Future of large-scale renewable energy said to be on the line
Public comments are due Wednesday on new rules that developers say will kill independent utility-scale renewable energy growth in Vermont.
Utilities say the changes are needed to protect ratepayers from unfavorable energy contracts and avoid expensive infrastructure upgrades that conflict with the state's goal of encouraging small projects throughout the state.
The proposed changes are to Section 4.100 of the Public Service Board rules, titled "Small Power Production and Cogeneration," through which the state administers a federal incentive program laid out in the Public Utilities Regulatory Policy Act, known as PURPA. This law was originally conceived to force utilities to purchase hydroelectric power from independent producers, to decrease reliance on foreign energy sources.
States are forbidden from discriminating against renewable energy firms that qualify under Section 4.100 rules. The rules force utilities to buy energy from certain renewable sources, and that would continue to be the case.
Developers say the change that would hurt them the most is curtailing the power contracts to five years, instead of the usual 20, since that brevity makes it hard to secure funding. Several other proposed changes are less controversial.
Energy developers say the new rules effectively leave to utilities the sole authority to build utility-scale projects, eliminating independent competition.
"If this rule is able to happen, the competitive marketplace is over in Vermont, and then all Vermont ratepayers are at the mercy of Green Mountain Power and their Canadian shareholders," said Adam Cohen, president of Ranger Solar, a Maine-based development company that has proposed six 20-megawatt projects across Vermont.
The proposed Section 4.100 rules would leave utilities able to set any price for the energy they generate from their own projects, he said.
"The competitive market that's driving prices down will go away," Cohen said.
But Green Mountain Power supports the rule changes because they'll actually protect utilities against being forced into costly long-term energy contracts, said the company's spokeswoman, Kristin Carlson.
For example, one of the projects Ranger Solar has applied for under the existing rules would require Green Mountain Power to buy the electricity at energy prices from last year, Carlson said. Those prices are derived in large part from last year's fossil fuel prices, she said.
Crude oil is selling at a little over half of last year's annual average and a third of 2014's. Electricity contracts pegged to today's energy prices would save money for ratepayers, Carlson said, but the existing Section 4.100 rules don't adapt contract pricing quickly enough to reflect market changes.
For such reasons, contracts under this set of rules have historically forced utilities to purchase artificially expensive energy, said Burlington Electric Department's general manager, Neale Lunderville.
Renewable energy producers can always enter into voluntary power purchase agreements with utilities, and utilities are likely to want to purchase competitively priced energy, he said.
But GMP's Carlson said the producers use Section 4.100 instead because those rules have forced utilities to buy even artificially high-priced energy.
For Ranger Solar, which began the application process for its projects on the cusp of the rules' rewrite, the new rules would forestall five of the six proposed arrays, Cohen said. The company has proceeded far enough on the sixth that it's assured the existing Section 4.100 rules would apply, he said.
Utilities also say they don't want to build or buy energy from projects of that size now anyway. Carlson said big generators such as Ranger's 20-megawatt projects are larger than what's called for by the state's goals for distributed energy production.
Power's cheaper when it requires less infrastructure to distribute it, Carlson said. By generating Vermont's power from numerous small plants near where the energy is used, utilities keep prices down while ensuring greater energy security, she said.
Green Mountain Power partnered with Vermont Electric Cooperative in the 21-turbine, roughly 60-megawatt wind installation on Lowell Mountain built in 2012.
The high infrastructure costs associated with large projects are a major sticking point for Vermont's utilities these days, said Vermont Electric Cooperative CEO Christine Hallquist.
A separate federal rule would force ratepayers to eat two-thirds of the cost of new infrastructure required to serve at least some of Ranger's solar plants, Hallquist said.
"If we want to drive rates down, it's all about really good grid engineering, and randomly locating projects is bad grid engineering," she said.
But Ranger Solar's attorney pointed back to the goal of PURPA, arguing before the Public Service Board last week that the new rules would accomplish exactly what the federal law forbids: discriminating against the merchant renewable energy producers those rules are designed to encourage.
Attorney Kimberly Hayden, of Montpelier-based firm Downs Rachlin Martin, said in her remarks to the PSB last week on behalf of Ranger Solar that the five-year cap on energy producers' contracts would establish a de facto market barrier against those energy producers, since lenders won't finance renewable projects with such short revenue commitments.
Since every other power purchasing arrangement — such as net metering — offers contracts of 10 to 25 years, the five-year limit would discriminate against the energy producers to whom the rules apply, she said.
Cohen would not say whether his company would sue the state if the PSB adopts the new rules in their current form. "Hopefully they follow the law and don't eliminate independent power production in Vermont," Cohen said.
The Public Service Board is scheduled to accept public comments until Wednesday on the proposed rules.
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