The Path to Carbon Balance Driving Vermont Lower on the GHG Chain

1. The Path to Carbon BalanceDriving Vermont Lower on the GHG Chain Michael Dworkin, Professor of Law & Director, Institute for Energy and the Environment Vermont Law School Renewable Energy Vermont 19 October 2006

3. * Energy policy is our world’s most important environmental issue.* Environmental issues are the energy sector’s most important challenge.

4. Putting Things in Perspective: 6.1 Billion People in the late 1990s world0.6 Billion averaging 10,000 kWh/household (US level ca. 12,000)2.0 Billion averaging 5,000 kWh/household (Latin/Eastern Eur)2.0 Billion averaging 1,000 kWh/household (Asia, Africa)1.5 Billion Without electricityQ: What happens if China and India and Indonesia try to buy fuel and resources to provide even half the electricity that we used ten years ago ? A: We will see a doubling in bids for electricity fuels & resources.

6. What Does This Mean in Practice?* Power costs will be high for a long time* Relying on gas and oil will be a costly bid against the developing world * Shifting to efficiency, renewables and co-generation will save money over the next decade. * Why not just buy some power from coal-fired U.S. utilities? Because relying on coal to be cheap will hit its limits very soon.

9. Carbon reduction is big business

10. Air Pollutants: The Willie Sutton Principle

11. U.S. Carbon Emissions: About 1/3 200 million Cars & Trucks Most vehicles made by 7 manufacturers Less Than 1/3 2 Billion Other Sources More Than 1/3 3,000 Power Plants 15% from 20 plants 50% from 100 plants 90% from 300 plants

12. So, How Is America Dealing with This Prospect?Do we have a national energy policy?We do .. And it is this -

13. EIA Predicts More Coal & Gas

14. Vermont’s Electric Needs • 1,000 MW peak demand now • Growing at about 2-3 MW per year since 1992 • 100 MW growth 1984-92 • 550 MW will need to be replaced in 2012 - 2015 timeframe!! • Current Sources • Vermont Yankee - about 30% demand and 36% energy • Contract Expires 2012 • Hydro Quebec - about 30% demand and 32% energy • Contract expires from 2012 to 2020, most expiring by 2015 • Independent Power Producers - about 10% demand and 5% energy (all renewable) • Contracts expire 2008 to 2020+ • Other sources (Market and small utility-owned sites- about 30% of demand and 27% of energy

15. … and we may not be low-carbon for long

16. Efficiency and Conservation VT Yankee Shift to Fossil Plants New Cogen in VT Spot Market Net Metered Small Projects Major In-State Renewables Hydro Quebec Connecticut River Dams Small Distributed Generation Creative Imports Blended Balance A Few Major Options: Some Pros and Cons

17. Can Energy Efficiency Really Help ? • Between 1999 and 2005 Vermont doubled its commitment to strong energy efficiency programs. The result? • Loweringthe burden of electric costs for Vermont residents and businesses: • In 1999, Vermont and NY had highest electric rates of seven north-eastern states; by 2005 we had the lowest such rates. • More importantly than rates, the burden went down. • Commercial & Industrial electric costs dropped from 1.9% of Gross State Product to less than 1.6%. • Residential electric bills dropped from 3.9% of disposable personal income to 3.3%.

19. Lovins: US energy/GDP already cut to 1973 “soft path” government actual total energy consumption gas nuclear renewables but that just scratches the surface, esp. for oil & electricity…

20. Cost of Wholesale Electric Energy including ancillary and bulk transmission costs ISO NE Monthly Average Wholesale Market Price Efficiency Vermont, Contract Price per levelized kWh, stacked below customer-cost

21. Efficiency and Conservation • Highly cost-effective; but requires $ upfront • Excellent climate-change effects • Keeps jobs and $ in VT • Probably can meet all new demand • Probably can’t replace all ‘disappearing’ supply resources.

22. Efficiency and Conservation VT Yankee Shift to Fossil Plants New Cogen in VT Spot Market Major In-State Renewables HQ Connecticut River Dams Small Distributed Generation Blended Balance Major Options: Some Pros and Cons

23. Vermont Yankee • VY license extension still unresolved • Assumes new VY contract acceptable • Waste storage/disposal issues still unresolved • Effect of NRC safety rulings still unknown • Price likely to be full market rate..expensive • Good climate change effects, compared to others • Transportation of fuel and waste unresolved • Some jobs and $ in VT

24. Efficiency and Conservation VT Yankee Shift to Fossil Plants New Cogen in VT Spot Market Major In-State Renewables HQ Connecticut River Dams Small Distributed Generation Blended Balance Major Options: Some Pros and Cons

25. Out-of-State Fossil Plants • Price likely to be high and volatile • Very poor climate-change and health effects • Jobs and dollars leave Vermont • Transmission constraints ?

26. Efficiency and Conservation VT Yankee Shift to Fossil Plants New Cogen in VT Spot Market Major In-State Renewables HydroQuebec Connecticut River Dams Small Distributed Generation Blended Balance Major Options: Some Pros and Cons

27. VT Cogen Plants • Siting means finding the right spots • Requires fuel delivery capacity • Price depends on installation and fuel • Keeps some jobs and $ in VT • Environmental impact must be built in • Could have high efficiency, if part of right site…e.g., Rock Tenn, Ethan Allen

28. Efficiency and Conservation VT Yankee Shift to Fossil Plants New Cogen in VT Spot Market Major In-State Renewables HQ Connecticut River Dams Small Distributed Generation Blended Balance Major Options: Some Pros and Cons

29. Spot Market Purchases • High price risk (both core price risk and highly volatile; hedge costs expensive) • Climate problems since fossil is on New England’s margin 85 % of hours. • Exports jobs and $ (most large scale supply out-of-state) • Ancillary charges, LICAP, Transmission collection for NE, ISO costs all rising

30. Efficiency and Conservation VT Yankee Shift to Fossil Plants New Cogen in VT Spot Market Major In-State Renewables HQ Connecticut River Dams Small Distributed Generation Blended Balance Major Options: Some Pros and Cons

31. Major In-State Renewable Plants – Combination Wind, Biomass, Wood & Solar • Less exposure to market and fossil volatility • Availability of sufficient biomass resources means sustainable forestry is key issue for Vt, NY, NH, Quebec • Keeps jobs and some $ in VT (could help stimulate in-state renewable businesses) • Excellent in terms of climate-change effects • Some already in process (WEC landfill gas, possible new wood, wind??) • Limited in-state hydro site options; but retrofit potential looks significant • Siting needs care and sensitivity; specific site matters • Not all bio fuels ae equal: cullulosic is the key

32. Efficiency and Conservation VT Yankee Shift to Fossil Plants New Cogen in VT Spot Market Major In-State Renewables HQ Connecticut River Dams Small Distributed Generation Blended Balance Major Options: Some Pros and Cons

33. HQ System Power • HQ’s path to expansion is unclear, given internal Quebec issues • Price likely to be high-market • Good climate-change effects • Jobs and dollars leave Vermont • HQ commitment of $1 billion+ to efficiency may free up kWh for our purchase • HQ’s wind from Gaspe may not be an option given Canada’s Kyoto commitments

34. Efficiency and Conservation VT Yankee Shift to Fossil Plants New Cogen in VT Spot Market Major In-State Renewables HQ Connecticut River Dams Small Distributed Generation Blended Balance Major Options: Some Pros and Cons

35. Connecticut River Dams • Stable price may be negotiated. • Environmentally neutral, assuming someone would operate them • Dollars leave Vermont • Known technology; limited cost risk • Purchase no longer open; long term contracts an option

36. Efficiency and Conservation VT Yankee Shift to Fossil Plants New Cogen in VT Spot Market Major In-State Renewables HQ Connecticut River Dams Small Distributed Generation Blended Balance Major Options: Some Pros and Cons

37. Small-Scale Distributed Generation / Micro Turbines • Cost may be issue • Probably won’t meet all new demand • Will siting issues limit deployment?? • Air Permit issues need attention • Good to excellent climate policy • Good for jobs and $ in VT • On spectrum with net metering • FERC sub 20 MW interconnect standards out now

38. Net Metered Small Projects • Trivial in past..significant in future. • IREC recommends up to 2 MW • FERC interconnect for up to 10 kw expedited. • Group net metering? • Californina heading from tneths of percents to true percents. • All Hands on Deck

39. Efficiency and Conservation VT Yankee Shift to Fossil Plants New Cogen in VT Spot Market Major In-State Renewables HQ Connecticut River Dams Small Distributed Generation Rebuild the Balance Major Options: Some Pros and Cons

40. Three Key Goals for All of Us • Build jobs in VT Renewables and Efficiency Sectors: • Reliable, efficient, cost-effective electric power, considering economic and environmental cost (Sec 218c) Create our “tool & die industry” for the 21st century. • Build towards having a buyer’s market, not a sellers market for Vermont by 2012