Burlington Electric Department 1UVM Energy Policy Series February 9, 2004Presented by: Patty RichardsDirector of Resource PlanningBurlington Electric DepartmentBurlington Electric Department 2About Burlington Electric Department (BED)• Municipal (not for profit)• Serve the City of Burlington (19,600 customers)• Long standing commitment to renewable power and energy • Power Supplyü Long term focusü Focus on fiscal prudence and environmentü Focus on sustainability and economic developmentü Focus on balanced approach of competing interestsBurlington Electric Department 3Total Energy Use (MWH)for the City of Burlington250,000270,000290,000310,000330,000350,000370,000390,000410,00078 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03MWHActual Energy Use Projected Energy Use w/o Efficiency This chart demonstrates the impact BED's energy efficiency efforts have had on annual energy consumption in Burlington. The area between the red and green lines represents the amount of energy saved by Burlington consumers from 1989 through 2003 from energy efficiency implementation.Burlington's load is acutall 2% less in 2003 than it was in 1989! Without energy efficiency Burlington's load would have been 15% more in 2003 than it was in 1989.Burlington Electric Department 4Burlington’s overall rates are 11% lower than statewide average• In 2002 BED’s average rate was 9.7 cents/kwh• Vermont statewide average in 2002 was 10.87 cents/kwh• Burlington’s residential rates are 26% lower than the statewide average• Burlington’s average business customer rate was 9.78 cents/kwh• Since 1995 Burlington’s business rates dropped 19%• BED increased renewable power from 31% in FY2002 to 40% in FY2003Burlington Electric Department 52002 Avg New England State Utility Rates9.199.709.7310.16 10.1810.4910.8711.360.002.004.006.008.0010.0012.0014.00Rhode Island BurlingtonElectric DeptConnecticut New England Massachusetts New Hampshire Vermont Mainecents/kwhBurlington Electric Department 6Economics of Wind• Long term purchase power commitment necessary to build wind – Developers looking for 15 to 20 years– Allows cost to be spread over time and reduces cost of energy• Price for wind power is falling– 1979: 40 cents/kwh– 2000: 4 to 6 cents/kwh• Vertically integrated utilities appear to be best suited to buy significant wind resourcesü Purchases can be done on scale that make economics workü Long term (15 to 20 years) ü Retail choice not spurring development of wind ü Individual buying power too smallü Retail consumers do not commit long term (15 – 20 years)Burlington Electric Department 7Economics of Wind• PPA gives known long term fixed cost• No fuel adjustment clauses in wind contracts• Energy price escalates at a rate less than inflation • Wind resource adds fuel diversity to power supply• Wind farms are a composite of many small generatorsü minimizes entire plant loss risk ü turbine maintenance cycled - not all units out at onceBurlington Electric Department 8Economics of Wind• COST counts• Bigger is better (economies of scale)• REC sales key - lowers cost of energy• REC sales limit ability to claim power as wind/renewable• REC’s managed properly can lower energy costs from wind projects• Don’t have to sell all REC’s from project – sell some/keep someBurlington Electric Department 9Wind vs Wholesale Markets• Wholesale market costs:– variable– volatile– driven by natural gas trends (price and perceived availability)– uncertain• Wholesale electricity markets moved to new paradigm that makes load pay congestion costs (known as locational marginal pricing)• Farther away generation is from load greater risk of congestion costs• Construction of major new natural gas power plants in ME, MA, CT, and RI. Known in Vermont. Need adequate TRANSMISSION to get it here.• New England peaks at 25,000 MW• Regional generation at 32,900 MW• Almost experienced rolling black outs in January 2004 – only 22,000 MW peak load• Locational Marginal Pricing (LMP) creates an incentive to obtain generation close to load • Building wind in Vermont can act as risk hedge to LMP’s• Management of REC’s can lower energy costs from wind resourcesBurlington Electric Department 10New England Spot Electricity MarketvsNiagra Falls Ave Spot Gas Price Index$-$10$20$30$40$50$60$70$80Power Price $/MWH024681012Gas Price $/MMBTUMonthly Avg Spot Price Niagra Falls Ave Spot Gas Price IndexData Source:Natural Gas: Natural Gas Exchange (www.NGX.com)New England Spot Electricity Market: www.iso-ne.comPower and gas are 86% correlatedNew England converted to SMD 3/1/2003. Monthly energy prices from 3/1/2003 todate represents Vermont Zonal average in the Real Time energy marketBurlington Electric Department 112002 Sources of Energy in New EnglandNatural Gas/Oil (dual fuel)9%Nuclear25%Coal12%Wood/Refuse5%Net Flows (imports - exports7%Other3%Natural Gas(single fuel) 29%Natural Gas 39%pumping load & adjustments2%Hydro5%Oil3%Data Source: ISO-NE websitePrepared by Burlington Electric Deparment 9/2003Burlington Electric Department 12Burlington entered a long term purchase power agreement with Equinox Wind Partners• Construction pending receipt of permits• Commercial operation between 2003 and 2005• Total 9 MW nameplate rating• 23,500 MWH• 7% of Burlington’s energy• Equivalent to 4,000 Burlington homes• Adds diversity to power supply• In-state energy• Local jobs and tax benefits• No air emissions• Renewable• Off-sets fossil fuel generation in New England• Sale of environmental attributes through REC’s (Renewable Energy Credit) lowers cost of energy coming from site Photo SimulationBurlington Electric Department 13Summary – The Economic Case for Wind• Risk Hedge• Cost of Energy can be managed by sale of REC’s• Power supply diversity• Closer to load is better• Ancillary economic benefits to towns with wind turbines• Wind is part of a balanced power portfolio• Wind is part of a forward thinking vision• Wind does contribute to rate stabilityBurlington Electric Department 14Thank YouThank
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