A question was posed in the online comments section of the Bangor Daily News on a recent article by Bob Cleaves titled: “Discontinuing Maine’s renewable energy standards is a mistake.” A commenter asked, “Why does Canada and our North West have low electricity costs?” The person also asked, “Creating new jobs in a favored energy sector seems noble, but what of the jobs lost to too high energy costs?”
The answers to these questions are key to understanding where Maine is in comparison to other regional electricity markets. It’s important to uncover some of the bias that is being applied to the energy discussion here, as we approach another legislative session with a new Legislature.
The Canadians operate under a different energy model than we do here in the Northeastern U.S. Those provinces that profess to have lower energy costs, specifically electricity costs, have government-owned power systems. They are supported by taxpayers in Canada, and their prices reflect the ownership structure that exists.
The annual reports of Hydro Quebec express the value that is returned to the people of Quebec from their exports to the U.S. In fact, profits from exports are used to lower rates for their residents and industries. Beyond that, those profits go to subsidizing their industries such as pulp and papermaking, which compete with our own industrial base here in Maine. So, when we buy Canadian power, their government makes money. That money, in the form of subsidies, is used to directly compete with our industries. It stops looking like such a good deal when our industries begin to shut down because of our short-term thinking.
The Northwest U.S. has an entity called the Bonneville Power Administration, funded by the federal government, which has developed significant hydro resources. Those projects were built years ago when issues that now plague hydro development — like expensive fish passage requirements — were not included in their capital or operating costs. These items are required of modern projects, and the addition of such requirements to legacy projects is making them more expensive.
A federal project will have fewer burdens than a development by a nongovernmental entity, though today these compliance costs are now being included in their cost of production, raising their pricing. It is questionable whether the projects that exist now could be developed in today’s regulatory structure. One thing is for sure: It is not an apples-to-apples comparison when putting Maine’s or New England’s electricity market next to that of the Northwest.
Few projects are developed outside of a “favored energy sector” environment, as the investment dollars will follow the path of least resistance. That is a reality of any market or any industry. Maine’s hydro assets have essentially been tapped, and any further development is improbable without price supports. In fact, there is a likelihood of further losses in hydro capacity in Maine because of the current low prices in the electricity market.
The biomass industry is facing significant pressure from other uses of its fuel resources, and, like the hydro industry, these projects truly rely on the limited price supports that come from the state’s renewable portfolio standard. If we were to abandon the standard, or dilute it with other resources that are supported by governments to our north, we will certainly lose some of the projects that are part of our industrial base and are vitally important to many rural communities in Maine.
The Beacon Hill Institute “report,” referenced by Gov. Paul LePage in his weekly radio address, may appear reputable, but it is contradicted by a separate report commissioned by the Maine Public Utilities Commission during the past legislative session. This vetted analysis of Maine’s renewable portfolio standard was performed by London Economics International, and it did not come to the same conclusions.
The London Economics report showed the gains from the renewable energy standards significantly overshadowed the costs. It showed that the jobs that might be lost from the modest increases in electricity costs paled when compared to the direct and indirect jobs created from the development of renewable projects in Maine. The groups that paid for the Beacon Hill report are certainly political and, to be fair, one should consider the findings biased for making political hay, rather than an independent view of Maine’s electricity marketplace, as the London Economics study certainly is.
The governor’s use of the Beacon Hill report over the London Economics report certainly is a political and calculated move. One report was designed to give a desired answer that would be useful in the political realm, where the other was an unbiased analysis of the marketplace by a group that stresses no political ties. Which is the best source to use in making our energy policy choices?
Stacey Fitts, R-Pittsfield, is a four–term member of the Maine House of Representatives and co-chairs the Joint Standing Committee on Energy Utilities and Technology.
Wow. And this from a Republican. I’m impressed. LePage should be depressed (and sanctioned).
What’s this? A Republican supporting an unbiased study over LePage’s biased sources! It’s about time someone in his own party had the sack to speak out for truth.
If you look at London Economics, their clients are all power companies. There is some bias here as well.
“Stacey Fitts, R-Pittsfield, is a four-term member of the Maine House of Representatives and co-chairs the Joint Standing Committee on Energy Utilities and Technology”.
He also works for Kleinschmidt Associates, a company that makes money from wind power and boasted on its website about having one of its engineers in Maine (FITTS) on the inside shaping wind laws with then Governor Baldacci.
This shameless shilling person led the rejection of 12 citizen-sponsored wind bills as co-chair and chief intimidator on the Energy and Utilities Committee. Thankfully he is termed out. He is known now as a traitor.
If you are going to argue with Rep. Fitts’ well reasoned perspective please do so in similar vein rather than resort to cheap innuendo.
Are you disputing the fact that his company boasted on its website that “we have been very active in the development of state regulations in Maine where one of Kleinschmidt’s engineers is a member of the Governor’s Ocean Energy Task Force”?
No. His employer’s statement is immaterial. You have said nothing that takes Rep. Fitts to task on the merits of his arguments.
Mr. Fitts commentary clearly suggests, in its discussion of Canadian power production, that we might want to consider publicly owned power production facilities. Works for them….
Canada both owns the power production and makes the rules to permit the plants to get built. None of Canada’s hydro could get built in the USA with our environmental or land use rules including the expropriation of private lands. When you make all the rules you can do anything you want.
Immaterial? Troll.
If you look at London Economics as well, their clients are all power companies. There is some bias here…
Geez, all the government parasites like to make random attacks on our good Governor. Meanwhile, the Cato Institute just gave Governor LePage an “A” grade. Only four of our 50 governors received such a grade. Congratulations Governor.
http://www.scribd.com/fullscreen/109347697
Very interesting report…..thanks for sharing…..keep that link handy for future reference……
Maine’s RPS were developed as an extension of Baldacci’s Wind Energy Task Force which never did a comprehensive cost analysis of mandating alternative energy. The Task Force made numerous unfounded assumptions of the efficacy of alternatives without any empirical evidence to support their decisions. The London Economics Report also made numerous assumptions to support RPS and the “potential” economic benefits of alternative energy without any cost analysis of the requisite infrastructure, operating problems and market disruption introducing large scale alternative energy would cause. Fitts can claim that the RPS brings short term jobs to build the alternative energy generation which are virtually all owned by non-Maine investors (exporting Maine dollars) but there are no long term jobs to speak of. If Fitts was as critical of the RPS process five years ago as he is now of the Governor’s current methodology we wouldn’t have the mess of high cost alternative energy defacing our mountain landscapes.
The Beacon Hill report is wrong but the London Economics report is right because it suits Mr. Fitts agenda better? Who are the best people to use in making our energy policy choices? How about someone without a vested interest in windsprawl? Clean up the EUT committee.
With the likes of Rep. Fitts in the legislature, we have a tax on our electric bill so the government can have their central planning funded. For taxpayer owned electric generation facilities, see the Hoover Dam. Built and paid for by taxpayers and making money for the taxpayers.
Mr. Fitts suggests an unbiased analysis? Any analysis at all would have been nice back in 2008 when wind power developers were given the key to the state with no real consideration to the negative impacts on Maine’s people or its quality of place. Mr. Fitts was on Governor Baldacci’s Task Force on Wind Power Development, which assembled and promoted this poorly conceived plan without even giving thought to the simplest of issues, such as how many mountaintop turbines their venture would require. Some analysis and a little less devotion to wind industry interests would have gone a long way toward avoiding some of the ugliness that exists today in Maine wind development matters.
Gov LePage is correct, Sen. Fitts is wrong.
Stacey Fitts represents only the interests of wind power developers like
Angus King.
Gov LePage is working in the interests of the people of Maine by trying to
create a job friendly environment.
On first read of Mr. Fitts article, one may tend to assign
some validity to his contorted views.
To truly assess his argument, however, it is necessary to
understand that Sen Fitts has long been a shill for wind power
developers.
He has, for example, used his elected position to effectively
and consistently thwart sincere citizen initiatives to provide
even minimal protection in DEP siting rules for residential properties
impacted by noisy, intrusive wind turbines throughout rural
Maine.
He has demonstrated zero concern about the destruction of
our mountain ridges and the negative health effects on people and wildlife from
wind turbines.
It is clear where Fitts’ loyalty lies. He has no credibility on
this issue.
By Fitts own statement Hydro Quebec is owned and operated by the Quebec Provincial Government. HQ, as such and by Fitts same statement, plows it’s Canadian ratepayer’s payments back into the plant as a way of reducing cost’s that the QPG outright subsidises. Now I may have fallen off the truck, but if HQ is getting subsdised by the Provincial Government, why are we, as Mainer’s, letting LePage have us SUBSIDISE (that’s your money !) the Provincial Government that we have no say in by calling and entering into power contract’s with them just so they can reduce their Provincial customer’s bill’s at our expense ? In short, HQ see’s Maine as a sheep to be sheared anytime they want and they know we can’t do anything about it courtesy of LePage. If there was ever a more clear reason for Maine to get back into hydroelectric, this is it. That a Republican arrogantly made the connection, and put the fact’s out, is just one more reason that Nov 6th needs to be a day when Maine, moderation and the public’s needs and position’s, not whining and crying political bully’s threat’s of impending doom and gloom, need to be voted in. That Fitt’s is termed out is both a very happy coincidence and proof that the term limit’s of legislators in Maine is a very good thing. Anymore of his ‘assistance and guidance’ and we all might as well start lining up in Fredricton to get our new car tags.
Contrary to what Rep. Fitts says, Hydro-Québec is NOT subsidized by the Quebec government. It’s the other way around. HQ pays hefty dividends (75% of profits) to its sole shareholder (the governement), taxes and royalties on the use of the hydraulic resources (that money is used to reduce public debt).
As far as domestic power rates are concerned, the amount of HQ exports doesn’t lower the tab for customers. The generation division of HQ is forced to sell 165 TWh of its output (~97% of domestic demand) to the distribution division at 2.79¢/kWh since the year 2000 (the so-called “heritage pool” of facilities built decades ago) as a way to curtail HQ’s market dominance. Even at that price, the generation division makes a nice profit for each kWh sold to Quebec customers since their average unit cost has ranged in the 2.0-2.1¢/kWh for the last decade (hydro is inflation proof). HQ gross margin for heritage pool power is close to 20%.
What’s left is mainly generated from recently commissioned facilities (with a higher marginal cost) and is exported at market prices. Recent projects, such as Eastmain-1-A-Sarcelle-Rupert have higher (5¢/kWh) costs but remain competitive with fossil-fuel based facilities on the New York / New England markets.
Rep. Fitts isn’t very knowledgeable regarding the power system up north. A trip to Quebec might be in order.
Fitts is the type of self-serving wind scoundrel we do not need in Augusta, no matter what the party .
Best he call himself a wind shill and work with Angus as an aide.
Societal leeches should “stick” together.
Here’s some food for thought. First, Mr. Fitts works for a company that contracts with the wind industry, so he is going to push their agenda, which he did in the Legislature.
Second, aside from short term construction jobs, a wind power site usually has one technician for every 8-10 turbines, so there aren’t many permanent jobs. Wind power is the costliest per MW investment in electricity generation because of its miserable output. Going with a lot of wind power also means more transmission costs and more back up. It inevitably drives up electricity rates. All it takes is to cause one large electricity consumer like Texas Instruments or Fairchild to leave Maine for a state that lures them with lower business overhead and an attractive economic development package and 1500 good paying jobs are gone because we are stupidly increasing electricity rates based on an ideological whim that wind power works.
Third, has anyone even considered that RPS is government run rampant and is an anti-free market scheme? It is government meddling at it’s worst, mandating that instead of the free market providing for us, the government should make arbitrary decisions and spend taxpayer money to prop up an industry, wind, that can’t compete in either science or economics with other energy resources.
Gov. LePage is following through on his campaign pledge, which I find admirable. He said all the concepts relating to energy would be on the table for consideration. Only those that had merit in cost effectiveness would be embraced. He also pledged to reduce the impediments to lowering costs to business and Maine consumers. Allowing large hydro to be considered part of the state’s RPS is only fair, even though it takes away a Baldacci era protection to the favored wind industry. Capping our RPS at current levels rather than destroy the state’s economy by increasing it with “new” RPS percentages is another prudent measure put forth by the Governor. Both of these two concepts level the playing field, but to the detriment of the wind power industry Mr. Fitts strives to protect.
As for me, a small government advocate, I say get the states (not just Maine) out of this foolishness of RPS. Let the free market provide our electricity and there won’t be a useless wind turbine built anywhere.