Could net metering save municipal hydro?

Tuesday, December 20, 2011

Two dams on the Royal River in Yarmouth, Maine are one step closer to removal, as a majority of the town council agreed earlier this month that the dams should be removed.  The town owns two dams near Bridge Street and East Elm Street, which provided mechanical power to mills as early as 1816.  The Sparhawk Mill site near Bridge Street was upgraded to produce hydroelectricity in 1984, and operates as a privately-owned hydroelectric project exempt from most Federal Energy Regulatory Commission regulation.  Yarmouth has considered dam removal for several years, with concerns over fish habitat restoration as the driving factor.

The push to remove the dams comes despite the value of the sites' ability to generate renewable electricity.  A consultant hired by the town in 2010 estimated that the Bridge Street site could theoretically produce over $150,000 in annual hydropower revenues (7 page PDF), with $55,000 being a more realistic estimate of practical production from the existing facilities if they could be repaired and maintained.  In reaching this figure, the report assumed the then-current energy price of 7 cents per kilowatt-hour (kWh).  The report also assumed that the project could qualify for net metering, which the report defined as "unused power is purchased by the utility".

Maine's style of net metering at present is slightly different from that suggested in the report.  Under what Maine calls net energy billing, the owner of eligible renewable or micro combined heat and power (CHP) equipment can use the generation facility to offset its consumption of electricity from the grid, effectively running its electric meter backwards.  If a customer generates more electricity than it uses in any given month, the utility banks the excess amount as credits to be used within the next year.

One advantage gained by a net metering customer is that when generation offsets consumption, the customer saves on more than just the energy component of its electric bill.  In Maine's electricity market, customers pay for both the energy they use and what it costs to deliver that energy over transmission and distribution wires.  Today, the standard offer energy price for residential and small commercial customers in Central Maine Power's territory (including Yarmouth) is 7.4 cents per kWh.  The Maine Public Utilities Commission reports that delivery fees add another 6.47 cents per kWh for residential customers, or 6.3 cents for small commercial customers.  Thus the total cost to these customers of buying electricity and having it delivered is closer to 13.7 cents per kWh - nearly double that assumed in the town's report.  This higher figure may more accurately reflect what the town could save by net metering the Sparhawk Mill project's output against its consumption.

Maine also allows more than one customer to cooperate in net metering.  One eligible generation project can be used to offset consumption on up to 10 customer accounts, provided the participating customers establish partial ownership or an entitlement to the part of the project's output.  This shared ownership net metering lets eligible projects reach their full potential, even when they can produce more electricity than the primary owner needs in a year.

If the town can take the full value of net metering into account and find a way to benefit from the existing renewable generation at the Sparhawk site, the economics would tip towards keeping the Sparhawk project running.  There are other ways that project revenues could be boosted by smart participation in other energy programs, such as selling capacity or renewable energy certificates (RECs) if the project can be certified as renewable.

Would reevaluating the Royal River dam's hydropower potential lead the town to a different conclusion on whether the dam should be removed?  The Yarmouth town council is holding a workshop session on January 5 and a public hearing on January 19 to discuss next steps.

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