by Timothy McQuiston, Vermont Business Magazine
Vermont has been teased with the promise of cheap electricity before, and recently. For instance, just this year the plug was pulled on the Twin States Clean Energy Link, which would have run 211 miles from Quebec through northeastern Vermont and into New Hampshire. This 1.2 gigawatt project would have generated $20 million over 30 years for the Northeast Kingdom economy. The $2 billion project, developed by National Grid, was canceled last winter due to financial concerns.
In 2004, Rockingham voters rejected a plan to purchase the Bellows Falls hydroelectric dam for $72 million. This proposal would have given the village control of the 49-megawatt Bellows Falls hydro facility. Experts were divided on the deal, with some praising and others criticizing it. Ultimately, voters felt it was too risky for the small village of Bellows Falls.
The state of Vermont has also considered purchasing hydroelectric facilities along the Connecticut and Deerfield rivers over the years. However, these proposals were abandoned due to concerns about the financial risk. Meanwhile, Vermont has had an interesting history with Hydro-Québec over the last 60 years. State utilities have signed two major contracts with the Canadian power provider. These contracts have supplied about 30% of Vermont’s electricity needs since the mid-1980s.
While the relationship between Vermont and Hydro-Québec has been mostly amicable, it hasn’t always been smooth sailing. In the late 1990s, the existing power contract was seen as too expensive. In 1998, the state attempted to end the contract, alleging Hydro-Québec failed to deliver power during the system-wide ice storm that January. The ice storm brought down power lines across Quebec and much of Vermont. However, the state lost that case in arbitration, and the contract remained in place, running through 2015.
However, with Vermont Yankee nuclear power plant going offline at the end of 2014, the Shumlin administration recognized the state’s need for a new bulk power deal. This, coupled with the state’s ongoing need for power, prompted the administration to seek a new agreement with Hydro-Québec.
In 2011, Vermont utilities signed a deal to buy 225 MW of power from Hydro-Québec. The contract runs through 2038 at 5.8 cents per kilowatt-hour, slightly less than the 6 cents per kWh of the previous contract.
But perhaps the most intriguing historical deal was one that never materialized, involving power from Labrador. According to a history written by Richard Saudek for VermontHistory.org, in the early 1960s Gov. Philip Hoff conceived of a plan to buy power from the newly constituted Hydro-Québec. This deal would have provided Vermont with power at less than half a cent per kWh from a massive hydroelectric facility in Labrador.
But the nuclear power age beckoned. By the late 1960s, Vermont Yankee was under construction and began producing power in 1973. This 605-megawatt plant was seen as the financial future of Vermont. Vermont utilities bought into that power and subsequently invested in the Seabrook, New Hampshire, plant, which was about twice the size.
While these plants initially produced a lot of power (and Seabrook still provides power to Vermont), they ultimately became financial burdens that nearly bankrupted Vermont utilities. Seabrook even drove Public Service of New Hampshire into bankruptcy.
Perhaps all of this suggests that Vermont should stay out of the energy production business. But consider the current state of electricity demand. It’s growing rapidly, driven by factors like renewable energy mandates, carbon emission reduction goals, electrification of heating and cooling, electric vehicles, artificial intelligence, data center and cryptocurrency.
Vermont may have another option to meet these growing needs. The $1.6 billion New England Clean Power Link is a proposed 1 gigawatt transmission line that would run from the Quebec border under Lake Champlain to Benson, Vermont. From there, it would follow existing rights of way to a substation in Ludlow, connecting to the New England power grid via existing transmission infrastructure.
Back in 2017, the NECPL was expected to go online in 2019, pending necessary permits and power contracts. While it ultimately secured the permits, it failed to secure contracts with utilities in southern New England. Over the projected 40-year lifespan of the transmission line, Vermont ratepayers would receive about $2.5 million annually. An additional $121.5 million was earmarked for Lake Champlain phosphorus cleanup. However, funding for that cleanup has since been secured from other sources, potentially freeing up those funds for other purposes.
Perhaps the state should consider underwriting the NECPL project itself.
In 2014, Vermont’s peak electricity demand was about 1,000 MW. Grid operator ISO New England estimates that this will rise to 1,300 MW by 2032, even with Vermont’s leading role in energy efficiency and demand-side management.
Vermont residents currently pay an average of 21.25 cents per kWh for electricity, compared to the national average of 16.62 cents (EIA, July 2024). However, demonstrating the state’s commitment to efficiency, the average monthly bill is only $109, versus $149.95 nationally.
It seems unlikely that the state would fully fund the NECPL project, or even a substantial portion of it. The opportunity to secure the project at a lower cost may have been missed before the COVID-19 pandemic drove up prices.
Vermont shouldn’t dismiss this opportunity too quickly. The demand for electricity will only continue to grow, both within the state and in the energy-hungry tech hubs of southern New England. This project represents a potential solution to a pressing regional need, and the long-term benefits of increased supply should be carefully weighed against the costs.
This piece first appeared in the November 2024 edition of Vermont Biz Magazine
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