Proposed renewable mandates could open markets for Hydro-Quebec in Vermont 

Legislation introduced in the House and Senate could open the door for a flood of “renewable” energy from Quebec.

Bills introduced by Rep. Tony Klein, D-East Montpelier, and Sen. Virginia Lyons, D-Chittenden, would establish a binding renewable portfolio standard, which would mandate that utilities buy a certain percentage of electricity from renewable sources.

Currently, the state operates what is called the Sustainably Priced Energy Enterprise Development program. The SPEED program promotes renewable energy development by encouraging long-term contracts for electricity from renewable sources.

The big question is: What is “renewable?”

Under current Vermont law, “renewable” means “energy produced using a technology that relies on a resource that is being consumed at a harvest rate at or below its natural regeneration rate.” Basically, if the resource replenishes itself faster than it is used, it is renewable under Vermont law. Enter Hydro-Quebec.

In 2010, Gov. Jim Douglas signed a bill designating large-scale hydroelectric power “renewable.” Previously, hydroelectric generating facilities had to produce less than 200 megawatts to achieve that label. The new designation takes effect in July 2012. This year, the Vermont Public Service Board approved a certificate of public good for 20 utilities to collectively purchase between 218 and 225 megawatts of energy from Hydro-Quebec starting in 2012 and continuing through 2038.

The “renewable” label never made much of a difference, until now.

Without careful planning, environmental groups fear electricity from Hydro-Quebec and other large-scale hydroelectric projects could essentially flood the market for renewable energy and eliminate the purpose of creating incentives for small-scale, local energy sources.

Klein said his proposed legislation has a lot of moving parts, but one of the major points is the renewable portfolio standard.

“What we’re doing is rolling the SPEED program into a renewable portfolio standard,” Klein said.

The SPEED program, started in 2005, set a goal of achieving 20 percent of statewide electric retail sales from small-scale local generation by July 2017. If the Public Service Board determines that those goals are not met, utilities will be required to meet a binding renewable portfolio standard.

Klein says his bill is a culmination of years of policy decisions to shift toward more renewable energy.

“All of these things are moving us forward on a policy that over the years Vermonters have supported,” he said.

Klein’s bill would require utilities to produce or at least own credits for renewable energy for 80 percent of the electricity they produce by 2025.

Both bills would, by creating a renewable portfolio standard, be the first time the rubber hits the road and utilities acknowledge Hydro-Quebec as a renewable source in an RPS.

Both Klein’s bill and Lyons’ bill address the potential for large-scale hydro to squeeze out other forms of lower impact, renewable energy sources. They both have tiers for what constitutes “renewable” and “new renewable” generation sources.

Klein’s bill separates existing and new renewable energy into two categories. New renewable projects are separated further into tiers based on the dates the projects go on line.

Tier one new renewable energy in Klein’s bill includes plants that come into service after Dec. 31, 2004, and before Jan. 1, 2013. On its face, it appears the legislation would include projects like the 1,550-megawatt Romaine Complex, where Hydro-Quebec broke ground in 2009, as “new renewable.” Tier two renewable energy would include plants that come into service starting in 2013. Hydro-Quebec also plans to add another 3,000 megawatts of large-scale hydro in its Northern Plan, which extends through 2035.

Lyons’ bill breaks it down into tiers as well. Her bill also will have language that will ask for tiering of environmental attributes, she said.

“You can’t ignore where you are getting it [energy] and how you get it,” Lyons said.

She said things like large-scale hydro generation facilities would be in a different tier from things like small-scale solar projects. Lyons admits the bill will need to go through some ironing.

“The bill is a skeleton of the discussion that will happen,” she said.

While environmental groups have commended the legislators for trying to ensure local renewable energy, concerns abound as to what will happen with large-scale hydro.

Sandra Levine, senior attorney with the Conservation Law Foundation, said the biggest challenge for both bills is determining how Hydro-Quebec fits in.

“The challenge going forward is how do we manage the rest of our renewable energy supply in a way that fairly treats renewable energy in the rest of New England?” Levine said. “We don’t want power from Hydro-Quebec to drown out all the other renewables in the region.”

While large-scale hydro power is a renewable resource, building massive dams can affect ecosystems by destroying wildlife habitat and releasing mercury into the environment, Levine said. Projects can also release significant amounts of greenhouse gases like methane during the first years of development, Levine said.

Levine said it makes sense to have different tiers, but how those tiers are defined is critical.

“Hydro-Quebec is a massive, government-owned utility,” she said. “To put them in the same class with small projects is unreasonable.”

One of the primary issues with large-scale hydro is the sale of renewable energy certificates. When utilities purchase renewable power, they receive certificates that they can then sell to other buyers.

In New England, Vermont is the only state that would qualify energy from large-scale dams as “renewable.” For example, under New Hampshire’s renewable portfolio standard, existing small-scale hydro projects must produce less than 5 megawatts of electricity. Under Maine’s RPS, projects must produce less than 100 megawatts. Existing hydro in Massachusetts must produce more than 5 megawatts.

Levine said the concern is with what are called “alternative compliance payments,” which utilities submit in lieu of purchasing renewable energy. A situation could arise where “renewable” energy is so cheap from large-scale hydro, that prices could dip to a point where utilities just buy credits from Vermont instead of more expensive in-state renewables. If Vermont were able to sell renewable energy certificates based on large-scale hydro to other New England states, it could undermine the regional market for renewable energy, Levine said. This is currently not allowed, since other states do not recognize the power in the same way Vermont does, but it is a real potential problem, she said.

“It would be an environmental disaster for Vermont’s renewable power statute to destroy markets for renewable power in the rest of New England,” Levine said.

In comments to the Department of Public Service on the state’s Comprehensive Energy Plan, both the Vermont Natural Resources Council and the Vermont Public Interest Research Group expressed concerns with including large-scale hydro in an RPS.

At a press conference releasing the final plan, however, Gov. Peter Shumlin said he is supportive of including energy from Hydro-Quebec as part of a renewable portfolio. He said he supports getting renewable energy from Quebec into Vermont and southern New England as a means of getting off our “addiction to oil.”

Shumlin said New England is a viable market for the renewable energy from Quebec. According to the Montreal Gazette, Hydro-Quebec predicts a 20 terawatt-hour surplus of electricity by 2020. One terawatt equals one trillion watts. A decrease in the energy needs of the utility’s industrial clients played a significant role in the predicted energy needs.

Or as Gov. Shumlin put it, “They can’t burn all the juice.”

A spokeswoman for Hydro-Quebec utility backs up the push for more large-scale hydro in New England.

In a written statement, Hydro-Quebec spokeswoman Ariane Connor wrote: “Hydro-Québec supports emerging renewable energy sources. Indeed, hydroelectricity is the only renewable baseload energy able to complement intermittent renewable energies such as wind and solar.”

She wrote that when there is no wind to power turbines, hydroelectricity can fill that gap. In acting as a back-up, Québec hydroelectricity supports the development of other renewable energy sources.

“There is room for both,” she wrote.