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United States

New England in need of attention

The New England states are keen to promote non-polluting forms of electricity generation, with much debate and discussion among policy groups and utilities. But they are requesting more help and advice from the renewable industry on how to develop legislation to achieve development of renewables in a deregulated market. The region favours imposing a levy on consumers to fund market stimulation programmes and there are also moves to encourage utilities to buy European style distributed generation to which wind power is well suited. An obligation on utilities to buy clean power is also being debated.

While the attention of US wind developers has been on the battle over deregulation of the electricity market in California, the New England area, a region that hosted many of America's earliest wind power advances, has been quietly progressing with its own restructuring plans. The companies which make up New England Electric Service (NEES) have already agreed to divest themselves of their generating businesses as part of a restructuring deal which will open the transmission network to competitive electricity suppliers from 1998. The costs they can no longer recoup as a result of selling their fossil and hydro businesses will be recovered through a levy on retail distribution rates, if the deal is finally approved by the Massachusetts Department of Public Utilities.

The largest wind turbine ever constructed in the US was the 250 ton Smith-Putnam grid connected wind generator erected on Grandpa's Knob in Vermont in 1941. It was long an inspiration for early wind power pioneers. Yet despite strong support for non-polluting power sources in the region today, the wind industry has not jumped at the New England potential presented by deregulation. "Wind developers are not paying any attention to New England, even though regulators here are throwing money in the streets," complains Michael Jacobs, policy advisor for Second Wind Inc, a supplier of electronic components for wind farms based in Somerville, Massachusetts.

While Jacobs may be guilty of a little exaggeration, he is right that few of the major wind companies with bases in the US have invested any resources into shaping restructuring activities in New England, in sharp contrast to the lobbying done in California. Jacobs points to a new regulation passed in Massachusetts that imposes a fee of one tenth of a cent on each kilowatt hour sold in the state to create a pool of funds for new renewable energy projects. The fee would generate roughly $40 million annually. Jacobs had testified on behalf of a 1.8 mill per kilowatt hour fee, but is happy that what is deemed as a significant financial stream is now available to wind developers.

Referring to the American Wind Energy Association's attempts to have legislation adopted for mandatory purchase of wind power, enshrined in its "Renewable Portfolio Standard," Jacobs comments: "The Renewable Portfolio Standard (RPS) was pre-empted here because key environmental groups and utilities preferred imposing a fee to fund social programmes." He points to the political alliance of the Conservation Law Foundation (CLF) and New England Electric Service (NEES), organisations that have led the way in articulating what a restructured electric utility will look like in New England.

four percent from renewables

In November, the Union of Concerned Scientists (UCS), the wind industry's strongest supporter among environmental groups, voiced support for the NEES restructuring plan as it included a policy stipulating that 4% of Massachusetts' new power capacity must be supplied by new renewable energy projects. The other feature of the restructuring proposals in Massachusetts and other parts of New England that could help the wind industry is subjecting all power plants to uniform air pollution control standards, a policy which could lead to the early retiring of old fossil fuel plants, making room for non-polluting power sources.

Some entrepreneurs, including Brian Braginton-Smith, president of the Conservation Consortium of Yarmouth Port in Massachusetts, are looking to find "green" customers in the Cape Cod area for installation of small, distributed wind turbines. He complains, though, that grid access charges to recover past nuclear and fossil fuel power plant debts included in the NEES proposal will dissuade customers from installing distributed systems. "I am lobbying that indigenous power resources such as wind should be exempt from these charges," he says. Such exemptions are included in California's new deregulation bill.

According to Braginton-Smith, California style wind farms will not work in Cape Cod due to sensitivity to compatible land uses. "I am trying to sign up small municipalities to buy into European-style distributed generation to develop a compatible blend of technology with these communities," he says.

Maine favours mandate

While the RPS has not found favour in California or even some New England states, Maine -- the state with the best wind resources in the region -- includes the concept in a draft restructuring proposal that was due to be finalised by the end of the year. Harley Lee, president of Endless Energy Corporation of New Gloucester, Maine, simply presented information generated by the American Wind Energy Association (AWEA) to Maine regulators and, much to his surprise, they adopted the policy. While final approval of it in Maine's Legislature "is a hurdle," says Lee, he has spoken with members of the Natural Resources Committee "and they have indicated they support the RPS."

Lee has suggested the RPS power purchase mandate for renewables be set at 47% of new capacity, the current level of renewable energy in the state, currently made up of wood fired and hydroelectric plants. Maine's total demand is only 2000 MW, and growth in demand has been flat. A 1% growth rate would only net a renewable energy project of less than 10 MW. These small numbers are, perhaps, one reason California wind firms used to operating within the framework of large wind farms have a hard time getting excited about New England.

Lee thinks that California's restructuring law has a number of good features, particularly the section allowing customers who buy half or more of their power from renewables to be among the first allowed to shop for electricity. "I would not like to hang my hat on that approach -- I'd rather have the mandate -- but I do think it is an exciting approach." Lee believes that attempts to market "green" power portfolios will occur, even if specific legislation authorising such activities is not enacted. "Look what happened in New Hampshire," he points out.

New Hampshire held a number of "retail wheeling" pilot projects this past year, where 30 marketers went after 16,500 customers representing 50 MW of load. About five companies offered "green" power, including Working Assets of San Francisco, a company that has successfully marketed a socially conscious brand of credit card and phone services. But here, and in an upcoming similar pilot project in Massachusetts, other companies are including nuclear and even coal as part of "green" blends of electricity. Indeed, it was this experience in New England which prompted California legislators to require certificates for power plants claiming to be "green."

The very small states that comprise much of New England operate what amounts to a giant power pool for trading electricity; there is a tendency for them to pass similar policies. Rhode Island, for example, has already put into place a law levying a fee on customers of just over two tenths of a cent per kilowatt hour for conservation and clean power programmes that takes effect in January 1997. According to Mary Kilmarx, director of energy policy and planning for the Rhode Island Public Utility Commission, the initial funding for renewables is minimal at only $100,000, but nonetheless it is enough to cover the costs of a green Request For Proposals for new power supply to be released in 1997. At this point, in-state projects are the focus of the RFP, she said, "though we may allow projects to be developed in Massachusetts."

Kilmarx acknowledges that the wind resources of Rhode Island are limited. The RFP for green power supply is open-ended. "We want the market to tell us how much green power is out there," she says.

free ridership an issue

Vermont, too, is wading into the waters of deregulation. The state is home to a 6 MW wind facility installed by California's Zond Systems and according to the project's John Saintcross of Green Mountain Power, AWEA's RPS may still gain approval in his state. The Legislature was expected to make a final decision at the end of last year. Saintcross complains that the green marketing approach favoured in California "is typically only targeted at residential customers. I think there is an issue of free ridership. We shouldn't let the industrial customers off the hook when it comes to saving the environment. All of us should pay a portion of the costs."

He share's AWEA's view that the RPS, with its renewable energy trading credit system, is among the best approaches to integrating wind and other renewables into utility resource mixes. "The best approach, however, is a carbon dioxide tax," he says, quickly acknowledging that political prospects for that path are even bumpier than the road to RPS. Though the principle of the RPS is sound, Saintcross worries "about the seams if the RPS is not in place in every state." A hodge-podge implementation, he fears, would give certain regions not complying with an RPS "an economic advantage" over other regions that were. This argument, unfortunately, may doom the RPS here as well. It could also bolster policy arguments in favour of a federal RPS.

Yet green marketing may still play a role in New England, given the cost data from the Zond project. Saintcross estimates the cost of energy at $0.058/kilowatt hour. "It is close to the market price during our winter peak," he remarks. However, without supplemental grant funding, the cost of electricity from the 11, Z-40 turbines would be closer to $0.08/kWh. One of the reasons for the high power costs was construction of the substation and distribution lines. If additional wind capacity is added at the same site, these costs would come down, says Saintcross.

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