Not as green as we thought
Using solar energy to power local homes, municipal buildings, schools, businesses or even plug-in cars is becoming increasingly popular in Vermont. Given the environmental challenges we face, this is an encouraging trend that hopefully will continue to grow.
Unfortunately, local residents, municipal officials and others seeking community solar opportunities must understand that not all so-called solar energy deals being offered locally are the same, and more and more of them, through complex contractual terms, do not actually sell the solar energy to the customer whose electrical account is used to support the transaction.
This problem is largely arising with the plethora of no up-front cost solar lease deals being offered to customers and not with the many successful solar projects sold to and owned by the customer.
Most people who contract with a business developing solar generation would expect that they could be assured of purchasing solar energy and greening their carbon footprint, if through a contractual relationship their electrical account is used to allow a developer to construct a solar array. Unfortunately, today in Vermont that is often not the case.
Many Vermont towns, school districts, community organizations and individuals are being offered solar purchase power agreements by a variety of developers where the developer offers to construct a solar facility and finance its construction. The developer then offers the customer the ability, through its electric account, to net-meter a portion of the solar output, often for a 5 to 10 percent reduction in their electric rate, with no up-front costs.
Unfortunately, in many of these transactions, the developer, or entity financing the transaction, includes provisions in the purchase power agreement allowing them to sell the renewable energy credits (RECs) from these facilities. The RECs, which currently are worth about 6 cents per kilowatt-hour, then can be sold into out-of-state renewable programs that exist in Massachusetts and other states.
This allows the utilities in a neighboring state that are paying the premium price for the RECs to legally claim they are buying the solar energy, not the Vermont customer.
It is not possible for two separate customers to consume the same kilowatt-hour of electricity. Instead, in this example the Vermont customer purchases fossil and nuclear-fueled electricity at a discount, while allowing the developer to take a 30 percent tax credit, accelerated depreciation and profit from the sale of the renewable energy credits to out-of-state utilities.
These misleading transactions are happening across the state but are especially prevalent as part of the Rutland solar promotion that has grown from the merger of Green Mountain Power and Central Vermont Public Service. Both utility-sponsored projects, as well as privately financed deals, are often portrayed as local solar energy, but the rights to the renewable energy are being sold out of state.
Importantly, a residential property owner or local business whose account is used for net-metering these projects with the RECs sold out of state would be making a false claim if they were to promote their energy use as being renewable.
These scenarios are not what you would expect to find in the Green Mountain State. Individuals, businesses and communities must be very careful to ask the right questions and carefully read the contractual agreements since these misleading transactions are happening regularly.
This is part of a larger trend of utilities across Vermont selling RECs out of state from Vermont large-scale wind and solar facilities, while many in the media and the public mistakenly believe that these are projects selling clean energy to Vermont consumers.
As a result of these sham renewable energy transactions, the carbon emissions from Vermont’s electric sector have been rising in recent years, contributing further to climate change.
Kevin B. Jones of Chittenden is deputy director of the Institute for Energy and the Environment at Vermont Law School. He is coauthor of “A Smarter, Greener Grid: Forging Environmental Progress through Smart Energy Policies and Technologies” forthcoming from Praeger.