By David Flemming
Vermont produces so much renewable energy that we can sell “credit” for producing it to other states. While Massachusetts and Connecticut are willing to pay high prices for a share of that energy, the risks associated with producing more renewable energy isn’t worth it for Vermont.
In the Senate Finance Committee on Feb. 16, Sen. Randy Brock, R-Franklin, asked Ed McNamara of the Department Public Service some probing questions about Vermont’s convoluted energy market.
The conversation was initially about Vermont’s renewable energy credits, or RECs, and the ability of our state to profit off of the REC system set up in New England. Whenever a solar, wind or other renewable array in Vermont produces a megawatt of power, the utility is notified and they produce a REC, which can be sold on a secondary market. Of late, this market has been New England utilities outside Vermont who don’t produce enough renewable energy in-state to meet the renewable energy mandates set by their legislatures. This is because a REC is worth far less in Vermont than in other states with renewable energy mandates.
Sen. Brock asked, “Suppose this whole arrangement of RECs and arbitrage … went away and there wasn’t anything like that at all. Would we [Vermont] do anything different?”
McNamara responded, “I believe we would. … The [Vermont] Legislature essentially told Green Mountain Power and the other utilities ‘go out and build wind, go out and contract for wind.’ And GMP is now saying, ‘OK, that wind that you built, we don’t value that. So sell that to Massachusetts, sell it to Connecticut (instead).’”
Brock found this answer remarkable: “I picture myself sitting in the seat in Massachusetts and trying to explain to my constituents why I just spent $3.7 million dollars to buy something worth $80,000 [in] Vermont? And I’m just having difficulty trying to articulate that. I mean, this reminds me of Enron, quite frankly.”
Enron was an energy company that declared bankruptcy in 2001 after using fraudulent accounting schemes to defraud investors.
There’s no way we could shuffle this burden off on other states, except as McNamara put it, “Vermont is 4% of New England’s load. So a lot of times what we do has very minimal impact. … [So] $3.6 million is a drop in the bucket for Massachusetts.”
Our Vermont legislators are betting that because we are so small, Vermont’s mark-up of RECs is only a minor nuisance to these larger states — perhaps how an elephant might feel after being bitten by a mosquito.
More money from those states means lower electric bills for Vermonters if those utilities put all of that money from selling RECs into lower rates. But is Vermont really gaming the system by outsmarting the politicians in Massachusetts and Connecticut? The only reason we sell our RECs is because we have a renewable energy standard, which carries hefty compliance costs. Setting that aside for the moment, we’re fooling ourselves if we think that this arrangement comes without graver concerns than mere electricity cost considerations.
In 2019, we reported how nearly 50% of Vermont’s 150 electrical power substations were at risk of “transmission ground fault overvoltage” (TGFOV) if more solar was added. Energy expert Meredith Angwin notes that “when we close nuclear and coal plants and don’t build gas pipelines, we increase our weather-vulnerable dependency.”
Anytime a megawatt of renewables is created, this creates more strain on our aging electric grid. We shouldn’t keep producing more RECs simply because other states are more willing to pay for our excess solar energy. Reliable electricity is vital to keeping Vermont households safe.
David Flemming is a policy analyst for the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.