Revolution Wind, developed jointly by Ørsted US Offshore Wind and Eversource, is expected to supply enough wind-generated electricity to fill nearly one-quarter of the state’s needs. And, National Grid, the utility through which the power will be distributed, reports that ratepayers in Connecticut, Rhode Island, and Massachusetts will save up to $91.6 million over 20 years thanks to wind power.
Sounds great, right? However, there are two serious problems with the projection and the power purchase agreement that National Grid signed with Rhode Island.
The first is, it is based on expectations about the market for Renewable Energy Certificates (more about them below) that seem less than a sure thing, and the reality that National Grid legally cannot lose money on the power it distributes. The second, and maybe even more significant issue, is the lack of transparency with which monumental decisions about the region’s energy future are being made.
The region’s nonprofit operator of the electricity grid, ISO New England, awards Renewable Energy Certificates to producers of renewable energy in a modified cap-and-trade system as states move to meet the Renewable Energy Standards they have set by law. Rhode Island, for instance, has a number of clean energy goals designed to help combat climate change. One mandates that 40 percent of its electricity production comes from clean-energy sources by 2035. Another wants the state to cut carbon emissions by 80 percent of 1990 levels by 2050. Both are laudable goals that will require public buy-in to be achieved.
Those RECs are then sold to either utilities or other electricity producers who use nonrenewable sources, but can nonetheless certify a portion of their product as green. In effect, they are buying the right to pollute. This system incentivizes clean energy development while moving the entire power grid toward more renewable sources of electricity.
National Grid projects that the buying and selling of RECs will yield it $87 million more than the cost of the electricity that Revolution Wind produces over 20 years, which it would pass on to ratepayers in the form of lower charges for the electricity it sells. But what happens if the value of each REC declines because of the increased production of renewable energy? National Grid will charge higher rates, because it is not allowed to lose money on the energy it purchases and transmits. Projecting that market over the next 20 years is at best wishful thinking and at worst dishonest. The additional $4.7 million in savings that National Grid estimates is a result of the difference between the price it will pay for the wind power, and the market rate for electricity. But that savings, too, is wholly dependent on the price Revolution Wind gets for the RECs. And we’re back to Problem One.
None of this takes into account the fact that ratepayers are ultimately footing the bill for the cost of the RECs – the utilities that buy them have to factor the cost into their rates, after all.
This is not an argument against renewable energy. It is instead a plea for honesty and transparency in making the case. There are many reasons to make the change, including improving health and minimizing the catastrophic results of climate change. The National Grid report estimates another $1 billion in savings for such societal benefits, in part by including the overall effects of not just the electricity being generated for Rhode Island but also by the portion of Revolution Wind that will directed to Connecticut as well as the Massachusetts-based Vineyard Wind project. While the $1 billion, like so much in the National Grid report, is debatable, the logic of taking such factors into account is sound.
Supporting wind power makes sense for myriad reasons. National Grid argues, unconvincingly, that savings to ratepayers is one of them. We need a full and accurate accounting of the actual costs and who will benefit and how. So far, such clarity has not been forthcoming from either the state or National Grid. Only then will we be able to make smart, informed decisions for today and for future generations.