million MWh in 2005. attributes of resources you may wish to Vermont Yankee provided 35% of this, and consider. Hydro-Québec provided an additional 28%. If you have bought a car recently, researching State-negotiated contracts with Independent on the internet, a consumer rating service, or Power Producers (consisting of several small a magazine, this will be a familiar exercise. hydro and wood facilities) provided another In buying a car, you often weigh price, gas 8%. As each of these contracts expire, a mileage, headroom, resale value, financing total of 3.9 million MWh (out of 5.8 million options, incentives, or other considerations. MWh) needs to be replaced, mostly during the 2012–2015 timeframe. The following attributes consider both new generation options and contract possibilities, This can be done by any one or a combination but not all attributes are applicable to every of the following: 1. Renewing existing option. You can pick and choose attributes contracts with updated terms 2. Signing based upon what is important to you. new contracts 3. Building new generation facilities 4. Reducing demand through Cost energy efficiency or 5. Purchasing power on the spot market. • Cost to Build or Install – Vary across options. Natural gas options tend to Demand in Vermont is projected to peak be cheaper to build than coal or wind at 1,274 MW (megawatts) in 2012. If new generation. generation sources are built, Vermont would • Cost to Operate – Are most often fuel. still need around 700 MW. While energy Natural gas is more expensive than need grows an additional 20-30 MW per coal, both are more expensive than year, efficiency programs and demand wind, which is essentially a free fuel. reduction are projected to more than offset • Total Cost per kwh – The annual such growth. capital costs (mortgage), fixed costs (property taxes), and variable costs It is likely Vermont will meet its needs through (fuel) divided by the expected annual some mix of contracts, energy efficiency, and production from the plant. Electricity on building new generation sources. As you will the wholesale market might typically see in the next chapters, all options have cost 6-8¢ per kwh (or $60-$80 per benefits and drawbacks. MWh). Retail prices can double after transmission, distribution, and overhead Factors to Consider: Attributes for each costs. Energy efficiency can also be Resource Type calculated on a total cost per kwh basis and is generally less expensive than Unfortunately, there are no perfect options, generation options. and it may be helpful to think of resources • Cost Over Time – is difficult to predict. in terms of their tradeoffs. Resources Fossil fuels may become scarce (in the with certain attributes may lack others—a case of natural gas or oil) or burdened resource may be renewable, for example, with new pollution control or green but not dispatchable. house gas requirements. Vermont’s Energy Future 17 Size • Water Use - Usually for cooling purposes when combustion is involved • Generation Output – The typical size or to divert for hydro resources. of a generation option. Nuclear plants • Other Environmental Impacts and coal-based plants tend to be the o Nuclear waste disposal and largest (500-1000 MW). Natural gas transportation plants tend to be in the mid-range (50- o Transportation of fuel sources 250 MW). Wind and hydro, as might be o Interruption of the flows of rivers feasible in Vermont, tend to be smaller o Visual impact—wind turbines or (1-50 MW). Efficiency programs tend transmission lines to be very small but add up when many customers participate. Economic Attributes • Footprint – The amount of space consumed by the option, either local • Jobs Created (Construction or or global. The local footprint is the Operation) – Vary considerably and land area occupied or impacted by are difficult to quantify and compare the option—the power plant or wind on a MW or MWH basis. Efficiency farm. The global footprint includes projects may be some of the most labor other considerations—the mine where intensive, while wood fuel sources can fuel originates, the refinery where it is benefit the entire timber industry. prepared, or the transportation of fuel to • Tax Benefits - Projects with large the power plant. investments create more taxable assets. New tax revenues potentially Environmental and Health Impacts lower property tax burdens and provide additional services. • Air Quality Impacts – There are four • Disposable Income Effect - Less major air pollutants to consider when expensive energy choices keep more weighing options: money for other goods and services in
o Sulfur Dioxide (SOx) – The major Vermonters’ pockets, creating additional component in acid rain economic benefits.
o Oxides of Nitrogen (NOx) – A major component of smog and haze Other Characteristics and Attributes o Particulates – A component of haze and contributor to breathing • Dispatchability - The ability to start problems and stop the resource. Natural gas and o Mercury – A pollutant from coal- many forms of hydro are dispatchable based sources that builds up resources, as they can be started and in organisms. It causes health stopped easily. Wind is not, nor are problems including developmental nuclear plants. and reproductive disorders • Contribution to the Load Curve • Climate Change and CO2 Levels - The - Whether the resource runs when impact climate change from emissions demand is highest (the peak portion of of carbon dioxide and methane. the load curve), moderate (the shoulder
18 Vermont’s Energy Future or mid-range), or lowest (the baseload). Point of View – Not Everyone Thinks the One is no more desirable than Same Things are Important another—it depends on the portfolio being assembled. Resource planning is also a challenge • Risk Factors – A broad range of because not everyone thinks the same things characteristics, such as the volatility of are important. fuel prices or supply interruptions due to political or environmental factors. One reason we have asked you here is to Risk can also include political elements, gain more insight into this issue. This section such as an additional carbon tax or focuses on value and tradeoffs with energy contractual risks including one party resources and is similar to the section on defaulting on its obligations. attributes for generation options. When you • Construction Time – The time to look at the attributes of each, how do you permit, approve, and build the facility. make a choice? A coal plant may take 5-7 years, gas 2-3, wind less than a year to build but While there are many possible values that several years to permit and study. The can inform your decision, important ones planning and construction of a nuclear include: plant is estimated at 10 years. • Impact on the Transmission System • Lowest Cost – Some participants may – Whether the resource requires a prefer the option costing least. They new transmission system or relieves may be on a fixed income or own a congestion on the current system. business and lack the ability to sustain Impact can depend where a generator is cost increases. They may work for a built instead of what kind is built. large employer who competes globally, • Lifespan of the Option – The longevity or they may be fiscally conservative. of the source. Conventional sources • Predictable Bills – Others may prefer usually have lifetimes of 25-30 years. having a consistent electric bill. This Efficiency options vary—appliances group might prefer a long-term contract have shorter lifespans, while insulation with a fixed escalation rate to a contract can last 50 years or more. The lifespan subject to market prices for fuel. of a contract is specified by the parties. Attitudes toward predictable bills can • Resource Availability – The probability reflect a person’s comfort with risk. that the resource will be available when • Greatest Reliability – Some customers needed (similar to dispatchability). may prefer reliability. They may be Whereas wind and small hydro vary with less interested in options that depend natural conditions, efficiency measures on natural or weather-related events, can depend upon customer behavior. preferring contracts with utilities that are Some imported purchased power well-funded with excellent credit ratings. contracts are subject to transmission They might be willing to pay more to congestion or interruption. assure that fuel supplies are under fixed-price long-term contracts. They may wish to avoid imported power or fuels.
Vermont’s Energy Future 19 • Least Environmental Impact – Some may prefer the options with the least environmental impact, whether in terms of emissions, climate change, radioactive waste, or visual impact. Some may be opposed to transmission line construction and favor localized or distributed generation options. They may be willing to trade cost for this value. • Independence and Self-Reliance – Some participants may prefer self- reliance and to be free of foreign fuel. For some, this may mean generating power in Vermont, for others, somewhere in New England, Canada, or nearby. Others might say that electric grids are highly interconnected and power flows freely within the U.S. and Canada.
20 Vermont’s Energy Future Chapter 1: Natural Gas, Coal, Nuclear, and Oil
in permitting in the Northeast. Advocates say his section of the materials discusses four T LNG might stabilize natural gas prices. options for electric generation. The options differ largely on fuel type and each option Advantages has advantages and disadvantages. • Low construction cost • Flexibility in unit size NATURAL GAS • Short construction period • Fewer emissions than coal or oil Brief • No need for fuel storage or fuel handling areas like coal or wood; has a smaller Natural gas as an electric generation fuel has footprint (backup fuel is usually oil) great flexibility and burns cleaner and the • Dispatchable technology is more efficient than either coal or oil. It is economical both as a peaking fuel Disadvantages (simple cycle) and as an intermediate and base load fuel (combined cycle). • Contributes to greenhouse gases; has some emissions of NO In terms of electricity generated in 2006, x • Natural gas prices are less predictable 38% of the generation in New England was than other fuel sources fueled by gas. The amount of natural gas • Natural gas is imported into the generation grew in the late 1990s when gas region and thus can be subject to was cheaper ($2 per MCF) than it is now, transportation or supply disruptions and inefficient oil units were replaced. caused by unforeseen environmental or political actions Gas is now in the $5-7 per MCF (per • There is a finite supply of gas thousand cubic feet) range and future prices • May require water for cooling for larger are difficult to predict. Gas is available in the combined-cycle plants northwestern portion of Vermont, but there is no natural gas-fired electricity generation Natural gas is a flexible fuel. It is readily in Vermont. The combustion of natural gas available in much of the U.S. and transported contributes to greenhouse gases. by pipeline. Natural gas burns cleaner than traditional coal plants (in which coal Right now in New England, wholesale market is pulverized and combusted in a boiler— electricity prices are strongly correlated with see coal section for prospective improved natural gas prices. While the largest global technologies). natural gas reserves are in the Middle East and the former Soviet Union, 80% of New Over the last ten years, it has increased in England’s natural gas comes from North efficiency by about 30%. Prior to 2000, there America, and Vermont’s natural gas comes was a boom in the construction of natural from Canada. gas generation in New England and the U.S. for these reasons. Several terminals to import liquefied natural gas (LNG) are either under construction or
Vermont’s Energy Future 21 The boom, however, has since declined note that natural gas turbines in smaller sizes because gas has become more expensive. are interchangeable with aircraft engines.
A major disadvantage of natural gas is the The recent improvements in efficiency have unpredictability of its prices. Gas prices are made the efficiency differential between often stated in the cost of a thousand cubic peaking plants and intermediate plants less feet (MCF). While gas prices are currently in important for natural gas. There have been the range of $6-$7 per MCF, over the past natural gas units proposed for Vermont decade prices have fluctuated from $2 per in the past—they ran into opposition, and MCF to $13 per MCF. development plans were dropped. As noted earlier, none has been permitted or sited to Vermont has little control over price swings date. of this magnitude. Natural gas plants are typically built to be 50-250 MW in size. They The nature of the opposition centered around are estimated to cost between $525-$730 placement of the proposed units and the per kW of capacity, with the larger plants proposed large size of the units (produced having the lowest cost per MW to construct. more power than was needed in the area or Vermont). Some opponents stated that There are three types of natural gas Vermont would suffer the disadvantages of technology: power plant location for power that was to be shipped to other states. • Steam Generator/Steam Turbines - Typically large units that serve as Supporters observe Vermont interests baseload or intermediate load units. could get all the power that they would want • Simple-Cycle Gas Combustion from such projects and would benefit from Turbines - The least expensive to the economies of scale associated with construct but expensive to operate producing more for export. Others believe (requires more fuel). They are typically smaller units, sized for the local Vermont used as peaking units. needs, might not suffer the opposition that • Combined-Cycle Gas Turbines plagued the earlier proposals. - Recycle exhaust gases from a combustion turbine, producing steam In the comparative tables found in Chapter to generate additional electricity in a 5, we use three gas plants as examples. steam turbine. They are more expensive to build than simple cycle units but are The first is a small (25 MW) simple-cycle more efficient and have lower fuel costs. combustion turbine (CT). This plant is They are typically used for intermediate designed for peak load purposes. The second portions of the load curve. is a larger 50 MW combustion turbine (CT).
The advances in natural gas efficiency have The third option is a larger (200 MW) come largely through improvement in gas combined-cycle plant (CTCC) that is turbine technology and the efficient use of appropriate for either intermediate load or recycled exhaust gases. It is interesting to base load purposes.
22 Vermont’s Energy Future Figure L: Vermont Gas Distribution Line and Service Territory - 2006
Vermont’s Energy Future 23 COAL Disadvantages
Brief •• Greater emissions than all other
generation types (NOx, SOx, particulates, While there is no coal-fired generation in mercury) Vermont, the state purchased 14% of its •• Major contributor to greenhouse gases electricity in 2006 from the New England •• New technology (IGCC) to burn coal Power Pool, which includes coal generation. cleanly is untested and cost is unclear
•• New technology to capture CO2 is In terms of the electricity generated in untested and cost is unclear 2006, coal made up 14% of the generation •• Takes longer to build and site (5-7 in New England. In the U.S., about 50% of years) than other options the electricity is generated with coal. New •• Coal plants only come in large sizes technology might make coal a cleaner burning •• Transportation costs and available fuel and lower its contribution to greenhouse infrastructure to support new gases, but this will also increase the cost of transportation are limiting factors using coal. The main advantages of coal are its Advocates say coal must be an element of abundant supply in the U.S., stable prices, the U.S. energy solution due to the large and consistency (its technology has been amount of new generation required and the used for over 50 years). impact on national security. Opponents say current pulverized coal technology should be While coal plants are more expensive and discontinued due to environmental impact, take longer to build than natural gas plants, and that the jury is out on the feasibility and they produce power at a cheaper rate per performance of new coal technologies. megawatt hour, due largely to stable fuel prices. States in the U.S. with large amounts If coal is selected as an element of the future of coal generation tend to have cheaper Vermont electricity portfolio, it would likely electricity. be through contract rather than a building a new coal plant in Vermont. The primary disadvantage of coal is emissions. While coal is doing significantly
Advantages better on air emissions (NOx, SOx, and particulates), efforts to control mercury are •• U.S.-based fuel source only now underway and coal still emits far •• Coal can be stored on-site in large more of these than natural gas. quantities •• Potential for long-term contracts The overwhelming concern for coal is its •• Less price volatility than gas contribution to climate change through •• 200 or more year supply carbon dioxide emissions. •• Generating plants using coal can be built in large sizes (700-1,000 MW), achieving economies of scale
24 Vermont’s Energy Future As a consequence, permitting of new design offers more efficiency in fuel conversion pulverized coal plants has significantly and less pollution than conventional plants. slowed in the U.S. and Canada, as most wait However, it is unclear whether there is any for improved technology. viable solution to removing CO2 from the emissions of this design. If coal is to have a significant future as a generation source, then technological A few IGCC plants are operating in a changes will likely be required to reduce demonstration phase, but most experts would carbon emissions. Since the coal itself agree we lack commercial experience with has a fixed amount of carbon, techniques the technology. Several companies believe for reducing CO2 emissions involve either their technology is ready for commercial
increasing efficiency or capturing the CO2 adoption and are proposing IGCC plants. before it leaves the exhaust stack. One of these is a 680 MW IGCC plant proposed by NRG (a company specializing The most-discussed technology for efficiency in generation) in western New York. improvement is called Integrated Gasification Combined-Cycle (IGCC). In a IGCC, a According to news releases, the plant chemical process converts the coal to a gas would go into operation in 2013. NRG was
that is cleaner to combust, enabling the CO2 the winner of the competition to build an to be more easily captured. The coal/gas is IGCC plant and sell to the New York Power then burned in a combined-cycle plant, which Authority. However, the costs of these new is an efficient way to burn gas. plants is uncertain until we have more experience. Some say the costs of IGCC The current challenge is to make the two plants with sequestration will be twice that of processes work together on a day-in-day-out a pulverized coal plant, others even more. basis, especially when coal does not have a consistent molecular structure (like gas). Assuming the technological challenges can be resolved, coal has additional advantages. Another consideration with new coal Because it is a domestic resource, coal has technologies is how to capture the carbon implications for energy independence in the dioxide and what to do with it. Some propose to U.S. use it commercially in process manufacturing or enhanced oil field recovery. Coal plants are generally larger (700-1,000 MW) and can achieve economies of scale. Others propose a process called Coal is typically transported to plants by rail sequestration, or storing it long-term in and barge and can be stored on site, avoiding abandoned gas and oil wells or at sea. supply shortages. While the ash produced Several companies say their technology for from burning coal has many chemicals and sequestration is ready for commercial use. needs proper disposal, it has found use in the construction industry. About 50% of the A less dramatic technology employs a electricity produced in the U.S. is from coal. conventional boiler combusting pulverized coal to produce ultra supercritical steam and scrubbers to clean the exhaust gas. The
Vermont’s Energy Future 25 The disadvantage of coal is its emission sequestration of carbon dioxide). The profile, especially carbon. Another current environmental chart in Chapter 5 compares disadvantage is the uncertainty over the cost current coal technology with an IGCC plant for new technology, such as IGCC. Because and includes sequestration. of the large size of typical coal plants, coal may be an unlikely option for location in Vermont. NUCLEAR POWER The cost of transportation for coal is a significant variable, and the availability of Brief transportation has experienced limitations in some parts of the country. Coal, especially The Vermont Yankee Nuclear Plant currently the IGCC version, has a much larger footprint provides 35% of the electricity consumed than does a natural gas plant and takes much in Vermont, which is about 46% of Vermont longer to build (5-7 years). Yankee’s total output (the other 54% is exported to other states). As a significant The issue then becomes the desirability of portion of our base load power (the other coal as a fuel type in a portfolio of purchased being Hydro-Québec), it often meets as much power contracts that electric utilities in as 50% of our daily demand for energy. Vermont may select. Some may say that if the coal plant is in another state, then that Vermont Yankee was granted a 40-year is not a Vermont impact, especially if the license to operate, beginning in 1972, by price is stable and lower than other energy the U.S. Nuclear Regulatory Commission generation contract options. (NRC). Under consideration now is whether the plant will be given permission to operate Others say it depends on which way the for another twenty years following 2012 and, wind blows regarding things like acid rain, if so, whether Vermont utilities will continue but that climate change is a global problem to purchase power from Vermont Yankee. regardless of plant location. They say that, Vermont utilities could also possibly purchase in any case, Vermont should be responsible power from other operating nuclear plants in about its emissions profile. New England if available.
The comparative chart in Chapter 5 looks at Proponents of nuclear power in the U.S. are three coal options. The first is a traditional advocating new nuclear plants and license pulverized coal plant that would form the extensions at existing plants as a way to basis of advantages and disadvantages for combat greenhouse gases, offer stable existing coal-based power. prices, and increase energy independence.
The second option is an IGCC plant Opponents of nuclear power say there are (without sequestration). The third option is other options available. They cite concerns a circulating fluidized bed (CFB) plant that about safety of nuclear plants as they age uses an advanced form of combustion to and the possibility of accidents and point reduce emissions (it also does not include out nuclear plants are considered possible
26 Vermont’s Energy Future terrorist targets. Opponents also cite the • There is currently more than one million considerable issue that absence of a national pounds of high-level nuclear waste waste disposal site represents. being stored at Vermont Yankee in a pool approximately 26 feet wide and 40 If the Vermont Yankee plant is not relicensed feet long. Continued operation creates and new power contracts for Vermont even more spent fuel stored on-site Yankee Power are not negotiated past 2012, • Operation of a nuclear facility always alternate measures will be needed to meet poses some degree of risk for potentially Vermont’s electricity needs and to meet its serious accidents greenhouse gas reduction goals. • The plant, like any other mechanical or industrial facility, has experienced Advantages mechanical failures • As a unit-contingent contracted • No greenhouse gases or emissions from facility, power from Vermont Yankee is power generation, since nuclear plants predicated on the reliability of a single do not burn fossil fuel facility, meaning that a plant shut- • Reliable base load power, meaning it is down would have a greater impact part of our every day energy supply on customers than would be the case • Potential to negotiate a long-term (up to if power were received from multiple 20 years) contract for power resources • Economic benefits to Vermont in the • Nuclear fuel is finite; reprocessing form of taxes, revenue sharing, and 650 nuclear spent fuel is practiced in other jobs countries but is not currently available in • The plant already exists along with the the U.S. If nuclear generation expands needed transmission infrastructure; it is worldwide, the price of nuclear fuel an in-state generation source could go up, with increased demand • If the plant is re-licensed, a prior regulatory order requires revenue The most likely option for nuclear power sharing for Vermont customers when for Vermont on an ongoing basis primarily prices are above $61 per MWH revolves around the Vermont Yankee Plant • The plant has a 35-year track record operated by Entergy Nuclear Northeast in of high reliability and consistent power the town of Vernon, VT. output • Over the past five years, the plant has Vermont utilities could purchase the output been retrofitted with multiple equipment from other nuclear facilities in New England, upgrades and large component but Vermont’s degree of leverage and long- replacements term relationship is with Vermont Yankee.
Disadvantages Entergy Nuclear is a specialized nuclear plant operator that owns and operates • There is currently no long-term solution several nuclear plants in the northeast. (nationally) for safe storage of nuclear waste.
Vermont’s Energy Future 27 The issues are whether the plant will be tax incentives for those interested in building relicensed by the U.S. Nuclear Regulatory new nuclear plants, the option for a new Commission (NRC) for an additional twenty plant anywhere in New England is beyond years of operation, receive a Certificate the 5-10 year timespan we are considering of Public Good (CPG) from the Vermont (a new nuclear plant would likely take at Public Service Board (both are needed least 10 years to permit and build). under federal and state laws), and whether additional storage of nuclear fuel waste will Vermont’s major utilities have indicated an be approved by the state Legislature before interest in discussing the continuation of the current license expires in 2012. new power contracts after 2012. Terms and conditions for such an extension are unknown The capacity of the original, water-filled at this time, but preliminary negotiations “spent fuel pool” is nearly exhausted. On- are expected to begin in the next several going operation is being conducted by months. moving some of the older fuel assemblies from the spent fuel pool into separate Those in favor of relicensing and new power concrete and steel canisters, or dry cask contracts past 2012 say: storage. Even if the plant were to be closed in 2012, additional dry cask storage would • Vermont Yankee is a good in-state be needed in order to empty the reactor and source for a large quantity of Vermont’s the spent fuel pool. base load electricity • The plant already exists, along with An additional consideration will be whether existing distribution and transmission suitable contracts for purchase of the power needed to move the power; no new can be negotiated between Entergy and construction is required Vermont’s distribution utilities. • The plant’s operation creates no greenhouse gas emission since The requirement for legislative and a nuclear plant is a non-fossil fuel regulatory relicensing approvals suggest generation source that a future contract with Vermont utilities • Continuing a reliable long-term contract could be obtained on favorable terms (e.g. could provide stable, predictable power lower price, easier credit requirements, etc.) prices; the contract currently in effect or other benefits obtained for Vermont. has saved Vermont customers more than $250 million over the past five Vermont Yankee currently provides years, compared to what the power approximately 35% of the electricity used in would have cost at market prices, and Vermont at a fixed price of $40 per MWh. In has contributed significantly to Vermont comparison, nuclear power provides 14% of having the lowest electric rates in New the power in New England and 20% of the England power in the U.S. • The plant provides economic benefits to Vermont estimated at about $200 million While there is renewed interest in new per year, including an employee payroll nuclear plants across the U.S., and the federal government has created a program of
28 Vermont’s Energy Future of 650, significant state and local tax The issue of storing and disposing of nuclear payments, and purchases of goods and fuel is of major concern. By law, spent services from in-state businesses nuclear fuel is the responsibility of the federal • Vermont Yankee produces benefits government. to the state, whether or not Vermont utilities take the power from the plant The federal government has failed to build an adequate waste disposal site despite An existing regulatory order requires plant more than two decades of research and sales after 2012, which are at prices above investment (the fuel is radioactive for many $61 per MWH, to be shared with certain thousand years). Until a national repository Vermont utilities. Depending upon future is opened, spent nuclear fuel is stored at the market prices, these benefits could be tens nuclear plants. of millions of dollars annually. Nuclear plant operators say the technology Those in favor say the issue of storing spent for plant storage is safe and reliable until the nuclear fuel is ultimately the responsibility of national issue is resolved. the federal government. While limited action has taken place at the federal level, the Opponents of the Vermont Yankee extension technology and funding is in place to safely are not convinced and say it is irresponsible store spent fuel at the Vermont Yankee to continue producing nuclear waste if there site until the federal government takes is no reliably safe long-term solution currently ownership. available.
Those who oppose the Vermont Yankee In the final analysis, it is perhaps overly nuclear power plant cite ongoing safety simplistic to cast the issue of long-term concerns about the plant (and nuclear power waste disposal in terms of how opponents or in general) and concerns about storing spent proponents see it. nuclear fuel. They point out that other nuclear plants in the region have been shut down. In deciding upon an extended life for Vermont Yankee in Vermont, the state and its citizens They say the economic benefits of the plant will need to balance the very real benefits (such as jobs and tax payments) do not offset of reliable base load power at stable prices the potential for an accident. They believe against the possibility that the spent fuel will the economic benefits of alternative energy be stored in Vermont for an as yet defined sources are as good or better, especially in period of time. This is the ultimate risk and job creation. benefit calculation that we all have to make.
While the debate continues, analysis of the economic benefits of alternative energy sources (with the exception of biomass) appears to be contained to early construction and, after completion, very limited as compared to the overall workforce.
Vermont’s Energy Future 29 OIL •• Oil consumption is a negative for national security and energy Brief independence •• Contributes to greenhouse gases
Oil has long been an important fuel in New •• Contributes to other air emissions (SOx,
England, but recently has been displaced by NOx, particulates, and mercury) natural gas where it is available. It provided 2% of Vermont’s in-state generation capacity Oil is an older fuel and, in many cases, has in 2006 and 9% of the electricity produced in been replaced by natural gas. Oil made up New England. 34% of New England’s generative capacity in 2000 and only 24% by 2006. Oil is also part of the system mix purchased from the New England Power Pool. It is New oil plants in Vermont would likely serve between gas and coal in terms of emissions peak demand. It is a relatively efficient fuel for and greenhouse gases. Oil is flexible, in peak load, and small oil-fired turbines have that it can be delivered by truck, making it a benefited from the technological advances potential fuel source for distributed generation in natural gas turbines. and combined heat and power systems. Oil can be transported by truck to remote Oil can also be used in peaking plants that locations that do not have natural gas. usually run less than 100 hours per year. Oil However, disadvantages include price prices have more than tripled over the past volatility (which fluctuate with natural gas decade. and world oil) and its emission levels. Oil is a hydrocarbon and burning oil releases Advantages carbon dioxide to the atmosphere at levels above natural gas and below coal. •• Less pollution and greenhouse gases than coal Those arguing for oil to serve demand point •• Can serve as a backup or replacement out that peaking units typically operate less to natural gas than 100 hours per year. •• Can be transported by truck to areas where natural gas is not available •• Has good dispatchability; starts quickly and can decide when to run •• Possible fuel source for distributed generation
Disadvantages
•• Price can be volatile and tends to be more expensive than gas •• Limited oil supply globally
30 Vermont’s Energy Future Chapter 2: Biomass, Hydro, Wind, Solar, and Combined Heat and Power
provide part of a single home’s usage. The his section considers a broad range of T very small projects are often dedicated to a generation options that are smaller in size particular load and are termed, “behind the and typically do not depend on finite fuels. meter.” Finite fuels are those with limited amounts remaining, including oil, natural gas, coal, If there is more power produced than the and nuclear. load requires, net metering is sometimes allowed for small projects. These small It is estimated there is oil and natural gas projects essentially turn the meter backwards for another 20-50 years, coal for 200-plus reducing the amount of electricity one needs years, and nuclear for several hundred to buy from their local utility, thus called net- years. Instead, the options in this chapter metering. If more electricity is produced than tend to rely on renewable fuels. The terms is needed, it can be sold to the electric utility renewable and renewable fuels can have at wholesale prices. multiple definitions. Net metering is a simplified billing method As commonly stated, a renewable is a fuel which does not take into account the fact source that is inexhaustible, such as wind, that energy produced at different times is of water, geothermal and solar, or one that different values. Net metering is designed regenerates at a rate greater than or equal to encourage very small, homeowner-sized to the rate it is consumed—as in many forms renewable generation sources. of biomass. Many of the options in this section are also For the purpose of discussion, renewable eligible for Renewable Energy Certificates projects come in two basic sizes: utility scale (RECs), another method used to stimulate and smaller scale. small renewable sources (see below). Utility scale projects share many characteristics with other utility generation. RENEWABLE ENERGY CERTIFICATES Utility scale projects can include large wind farms, large scale hydro, large scale In the U.S., a growing recognition of the biomass, and geothermal. 20-50 MW would importance of renewable energy has be a large, utility scale renewable installation resulted in a number of federal, state, and for Vermont (such as a large wind farm, or the utility initiatives to encourage the growth of Burlington wood chip plant). It is also possible the renewables sector and to incorporate to purchase power from large renewable more energy from renewable resources into projects located outside Vermont (Hydro- the nation’s power grids. Québec is an example). Utility scale solar is under development in the southwestern U.S. Some of these initiatives are voluntary, but is several years away from commercial like green pricing programs, and some operation. are mandatory, like renewable portfolio standards. Smaller scale renewable projects range from several MW to very small projects used to
Vermont’s Energy Future 31 Almost all of these initiatives require the ensures that those paying for the renewable operator of the New England electric attribute get the credit. system to carefully account for the amount of renewable energy sold to customers. For a utility, RECs represent a convenient One feature of this accounting is the use of way to demonstrate compliance with any Renewable Energy Certificates (RECs). regulatory requirements regarding quantities of renewable energy. They also ensure One REC represents the attributes of one customers get what they pay for, since MWh of renewable energy—but not the only one REC is issued for each MWh of electricity itself. renewable energy produced.
Generation from renewable sources can be For an owner of a renewable project, RECs separated from the commodity electricity to represent an additional source of income create two products—each of which can be to justify the construction of a project and sold separately: encourage additional projects are built.
For policy makers, RECs inject market forces into the procurement of renewable energy. Competition would suggest that the most cost-effective renewable projects will be built A utility with requirements to meet a certain under such a system. percentage of its supply with renewable energy is able to demonstrate compliance For consumers of electricity, RECs represent either by creating RECs with its own resources a way to ensure that their utility is actually or by purchasing them from owners of delivering renewable energy to them. other renewable facilities. When RECs are combined with electricity from any source, it The market price of RECs depends on the is considered renewable electricity. relationship between the demand for RECs and the supply of RECs. The demand is a function of the region’s various renewable portfolio standard requirements. Most REC requirements will likely increase over the For example, if a utility receives 100% of its next several years. electricity from a coal plant but combines it with the purchase of an equivalent number The price is also influenced by the demand of RECs, that electricity would be considered for voluntary green pricing programs, such renewable energy for their reporting the Cow Power program offered by CVPS. requirements. Conversely, if a utility chooses The supply is driven by the pace of new to sell the RECs from a renewable project, construction of projects that qualify. At it no longer can claim that resource as present, supply is lagging demand in many renewable in its portfolio. areas, so prices for RECs from new projects are high. A strict rule which prohibits double counting retains the integrity of the system and
32 Vermont’s Energy Future Referring to the discussion on externalities, The requirements for renewable portfolio the price of RECs internalizes through a standards are enacted by elected officials combination of policy and markets what used who are concerned about the pollution to be thought of as an externality. associated with generating electricity and want to see renewable energy business grow Each state defines the type of generation in their state. The additional costs, which are that qualifies as a renewable resource in that passed on to consumers, represent those state. Generally, RECs are tradeable within societal values as perceived by the various the New England region. state legislators, and they serve to send a price signal to consumers regarding their use of electricity. EXTERNALITIES
The production of electricity involves many BIOMASS costs—some of which are borne by the consumer and some of which are passed on Brief to society at large. Vermont is one of the leading states in the Costs typically borne by the consumer include use of biomass to generate electricity—most the fuel and capital costs of generating is from wood by-products. With 78% of the electricity. Whereas those costs passed on state forested, the rate of consumption is to society at large include emissions from sustainable (less is used than replaced). power plants (particulates and mercury) and the related healthcare costs that follow— In 2006, wood provided 8% of the electricity these are called externalities. consumed in Vermont. Wood generation units can range from 50-60 MW down to 1-3 There have been efforts to include a greater MW. Wood has economic benefits in terms portion of externalities in the production costs of jobs, but price can also fluctuate based of electricity. Initial efforts included requiring on what is going on in the forest products emitters to clean the sulfur from flue gases industry. with scrubbers or by purchasing lower sulfur fuel. More recently, permits have become Burning wood emits greenhouse gases. required in order to emit various pollutants However, the CO2 from biomass is recycled into the air. as the next generation of trees mature. Generation from farm-based wastes (such The annual amount of permits issued is as manure) that have been turned into limited, thereby reducing the aggregate methane is a new and growing source. While pollution from a particular generation type. farm methane projects are not economic RECs are a similar device, in that the just for electricity production, the associated externality costs for cleaner generation are benefits of odor and runoff control make the included into the costs we pay for renewable process feasible. resources.
Vermont’s Energy Future 33 Advantages Because the range of options in biomass energy is so broad, these materials will • Wood as a fuel in Vermont is renewable concentrate in two areas: 1. Wood chips and • Landfill gas or methane from a farm is 2. Methane gas from farms and landfills. generated from a waste product • Creates jobs and provides another The potential for wood chips or wood as a revenue stream for forest industries and fuel is all around us—about 78% of Vermont’s agriculture land is forested. Vermont electric utilities • Is neutral to beneficial on greenhouse have long considered wood as a source of gases (wood is neutral if sustainably fuel to generate electricity and as a source harvested, beneficial if used instead of of energy for combined heat and power natural gas; methane fuel sources are systems. beneficial when they prevent methane from escaping to the atmosphere) The technology for using wood as a fuel is • At current natural gas prices, the cost for advancing and is becoming more efficient wood generation is competitive and cleaner. But the source of wood for large electric generation can be uncertain Disadvantages as it tends to be a by-product produced from other industries. For example, wood • Biomass is usually waste wood from availability and price suffers at times because another process and price and supply of the close and obvious linkage to the forest can fluctuate products industry. As the forest products • Must be transported from the forest to business goes through cycles, wood-fueled the plant power is directly impacted. • While emissions have improved, there remains some concern over particulates Wood • Some say wood products should be dedicated to combined heat and power According to the Vermont Department of systems (where both electricity and Public Service, wood provided 8% of our useful heat is generated) rather than electricity supply in 2006. Vermont currently used for large-scale generation has two wood-fired power plants and one more in a conceptual stage. Vermont is a leader in the use of electrical energy produced from biomass sources. The McNeil Generation Station in Burlington is owned by the Burlington Electric Department The following discussion about advantages (50%) and other Vermont utilities. It has a and disadvantages of biomass energy is rated capacity of 53 MW and has operated taken largely from the Vermont Energy since 1984. McNeil was the largest wood- Digest published in April 2007 by the Vermont fired generator in the world when it came on- Council on Rural Development (Brenda line. Hausauer, author) and from the work of the Biomass Energy Resource Center and their After the plant opened, its fuel price was not Vermont Wood Fuel Supply Study. competitive with low oil prices beginning in 1986, and thus it operated at a low capacity of
34 Vermont’s Energy Future about 20% for a time. In 1989, McNeil added may increase in the future, the creation of the capability to fire its boiler using natural gas wood chips as a by-product is not likely to when wood was not economic. With today’s increase. high natural gas and oil prices, McNeil is now fairly competitive and basically burns no oil Production of wood chips requires significant or gas except for startup purposes. investment in a wood chipper for a low value product. This creates a market that is not The McNeil plant provides 39 jobs at the power straightforward, and prices and reliability of plant, including four procurement foresters. supply can change. Developments in the There are about twice that number of full- pulp and paper industry impact wood energy time jobs associated with wood harvesting, prices. Wood chip prices have gone from transportation, etc. It has contributed over $18 per ton in 1984 to $29 per ton today. $200 million to the local economy through This price change is similar in pattern to coal, January 2007 (not including the construction smaller than the change in other fuels such of the plant). as gas, but is less volatile.
It also uses sawdust, chips and bark from Vermont has enough wood to increase its local sawmills, and processed urban wood use for the large-scale generation of electric waste. Local residents contribute between energy, but the state may not have enough 2,000-3,000 tons per year of yard trimmings loggers and equipment. Landowner and and 3,000-4,000 tons per year of pallets harvesting issues also exist. The sizes of (Irving, 2007). land parcels are shrinking, and there is a new generation of landowners purchasing A second wood-fired generation plant properties. Harvesting wood often has in Ryegate came online in 1992, with a no significant financial advantage to capacity of 20 MW. The Ryegate plant is an landowners. Independent Power Producer (IPP) selling power through the Vermont purchasing Farm-Based Biogas Energy Systems agent, similar to in-state hydroelectric facilities. When Ryegate’s contract ends When Vermont’s cows are fed a ration of in 2012, the company hopes to sell power grain, corn silage, and hay, they extract the through the New England power grid. energy they need from the feed to provide for their own growth and sustenance and to There are several new wood-fired generation produce milk. However, because no biological plants currently under consideration in process (including a cow’s stomach) is 100% Vermont, including one that plans to supply efficient, the manure it excretes contains a heat and power to an existing industrial significant amount of additional potential facility. energy.
Wood chips are a low value product produced By employing the process of anaerobic from sawmill residue or concurrently with digestion, farmers can extract this potential a forestry logging operation. Sawmills energy in the form of biogas. The biogas generally try to minimize their creation of can, in turn, be used to create electricity and wood chips. So while demand for wood chips heat.
Vermont’s Energy Future 35 Anaerobic Digestion of Biodegradable Additional projects are due to come on-line Wastes in the coming months. The overall potential for farm methane systems in Vermont is Anaerobic digestion is the bacteriological estimated to be fairly small. breakdown of organic (carbon-containing) material in an oxygen-free environment. Landfill Biogas
Manure-to-energy projects collect manure Landfill biogas is created when municipal from the cows into a large airtight concrete solid waste decomposes. The gas is about tank and hold it there for about three weeks. 35% methane (much of the rest is carbon dioxide) and has roughly one-half the energy Bacteria already present in the excreted value of natural gas. This landfill biogas can manure further digests the manure in be captured, converted, and used as an virtually the same process as was occurring energy source. in the cow’s stomach. Biogas, produced by the bacterial breakdown of the manure, This not only reduces odors and other local builds up in the tank and a pipe delivers it air pollution problems, it also prevents the to an internal combustion engine where it is gas from migrating into the atmosphere and burned to make electricity. contributing to smog and global warming. (Methane has about 21-times the global Anaerobic digester systems are unique in warming impact of carbon dioxide.) that their benefits are a result not only of the renewable nature of the energy produced, Today, only two major landfills operate in but also because they have a significant Vermont—in Coventry and Brattleboro. positive impact on existing farm manure management practices. Coventry is Vermont’s only operating landfill that has a biogas project. That project The anaerobic digestion process leads currently has 6.4 MW of capacity, and could to improved water quality, a significant grow to 8 MW. The current project is expected reduction in farm odor emissions, improved to produce power for about 25 years. farm nutrient management practices, and, perhaps most significant given our current The Waste System’s Moretown landfill has understanding of global climate change, a the largest untapped potential for a biogas reduction in total farm methane emissions. project. The Moretown landfill has capacity for a 3 MW landfill biogas project. Sewage Currently, there are four anaerobic digester treatment may offer a source of biomass systems in operation on Vermont dairy generated electricity in the next decade. farms with a capacity of 1 MW. Because the feedstock is available 24 hours per day, throughout the entire year, the systems produce power on a nearly continuous basis.
36 Vermont’s Energy Future HYDROELECTRIC term contract (because the fuel price does not fluctuate) Brief • Contributes to goal of energy independence from oil Hydroelectric power is a large scale • A contract with Hydro-Québec provides energy source in Vermont, second only to system power as a backup, therefore nuclear power. The current contract with reliable and dispatchable deliveries; Hydro-Québec provides 27% of Vermont’s transmission infrastructure is in place electricity. Other hydro sources, mostly in • Some hydroelectric is a local resource Vermont, provide an additional 12%. Hydro has environmental benefits related to air Disadvantages pollutants because it has low emissions and creates few greenhouse gases. • Small and new hydro projects are expensive to permit and build and can Hydro built in Vermont can have economic disrupt existing stream flows benefits, but by most estimates less than • Small hydro power can be intermittent, 100 MW of potential new or refurbished so needs to be combined with another hydro sites exist, and most are small. Hydro resource type is expensive to site, permit, and build, but • Hydro-Québec contract or other large the fuel is free. scale hydro contracts means direct economic benefits don’t reside in The Hydro-Québec contracts begin to expire Vermont; a contract with Hydro-Québec in 2012, but Hydro-Québec has indicated does not produce local economic a willingness to discuss terms of a new benefits in the form of tax payments and contract with a price to be negotiated. Other jobs large scale hydro resources are potentially • Canada or Québec could change energy available from other providers outside of export policies Vermont, both in the U.S. and Canada. • Contract will likely renew at a multiple (above or below) of then market price If a new contract is not put in place, Vermont forecasts so can be above or below will need to replace this relatively large and market price in future years inexpensive power source and factor in the • New hydro projects can significantly loss of this non-greenhouse gas generation harm wildlife habitats and limit stream source into the Vermont plan to reduce flows greenhouse gas. There are many sizes of hydroelectric Advantages facilities. Large hydroelectric facilities, usually owned by utilities, generally impound • Low emissions; low greenhouse gas; water behind a dam. The water is controlled renewable source and released to turn turbines and run • May be able to enter into longer duration generators when electricity is needed. contracts more easily than sources with Facilities with impounded areas are more less fuel price predictability economically attractive, but they have greater • Stable pricing can be negotiated in long- environmental impacts due to the flooding of lands to create lakes and fluctuating water levels. Vermont’s Energy Future 37 Small hydroelectric projects often refer to producers selling power to utilities owned facilities with 1-5 MW capacity. In general, about twenty hydro stations with a total small hydroelectric projects have fewer capacity of 54 MW. environmental impacts than large projects due to their use of run-of-river design. In 2003-2004, the state declined an (Opponents of specific projects, such as the opportunity to purchase a network of Peterson Dam, might disagree.) hydroelectric facilities with 567 MW of capacity on the Connecticut River between Run-of-river hydroelectric projects generate Vermont and New Hampshire and the power as the water flows through the facilities, Deerfield River in Southern Vermont. Instead, requiring little or no impoundment. Small the dams were purchased by TransCanada hydropower systems have other benefits Corporation for $505 million, who sold the as well—they do not displace people, the power into the New England electricity grid, technology is not complex and can be though not directly to Vermont utilities. easily transferred to communities, and the technology can provide power for locations There has been a new interest in considering that are not connected to larger grids. whether nonworking in-state hydro sites can be redeveloped, whether working hydro Small hydropower sometimes includes the sites can be repowered (their output levels classifications of very small projects, including increased), and whether more micro-hydro mini-hydro (less than 1 MW), micro-hydro and mini-hydro facilities can be built. (less than 100 kW). These smaller projects almost always use run-of-river designs. Costs, permitting, and environmental Some can be installed in farm ponds and constraints are significant barriers to small water supply pipes. The projects can produce hydro development in Vermont. Hydro enough power for a single home, a block of projects that use public waters, even small homes, a school, or a municipal building. rivers and brooks, require several permits, including permits from the Vermont Public About 2,321 GWh, or 37%, of Vermont’s Service Board, the Agency of Natural electricity supply came from hydro sources Resources, and the Federal Energy in 2005. About 28% came through contracts Regulatory Commission. with Hydro-Québec; 8% from Vermont utility- owned and privately-owned Vermont plants; Many of the permits are required to mitigate and 1% from New York plants. Starting in environmental impacts. Projects can take 2015, the quantity of contracts Vermont will from 3-5 years to develop and are expensive, hold with Hydro-Québec decreases sharply. making it prohibitive for small projects.
In 2005, Vermont had 138 MW of small A pico-hydro-sized system (less than 5 kW) in-state hydroelectric capacity providing in Vermont costs around $20,000 installed electricity. Utilities owned 84 MW, of which (including the grid interconnection) without 51 MW came from a run-of-river stations, permitting costs. On a project of under 1 and 32 MW from facilities that have the MW, permitting costs add about $2,000 per ability to store water for use when electricity kW to the total cost, bringing the total cost of demand is at its peak. Independent power a 5 kW system up to $30,000.
38 Vermont’s Energy Future Studies on the economic potential for small Hydro-Québec has indicated an interest in hydro in Vermont show that it can range negotiating a new long-term contract with from 93 MW (Barg, 2007) to 10 to 15 MW the possibility of additional hydro resources. at existing dams ranging in size from 500 Terms and conditions for such new contract kW to 2 MW (Warshow, 2007). (Note: the are unknown at this time, but any contract previous section drew from and excerpts will depend upon regional electric market from the Vermont Energy Digest, Brenda conditions anticipated at the time. Hausauer, April 2007, Vermont Council on Rural Development.) One would assume at this early point that Vermont might enjoy a small advantage when Negotiation of a New Long-Term it comes to price, as alternate purchases Contract with Hydro-Québec of the Hydro-Québec power might require additional transportation costs to reach The Hydro-Québec contract provides 28% markets to the south. A new contract brings of the electric energy used in Vermont. The the benefits of hydropower to the Vermont bulk of the contract is scheduled to decrease portfolio such as no emissions, dispatchability sharply beginning in October, 2015. The (within contract terms), and the potential for current Hydro-Québec contract totals 309 a pricing formula that could include stable MW. It is divided into six schedules with prices or prices with low variability. expiration dates as follows. The existing Hydro-Québec contract already Each schedule has a 75% annual capacity demonstrates some of the advantages and requirement on energy deliveries. GMP disadvantages of long-term pricing. At times, has a resale agreement under which they during the current Hydro-Québec contract, annually sellback some of their energy to prices paid for the power were above market HQ at contract energy prices. price and at times (more recently) prices charged for the power were below market Roughly half of the cost is a fixed capacity prices in New England—Vermont consumers payment (minor variation among schedules) benefited. and the other half is an energy payment that changes with an inflation-based index. The current energy cost is about 3.1¢ and the WIND average capacity cost is about $20 per kW a month. Total cost is on average about 6.8¢ Brief per kwh (some variation among schedules). Across the U.S., wind power is the fastest Schedule B 175 MW expires 10/31/2015 growing source of new generation (annual Schedule C-1 57 MW expires 10/31/2012 (27MW sellback) growth rate of 25%). Successful projects Schedule C-2 28 MW expires 10/31/2012 require attractive wind speeds, sites that can Schedule C-3 47 MW expires 10/31/2015 be permitted, and access to economically Schedule C-4a 25 MW expires 10/31/2016 competitive markets for the electricity Schedule C-4b 6 MW expires 10/31/2020 generated.
Vermont’s Energy Future 39 Experience with Vermont’s only commercial- turbines are a significant intrusion on scale wind power facility, the 6 megawatt landscapes, that they spoil views, alter Green Mountain Power wind facility in Vermont’s “Green Mountain State” ridge Searsburg, has generally been good. lines, and could have wildlife impacts at Searsburg verified the feasibility of wind higher elevations. power operating in cold climates. There are plans being considered by It has been asserted by wind industry independent developers to install over 100 proponents that the technical potential for megawatts of new wind power in Vermont at utility scale wind power could reach 200 MW the present time. So far, the Vermont Public of rated power, or up to 20% of the state’s Service Board has approved the Searsburg current electricity peak demand, over the next Wind Power Facility, the region’s first utility- decade. However, this projection is based scale project with 11 turbines, and, more largely on the assessment of wind resources, recently, a 16-turbine project in Sheffield. the proximity to the bulk transmission system, PPM Energy recently submitted a petition to and eliminating sites that are part of either site a 45-megawatt project with 17 turbines state, federal or other conserved lands and in the towns of Readsboro and Searsburg. may not reflect what amount of commercial wind can ultimately be sited in Vermont. Advantages
Vermont’s predominant wind sites are along • No air emissions higher elevation ridge lines, thus placing • No greenhouse gases them potentially in higher visible parts of • Wind is a renewable resource Vermont’s communities. Wind power could • Fuel is free, enabling stably-priced also be purchased from outside Vermont contracts under contract. Wind power is competitive • Vermont-based wind farms would with other sources of generation. produce local economic benefits in the form of tax payments and installation Implementing new wind-powered generation jobs in New England has been problematic due • Can be built or expanded in manageable to siting and permitting concerns. increments of 20-50 megawatts as needed As beauty is in the eye of the beholder, wind power advocates believe large wind farms Disadvantages are visually attractive and increasing their use will improve air quality by displacing • Wind turbines can be an intrusion on the greenhouse gas emissions from fossil fuel- landscape driven electricity. Advocates point out there • Wind farms may cause wildlife or habitat are clear precedents for mitigation should damage from either construction or wildlife impacts exist. They say wind farms operation because windy ridgelines are provide economic benefits to the regional often wild and undeveloped and local economies. • Wind power is only available when the wind blows, so is not dispatchable In contrast, opponents contend that wind • Windy locations are often remote from
40 Vermont’s Energy Future electric load centers and may require transmission lines to be upgraded or wholesale market price for electricity is in constructed the range of 6¢ (this is a dynamic number • Permitting timeframes are uncertain effected by a variety of factors, most in Vermont (true for all fuels); this can notably fluctuation in natural gas and other make projects more expensive and, in commodity prices), the difference is often an active market like wind, encourage made up by the value of the renewable wind developers to go elsewhere energy certificates wind can attain. • Some may like wind as an option but feel that it is better for wind power The second factor driving growth is that wind to come from outside Vermont (New turbine technology has proven to be much England, Canada, or New York), where more reliable than turbines just a decade the wind resource may be better, it ago, allowing the financial community to may be less expensive to develop wind become comfortable investing in wind. projects, and the projects can achieve economies of scale The third factor is federal and state policy initiatives, including financial incentives Over the past decade, wind turbines have that have been implemented over this past become larger in terms of physical size decade, encouraging forms of renewable and power generated. Production size per energy development. turbines have gone from less than 1 MW and are now between 1.5-2 MW. Off shore Variability of Wind machines are bigger. Because wind generation is a variable Wind turbine towers come in a variety of resource (similar to small hydro but with heights. 262 feet is a common size, and one much greater short-term variability), wind of the taller sizes is 328 feet. Blades can be can only provide a portion of electric system 120 feet longer, so the tower and blade would load requirements. 20-25% of a regional be 260-430 feet (depending on the height of system’s energy needs may be a practical the tower and the position of the blade). limit for the technology (some European systems already have higher percentages). Wind power costs can be competitive relative to other forms of generating electricity. Wind Wind power in New England currently power can be produced for as low as 6-8¢ produces less than 1% of our electricity, so per kWh. Because the costs of a wind project this should not present a practical constraint do not vary year to year, a wind developer in the near term. is more likely to enter into a stably-priced contract than the owner of a fossil fueled Modern wind farms generate electricity 70- plant. 80% of the time, but, due to changing wind speeds, they generate over a year 30-40% However, there are often cases where wind of their full, theoretical name-plate capacity generated energy is priced according to the (if they were able to run 100% of the time at going wholesale market price. If the current full output—something no generation source is capable of doing).
Vermont’s Energy Future 41 Wind power’s greatest value will be on The Wind Power Resource in New electrical systems that have at least an equal England amount of variable generation (gas peaking units or storage, such as hydro storage) to The fact that wind blows the strongest and fill in when the wind is not blowing. steadiest at the higher elevations in interior New England is well documented. This effect When paired with another variable generation can be seen visually in the wind map for New source, wind acts as a “fuel saver” on the England included in this section. (This map system, preventing the burning of fossil fuels was produced by AWS Truewind). and generation of attendant air emissions. An electrical system with a significant amount Stonger annual wind speeds are illustrated of hydro storage or natural gas or oil-fired by the red-hued colors on Figure L and generation like the New England system show the best resources are concentrated is a good match for expanding wind power off the coast and at the summit of the higher generation. mountain ranges.
Wind power can therefore be readily Regardless of the theoretical potential in integrated into the existing regional electric Vermont, most planners, environmental generation system. Geographic diversity agencies, and organizations that have provided by multiple wind installations will looked closely at Vermont’s potential for also serve to dampen the intermittent nature wind power acknowledge that a relatively of any single project. small percentage of this theoretical resource will be developed due to land use conflicts Transmission Issues and economic reasons.
Because the best wind locations are Some say that 250-300 MW could be often located remote from load centers, installed in Vermont over the next decade. transmission of the power can be a If each turbine had rated capacity of 1.5-2.5 significant and sometimes limiting issue for MW, this level of development would require wind development. between 5-7% of Vermont’s ridgelines.
The transmission infrastructure near a wind Utility Scale Wind development must be capable of carrying the peak output load of the wind facility. The costs Most large wind developments have been and other impacts of strengthening these built by independent, non-utility companies. wires can, for some sites, be prohibitive. Typical size across the U.S. and Canada is now around 100 MW, with big projects in An active issue in the New England electric the range of 200-300 MW. Projects in New system is to determine what portion of these England are smaller, in the range of 20-50 upgrading costs should be shouldered by MW. the developer and what portion should be allocated to all electric users in the region.
42 Vermont’s Energy Future Figure L: Wind Speed Map of New England with Electric Transmission Lines
Vermont’s Energy Future 43 Electricity from these large projects is usually Local Area Wind sold at wholesale prices, under long-term contracts to electric utility companies, or on These wind facilities involve one or several regional electricity spot markets. The cost of large modern turbines installed close to electricity from these large wind facilities is where the power is needed. Capital is lower than for smaller local area projects or provided through local investors, banks, or residential scale projects. municipal utilities. The electrical output can be supplied as bulk power to the regional Quantity pricing results in lower turbine grid or can be used on local power systems. prices, and a facility’s fixed costs, such as interconnection, permitting, and operation The cost of energy produced by these facilities and maintenance, can be spread over many is higher than utility scale wind because fixed more units of output. These large wind costs are spread among fewer turbines and projects require careful siting, especially there are often lower quality wind regimes. considering their higher elevations, to mitigate environmental and aesthetic impacts. However, municipal electric utilities sometimes have access to low cost tax Vermont is unique in that its electric utility exempt financing and/or some ability to sell companies remain vertically integrated the output at retail prices to offset this cost businesses. Utility companies, private disadvantage. Presently, there are no such entities, municipalities, and cooperatives can installations in Vermont. all invest in generation plants in Vermont. It is possible for Vermont utilities to participate Examples are the town of Hull, Massachusetts directly in large wind plants by agreeing to (Figure N), 8 miles to the southeast of Boston, finance a portion of the cost of the facility in where a 660 kW turbine was installed in 2001 return for a similar portion of the output of and a 1.8 MW turbine in 2006. the facility or other returns. A privately-owned example is provided by For wind to reach it full potential in Vermont, the summer 2007 installation of a 1.5 MW the price of the electricity produced must be wind turbine at Jiminy Peak Mountain Resort competitive. Like other sources of generation, in the Berkshires of western Massachusetts the contract or spot market prices paid for (Figure O). wind are not related to the amount spent, but rather to prevailing wholesale market Local area wind development may be conditions on the New England electric constrained in the future due to lack of system. technical knowledge of the resources, siting, and competition for wind turbines and Prevailing policy in Vermont has been constructors. There is currently a world-wide focused on obtaining stable-priced contracts shortage of wind turbines, especially for to take full advantage of wind power not small projects. being subject to fuel price fluctuations.
44 Vermont’s Energy Future Figure M: Simulation of a Large Wind Project from along Interstate 91 in Sheffield, Vermont in the Northern Part of the State.
Residential Scale Installations For example, it would take as many as 1,400 residential scale turbines in Chittenden This scale of development involves small County to produce the same amount of wind turbines, 25-100 kilowatts in size, to power as one large wind turbine on a windy meet the needs of an individual home or ridge. small business owner or small groups of homes and businesses. These installations are usually financed by the homeowners or small business that use Existing Vermont electric regulations usually the power themselves. Over the last three permit net billing where small projects sell years, there have been over 70 Homeowner excess electricity back to the utility company Scale wind turbines installed across Vermont at retail prices (roll the meter backwards). at farms, homes, and schools.
The cost of energy from this scale of wind Many of these have received substantial turbine is the highest of the three categories federal subsidies provided through state (they are over twice as expensive per kilowatt agencies. However, because they can to purchase as large wind turbines and the offset retail electric prices, which are about electrical output is significantly lower per twice as high as wholesale prices, some dollar invested because they are generally can enjoy economic practicality in the best installed in less windy areas). circumstances.
Vermont’s Energy Future 45 Figure N: 600 KW Turbine Developed, Financed, and Installed by the Hull Municipal Light Plant in 2001 on the Coastline beside its Elementary School.
Figure O: 1.5 MW Wind Turbine Installed at the Jiminy Peak Resort in Western Massachusetts in July 2007 to Help Provide the Resort’s Electric Usage.
46 Vermont’s Energy Future Solar Advantages
Brief • No emissions; no greenhouse gas; renewable source Solar energy can be captured by using • Fuel is free photovoltaics (PVs) and thermal collectors. • Economic benefits from installation jobs PVs convert sunlight into electricity and • Distributed generation have many applications. Thermal collectors • Solar power works best on hot summer are used to heat water or air for domestic or days and cold clear winter days when commercial use. electricity prices are the highest
As this report focuses on electricity, we will Disadvantages focus our description on PVs. PVs produce electricity any time the sun is shining, but • Solar generation is comparatively more electricity is produced when the expensive and only cost competitive for light is more intense and is striking the PV remote locations (off grid) or specialized modules directly. applications (offset the cost of running a line) Solar electricity is the most expensive • All the costs are front-loaded, requiring generation technology under consideration a multiple year payback in Vermont. Because of the expense, it is currently cost competitive only for specialized Solar energy as a technology and as an and remote applications when compared option for generating electricity in Vermont is with large scale options. But photovoltaics still evolving. In the comparative charts, solar are coming down in price as technology and options have some of the highest prices. markets advance. (By contrast, using the sun Most of the costs are equipment-based, to heat water is already cost competitive.) since the fuel is essentially free.
Most of the cost for solar systems is upfront Solar energy will likely generate only a (fuel is free) and the systems often need portion of Vermont’s electricity, in the 1% or incentives and/or net metering to make the below range, over the next 5-10 years. economics more attractive. Most of the solar activity is in the area of The near-term potential to supply electricity displacing electricity used to heat water. for Vermont is enormous. Enough sun hits About 37% of the water in Vermont is still the average house roof in Vermont to supply heated with electricity. 10 times the electricity used by the average homeowner. Current practical limitations, however, will likely keep the contribution of solar power to small levels (estimates are in the range of under 5%). Technological advances and policy driven incentives could change that potential.
Vermont’s Energy Future 47 In the cost comparison chart in Chapter 5, we installations in Vermont, including NRG look at solar for a commercial installation (50 Systems and groSolar, but this is not a KW to 1 MW). Similar to small wind power large sector of use currently. systems and small hydro power systems, solar potential in Vermont in the near term Vermont provides incentives for solar will not likely provide bulk electricity supplies installations. The Vermont Solar and Small to the regional electric grid, but rather Wind Incentive Program was established in provide for part or all of a residence’s or 2003. Under the program, individuals and small business’s electricity needs. businesses can receive $1.75 per watt for approved solar PV projects, with a maximum Photovoltaics (PVs) convert sunlight into of $8,750 or 5 kW. The Clean Energy electricity and have many applications. Development Fund has provided support for PVs produce electricity any time the sun is larger projects. shining, but more electricity is produced when the light is more intense and is striking While some solar systems are cost- the PV modules directly. Unlike solar effective over the long run, about 95% of thermal systems, PVs do not use the sun’s their lifecycle cost is up front, making them heat to make energy, but instead produce difficult to afford for many people. electricity directly from the electrons freed by the interaction of photons of sunlight For example, residential solar water heaters, with semiconductor materials in the PV with or without current Vermont incentives, cells. are less expensive than electric or propane water heaters over their 25-year lifetime When domestic PV systems are installed ($13,500 for solar with incentives on a typical on homes that are independent of the utility residential system, compared to about grid (called off-grid), they use battery $21,000 or more for electric or propane). banks to provide power when the sun is not out; domestic PV systems on homes or But the up-front capital cost is considerably businesses connected to the grid can use higher (about $6,250 for a solar system with electricity from the utility when the sun is not incentives and propane backup, compared to shining. The market has largely shifted from $750 for a propane or electric system). remote, off-grid, and consumer products to a majority of grid-connected, distributed Some states such as New Jersey have power. decided to dramatically encourage solar systems and have created special solar Vermont had 240 net-metered solar PV RECs. systems, providing 673 kW of capacity, as of March 2007. It is estimated that Vermonters Some have decided to target the flat roofs have installed about 300 PV systems not typical of commercial or industrial buildings connected to the electricity grid. and are working with chain stores owned by companies looking to make a difference in In addition, there are an estimated 500 solar climate change. water heater systems in the state. There are a few commercial facilities with solar
48 Vermont’s Energy Future COMBINED HEAT AND POWER (CHP) Disadvantages SYSTEMS • Combustion is still required so there are Brief environmental impacts • Systems are small Combined heat and power systems (also • Upfront costs may require incentives or known as co-generation) are a growing ways to spread out cost recovery and source of electric generation in Vermont payback with the added benefit of offsetting other energy needed for heating buildings. A CHP Vermont has several Combined Heat and system is one where the waste heat from a Power (CHP) applications operating in the combustion-type generator is used to provide state. The Department of Public Service space heat or process heat for a building. estimates approximately 21 megawatts of CHP capacity is installed in Vermont. An example of this system would be an internal combustion engine where the heat The definition of CHP is the sequential or from the radiator provides space heat to a simultaneous generation of multiple forms of building or steam in industrial applications. useful energy, usually in the form of electric The advantage of CHP is greater efficiency and thermal. Another name for CHP is co- than if the electric generation and heating generation. Normally, for CHP to be a viable were done separately. Vermont is estimated option, it requires a host site that has the to have 21 MW of electric generation from need for both electrical and thermal energy CHP with more growth potential, depending concurrently, which typically is an industrial on the site. site or large commercial building.
Advantages CHP is a specific form of distributed generation (DG); DG refers to locating • Greater efficiency means lower fuel use, electrical generating units in or near a facility fewer emissions and less greenhouse to supply or augment the onsite electrical gases needs of the facility. DG offers the host site • Vermont-based resource many advantages, such as energy security, • Can create local jobs and economic improved energy reliability, and cost benefits savings. • Distributed generation; can benefit transmission system But CHP goes a step further than DG by giving • Can use biomass from Vermont’s woods the host site the simultaneous production and farms of electric power and useful thermal output which greatly increases overall system efficiency (see Figure P).
Vermont’s Energy Future 49 Figure P: Efficiency of Conventional vs. Combined Heat and Power Generation
The advantages of the CHP systems over a powers a generator to produce electricity, and traditional set up of electric energy received the waste heat from the engine is recovered from the utility and on site thermal systems through a heat exchanger to produce useful are greater efficiencies and potential cost thermal energy. savings. This thermal energy output can be in the CHP technology could benefit any customer form of steam or hot water and can be used that has the requirement of both electrical and for a host of different applications depending thermal loads, such as schools, hospitals, on the needs of the site, such as heating, apartment buildings, commercial buildings, domestic hot water, laundries, or process universities, industrial buildings, health clubs, use like drying. The thermal energy can laundries, nursing homes, etc. also be used for cooling needs by using a absorption chiller. A typical CHP system will include three major components: the prime mover, the electric In a electric generator set up using a fossil generator, and the heat recovery system. fueled boiler and a steam turbine, the The prime movers for CHP systems can be efficiency would be approximately 30-35% gas turbines, micro turbines, steam turbines, just to generate the electric power. reciprocating engines, and fuel cells. If none of the waste heat is captured, that The CHP system can be designed to use a means that 65-70% is wasted. But in a CHP variety of fuels, such as natural gas, propane, set up, this waste heat is captured and turned fuel oil, and biomass. An example of a typical into useful thermal output, which can double CHP system may consist of a reciprocating the efficiency of the process. engine running on natural gas. The engine
50 Vermont’s Energy Future The benefits of this improved efficiency is The Brattleboro Kiln Dry company system that the host site saves money, conserves was installed in 1989. The system uses fuel, and has less air-polluting emissions. boilers fired by wood waste from the site. The steam from the boilers powers a steam In 2000, The Department of Energy turbine generator rated at 380 KW, and completed a study to estimate the market waste heat from the turbine is used in their and technical potential for CHP systems in kiln drying process. the United States. This study estimated a technical potential of 179 megawatts of CHP Green Mountain Coffee Roasters installed capacity in Vermont. a 280 KW CHP system in 2003. The CHP system uses a Waukesha engine running It is important to note that this number is on propane. The heat recovered from the technical potential, meaning that there is engine is used for heat and hot water for enough industrial and commercial sites to their building. support 179 megawatts of capacity. This does not mean 179 megawatts of CHP capacity The CHP system at North Country Hospital could be installed that is cost effective and was installed in 2005. The CHP system economically viable for the host site. consists of a wood chip fired boiler and a 274 KW steam turbine generator. Waste The economics of the CHP systems revolve heat from the steam turbine serves a variety around cost of the fuel and price of the of the hospital’s heating needs. electricity which is being displaced and avoided, operating and maintenance costs, and any financing costs that where required to purchase and construct the system.
The host site must weigh the costs and benefits of a CHP system versus a more traditional set up before deciding to move forward on a CHP project. The host site would normally only install a CHP system if it was economical to do so. In addition, large upfront capital costs have also been a barrier to CHP project development.
Some sites that have CHP systems installed in Vermont are the Brattleboro Kiln Dry Company, Green Mountain Coffer Roasters, and North Country Hospital.
Vermont’s Energy Future 51
Chapter 3: Energy Efficiency and Demand Reduction
Brief Advantages
• Significantly lower cost than other Energy efficiency can be considered as a resource options resource option comparable to traditional • Lowers everyone’s power costs by generation resources like coal, nuclear, displacing the most expensive resource natural gas, and renewables. It is relatively at any given time inexpensive and clean compared to • Large quantity of both energy (kwh) generation options. and capacity (kw) available from energy efficiency in Vermont It also is considered an alternative resource • Improved electric sector reliability in transmission and distribution (T&D) • Can defer or avoid costs to upgrade planning. In the past decade, utility ratepayer electric transmission and distribution investments in energy efficiency resources system have reduced overall electric consumption in • Can be deployed or scaled back New England by about 3-5% and in Vermont relatively quickly by over 5%. • No significant greenhouse gas emissions or other pollutants Since 2000, energy efficiency services have • Job creation and local economic been provided in Vermont by the nation’s development impacts first energy efficiency utility1. A 2006 study • Improves the value, public health, done for the Department of Public Service and comfort of Vermont’s homes and concluded that nearly 15% of Vermont’s buildings. electricity needs in 2015 can be met through • Reduces our dependence upon foreign cost-effective efficiency programs (it would energy sources be 20% if fuel switching occurs). • Reduces natural gas price volatility
Advocates say efficiency should be the first Disadvantages choice for meeting Vermont’s electricity needs due to its low cost and associated • Requires coordination among many to environmental and economic development be most effective benefits. There is little opposition to efficiency • Can initially raise rates and bills for non- as a concept. participants if costs are not spread over the period of benefits However, some are concerned about • The effects of efficiency on overall increased rates and costs on near-term bills energy use can be difficult to quantify (especially for non-participants) and ensuring • Requires an infrastructure of the accountability and cost-effectiveness of knowledgeable and skilled efficiency the delivery mechanisms. service and product providers
1Efficiency Vermont (“EVT”) provides energy efficiency services statewide, with the exception that the Burlington Electric Department (“BED”) provides these services in its service territory. Both EVT and BED are part of the Energy Efficiency Utility (“EEU”) structure that is currently funded through the Energy Efficiency Charge (“EEC”).
Vermont’s Energy Future 53 Energy efficiency includes: 1. Using less Energy efficiency programs are primarily energy by making buildings and the energy- paid for by customers through their electric using devices in them more efficient (their rates or as a surcharge on their electric design, lighting, motors, appliances, etc.) bills. Vermont is a national leader in the 2. Using energy-consuming devices less development and delivery of efficiency (conservation) and 3. Reducing the peak programs for residential, commercial, and demand for electricity (through load shifting, industrial electricity customers. self-generation, or interruption). Efficiency efforts in Vermont began with It may be helpful to think of cars and highways programs run by Vermont’s electric utilities as a way to understand these strategies. Just in the 1980s and 90s and were continued by as certain cars get more miles per gallon, Efficiency Vermont, the nation’s first energy buildings and devices can be made more efficiency utility, and the Burlington Electric efficient. Driving less would be an example Department (BED). of conservation, and rush-hour traffic the equivalent of peak demand. Electricity Savings To-Date
Energy efficiency can be as simple as Over the last decade in Vermont, savings installing additional insulation in buildings from efficiency programs and investments and switching incandescent lights with have helped to reduce the growth rate of fluorescents. Or it can be as complex as electricity requirements. Efficiency savings installing computerized energy management along with changing economic conditions systems in commercial buildings. have cut the rate of electric demand growth from 2% to 1% (see Figure Q).
Figure Q: Efficiency Savings in Vermont since 1999
6,000
4,000 GWh
2,000
0 1999 2000 2001 2002 2003 2004 2005 2006
54 Vermont’s Energy Future Figure R:
Source: Efficiency Vermont, Annual Report, 2004
Vermont businesses and homeowners demand could be reduced by nearly 20% by who worked with Efficiency Vermont from 2015 and 30% by 2028 (Figure S). 2000-2006 to make cost-effective efficiency investments saved almost 315 million Cost and Benefits of Efficiency kilowatt hours (kWh) in annual electric energy Investments (approximately 5% of total sales). In 2004, Vermont electric customers spent Households and businesses are expected to around $15 million on efficiency programs see savings continue for at least a decade— to save electricity, leading the nation with an the average life of the efficiency measures. investment of $25 per person. After extensive review of its potential, the Vermont Public The effect of investing in energy efficiency Service Board significantly increased the is cumulative and, over the years, can efficiency investment. contribute significantly to offset energy and demand. Comparing efficiency to an electric By 2008, customer expenditures on energy plant generator, such as Burlington Electric’s efficiency should be approximately $30 McNeil Generating Plant, demonstrates the million per year, or approximately $49 per savings each year (Figure R). person.
Efficiency Savings Potential The Board largely targeted this increased funding toward geographically constrained Vermont recently completed studies of electric areas of the state in an effort to avoid or defer energy efficiency potential and concluded costly investments in transmission facilities. that, with an increase in investment, electricity
Vermont’s Energy Future 55 Figure S: Achievable Cost Effective Electric Energy Efficiency Potential by 2015 in Vermont
Vermont Electric Efficiency Program can increase rates in the short run. This is Expenditures because existing costs are spread over fewer kilowatt hour sales. This can doubly impact non-participants, who do not reduce use and Year Amount (in millions) whose rates increase. 2000 $9 2001 $10 Rates can increase in the short term because 2002 $12 efficiency costs are paid as they are incurred. 2003 $14 In traditional utility investments, like power 2004 $15 stations or transmission lines, costs are 2005 $16 spread out. One issue under consideration 2006 $16 is whether efficiency investments should be 2007 $24 (budgeted) funded with a similar, longer-term approach. 2008 $31 (budgeted) Benefits from efficiency include: Source: VT DPS (EVT and BED expenditures) • Reduces greenhouse gas emissions In 2006, investments made by Efficiency and local air pollution Vermont cost approximately 3.5¢ per kWh. • Comes in small units and can be This includes money contributed by state accelerated or decelerated quickly ratepayers and additional amounts paid • Can act as an alternative to the costs or by Efficiency Vermont customers and visual impacts of transmission systems reflects the savings in water, maintenance, • Creates in-state jobs and economic and other costs resulting from measure development opportunities installation. This combined expenditure • Improves the value, public health, reduces Vermont’s annual need for electricity and comfort of the state’s homes and generation by 52,950 MWh and 7.8 MW at buildings summer peak demand and 7.2 MW at winter • Can enhance physical infrastructure and peak demand. worker productivity (i.e, through better lighting) One challenge related to utility-funded • Provides short and long-term savings to energy efficiency programs is that, although building owners they reduce average electricity bills, they
56 Vermont’s Energy Future There is little opposition to efficiency as a These schemes generally include some form concept. Some are concerned, however, of advanced metering that can register not about increased rates and costs on near- only how much electricity is consumed, but term bills (especially for non-participants), when it is consumed. and the need to ensure the accountability and cost-effectiveness. Dynamic pricing schemes could be simple, such as charging residential customers a Demand Reduction higher price from noon to 6 p.m. every day, with prices set annually or by season. Reducing energy use, especially during peak hours, is important, as the costs to generate Or they could be more complex, with electricity are highest at those times and the customers having a real-time price that differs electricity system has the greatest potential every hour of the year based on the current for outages. cost to produce electricity in New England.
To the extent that energy efficiency reduces consumption during peak periods, it is an important demand reduction tool.
Demand reduction can also occur by shifting consumption from peak to off-peak periods, such as an industry moving its production schedule from a summer afternoon to the evening, a home using a timer to run its dishwasher in the middle of the night, or businesses running generators during peak periods to reduce the demand on the electricity system.
One method that states are considering to reduce energy use at peak periods is called dynamic pricing. Although there are numerous ways to implement dynamic pricing, customers would pay more for electricity use during peak periods and less during off-peak periods.
Currently, most Vermont customers pay the same price for electricity at every hour. Dynamic pricing is similar to phone plans that charge less for nights and weekends when demand is lower.
Vermont’s Energy Future 57
Chapter 4: Cross Cutting Issues
exactly what your are paying for that power n previous sections of these materials, I for the duration of the contract. we looked at specific options for providing electricity in Vermont. To the extent possible, Market prices could rise to 10 or 15¢ per the options were compared side by side kilowatt hour, but you would still pay 8¢ until based upon a series of attributes such as the expiration of the contract. Alternately, cost, time to build, footprint, typical size, market prices can go down. If prices were environmental impact, potential to create to fall to 2¢, you would pay more than four jobs, etc. times the market price. In this section of the materials, we look at For utility investments, price certainty with some of the issues that are common to regard to future costs can also be obtained many of the options. In that regard, the from utility investment (ownership) of those issues discussed in this section cut across fuel sources that have no or relatively low fuel the spectrum of options. costs or fuel costs with little or no correlation to fossil fuel commodities, such as wind, The Buy versus Build Decision: Power hydro or, to a lesser extent, nuclear power. Supply Contracts versus Investments in Most of the costs for these facilities are for Power Plants the initial permitting and construction. Vermont utilities are responsible for procuring Utilities would collect these costs from power resources to meet the electrical needs customers over the life of the plant. Future (including reserves for reliability) of their rate changes arising from these investments service territories. Regardless of the fuel would be very low, whether future market source, power supply may be obtained by costs of power declined or rose. Of course, contracting with the owners of a generation if wholesale market power supply prices source or by investing in power plants. declined substantially, then the power produced from these plants could end up The principal differences between contracting being well above market prices. and building are: 1. The degree of future price certainty of a power supply and 2. The Cost volatility in gas/oil plants tend to be effect of each option on utility credit ratings greater because the price of fuel represents and access to capital. There is also concern a significantly higher percentage of these regarding the ability of a utility to effectively plants’ total costs. Fossil fuel prices have, manage ownership of power generation. at least on a near-term basis, experienced substantial volatility. Price Certainty and Contracted Power But since any price change would reflect Price certainty represents the predictability underlying fuel costs, there is much less of future power supply costs. For example, if risk that wholesale market prices would be your utility company entered into a long-term substantially different from the price of output contract to buy energy for 8¢ per kilowatt from these plants. hour for twenty years, you would know
Vermont’s Energy Future 59 Financial Effects of Contracts economies of scale, smaller scale plants are typically more expensive to construct. Consumers may see little difference in rates whether a utility owns a plant or whether it The efficiency (output) of larger plants tends enters into a twenty year (or longer) fixed to grow as the size of the plant increases. price contract. On the other hand, because There may be opportunities for Vermont of the way credit rating agencies view long- utilities to obtain a small ownership share of term contracts, utilities that invest in a plant a large scale investment, but only if owners will generally enjoy better credit treatment. of that facility are seeking investors. Should this opportunity arise, the larger scale Rating agencies sometimes look at long-term investments are likely to be out of state. power supply contracts as debt obligations— this can potentially increase the cost of Types of Contracts borrowing for utilities, who pass that cost to consumers. Additionally, if the utility has a Power supply contracts can be firm power poor credit rating, it may not even be able to delivery (meaning it can come from any plant) obtain long-term power supply contracts. or unit contingent. Unit contingent means that the utility and its customers only pay for Termination of Contracts the power that is produced by that particular power plant. If something unexpected occurs When a contract ends, other costs and that takes the plant out of service, customers benefits become apparent. For instance, would be exposed to market prices during had the utility invested in a plant rather than the time the plant is not operating. contracting, it would likely own the site. It could potentially extend the life of the plant Market power contracts are not based on or undertake other plant development. a specific source and require all energy purchased to be delivered regardless of the However, ownership would entail its own performance of the seller’s plants. Therefore, burdens, such as assuming any liability unit contingent power is less valuable than risks of owning the plant/site, including system power and should be priced lower. plant removal at the end of the plant’s life. In a contract, by contrast, there are no such Of course, when a utility invests in a power obligations on either party at the conclusion plant, the power derived from that plant of a contract. is completely dependent on that plant operating at optimum levels. Plants with Ability of Vermont Utilities to Develop more predictable production are therefore Investment Opportunities worth more than contracts or investments in units with less predictable output. Opportunities for Vermont utilities to invest in plants are limited due to their size (Vermont Term of Contracts utilities are among the smallest utilities in the nation). Therefore, the number of investment The length of a power contract is important opportunities and the nature of those if customers value price certainty above the opportunities are likely to be limited. Due to lost opportunity of riding the market when
60 Vermont’s Energy Future energy prices decline. A longer duration voiced a preference for Vermont to manage contract along with a fixed price obtains price risk by locking in price terms or minimizing certainty. Shorter-term fixed price contracts correlation with fossil fuels, even if it means would generally result in prices closer to the paying a more at some times. We will be average market price than would longer- interested to see if you agree. term contracts. In-State versus Out-of-State Price Terms of Contracts A second issue related to the theme of cross Power supply contracts do not always have cutting has to do with whether a generation fixed prices. They can be tied (entirely or in resource (either built or purchased under part) to the market price in energy, capacity, or contract) is located in Vermont or out-of- even Renwable Energy Certificates (RECs). state is of concern to Vermonters. They can contain both fixed and variable components. For example, a contract could The issue of in-state versus out-of-state has move with market prices within a certain a different impact on the various resource range, but stay at a predetermined price options. For some resources, the answer is outside of that range (or vice versa). clear cut and based upon previous decisions or the nature of the resource. For example, Utility investment in plants can have similar the Vermont Yankee Plant is already in features. For example, utilities can buy future Vermont and that in-state location has its gas supplies for a gas plant investment or let own advantages and disadvantages. the price float with the market. If a new nuclear plant were built, it would Summary – Price Certainty more likely be outside of Vermont. If large- scale hydro were selected as a resource, A look at current Vermont power supplies it would likely come from outside Vermont, indicates a strong preference for price most likely from Canada. If the energy certainty. efficiency or demand control resources were favored, those resources would likely come The contract with Hydro-Québec includes from inside Vermont (although it may be price terms that were set at the beginning of possible to contract for energy efficiency or the contract and are completely disconnected demand response resources from outside from fossil fuels. The contract with Entergy the state—it would not be typical). Vermont Yankee is also a stable price with no fossil fuel connection. In addition, Vermont Coal-based resources would likely come utilities obtain a significant amount of power from plants outside Vermont because coal from local hydro and biomass sources that plants tend to come in sizes that surpass the have had stable prices disconnected from demand in Vermont. In addition, siting coal fossil fuels. in Vermont would likely be more difficult than it would in other states. Generalizing across These outcomes, however, have not come the set of resources, there are several ways about by chance. Regulators, utilities, and to think about the in-state versus out-of-state political leaders of prior decades have issue.
Vermont’s Energy Future 61 Economic Impact and power project might be a local university or school district. If a generation resource or contract has positive economic impacts such as tax Control Over the Resource - revenues or creation of jobs, then one might Self-Sufficiency argue for an in-state location. Biomass resources would be a good example, as The issue can also be considered in terms of would nuclear projects, or smaller oil or gas control and self-sufficiency. Many are proud peaking plants. Energy efficiency also adds that Vermont does things its own way, and local economic value. they would like to ensure that the priorities of other states do not interfere with their own. Environmental Impact They would argue that the way for Vermont to control its energy supply is to build and Environmental impacts on Vermont’s air retain generation sources within the state. quality, land use, water use, and visuals Others would argue, however, that control could be lessened by purchasing electricity and self-sufficiency are elusive and that generated out of state. However, buying contracts provide security. electricity from facilities outside of Vermont will not reduce the impact of emissions, but Generation Ownership merely put them in someone else’s back yard. Moreover, the location of generating The question in the third cross cutting issue facilities has no global impact in terms of is whether the type of entity that owns the greenhouse gas emissions. generation sources matters to Vermonters. The first way to think about the issue is Other Local Impacts public ownership (state, municipal, or special purpose entity) versus investor- A second way to think about the in-state based, private ownership. Some practical versus out-of-state issue is to consider local and philosophical questions can include: impact. On the negative side, many of the local impacts are environmental. Pollutants, • What type of entity has the management land use, water use, and visual impact are capacity to oversee the project? examples. • What type of entity can raise the investment capital at the least expensive There can also be positive local impacts. An rate? example might be the positive side effects of • What type of entity is better able to extending a natural gas line to fuel a peaking assume risk? plant. With the natural gas peaking unit as the • What types of activities are best handled anchor tenant, natural gas is then available in the private sector versus the public to customers along the way. sector?
A combined heat and power project built in Some options, such as local area or Vermont can have positive local impact in residential scale wind, tend to be community- the form of lower rates and overall energy based and work well under public ownership. costs. An example of a local combined heat
62 Vermont’s Energy Future Other options are larger than a particular requires a Certificate of Public Good before community can handle. Investor-based it can be constructed. Community concerns ownership can have advantages in terms about transmission systems can include of risk. If a generation plant has problems their route, visual aesthetics, impact on in a regulated setting, regulators can assign property values, and potential health effects the risk and cost to the shareholders. New from herbicides and electro-magnetic fields technologies, such as coal IGCC, are good (EMF). examples. If the owners are independent power producers, such as out-of-state Because of these complexities, Vermont entities specializing in generation ownership, has instituted a new least cost transmission assigning risk is even easier—it is assumed planning process. Before a new transmission by the market. line can be authorized, those involved must evaluate alternatives such as efficiency, Impact on Transmission demand response programs, or distributed generation that might allow for the deferral Impact on the transmission system is a or down-sizing of the transmission line. another cross cutting issue impacting the various resource options to a greater or Distributed versus Centralized lesser extent. Resources built in remote Generation Sources areas tend to require new transmission. As generation plants have grown larger to Large-scale resources tend to require achieve economies of scale, the tendency either new transmission, or transmission in the U.S. has been to move towards upgrades. The two existing large-scale centralized generation. Vermont, however, contracts, Hydro-Québec and Vermont is an example of a different trend. Yankee, already have transmission systems in place. New large-scale contracts for the Other than the obvious example of Vermont import of additional power could require new Yankee, much of the generation in Vermont transmission or additional electric import is small-scale, and there are a number of capacity. Generation resources built near cases of distributed generation built close the load, as in distributed generation, often to the load. These include small hydro and relieve strain on a transmission system. biomass projects.
Efficiency programs and Demand Response While centralized generation has certain programs generally defer the need for attributes, such as economies of scale additional transmission facilities. Generation (and therefore relatively lower costs), built away from load centers, even in distributed generation has a different set of modest quantities, may require significant advantages. transmission to deliver the power to the grid. Some wind sites have this characteristic. Those advantages include less impact on the transmission system, more local control, New transmission raises significant financial localized economic benefit, and less risk, and environmental issues and has a negative since each increment of generation is of a bias. For these reasons, new transmission smaller size.
Vermont’s Energy Future 63 When a large, centralized resource fails (i.e. renewable purchases. Since RECs can an 1100 MW generator or a heavily loaded provide revenue beyond the spot market power line), the impact can be widespread. sale price, the development of renewable When a small, decentralized generation resources in Vermont is stimulated. resource fails, the impact tends to be limited to the local area and is more quickly and The cross cutting issue is that environmental routinely managed. benefits and energy value can be traded separately. So a utility can either use the The centralized versus decentralized issue money from the sale of RECs to lower its cuts across the entire spectrum of resources costs or claim the environmental benefits of because each of the generation options tends the renewable generation, but not both. to fall in one of the two groups (e.g. nuclear and coal are used in centralized generation, If Vermont were required, through state or and solar, wind, CHP and biomass tend to federal action, to obtain 20% of its portfolio be more decentralized). from renewable sources, it could either: 1. Build enough renewable generation to Favoring centralized or decentralized can provide that amount or 2. Purchase enough be a factor in the generation source one renewable energy certificates to represent recommends. 20% of its portfolio.
Renewable Energy Certificates (RECs) How Vermonters feel about satisfying renewable requirements with RECs and how Earlier in the renewable energy chapter, we they feel about Vermont’s RECs being sold discussed renewable energy certificates in other states where their value is higher (RECs). RECs are a way to influence are important considerations. Many feel that generation choices by placing a value on in buying renewables, the resource should the benefits of renewable sources. Since be within transmission distance. many of the renewable benefits are shared by all, RECs create a market value for those Others insist that the impact of renewables benefits and spread the costs. on the system as a whole is more important– they are satisfied if the renewable power The REC program enables societal benefits enters the system and less concerned who and the value of energy to be sold separately. uses the electrons. For example, the energy output from wind power in Vermont can be sold to the New Another issue facing Vermont is what to do England grid at the same price as electricity with its qualifying facilities (QFs). Qualifying from any other source. facilities are hydro and wood plants built under previous federal legislation, designed The resulting RECs can be sold separately to stimulate more efficient generation. to entities needing to meet renewable energy portfolio requirements. This includes entities in states where the REC value can be higher, such as Massachusetts. Purchasing a renewable credit is how a utility proves
64 Vermont’s Energy Future The contracts expire in the 2012-2015 timeframe. It is possible that many of these will not survive in a pure power market without the beneficial contracts, which utilize elements similar to RECs. If Vermonters care about the circumstances surrounding these 20 facilities, which total 70 MW, a test could be developed to determine if these projects require RECs to continue.
Summary on Cross Cutting Issues
There are differences as you look down the list of options to meet the need for generation. We have called those attributes or advantages and disadvantages.
There are also multiple ways to implement each of the options—long-term versus short- term, build versus contract, in-state versus out-of-state, etc. These multiple ways to implement are the cross cutting issues in this chapter. In the next and final chapter, we begin to put it all together and start the process of asking you to make recommendations.
Vermont’s Energy Future 65
Chapter 5: Putting It All Together and Making Recommendations
INTRODUCTION 4. Natural Gas Combustion Turbine Combined Cycle (CTCC) - This is a more efficient natural gas generator. It We need to know how you would decide captures waste heat to generate more which tradeoffs should be a part of planning electricity. It costs more to build but for Vermont’s energy future. We will ask you uses less fuel. a series of questions to collect your opinions. 5. Fuel Cell - This is an advanced There are no right or wrong answers—we technology that is still in development only want to know what is important to you stages. Most fuel cells use natural as an individual. gas as a feedstock. They are a good candidate for distributed generation but, as you can see, are the second (to COMPARING ATTRIBUTES OF THE solar) most expensive option. OPTIONS 6. Coal-Integrated Gasification Combined Cycle (IGCC) - This is the new Each of the options we have discussed has technology being discussed for using different characteristics—or attributes. The coal. The coal is gasified and then put following charts are an attempt to summarize through a combined cycle turbine. These some of those attributes across the options. numbers do not include sequestration, which would approximately double the Figure T deals with costs for a new generating costs shown. plant. The chart uses 2007 as a way to use 7. Nuclear - These costs would be for a consistent dollars, but several of the options new nuclear unit. have long lead times. For example, a coal 8. Solar - This is for a photovoltaic system. plant might have a lead time of 5-7 years, They are currently the most expensive and a nuclear plant of 10-15 years. The 2007 option considered but are used in costs shown in the table would be subject specialized applications where they to inflation in those later years. This cost offset an even higher cost, such as a structure impacts either a generation plant transmission or distribution line. built by a Vermont utility or the cost of a 9. Wind - This is for a utility scale wind contract for the plant’s output. The types of project. Small projects are considerably plants covered are: more expensive. 10. Wood-Circulating Fluidized Bed 1. Coal-Circulating Fluidized Bed (CFB) (CFB) - As with coal (CFB), this is a - This is a more advanced form of more advanced form of combustion. combustion. It is more expensive but with lower 2. Coal-Pulverized - This is current emissions. technology of most coal plants and is 11. Wood-Stoker - This is more typical wood less expensive than CFB. combustion. 3. Natural Gas Combustion Turbine (CT) - This is the standard design for gas peaking units. Two sizes are shown— 25 MW and 50 MW. Both are relatively small.
Vermont’s Energy Future 67 Hydro 500 kW Hydro 2 MW DSM (w/o-non-electric savings DSM (w-non-electric savings Wood (Stoker) Wood (CFB) Wind Solar Nuclear IGCC Fuel Cell CTCC CT (50MW) CT (25MW) Coal (Pulverized) Coal (CFB) Because of this, the nuclear cost estimate is subject to additional uncertainty to finance such a large project and cost effectively manage the construction of a plant would be challenge. A new nuclear plant has not been proposed or built in the US 15 years. The ability of a utility or developer Summary Results for a plant that would come on line in 2007 Investment - Total Plant No AFUDC ($/kW) - 2007$s 4000 2500 2385 2518 2059 6040 2633 2058 5820 1936 2426 730 524 662 Real levelized capacity cost (including ($/MWh) - AFUDC) 2007$s 102.06 296.27 198.08 63.79 37.08 37.15 88.83 42.23 35.78 29.56 35.95 10.19 65.92 79.89 Real levelized 2007 dollars/MWh Figure T ($/MWh) - levelized energy 2007$s 225.25 : 19.00 19.00 53.34 47.66 17.81 31.16 33.35 40.92 55.35 84.79 84.79 Real cost 0.00 0.00 all in cost ($/MWh) - levelized . 2007$s 121.06 296.27 423.33 150.71 164.67 88.83 82.79 90.43 84.82 60.04 66.94 62.91 76.87 65.55 66.97 29.28 Real REC value ($/MWh) - levelized 2007$s 25.03 25.03 25.03 25.03 25.03 25.03 Real 0.00 0 0 0 0 0 0 0 0 0 emissions ($/MWh) - levelized (included in all in) 2007$s costs Real 0.00 1.82 3.38 3.38 0.71 0.36 0.00 0.00 4.25 5.02 5.37 2.04 0 0 0 0
68 Vermont’s Energy Future 12. DSM (with non-electric savings) - This shows the cost for emission allowances option includes both electric savings that were included in the all-in column. and collateral savings from associated resources such as water and other Figure U compares relative environmental fuels, as well as a reduction in costs impacts for each of the options. Impacts for operation, maintenance, and are not cradle (e.g., mining) to grave (e.g., replacement. disposal) but associated with the generation 13. DSM (without non-electric savings) - or saving of electricity only. This option looks strictly at electricity savings. Impacts can vary within a particular fuel type 14. Hydro - This option shows costs for two based on technology, design, specific fuel sizes of small hydro that might be built used (e.g., type of biomass or coal), and in Vermont. location.
Each of the options is evaluated on a series of cost comparisons. They are: WHICH ATTRIBUTES ARE MOST IMPORTANT TO YOU A. Total Plant Investment (without a return to the utility during construction Cost or AFUDC) - This cost is measured in dollars per kW. The figure shown is Think about the upfront costs and operating what it costs to build a kW of generating costs of each option. For example, coal- capacity for each option. based options cost more to build than gas B. Real Levelized Capacity Cost with or oil-based options, but have cheaper fuel. AFUDC - This column looks at what Nuclear has cheap fuel, but long-term waste it costs per MWh and assumes the disposal costs. Fuel is free for wind and utility is allowed to earn a return on solar, but not always available, so these are its investment during construction. often paired with other generation options. This way of viewing the cost allows Contracts for energy will likely have no contracts for power and building plants upfront costs but obligate the utility to pay in to be compared. These are the costs to the future. construct or capacity costs. C. Real Levelized Energy Costs - These Risk are the costs per MWh to operate the plant—most are either fuel or operations Resources come with varying amounts of and maintenance. risk. Risk can often be managed through D. Real Levelized All-In Cost - This is practices such as diversification, spreading combined dollars per MWh to build and out investments and contracts. Potentially, operate or cost for both capacity and diversification could mean committing less energy. to a source than would be attractive. To what E. Real Levelized REC Value - This is the extent should diversification be a priority in estimated value for renewable energy future resource investment? credits. F. Real Levelized Emissions Costs (included in all-in costs) - This column
Vermont’s Energy Future 69 Figure U: Relative Environmental Impacts by Resource Type Relative Environmental(per comparable unitImpacts of energy) by Resource Type (per comparable unit of energy) ) ) 2 2 ) 2 Nitrogen oxide (NO Carbon dioxide (CO Carbon Particulate matter (PM) Mercury (Hg) Quality Impacts Water Habitat impacts Solid waste Nuclear waste Sulfur dioxide (SO
Biomass
Coal
Coal gasification with
CO2 capture Energy efficiency
Hydro-dam with reservoir
Hydro-run-of-river
Natural gas
Nuclear
Oil
Solar
Wind
High Impact Medium Impact Low Impact No Significant Impact (blank)
Notes 1. Impacts are not cradle (e.g., mining) to grave (e.g., disposal) but associated with generation or saving of electricity only. 2. Impacts can vary within a particular fuel type based on technology, design, specific fuel used (e.g., type of biomass or coal) and location.
3. Biomass is assumed to be sustainably harvested, resulting in no net C02 emissions.
70 Vermont’s Energy Future Predictable Bills Vermont-Based Energy Resources
In recent years, gas costs have been Some people value a resource that is unpredictable. Oil also shares that Vermont-based. Their opinion could be a unpredictability. While long-term contracts for desire for control, a belief that self-sufficiency either fuel or power as a combined product is important, or a view that some technologies can provide more predictability, they often provide Vermont with economic benefits. come at a premium when sellers demand some of the upside. The price of wood, even Others discuss this issue in terms of “doing as a byproduct, varies based upon conditions our part.” Is it right for Vermont to lean heavily in the forest products industry. on surrounding states and provinces for a large share, shifting to them the burdens of Least Consumption of Finite Resources generation siting? The counter view would say, if other places are better generator sites, The sustainability of a resource can also be that’s OK. It is an ethical versus practical a consideration. While the debate continues dilemma. over how much gas and oil remain in the world, these resources will eventually Least Local Environmental Impact expire. Local environmental impacts range from Both coal and nuclear fuels will likely be emissions of particulates, nitrogen oxide and available beyond our lifetimes, but they are sulphur dioxide, visual impacts from wind still finite resources. Solar and wind, on the turbines and transmission lines, to waste other hand, are renewable resources. Some management. Larger generation plants have will say that our consumption will have greater footprints, and some plants require implications for future generations, others water for cooling. will argue that Vermont is so small that its impact will not make a difference. Plants located in other states or Canada obviously have little visual or land impacts Greatest Reliability on Vermont but can still impact the air quality of the state if upwind. A contract often has Reliability can signify the stability of a no particular fuel or power source associated particular technology, whether it needs with it and therefore has no clear emissions frequent maintenance, or if a fuel source is impact. Preferred attributes, however, can regularly available (in the case of wind, solar, be purchased in the market for a premium. and water). It can also signify the impact to the grid in the event of a failure—the larger the resource, the greater the impact tends to be. For a contract, reliability can signify the credit worthiness of the other party and the quality of their portfolio.
Vermont’s Energy Future 71 Least Impact on Climate Change needed to support these activities, as well as local tax revenues. Any option involving the combustion and release of carbon dioxide can impact climate Also, when Vermonters choose less change. Natural Gas plants have less expensive resources, they have more impact than coal, but much more than wind disposable income to spend on other goods or hydro. Coal plants with new technologies and services. are predicted to have much less impact than traditional plants, but are considerably more Efficiency programs are both labor intensive expensive. and less expensive than most alternatives. Vermont Yankee Plant also sustains a large Wood burning plants operated in a number of local jobs and pays significant sustainable manner can offset carbon local taxes. And Burlington’s biomass plant dioxide with the carbon absorbing properties supports local jobs while consuming wood to of trees. Contract power, once again, may or help sustain the Vermont forest industry. may not be associated with a fuel type. Long-term contracts from out of state tend For some, climate change considerations to have less direct economic benefits for have become the primary concern. As carbon Vermont. When these contracts provide controls are implemented with increasing cheaper electricity, however, they can free intensity, this consideration may increasingly up disposable income for Vermonters. merge with cost.
More Control over my Energy Future OTHER FACTORS THAT MAY BE IMPORTANT TO YOU Like many of the attributes discussed in the section, control can mean different things. There are a number of additional ways to Control can signify smaller, community- think about electricity resources that may be based resources or public ownership in of importance in your recommendations. which users have input. It can signify an energy source local to Vermont or predictable Impact on Large Volume Users prices and bills. For some utilities, control signifies surviving a blackout with their own Some generation options—such as resources. environmentally favorable options—can cause electricity bills to increase. Often, Most Economic Benefit to my Area or to customers impacted most by price increases Vermont are those who use large volumes of power. A price increase that is digestible for a family Economic benefits in electricity resources may be beyond the range of a manufacturer arise from building and operating a generating in a competitive market. Additionally, the facility and the manufacturing and installation shared costs of transmission line construction of energy efficiency equipment. This includes greatly impact those who use large volumes the local jobs and the goods and services of power.
72 Vermont’s Energy Future Impact on Low and Fixed Income Users Moving Toward Market-Based Pricing and Solutions While some families may be willing to pay more for certain attributes, price increases Some believe energy decisions are better are more challenging for those with low or based upon market signals than government fixed incomes. Low or fixed income families policy. Advocates for market-based systems may find the attribute of lowest cost more would argue that retail prices adequately important. balance consumption and the need for new generation sources. They would say the Impact on Energy Independence, Self- marketplace reinforces consumer values, reliance, and National Security citing long-term contracts stabilizing prices as an example. Some Vermonters may prefer options not reliant on imported oil or gas, believing them Market-based solutions would advocate for to improve national security. Some may green choice programs, where only those prefer renewable and efficiency options for customers desiring renewables would pay their contribution to energy independence for them and, in turn, receive them. Central and sustainability. Still others may support Vermont Public Service’s Cow Power Vermont-based options that encourage self- Program is one such green choice program. reliance. Others would argue, however, that markets Moving Toward Distributed Generation do not include all policy objectives and that there are unintended consequences to Some may prefer the benefits of distributed overly relying on them. Market barriers, for generation—producing power in smaller instance, often require government action— amounts closer to delivery points—over such as net metering, statewide energy traditional, centralized generation. They efficiency programs, or renewable portfolio would prefer options such combined heat standards. and power systems, small hydro, small gas or oil peakers, and community scale wind Making It Easier to Site, Build, and installations, all of which are candidates Invest in Vermont for distributed generation. In some cases, smaller scale resources come at a higher Some argue it is too difficult to build new price. generation sources in Vermont and that siting processes create uncertainty and Impact on Future Generations long delays. Certain wind developments in Vermont could be examples of this. Energy Certain options can impact future generations developments and their economic benefits, by leaving nuclear waste, consuming they would say, go instead to other states, finite resources, or emitting pollutants that where it is easier to build. accumulate in the environment, such as greenhouse gases or mercury. Others would argue that the lifestyles and scenic beauty in Vermont need protection, and that the high standards of the siting process reflect these values.
Vermont’s Energy Future 73 Role of the Local Utility and Ownership Structure
Some argue that local utilities (especially those owned by investors) are in a better position to absorb risks from large-scale projects and make decisions based on market economics.
Others argue that government-owned or community-based electric utilities have a better ability to match local preferences and lifestyles with energy choices.
It differs from time to time which type of entity can obtain the lowest cost investment funds.
CREATING A MIX OF OPTIONS OR PORTFOLIOS
Vermont currently operates with a mix of energy resources in the form of a portfolio, which will likely continue in the future. In the current portfolio, two-thirds of the energy consumed comes from either Vermont Yankee or Hydro-Québec.
Because both contracts expire in the near future, there is both a need to replace that power and an opportunity to adjust the portfolio. The amount of power built in Vermont versus the amount obtained through contract can be adjusted, as well as the types of resources.
The recommendations you make on the portfolio will depend upon which attributes you believe are most important.
74 Vermont’s Energy Future