U.S. Department of Energy - Energy Efficiency and Renewable Energy

Water Power Program

Vermont Passes a Feed-In Tariff, Plus Other Clean Energy Measures

June 3, 2009

Vermont legislators have passed House Bill 446, also known as the Vermont Energy Act of 2009, which will allow owners of small renewable energy facilities to sign long-term contracts for the sale of power produced by their facilities. The approach, commonly referred to as a "feed-in tariff," is meant to encourage individuals and businesses to install their own grid-connected renewable energy system. The long-term contracts provided by such feed-in tariffs can make renewable energy systems a profitable investment, and the guaranteed income can help attract financing for such systems. The new Vermont Energy Act will apply to renewable energy systems commissioned on or after September 30, 2009, that are up to 2.2 megawatts in capacity. It allows for power purchase contracts of 10-20 years in duration for most renewable energy projects, and up to 25 years in duration for solar energy projects. The act sets a statewide limit of 50 megawatts for such contracts, but that limit also includes any new, similar-sized renewable power facilities built by the state's utilities.

For now, the act sets standard rates of 12 cents per kilowatt-hour (kWh) for a power plant fueled with methane from a landfill or agricultural operation, such as an anaerobic digester; 20 cents per kWh for wind turbines of 15 kilowatts or less; 30 cents per kWh for solar power; and the state's average residential rate for biomass power plants not fueled with methane, wind power projects larger than 15 kilowatts, and hydropower facilities. However, the act allows the Vermont Public Service Board to adjust these "standard offer" rates, with the intent of allowing a rate of return on equity not less than the highest rate of return approved for investor-owned utilities in Vermont. The rates must also providing sufficient incentive for the rapid deployment of such small renewable power facilities, but not an excessive incentive. If any of the rates seem way out of line with these goals, the board can set interim rates at its discretion before September 15. And whether it does that or not, the board must go through a formal process of setting its own rates by January 15, 2010, and it must repeat the process every two years. See the history and text (PDF 162 KB) of the Vermont Energy Act. Download Adobe Reader.

The Vermont Energy Act was passed by the legislature on May 7 and delivered to Governor Jim Douglas on May 21, but on May 27 the governor announced that he would allow it to become law without his signature. The difficulty with any feed-in tariff is to set a standard offer rate for each technology that meets the goal of encouraging renewable energy deployment without providing an excessive profit to the system's owner. The governor expressed concern that the bill set such standard offer rates, but he allowed the bill to become law because it allows the Vermont Public Service Board to adjust those rates. However, the governor also noted that a number of incentives for renewable energy are already available, and he opined that the feed-in tariff does not achieve the lowest-cost approach to adding new renewable power capacitys to the state's power grid. See the governor's press release.

The Vermont Energy Act also has a number of other notable features. First of all, the state's utilities are no longer required to offer voluntary renewable energy programs to their customers. The state previously required utilities to establish such "green power" or "green pricing" programs by July 1. Second, the act extends the Vermont Clean Energy Development Fund to include geothermal energy devices. Third, the act encourages appropriate wind power development on state-owned lands. Fourth, the act does not allow covenants, deeds, or other binding agreements to prohibit the installation of solar collectors, clotheslines, or other renewable energy devices. Fifth, it allows municipalities to finance renewable energy and energy efficiency projects. Sixth, the act directs clean energy development funds to two "Vermont village green" renewable pilot projects, tentatively located in Montpelier and Randolph. The pilot projects will offer district heating to local homes and businesses, using a centralized heating system fueled with renewable energy. And last but not least, the act requires that the state's building energy codes comply with the 2009 edition of the International Energy Conservation Code.