Energy: Clean Heat Standard coming, electric costs rising

Photo: The Burlington Waterfront on a June day, hazy from the Canadian wildfires, no Adirondacks in sight. VermontBiz photo.

by Timothy McQuiston, Vermont Business Magazine

Vermont could see a significant transition of its energy management and transmission sources in the coming years. The state’s Public Utility Commission has begun the process of developing the Clean Heat Standard as mandated by the Legislature. Lawmakers overrode a gubernatorial veto to enact the law, which the PUC must now develop.

Meanwhile, the weather impacts from the July rainstorms do not appear to have had a significant adverse impact on the electric grid.

Regional electric manager ISO New England, in its report in late spring, said the power supply is expected to be sufficient this summer. ISONE builds in about a 20% margin to its estimates.

However, ISONE acknowledges that smoke from Canadian wildfires has lessened solar voltaic output in the region. It will take some time to determine the ultimate cost to consumers. The hazy skies also somewhat lower air temperatures, which in the summer would lower demand. The effects of those two competing factors are not yet known.

Meanwhile, U.S. Sen. Peter Welch and Gov. Phil Scott have become more optimistic that the 1 gigawatt underwater power line from Quebec, down Lake Champlain to a Vermont substation, may come to fruition. TDI had proposed two such power lines, one to Vermont and another to New York.

The $1.6 billion Vermont merchant line will be privately financed and will not use taxpayer dollars. It received a presidential permit in 2016, but had faded from view until recently. The developers of the Clean Power Link are also developing the Champlain Hudson Power Express project. New York State broke ground on that power line earlier this year.

Governors are also looking at the growing cost of power in the region.

ISONE released in June its price report from last year. The cost of electricity in New England increased 90% from 2021 to 2022.

On June 30, the Public Utility Commission issued two orders to begin the process of designing a potential Clean Heat Standard program as directed by Act 18 of 2023 (the Affordable Heat Act). This marks the beginning of what will be an 18-month process of stakeholder engagement, public input and rigorous analysis that will culminate in the regulators submitting proposed rules to the Legislature for approval.

The aim of Act 18 is to reduce greenhouse gas emissions in the heating-fuel sector, in line with the state’s decarbonization requirements.

It directs the PUC to design a regulatory structure that would create “clean heat credits,” a tradeable commodity that represents a unit of greenhouse gas reduction attributable to a “clean heat measure.” Clean heat measures may include weatherization, heat pumps, electric water heaters, reduced carbon-intensity fuels and more.

Under the proposed system, certain heating fuel suppliers, known as “obligated parties,” would obtain clean heat credits by delivering clean heat measures that reduce the life cycle emissions attributable to their customers’ heating of homes and buildings.

If the Legislature approves the program designed via the PUC’s public rulemaking process, obligated parties would be required to retire a certain number of credits every year by paying a “default delivery agent” to deliver clean heat services on their behalf, by purchasing credits on the market or installing clean heat measures themselves.

The commission has opened two proceedings:

Case No. 23-2220-RULE is the actual rulemaking process, which will address the overall design of the program, including the credit market, annual credit requirements, statewide registry, possible funding streams, technical specifications and other structural aspects. This proceeding will include multiple public hearings, workshops and opportunities to comment.

Case No. 23-2221-INV will be an investigatory docket on the specific subject of the budget and plans for a default delivery agent, including the number of credits the default delivery agent would make available and at what cost.

“The commission has structured these proceedings to facilitate a robust and collaborative design process,” said commission chairman Anthony Roisman. “We look forward to working with Vermont customers, fuel suppliers and interested stakeholders to create proposed rules that address our statutory mandate in an equitable manner.”

Scott vetoed the bill and believes it would inevitably raise the cost of home heating, especially in rural areas where the heating options rely on fuel oil and propane. Furthermore, he said, the literal letter of the law is too confusing.

In his veto letter in May, the governor said in part, “The risk to Vermonters and our economy throughout the state is too great; the confusion around the language and the unknowns are too numerous; and we are making real and measurable progress reducing emissions with a more thoughtful, strategic approach that is already in motion.”

Record-high energy prices defined the region’s wholesale electricity markets in 2022, according to the latest annual report by ISO New England’s Internal Market Monitor, released July 5.

The average price in the Day-Ahead Energy Market was $86 per megawatt hour, a year-over-year increase of 90%. The average Real-Time Energy Market price also increased by 90% from 2021, to $85/MWh.

High natural gas prices drove the price increases in the energy markets. Several factors contributed to this rise, including international events like the Russia-Ukraine War and the pipeline limitations New England experiences in winter.

The region’s wholesale electricity markets performed well and were competitive in 2022, the report concluded.

Other highlights from the report include:

The capacity, energy and ancillary services markets performed well and exhibited competitive outcomes in 2022. The day-ahead and real-time energy prices reflected changes in underlying primary fuel prices, electricity demand and the region’s supply mix.

The total wholesale cost of electricity in 2022 was $16.7 billion, the equivalent of $140/MWh of load served. These were the highest costs of the last five years, and the total cost was a 49% increase over the $11.2 billion recorded in 2021.

Natural gas generation continued to account for the largest share (52%) of electricity produced within New England, representing twice as much as the second-largest fuel type (nuclear). Natural gas prices averaged $9.32 per million British thermal units in 2022, up from $4.62/MMBtu in 2021.

Capacity costs totaled $2 billion, down 10% (or $0.022 billion) from 2021. These costs continue to decline as the market maintains surplus capacity over the system’s capacity requirements.

Regional network load costs, which pay for the use of transmission facilities, reliability and certain administrative services, were $2.8 billion, up 2% from 2021. The change was due to a slight increase in infrastructure costs, which make up the majority of the regional network load costs.

Given their larger populations, Massachusetts and Connecticut are the largest consumers and producers of electricity within the ISO’s six-state footprint.

Released each spring, the Annual Markets Report presents an assessment of each of the ISO’s wholesale electricity markets, based on market data, performance criteria and independent studies.

Created in 1997, ISO New England is the independent, not-for-profit corporation responsible for the reliable operation of New England’s electric power generation and transmission system, overseeing and ensuring the fair administration of the region’s wholesale electricity markets and managing comprehensive regional electric power planning.

New England is expected to have sufficient resources to meet consumer demand for electricity this summer under typical weather conditions, according to ISONE.

Tight supply margins could develop if forecasted peak system conditions associated with above-average hot and humid weather occur. If this happens, ISO New England stated in its annual assessment that it will take steps to manage New England’s electricity supply and demand and maintain power system reliability.

The assessment was issued in June, before storms and flooding hit Vermont and other parts of the Northeast in July. At this point, those events have not affected power projections. More than 20,000 electric customers in Vermont lost power from the storms that began July 9.

Electricity demand was forecasted to reach 24,605 megawatts. Above-average summer weather, such as an extended heat wave, could push demand up to 26,421 MW.

More than 30,000 MW of capacity is expected to be available to meet New England consumer demand for electricity and required reserves. ISONE employs a variety of resources to meet demand: generators that produce electricity, using fuels such as natural gas, nuclear, oil, coal, hydro, biomass, wind and sun; demand-response resources that reduce their energy use; and power imported into New England from New York and Canada.

This summer’s forecasts incorporate the demand-reducing effects of more than 1,900 MW of energy efficiency measures. This decrease comprises resources that are designed to save electricity across many hours, but cannot change the amount saved in response to instructions from system operators. Examples include the use of energy-efficient appliances and lighting, and advanced cooling and heating technologies.

The forecasts also include a reduction of just more than 980 MW during the peak hour that can be expected from the region’s behind-the-meter solar photovoltaic installations.

Though New England has over 5,400 MW of BTM solar PV installed, these systems produce their highest output in the early-afternoon hours. The increase of solar power in New England has, in effect, pushed the peak hour of grid demand later in the day, when the sun is lower in the sky and production from solar PV systems is also lower.

Rather than peaking during the mid-afternoon, as was customary during the summer before PV installations became more widespread, demand for grid power now tops off in the early evening hours.

Last summer’s demand peak of 24,780 MW occurred on Aug. 4, 2022. The all-time record for electricity demand was set on Aug. 2, 2006, when demand reached 28,130 MW after a prolonged heat wave. In New England, consumer demand for electricity is highest during the summer because of air conditioning use.

Smoke from wildfires in Canada in June and July has traveled to New England, significantly lowering production from solar resources in the region compared to what would be expected absent the smoke, according to an ISONE report released in June.

Most solar resources in New England are connected to the distribution system and reduce demand on the regional grid when they are producing electricity. Decreased production from these resources has the effect of increasing demand on the regional grid.

ISONE forecasters have worked to adjust consumer demand forecasts to account for these differences, as modeling software, which relies on weather forecasts, is anticipating greater production than what ISO operators are observing in real time.

The smoke has also lowered actual temperatures in New England compared to what weather models are forecasting. This leads to lower demand on the regional grid, as there is less need for things like air conditioning.

These two factors — decreased production from solar resources and decreased consumer demand due to lower temperatures — have made forecasting demand for grid electricity challenging, ISONE stated.

It’s difficult to determine the exact impact of each of these factors, they said, given that there are many variables affecting consumer demand for electricity at any given moment.

In forecasting real-time and future demand for electricity, ISO New England relies on historical data from similar days, adjusting for changing system conditions. Because these smoky conditions are unprecedented in the region, there is little, if any, historical information to rely on, creating further complications in generating accurate forecasts.

Despite these complications in forecasting, ISO New England continues to manage the regional grid under normal operating conditions and does not anticipate this changing. The ISO has long-established procedures in place to maintain system reliability, should they be needed.

Welch and four colleagues sent a letter to U.S. Secretary of Energy Jennifer Granholm in June urging the Department of Energy to consider Transmission Developers Incorporated’s application for funding to develop the New England Clean Power Link. They said this transmission line would expand New England’s access to clean energy and ease winter grid reliability issues in the region.

Earlier this year, Scott, who has long been a proponent of the underwater power line, met with southern New England governors who showed renewed interest in the project as both a source of new power and one from a renewable energy source.

In his letter to DOE, co-signed by Democrats Richard Blumenthal and Chris Murphy of Connecticut and Edward Markey and Elizabeth Warren of Massachusetts, Welch asked the agency to carefully consider TDI’s application in order to facilitate implementation of this project.

“We strongly support the development of new transmission capacity, such as the New England Clean Power Link, which would help address New England’s annual winter grid reliability issues and help the region achieve its renewable energy goals,” the letter read. “The New England Clean Power Link has the capacity to provide much-needed support for New England’s electric grid (and) help us to address the grid reliability challenges we currently face as well as the problems we will confront in the future caused by a warming climate.”

TDI has applied for funding under DOE’s Transmission Facilitation Program to support the construction of the New England Clean Power Link. The project is a 1,000 MW bidirectional transmission line, running from Canada, through Vermont and into southern New England.

TDI has also pledged $263 million for Lake Champlain cleanup and $109 million for Vermont renewable energy projects over 40 years.

The project has received all required permits that allow it to bury two 6-inch-wide cables an estimated 150 miles, all in Vermont. Approximately 100 miles are permitted to be buried under Lake Champlain, with the balance buried underground in existing rights-of-way.

The line will end at a converter station to be built at a location in Ludlow and connect into the VELCO transmission grid to serve Vermont and the broader New England market.

The $1.6 billion merchant line will be privately financed and will not use taxpayer dollars. The developers of the Clean Power Link are already developing the Champlain Hudson Power Express project to serve New York state.

Scott and the Vermont Department of Housing and Community Development launched the Vermont Community Electric Vehicle Chargers Incentive Program on July 6. This program aims to increase access to electric charging opportunities for Vermonters at locations such as workplaces, multiunit homes and public areas.

Green Mountain Power will administer this statewide grant program, and interested parties can submit preapplications through the program’s website.

“To meet our carbon emissions goals, we have to make it easier for Vermonters and visitors to convert to cleaner energy,” Scott said. “That’s why EV infrastructure has been an area of focus for my administration and partners throughout the state. In fact, Vermont leads the nation in the number of public charging stations per capita.

“This program will help us increase equity in our electrification efforts, particularly in locations where charging solutions are not as straightforward as in single-family, owner-occupied homes.”

“GMP is proud to partner with the state to deploy these resources as quickly as we can to speed the transition to electric vehicles for more Vermonters all across the state,” said Green Mountain President and CEO Mari McClure. “A robust and widespread charging network is essential infrastructure to help us reach our carbon emissions reduction goals. By working together, we can continue to lead the nation in clean energy by continuing to reduce carbon emissions from transportation.”

This new program builds upon the success of the Multiunit Dwelling Electric Vehicle Charging pilot program, which was introduced in spring 2022.

The program is supporting the installation of 84 new Level 2 charging ports at 37 different locations across eight counties. Once this work is completed, the program will serve to eliminate the barriers to at-home charging for EV ownership in 6,230 affordable multifamily homes.

Incentives will be issued on a first-come, first-served basis to eligible applicants. Preapproved electrical contractors and local electric utilities will also offer technical assistance to help applicants who may have limited experience with EV charging. To ensure fair distribution, there will be caps on the total incentives issued per applicant, per site and per county.

EVLO Energy Storage, a fully integrated battery energy storage systems and solutions provider, recently announced its first utility-scale storage project in the United States. Located in Troy, the 3 MW/12 MWh battery energy storage system (BESS) project will help to further the integration of local renewable generation into the New England grid.

The EVLO BESS will store energy during strong energy production periods for use during times of peak energy demand, helping to smooth out the intermittency of renewable power generation and delivering value to utility customers.

Troy is located in the Sheffield-Highgate Export Interface, and this project will also provide data to the U.S. Department of Energy and Sandia National Laboratories to support analysis of how batteries can help the export of energy from the region.

“EVLO is honored to lend our decades of experience and technical expertise in the development and operation of battery energy storage systems to support this renewable integration project,” said Sonia St-Arnaud, president and CEO at EVLO. “With this project, we’re excited to demonstrate how it can benefit utility customers and the New England grid.”

The project includes a $2 million cost-share partnership with the Department of Energy through Sandia’s Energy Storage Demonstration Projects program. EVLO will deliver an end-to-end solution consisting of its EVLO 1000 units, Power Converter System platforms and industry-leading Energy Management System EVLOGIX.

The BESS project will be commissioned by the end of 2023, and EVLO will continue to monitor and maintain the system for 20 years.