GREEN MOUNTAIN POWER COST OF ELECTRICITY, c/kWh

Green Mountain Power, a subsidiary of a Canadian company headquartered in Quebec, has about 77% of the Vermont electricity market. Some of its policies are to promote renewable energy, especially if significant federal and state grants, federal and state investment tax credits, accelerated depreciation, and low-interest loans are available to implement projects.

 

Such subsidies create the false impression these projects have short paybacks, whereas, in fact, they would not make sense without the subsidies. See Appendix.

 

GMP Purchased Electricity in 2016

GMP purchases electricity from about 25 sources. An increasing proportion has been expensive renewables, such as wind and solar, which are included in the “Standard Offer” and “Net-metered” items in table 1A.

 

GMP also generates electricity with its hydro plants, and wind and solar systems. The electricity produced (MWh) and the cost of the self-produced electricity ($; c/kWh) is unknown to the public at this time, but likely known to GMP, the PUC and DPS.

 

The data in the table was obtained from a GMP spreadsheet titled “GMP Test Year Power Supply Costs filed as VPSB Docket No: Attachment D, Schedule 2, April 14, 2017”. Table 1 shows:

 

- The cost of ISO wholesale market electricity is 46% less than GMP average cost of purchases. See note.

- The cost of HQUS electricity is 8% less than GMP average cost. See note.

- The cost of net-metered electricity is 3.61 times GMP average cost.

- The cost of Standard Offer electricity is 3.61 times GMP average cost.

- Ryegate, a wood chip-fired power plant, sells all of its output at 10.031 c/kWh, about 1.7 times GMP average cost.

 

NOTE: It would be much wiser for GMP to buy more ISO wholesale electricity to reduce its average costs.

 

NOTE: It would be much wiser for GMP to buy more HQUS electricity, which is abundant. Instead, GMP refuses to purchase additional, low-cost (5.549 c/kWh), very low-CO2 (much less than wind and solar), renewable, HQUS electricity even though 200 MW of a new power line, to be completed in 2019, is reserved for Vermont. See URL.

http://www.windtaskforce.org/profiles/blogs/gmp-refusing-to-buy-add...

 

NOTE: In 2016, the PUC finally wised up, after 6 years of prodding by various concerned Vermonters, and began competitive bidding of SO solar systems. A few competitively bid, large-scale, SO solar systems produce at about 13.26 c/kWh, heavily subsidized. More such SO systems would slowly (over at least a decade) reduce the average SO cost of 21.793 c/kWh in future years. See Appendix.

 

Table 1A	1	2	3	4	5	6
GMP purchases, 2016	MWh	% of purchases	Cost, $	c/kWh	% of Cost	Ratio of 5/2
HQUS (Hydro-Quebec)	919312	22.13	51013678	5.549	20.34	0.92
Standard Offer	78920	1.90	17199202	21.793	6.86	3.61
Net-metered	71970	1.73	15699137	21.813	6.26	3.61
Ryegate (wood)	126707	3.05	12710175	10.031	5.07	1.66
ISO wholesale	575553	13.85	18645214	3.240	7.43	0.54
	1772462	42.66	115267406	6.503	45.96	1.08
Other	2382075	57.34	135516232	5.689	54.04	0.94
Total GMP purchases	4154537	100.00	250783638	6.036	100.00	1.00
ISO midday wholesale				6.000

High Costs of Net-Metered Program

PV solar owners in the net-metered program receive about 18.9 c/kWh for their surplus electricity, which reduces their charges for electricity and also any taxes, fees and surcharges on monthly electric bills. Almost all net-metered electricity, 71970 MWh in 2016, was PV solar. Total program cost was $15.699 million.

 

Recently, the PUC reduced the 18.9 by 0.5 cent in 2018 and one cent in 2019 (Category I systems up to 15 kW) to reduce program costs. GMP collected a minimum management fee of about 71970 x 1000 x (21.813, program cost - 18.90, Category I compensation) = $2.096 million in 2016, increasing in future years with the growth of the program. See table and URL.

 

NOTE: The actual 2016 GMP fee is much higher, because Category II, III, IV systems are compensated at much lower rates than Category I. If the weighted average were 16.9 c/kWh, the likely GMP fee would be 71970 x 1000 x (21.813 - 16.900) = $3.535 million in 2016, or 3.535/15.699 x 100 = 22.5% of the total program cost. See URL.

 

http://www.windtaskforce.org/profiles/blogs/green-mountain-power-co...

https://solarindustrymag.com/vermont-puc-makes-changes-to-net-metering

 

PV Solar, Category I	2016	2017	2018	2019
GMP charges	2.913	2.913	2.913	2.913
Feed-in tariff	18.900	18.900	18.400	17.400
Total cost	21.813	21.813	21.313	20.313

High Feed-in Tariffs of SO Solar Program

The high 21.793 c/kWh is primarily due to the outrageously high feed-in tariffs for solar (24 - 30 c/kWh), which were kept high for political reasons, even though solar system prices had decreased. The tariffs attracted multi-millionaires from all over the US to build solar systems. GMP had a significant solar capacity on its system at end 2017. See slide 3 - 7 of 13.

 

Eventually, Vermont, marginal for solar, could claim to be second only to sunny Hawaii regarding installed solar kW/capita. See slide 3 of 13.

https://legislature.vermont.gov/assets/Documents/2018/WorkGroups/Ho...

 

During prior years, the PUC used outside consultants, who, for a generous fee, would conjure up convoluted reasons for justifying the high feed-in tariffs, even after solar system prices had decreased.

 

The excess cost of SO solar, c/kWh, charged to ratepayers, equal to the average cost of the SO solar, c/kWh, minus NE midday wholesale prices, about 6 c/kWh, became so high that GMP and others complained. The PUC was claiming lowering feed-in tariffs would jeopardize the commercial viability of SunCommon, a major solar promoter.

 

Finally, the pressure on the PUC became too great and it gave in. The PUC had to institute competitive bidding of solar systems; Germany had been doing that for years. Vermont not leading!

The Mirage of Low Solar System Electricity Costs

GPM claims the value of solar to its system is about 10 c/kWh, about 3.26 c/kWh less than recently auctioned SO solar projects. GMP has not provided a detailed numerical explanation of its claim. See Appendix.

 

A 2200 kW SO solar project was bid at 12.90 c/kWh on December 2017. That may be a bottom price, because future SO solar projects likely will be bid at higher c/kWh, because US tariffs will be imposed on imported solar panels. See table 2.

 

The above 13.26 c/kWh and 12.90 c/kWh are low, because of very high subsidies. They would be at least 50% higher, about 20 c/kWh, without those subsidies. GMP, VT-DPS and VT-PUC have the spreadsheets for each project that proves it. See Appendix.

 

In addition, solar systems on local distribution grids have varying outputs, especially during variable cloudy weather. Such distribution grids would need batteries, such as Tesla Powerpack 2.0s, to dampen excessive variations. The costs of those batteries is just another “externality” not charged to solar system owners (the disturbers), but to all ratepayers (the victims); another example of making the cost of subsidized solar, c/kWh, appear less than in reality. See Appendix for other externalities.

 

NOTE: The damping is a separate issue and has nothing to do with the daily shifting of midday solar to late afternoon/early evening (peak demand hours), and seasonal shifting of summer solar to winter.

  

Table 2		c/kWh	Comments
1	VT Competitively auctioned SO solar	13.26	See Appendix
1A	Next Gen Solar Farm, 2200 kW	12.90	Dec 2017
2	GMP claimed value of solar	10.00	No back up provided
3	Excess charged to rate payers, 1 - 2	3.26
4	NE midday wholesale price	6.00	Per ISO-NE spreadsheet
5	Excess above NE wholesale, 1 - 4	7.26

 

APPENDIX 1

Various Subsidies for Wind and Solar: Because of the various subsidies, taxpayers and rate payers are forced to pay 1) higher monthly electricity bills, 2) higher prices for goods and services, and 2) taxes to finance various subsidies for wind, solar and other RE producers. Here is a partial list:

 

- The federal ITC, 30% of the qualified portion of the turnkey capital cost. The federal ITC is an upfront, tax credit that can be applied against any of owner’s taxes.

- The state ITC, usually a percentage of the federal ITC. The state ITC is an upfront, tax credit that can be applied against any of owner’s taxes.

- The federal production tax credit, PTC, of 2.4 c/kWh for the first 10 years of operation, a subsidy of 2.4/5 = 48% of the US average wholesale price. No wonder owners are crowing about underbidding traditional generating plants. For example, in areas with good winds, low construction costs and low operation and maintenance costs (Texas, Great Plains), if an owner’s cost is 7.3 c/kWh and he deducts 2.4 c/kWh as PTC, then his bid price could be 4.9 c/kWh, which is sufficient to get the contract, in most cases, and “competitive” with traditional plants.

- The federal and state tax savings due to rapid depreciation write-offs in about 5 to 6 years, much more rapid than normal utility equipment write-off schedules of 10 to 20 years. Having tax savings earlier, instead of later, is financially more advantageous.

- The exemption of equipment purchases from the state sales tax and from the education property tax.

- Selling wind electricity at generous feed in tariffs of about 9 - 10 c/kWh in areas with high capital costs and low capacity factors (CFs), such as New England.

- Selling solar electricity at generous feed in tariffs of about 13.5 - 14.5 c/kWh in areas with high capital costs and low capacity factors, such as New England.

- Selling renewable energy credits, RECs, which lower the utility purchased RE energy cost by up to 50%.

- Loan guarantees by the federal and state government, which lower the interest rate of the funds borrowed from private entities, because the federal and state government assume the risk of the loans.

 

NOTE:

Wind ITC and Wind PTC decrease in 2017, 2018, 2019, and expire in 2020.

Solar ITC decreases in 2020, 2021, and expires in 2022.

 

APPENDIX 2

Warren Buffett, considered one of the outstanding investors of all-time, has stated: “On wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit”. Buffett has investments in multiple wind sites, as do many other multi-billion dollar entities. Buffett and his cohorts hire tax accountants/lawyers to refine the subsidy-milking art form, as well as PR pros and RE lobbyists to continually increase the milking, via higher RPS targets and renewed subsidy periods.

 

APPENDIX 3

Hydro-Quebec A Much Better Alternative Than Standard Offer: Hydro-Quebec has about 5600 MW of spare hydro plant capacity, and has under construction and in planning stages an additional 5000 MW of hydro plant capacity. Here a list of the benefits of hydro energy:

 

- Clean (no particulates, no SOX, no NOx)

- Low-cost (5 - 6 c/kWh, plus 1 c/kWh for transmission), much less than wind and solar

https://vtdigger.org/2015/01/28/utilities-want-flexibility-renewabl...

- Very low CO2/kWh emissions, much lower than wind and solar

- Steady, 24/7/365 energy, i.e., NOT variable and NOT intermittent, unlike wind and solar, which are weather dependent, variable cloudiness dependent, night and day dependent, and season dependent

- NO federal and state subsidies and investment tax credits

- NO capital outlays by Vermont’s government

- NO enriching of multi-millionaires and their lucrative, risk-free, tax shelters

- NO additional environmental impact in Vermont

- Private entities would own the transmission lines from Quebec to New England

- RECs would not be sold to out-of-state entities so they would be wearing the green halo, instead of Vermonters.

- Much less social discord than controversial wind on pristine ridgelines and solar in fertile meadows

 

Here are some URLs about increased hydro energy from Hydro Quebec.

 

http://www.windtaskforce.org/profiles/blogs/gmp-refusing-to-buy-add...

http://www.windtaskforce.org/profiles/blogs/more-energy-from-hydro-...

http://www.windtaskforce.org/profiles/blogs/increased-canadian-hydr...

APPENDIX 4

Auctioned SO PV Solar Projects: The production of the 4 auctioned PV solar projects (8,380 kW) was about 10,897 MWh during the latest 12 months. The average price paid to multi-millionaires owners of these large systems was about 13.26 c/kWh, about 2.2 times the NE annual average midday wholesale price of about 6.0 c/kWh. See table 7.

http://www.windtaskforce.org/profiles/blogs/vermont-speed-renewable...

 

Owners of the 4 projects could make such low bids, only because the equivalent of about 54% of the turnkey capital cost was ITCs and rapid asset depreciation tax savings during the first 6 years, plus they received high feed-in prices for their production. Without those subsidies, the cost of PV solar in Vermont, and all of NE, would be about 20 c/kWh.

http://www.vermontstandardoffer.com/projects-online/

 

APPENDIX 5

New England PV Solar Much More Expensive Than Elsewhere: Pro-RE interests are saying PV solar (heavily subsidized) is competitive with fossil in some very sunny areas of the US (Texas, Arizona, New Mexico, etc.), but that is far from reality in not-so-sunny, variably cloudy New England, as proven by energy prices of the 4 auctioned projects (heavily subsidized).

 

Table 7, Auctioned Projects	Start	Type	Production	Capacity	Rate	Paid
			MWh	kW	c/kWh	$/y
Champlain Valley Solar Farm	Jul 24, 2015	Solar	2,794	2000	14.41	402,615
Otter Valley Solar	Aug 30, 2017	Solar	2,769	2180	13.38	370,492
Pownal Park Solar	Dec 30, 2016	Solar	2,794	2200	10.96	306,222
Sudbury Solar	Apr 18. 2016	Solar	2,540	2000	14.40	365,760
Total			10,897	8,380	13.26	1,445,090
Elizabeth Mine		Solar	8,675	7000 DC	14.90	1,292,575

APPENDIX 6

The cost of solar, c/kWh, heavily subsidized, excludes the costs of externalities, such as:

 

– Any peaking, filling-in and balancing performed by the other generators
– Any battery systems to stabilize distribution grids with many solar systems.
– Any measures to deal with DUCK curves, such as utility-scale storage and demand management
– Any grid expansions and augmentations to connect distributed solar systems

 

Those costs, as c/kWh, are not easy to quantify, and as a result they are charged to ratepayers via rate schedules, and to taxpayers. Ultimately, they are reflected in the increased costs of goods and services, which likely would act as a headwind to economic growth. There is no free lunch.

 

NOTE: For example, to bring wind electricity from the Panhandle in west Texas to population centers in east Texas, $7 billion of transmission was built. The entire cost was “socialized” as a surcharge on residential electric bills.

 

http://www.theenergycollective.com/energy-innovation-llc/2420282/ra...

http://www.windtaskforce.org/profiles/blogs/subsidized-solar-system...

http://www.windtaskforce.org/profiles/blogs/the-true-cost-of-solar-...

http://www.windtaskforce.org/profiles/blogs/the-true-cost-of-wind-e...

http://www.windtaskforce.org/profiles/blogs/a-very-expensive-offsho...