• Heat pumps put pressure on power marketplace
    June 08,2014

    Heat pumps heat more and more Vermont homes and businesses each year. Cheap, clean and efficient, they provide enough heat on all but the coldest winter days. But they use electricity.

    A surge in electric use from any source would threaten to throw a wrench into Vermont’s award-winning electric efficiency program. Thirteen years ago, Vermont realized that electric bills would face sharp increases, as the number of Vermont homes and businesses grew. If we could grow our economy without growing our electric demand, a spike in Vermonters’ electric bills could be avoided.

    Two basic costs make up electric rates: First, generation costs about 7-8 cents a kilowatt-hour when purchased in bulk contracts for delivery 24 hours a day. (Note: Extra electricity purchased on very hot summer afternoons or cold winter evenings can cost as much as $1 a kilowatt-hour on the spot market. More on this later.)

    The second, transportation, costs about 6 cents to deliver electricity over poles and wires from the generator to the consumer. Added together, these two expenses are around 13-14 cents a kilowatt-hour where you live.

    Thirteen years ago Vermonters figured out if we could get customers to reduce their electricity demand by using more efficient appliances (motors, light bulbs, ceiling fans, pumps, air conditioners, oil burners, compressors, refrigerators, hot water heaters), utilities would not need to build more expensive new poles and wires.

    Of course, generation costs would likely increase gradually with inflation, but careful planning could hold transmission costs in check and keep downward pressure on customers’ bills. What if we built new homes and businesses with energy-efficient appliances and retrofitted the older ones? Vermont’s energy efficiency program was born.

    For the last decade, Vermonters have paid an electric efficiency surcharge on bills. Each year since then, Vermonters’ electric bills have been lower that they would have been, if instead, unnecessary new poles and wires had been built. Today, “buying” new electricity through efficiency costs about 3.5 cents per kilowatt-hour instead of 13-14 cents. Even as the number of Vermont households and businesses grow, ratepayers are spared ever higher bills. Other states now copy Vermont’s model efficiency system.

    Enter heat pumps. This technology removes “cold” from air, operating like air conditioners, only in reverse. Last year over 2,400 heat pumps were installed in Vermont. Green Mountain Power began leasing heat pumps to homeowners and business customers. The April energy fair at the Crossett Brook School in Waterbury featured a half-dozen heat pump vendors. Costco’s May home mailer sported a two-page sale on heat pumps. How many new heat pumps will be put into use this year?

    Heat pump sales pose three challenges to our electric grid.

    First, they increase demand for electricity; second, they reduce the incentive for owners to weatherize homes that use heat pumps; and third, they drive up power costs during summer peaks.

    If you can get heat at one-third the cost, wouldn’t you be less likely to insulate your home? When home owners pay only one-third of their former heating costs, suddenly the “payback” time” for insulating takes three times as long. Do the math.

    Buyers will likely conclude: “So what if plenty of the heat still leaks out through my roof, I‘m saving two-thirds on my heating bill.”

    And there’s more! Remember, on the hot summer months electric utilities can pay cup to $1 per kilowatt-hour on the spot market to serve customers. If is hot, you need only a flick of the switch, and suddenly you have air conditioning.

    So what’s the big deal? More electric use, less efficiency.

    Which utility will be first to file for rate increases before the Public Service Board? How long before transmission lines need upgrading, as heat pump-driven summer peaks require more, expensive transmission capacity? Without action, all electric ratepayers face higher bills.

    Of course, solar projects crank out their greatest hourly output during these summer peaks. Suddenly, 22 cents per kilwatt-hour for local renewable electricity looks even more attractive. It beats buying expensive summer peak electricity from afar on the spot market. Remember, too, local power sources help prevent expensive new transmission upgrades. But this is a discussion for another time.

    In response to this marketplace change, a “heat pump” bill passed the Legislature this session. It authorizes electric-efficiency monies to “buy down” the cost of heat pumps for customers who buy models using the least electricity.

    Not all heat pumps are equal. Some use much more electricity than others. The bill also authorizes electric-efficiency funds to weatherize for heat pump buildings, but the Public Service Board must balance weatherization costs between the electric-efficiency funds and monies the home weatherization program.

    (Home weatherization offers revolving loans to weatherize older, inefficient homes owned by Vermonters of all incomes.)

    The bill directs the Public Service Board to limit the share of electric-efficiency money to the amount necessary to ensure that heat pump use doesn’t drive up future electric bills for all other Vermonters.

    Close monitoring over the next two years will determine if more adjustments are needed, as Vermont’s electric energy-efficiency program continues to stand between Vermonters and higher electric bills.

    Sen. Mark MacDonald of Williamstown is a Democratic senator from Orange County.

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