Vermont’s all-renewable claims based on uneven RECs market 

As Vermont races to become the nation’s first all-green-energy state, reports that municipalities are reaching the goal may be overblown.

Claims that some municipalities in the Green Mountain State draw 100 percent of energy from renewable sources may technically be true, but with an asterisk.

Kevin Jones, professor of energy technology and policy at Vermont Law School, says such claims involve an accounting of renewable energy credits and are misleading, especially in Burlington.

“What Burlington Electric Department is doing is selling all its premium solar and biomass RECs for a high price and replacing them with very low value, almost worthless RECs at a low price, and then claiming they are 100 percent renewable,” Jones told Vermont Watchdog.

Jones said RECs that are being sold are going out for between 5 cents and 6 cents apiece, but RECs that are being purchased to replace them cost about 1 cent.

Renewable energy credits are certificates that verify a certain amount of electricity was generated from a renewable energy resource. RECs can be sold or traded, and the holder of the REC gets the right to claim to have purchased renewable energy.

New England states have a REC-trading market in part because renewable-sourced power is more expensive than power derived from natural gas, coal or nuclear, and utilities sell RECs to make up the difference. REC-selling generates about $50 million annually in Vermont, and that revenue subsidizes high-cost renewables to help keep electricity rates low for customers.

According to Jones, inflated green claims in Vermont are based on purchases of cheap RECs, not actual power generation derived from Vermont sources.

“By law, you can call yourself renewable if you have a REC from a renewable facility,” said Jones. “… If you are not trying to meet a state requirement but you wanted to make a green claim, you can legally buy these very low priced RECs and say ‘I’m 100 percent renewable.’”

If everybody did what Burlington Electric is doing with the cheaper RECs, Jones added, energy would become much more expensive. This doesn’t happen, however, because other New England states don’t count low value RECs toward their renewable portfolio standard targets.

One problem with using RECs to account for green energy is that not all states acknowledge the same RECs. For example, Burlington has a wood burning plant that it touts as renewable, and it sells the RECs for that energy. But since Massachusetts doesn’t count biomass in its REC system, Burlington sells wood burning RECs to Connecticut.

While Vermont has one of the most aggressive renewable standard portfolio targets in the nation, it also has some of the lowest standards when it comes to the type of RECs that can be used to achieve this goal. Jones said manipulating RECs creates a false perception that Vermont is a green energy leader.

State law forces utilities to engage in such greenwashing. Under Act 56, utilities must get 55 percent of energy sales from renewables beginning in 2017. The percentage ratchets up each year until 2032, when utilities need to have 75 percent renewable energy in their energy portfolios.

John McClaughry, vice president the free market think tank the Ethan Allen Institute, says Act 56 put a new wrinkle into the mix by allowing Vermont to use RECs for hydro energy, most of which is sourced from Hydro Quebec. According to McClaughry, hydro RECs are in low demand because other states either don’t count them or consider them of low value.

The different accounting systems allowed Vermont to stock up on low cost RECs while selling its high-value wind and solar RECs out of state, a scheme McClaughry characterized as “basically cheating.”

Jones said the REC market can be useful to states, but it needs to be done right.

“It’s just that states have different rules and different requirements, and Vermont unfortunately has a very inferior system compared to most of the country and all of the other New England states. …(RECs) work very well when you use them appropriately.”