Waterbury hydro need and economics

A recent order issuing a new hydropower license to Green Mountain Power Corporation's Waterbury Hydroelectric Project sheds insight into the project's operations and economics.

The Waterbury project is located at a dam built in 1938, and licensed for hydropower development since 1954.  After a 16-year relicensing process, the Federal Energy Regulatory Commission issued a new license for the project in February 2016, authorizing 5.52 megawatts of generating capacity.  That relicensing process illustrates how the Commission considers the need for power from the project, as well as project economics, when considering whether to relicense a hydropower project.

By regulation, the Commission's process for reviewing a license application includes an evaluation of the "need of the applicant over the short and long term for the electricity generated by the project or projects to serve its customers."  In the Waterbury project's relicensing case, this consideration of the applicant's "need for power" involved observations about the project's expected output as well as the regional power market.  The order notes historic average generation from the Waterbury Project of 17,562 MWh annually, but observes that under the new license average annual generation will be reduced to 14,767 MWh.

The order then states, "Electricity generated from the Waterbury Project will help supply the power needs in northern Vermont."  It also cites a 10-year forecast by electric reliability organization North American Electric Reliability Corporation (NERC) showing summer peak demand in the region is expected to increase at an average rate of 0.84 percent per year between 2014 and 2023.  Based on this, the order concludes that "the project's power will help meet the regional need for power."

The Commission's process for determining whether to issue a new license for an existing hydroelectric project also includes consideration of public interest factors, such as the economic benefits of project power.  A 1995 decision established the Commission’s approach to evaluating the economics of hydropower projects.  Under that approach, the Commission uses current costs to compare the costs of the project and likely alternative power with no forecasts concerning potential future inflation, escalation, or deflation beyond the license issuance date.  The Commission has described the basic purpose of this economic analysis as to provide a general estimate of the potential power benefits and the costs of a project, and of reasonable alternatives to project power, "to support an informed decision concerning what is in the public interest with respect to a proposed license."

For the Waterbury project, as ultimately licensed with mandatory conditions and staff measures, the Commission concluded that:

• the levelized annual cost of operating the project is $711,735, or $48.20/MWh
• the proposed project would generate an average of 14,767 MWh of energy annually.
• average generation is multiplied by the alternative power cost of $44.12/MWh, for a total value of the project’s power is $651,520, in 2015 dollars.

Therefore, the Commission concluded that in the first year of operation, the project would cost $60,215, or $4.08/MWh, more than the likely alternative cost of power.  As the order notes, "Although staff’s analysis shows that the project as licensed herein would cost more to operate than the estimated cost of alternative power, it is the applicant who must decide whether to accept this license and any financial risk that entails."

The Commission did note that its consideration of public interest factors also considers that "hydroelectric projects offer unique operational benefits to the electric utility system", including ancillary services like stability and rapid response.  The order also notes that while staff did not explicitly account for the effects inflation may have on the future cost of electricity, hydropower generation is relatively insensitive to inflation compared to fossil fueled generators -- illustrating why "project economics is only one of the many public interest factors the Commission considers in determining whether or not, and under what conditions, to issue a license."

FERC relicenses Waterbury hydro project

More than 16 years after Green Mountain Power Corporation applied to the Federal Energy Regulatory Commission for a new license to continue operation and maintenance of its Waterbury Hydroelectric Project on the Little River in Vermont, the Commission has issued a new license for the project.

Waterbury dam and reservoir were built by the United States in 1938 to reduce flooding in the Winooski Valley, but are owned by the State of Vermont and operated by Green Mountain Power.  The Commission issued the original license for the project in 1954, effective September 1, 1951, for a period of 50 years.

That original license expired on August 31, 2001.  Two years before that date, Green Mountain Power applied for a new license to continue operation and maintenance of the project.  But relicensing a FERC-licensed hydropower project can be an involved process.  Environmental, conservation, and recreation-oriented groups intervened in the application case.  As the relicensing case progressed, the original license expired, after which Green Mountain Power operated the project under annual licenses pending the disposition of its license application.

Over time, the applicant revised its proposal, in part to propose a change to run-of-river operation as contemplated by the project's Vermont Department of Environmental Conservation water quality certification. Ultimately, on February 19, 2016, the Commission issued an order issuing a new license for the Waterbury Project for a period of 40 years.

In setting the 40-year license term for the Waterbury project's new license, the Commission noted its discretion under Section 15(e) of the Federal Power Act to issue new licenses for a term that the Commission determines to be in the public interest, but not less than 30 years or more than 50 years.  The order also notes the Commission's general policy "to establish 30-year terms for projects with little or no redevelopment, new construction, new capacity, or environmental mitigation and enhancement measures; 40-year terms for projects with a moderate amount of such activities; and 50-year terms for projects with extensive measures."

The Waterbury project relicensing case illustrates one potential path for what happens when a license expires for an existing FERC-licensed hydropower project.  According to the Commission, as of February 11, 2016, over 50 projects were pending relicensing, with an increase expected in applications for new licenses over the coming years.

Controversy over renewable energy claims

If an electric utility generates power from renewable resources and sells renewable energy certificates representing the renewable attributes of that energy, can it still call the underlying power "renewable"? No, according to the U.S. Federal Trade Commission.

Solar panels in the Utah desert.

While this question may seem metaphysical, it arises from the structure of most U.S. renewable energy markets.  Most states have adopted renewable portfolio standards, which require utilities and competitive electricity suppliers to source some of their power from renewable resources.  In most cases, utilities and suppliers can satisfy this requirement by using renewable energy certificates or credits known as RECs.  While each state's program differs, these RECs typically represent the renewable attributes of electric energy -- the right to claim that energy is renewable -- but are distinct from that underlying energy.  As a result, a renewable generator can sell RECs to one buyer and the underlying energy to another.

Vermont utility Green Mountain Power Corporation recently found itself at the center of controversy over its claims regarding renewable energy.  The utility owns and is involved with a variety of renewable energy generation projects in Vermont, including wind and solar projects.  It sells energy produced from these projects to Vermont customers, while simultaneously selling some of the RECs generated by these sources to out of state utilities.

In 2014, concerns over "double counting" of renewable energy attributes led Connecticut to ban the use of RECs from renewable generation that also is counted toward another state’s renewable goals for meeting Connecticut's requirements, and REC marketer NextEra Energy to notify New England market participants that it would no longer buy Vermont RECs.

On September 15, 2014, a group of petitioners asked the Federal Trade Commission to investigate Vermont utility Green Mountain Power Corporation's claims that it is providing its customers with electricity from renewable sources such as commercial wind and solar projects, given its separate sale of the RECs to out of state utilities.  The Federal Trade Commission regulates claims about the environmental impacts of commerce under Section 5 of the Federal Trade Commission Act, including claims regarding the production, sale, and use of renewable energy.  In their complaint, the petitioners claimed that "Vermont customers are being misled into thinking that they are buying 'renewable energy,' when in fact what they are getting is 'null' electricity consisting of a mix of fossil fuel, nuclear, gas and other 'brown' sources of electricity from the regional grid."

The FTC responded to this petition in February 2015 by issuing a letter to Green Mountain Power's counsel expressing concern that the utility might have created confusion for its customers about the renewable attributes of the power they purchased by not “clearly and consistently communicating” that it sells RECs for most of its renewable energy-generating facilities to entities outside Vermont.  In the letter, the FTC said that it had not found that any Green Mountain Power statements violated the Federal Trade Commission Act.  However, the Commission urged Green Mountain Power in the future to prevent any confusion by clearly communicating the implications of its REC sales for Vermont customers and REC purchasers.

The FTC letter represents the latest salvo in efforts to regulate claims regarding the production, sale, and use of renewable energy.  To help marketers avoid making deceptive environmental claims, for over 20 years the FTC has issued "Green Guides" providing its administrative interpretation of the law. The Green Guides outline general principles that apply to all environmental marketing claims and provide guidance regarding many specific environmental benefit claims, including renewable energy claims.  The Green Guides, as well as the recent FTC letter, illustrate the importance of caution in making claims about renewable energy in business activities.

Vermont wind project contested

A wind energy project in northern Vermont is the focus of significant controversy.  Utility Green Mountain Power is currently developing the Kingdom Community Wind project on Lowell Mountain near the town of Lowell in Vermont's Northeast Kingdom.  The 63 MW project is the first large-scale generation facility proposed by one of Vermont's investor-owned regulated utilities since the Searsburg wind project was approved in 1996. 

In May 2010, Green Mountain Power Corporation, Vermont Electric Cooperative, Inc and Vermont Electric Power Company, Inc. filed a petition with the Vermont Public Service Board seeking approval to build up to a 63MW wind generation facility, and to install or upgrade about 17 miles of transmission line and associated substations.

A year later, the Vermont Public Service Board issued its final order and certificate of public good approving the project (182 page PDF).  In the order, the Board found that "the proposed project will promote the general good of the state".  Among the factors supporting the Board's decision was the fact that the project would produce energy without greenhouse gas emissions, and would thus support the goals of the Regional Greenhouse Gas Initiative (RGGI).  The Board also noted that the project would help the state meet its goals of promoting new renewable generation as required in Vermont's SPEED, or Sustainably Priced Energy Enterprise Development Program.  SPEED requires that, by 2012, at least 10% of the state's electric load be served by new sources of renewable energy.  The Board also noted economic development benefits from the project, including job creation and tax revenues as well as the benefits of providing the developing utilities a long-term source of stably priced power.

The project drew opposition from a variety of sources, including those who oppose mountaintop wind development generically as well as those opposing development of this particular site.  Now, while Green Mountain Power is preparing the site for construction, a group of protesters has set up a camp near the ridgeline.  Abutting landowners have also asked a court to delay blasting and other work, claiming that they own part of the land where the blasting will occur.

What will happen to the Lowell Mountain project?  Green Mountain Power planned to complete the project by December 3, 2011.  As the Burlington Free Press has noted, the company has argued that delay is costly, and that too much delay would be fatal: Green Mountain Power must have project up and running by December 31, 2012 to qualify for $48 million in federal tax credit that are part of the project's overall financing plan.

Vermont dam weathers Hurricane Irene

Hurricane Irene barreled up the East Coast of the U.S. this weekend, bringing high winds and heavy rain to a broad swath of the continent.  About 5 million electricity customers lost power at some point during the storm's progress, with service still off for many consumers.  Hurricanes and other storm events place added stresses on our electric infrastructure, resulting in not only power outages but possible dam failure.

In rain-lashed Vermont, utility Green Mountain Power worked to prevent the failure of the Marshfield Dam near the town of Cabot.  Located on the Winooski River less than 20 miles upstream from Vermont's capital Montpelier, the earthen Marshfield Dam creates a 400-acre impoundment known as Molly's Falls Pond.  Green Mountain Power uses the water impounded by the dam to run a 5-megawatt hydroelectric project.


Irene dumped a lot of water on Vermont.  As a result, the water behind the Marshfield Dam rose within 10 feet of the dam's crest on Sunday night -- far too close for comfort.  When the impoundment behind any dam gets too full, the dam is at increased risk of breaching; if a dam gets overtopped -- particularly an earthen dam -- this risk of dam failure is even greater.  Dam failure at Marshfield could have serious impacts for the people and property downstream in the Winooski River Valley, from Montpelier further down.  As a result, Green Mountain Power's emergency plan calls for a large controlled release of water through the dam once the water gets within 6.5 feet of the dam's crest.  As a precaution, the utility asked the state emergency management agency to evacuate about 300 households in Marshfield, Plainfield, East Montpelier and Montpelier.  Dam safety was at risk.

In the end, the water stopped rising, and then returned to a lower level.  (Check out the USGS's streamflow data for the Winooski River near Montpelier.)  Although Vermont suffered major damage from Hurricane Irene's remnants, the Marshfield Dam survived this storm.