In recent weeks there has been a great deal of discussion about the future of Maine’s energy policy and whether changes are necessary to bring economic vitality to the state. The goal should be an energy policy that focuses on lowering costs and maintaining reliability while growing the economic and employment opportunity that already exists in Maine's energy industries.
Three related oft-mentioned topics are rarely explained in sufficient detail: the history of the Renewable Portfolio Standard; costs and benefits of the RPS; and Hydro Quebec.
The RPS is a state policy to recognize and incentivize the economic, environmental and energy security value of growing indigenous, clean energy sources. This law stipulated that 30 percent of Maine’s electricity must come from eligible renewable resources; however, at the time the law was passed, Maine's generation mix was made up of nearly 50 percent renewable sources, mainly hydropower and biomass. In other words, this incentive provided little financial value due to the supply far outpacing the demand, but operates as an important policy signal sent to investors and clean energy developers.
In 2007, the Legislature determined the original law was not doing enough to drive investment in new “steel in the ground” for renewable resources. They wanted more electricity sources that would drive down the wholesale price of power, which meant reducing the state’s dependence on volatile fossil fuels.
On a bipartisan basis — the bill was sponsored by then Rep. Ken Fletcher (currently Gov. LePage’s energy office director) — the Legislature added to the RPS to bring more new or refurbished renewable power facilities into the state’s energy mix.
That policy has helped drive many hundreds of millions of dollars of investment into the Maine economy during the past five years. In fact, the renewable energy industry has invested more than $2 billion in the past 12 years, pays nearly $20 million annually in property taxes, and is creating and supporting jobs all across the state.
The 1999 and 2007 laws each contain a 100 megawatt cap on eligible resources in recognition of the limits of Maine’s resources. Therefore, lifting the cap now serves no purpose other than to send incentive dollars meant for Maine companies to Canadian energy producers. How does that benefit Maine?
Questions regarding the benefits of the RPS led the Maine Public Utilities Commission to analyze the RPS and provide an unbiased review.
Subsequently, the MPUC contracted with Boston-based London Economics International to provide said assessment. The findings by LEI demonstrate a clear and undeniable conclusion: due to Maine's rich natural resources the state benefits greatly from the region’s RPS policies and it would be reckless to step back from the current policy.
Among LEI’s key findings was that regional RPS policies will:
— Create 11,700 jobs in Maine over several years, while potentially reducing employment by 32-129 jobs;
— Increase Maine’s gross state product by 2 percent, or $1.1 billion over several years as the RPS policies of Maine and New England will encourage new renewable power facilities; and
— Account for a nominal increase ($0.37) in a Maine resident’s monthly electric bill under current law, and by 2017 would represent less than two percent of the customer’s overall bill.
As Maine seeks to lower its energy costs, the idea of purchasing electricity from Hydro Quebec at below-market rates frequently receives attention. However, there are many reasons to think that getting power from Quebec at a discounted price is highly unlikely.
When the Legislature returns in January to begin its work, it is important to recognize relevant data that provide a good indication of what a contract with HQ may look like. The state of Vermont signed a contract for hydropower from HQ and it provides a useful example. While the full details of the contract remain confidential, publicly available documents show that the beginning price for this power is at least fifty percent above current market prices.
Perhaps the clearest indication that HQ power is not cheap came from its vice president of business development at a recent ISO New England meeting when he stated that HQ power “is not cheap, contrary to popular opinion.” He explained that large-scale hydro is not an inexpensive resource when transmission and dam construction costs are taken into account.
So the next time someone tells you we need cheap electricity from Quebec, you can tell them you know better — and that a good deal with HQ may prove as elusive as the Great Pumpkin.
Jeremy Payne is executive director of the Maine Renewable Energy Association in Augusta.