Have you ever wondered about where your power comes from and what its sources are? Power supply planning is a complicated topic, here is some information about how VEC approaches power supply decisions and planning. Our short-term (1-5 year) power needs are calculated based on actual power used during the past 3-5 years (depending on how the weather in those years compares to long-term trends).These figures are then adjusted based on major known expansions or reductions. Going into the year, we try to have contracts for at least 90 percent of our projected needs locked in, and we use the spot market for the remainder. The spot market is where you buy power as you go to meet your load. Since spot market prices have been volatile in recent winters, we will go higher than 90 percent in winter months to limit VEC’s financial exposure. Our long-term power supply needs are projected based on formal forecasts conducted every three years.

VEC’s current policy is to purchase as much in renewable fuel sources as we can in the least expensive way possible. The analysis of which contracts are the least expensive will change depending on whether you consider the long-term or short term and can lead to different decisions.  For example, a five-year contract that has a flat price for the entire term may be less expensive in the long run than a five-year contract that begins at a low price but increases each year.  We balance short-term savings with long-term savings and price stability.  There is no set equation.

The chart below shows VEC’s fuel mix since 2011.

Note: This chart shows the fuel sources without consideration of the Renewable Energy Certificates (RECs), which are available for many of the renewable energy sources listed below. RECs are the renewable attributes of the electricity, and if they are sold the energy can no longer be considered renewable. VEC currently sells many of the RECs associated with various renewable energy sources in order to keep rates low for members. How many RECs VEC sells versus how many it retains will change beginning in 2017 as Vermont’s Renewable Energy Standard (RES) comes into effect.

 

2011

2012

2013

2014

2015

2016

Hydro

59.6%

58.5%

43.8%

57.8%

58.5%

59.6%

Natural Gas or Oil

17.9%

26.5%

41.3%

25.4%

7.0%

3.2%

Nuclear

17.0%

4.0%

 

 

15.9%

17.9%

Wind/Solar/Farm Methane/Wood

5.5%

11.0%

14.9%

17.6%

18.5%

19.4%

Total

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

 

VEC is working to bring more renewable energy into our portfolio and has three solar projects in development through Power Purchase Agreements (PPAs) with solar developers. These three projects would total about 7.5 megawatts, which could produce about two percent of VEC’s annual power supply needs. Currently, utility-scale solar is the most cost-effective means of bringing renewable power onto the grid because of economies of scale and the ability to locate generation in places where it is most beneficial. Vermont also allows individuals to connect small-scale renewable generation projects through the net metering program and is currently working through the regulatory rule-making process to ensure that the net metering rates that start in 2017 will be financially sustainable. 

The last way that renewable energy projects are developed is through the Standard Offer program, which is a program administered by the State where developers submit their bids on projects they would like to develop and the State awards them contracts. Utilities then purchase their share of this generation.