Real solutions to Maine’s rising energy costs
This month, Governor Mills and her allies in the legislature attempted to pass a nearly-half-billion dollar emergency spending package on the first day of the new session immediately after lawmakers were sworn into service.
Supporters touted the “winter relief” proposal as a way to provide quick help to Maine households who may be struggling to afford heating oil this winter. The catch is, only about 20% of the money was dedicated to emergency heating assistance through LIHEAP, a program which MaineHousing confirmed is fully funded for the remainder of the fiscal year. Because the plan was to be voted on without public input or hearing, Senate Republicans blocked the measure from advancing any further until legislators next convene, likely in early January.
Mills’ spending bill was inspired in part by a Maine Public Utilities Commission (PUC) announcement last month that it had selected bids from electricity generators to determine the 2023 “standard offer,” or the price at which the state pays per kilowatt-hour for power generation. As a result of the new bids, CMP’s standard offer will increase nearly 50% in January, up from 11.8 cents to 17.6 cents per kilowatt-hour. This will lead to a roughly 26% increase in the average customer’s bill. Versant’s standard offer hike will mean the average northern and eastern Maine customer’s bill will grow by about 20% overall.
These moves signal another steep hike in Mainers’ power bills, the second in two years. In January 2022, a jump in standard offers considerably raised consumers’ bills from 30% to 50% on average.
As costs for Mainers continue to climb due to inflation, lingering supply chain issues, and energy markets unsure of the future, policymakers are sounding the alarm. ISO New England, Inc. (ISO-NE), the organization which manages the electrical grid for the six states in the region, recently warned of the possibility of rolling blackouts this winter, especially if the region experiences a long cold snap. Many have already worried aloud of the potentially deadly consequences of high heating costs for Mainers on fixed incomes this winter.
It is incumbent on the incoming 131st Maine Legislature to find and contribute to a lasting solution. They must be deliberate, but they must move quickly. Policy must be guided by crafting a level playing field for all energy sources, embracing the power of decentralization, and promoting competition to lower prices. Maine’s current energy policy fails these criteria. Simply, the state does not have a sufficiently diverse power generation portfolio to insulate residents from this financial pain. Leveling the regulatory playing field and opening up clean, reliable nuclear and hydro power generators could help Mainers resist current global energy price pressures.
Some, including state Democratic politicians like Senate President Troy Jackson, Gov. Janet Mills, and Phil Bartlett, Public Utilities Commissioner and former Chair of the Maine Democratic Party, blame the high price of electricity on ISO-NE’s over-reliance on natural gas. While this assessment of the problem is correct, they are misguided on a solution. They say that a more rapid transition to renewable energy sources is the solution, but unfortunately for Maine ratepayers, this means more subsidies and giveaways to the wind and solar industries. Other clean and renewable sources are often left on the table.
They praise an incoming $1-2 billion project in Aroostook to connect the region to the New England grid and build out wind power generation as a potential solution. Bartlett believes that “The influx of renewable energy into the regional grid will also place downward pressure on electricity prices,” but this assumes the build-out sticks to current cost estimates, for which there is little guarantee. As he notes, the state of Massachusetts may decide to fund very little of the Aroostook wind project, but has until the end of the year to decide. “We do not know how much of the cost of this transmission and generation project Maine ratepayers are being asked to finance,” he mentioned to the Bangor Daily News. In the event that the project costs more than the benefits it delivers, Mainers in the County will not see the downward price pressure for which he hopes.
Opening the marketplace by reducing unnecessary restrictions on power generation in Maine would welcome more energy-dense and less land-dependent generation sources—like nuclear and hydro—and would more likely help keep rates down better than the status quo.
Even though Mainers voted to kill the New England Clean Energy Connect (NECEC) project, also known as the CMP corridor, in November 2021, the project cleared a major hurdle with a recent ruling from the Maine Supreme Judicial Court. As noted by the Bangor Daily News, the decision upheld a 2020 public land lease given to NECEC, reversing a 2021 decision by a lower-court judge. The project seeks to widen an existing stretch of power lines across the western Maine woods in order to accommodate more hydroelectric power from across the border in Quebec.
For all the public criticism of CMP and the corridor, right or wrong, it is difficult to imagine that a fully-functional NECEC—providing clean, baseload, hydroelectric power into the grid—would not immediately provide the downward pressure on electricity prices of which the Maine PUC and politicians seek.
Mills supports the corridor, but environmentalists on the Left would rather subsidize wasteful wind projects, or clear cut forests and farms for solar panels, than lift the restrictive cap on in-state hydroelectric generation, or clear a path for new nuclear power reactors in the state.
Natural gas dependence puts New England in a tough spot
Throughout the year, ISO-NE relies on burning natural gas to provide nearly half of all electricity used by New England consumers. Mainers who rely on the fuel to heat their homes are hit even harder. Some accounts are facing price hikes of 60% or more since this time last year, and the winter season has only just begun.
Because such a high percentage of grid power is provided by natural gas, the region is at the whim of a volatile global market. Both archaic federal regulations and self-limiting state energy policy contribute to this energy-price squeeze.
During periods of high winter energy demand, New England suppliers often look to overseas liquefied natural gas (LNG) markets, given that the limited pipeline capacity is used by many homes and businesses which heat with natural gas. US Energy Information Agency data show that gas imports can make up more than a third of New England’s supply during these peaks. Given pipeline limitations, power generators and grid operators like ISO-NEmust look to spot market LNG purchases to make up for gaps in supply. This requires the grid to go to the global market, competing with nations across the pond. This year, European nations are dealing with severely limited supply from Russia, which cut off its European customers soon after invading neighboring Ukraine in early 2022.
Constricted markets, unstable supply chains, and suffocating global inflation have pushed prices to never-before-seen levels. As noted in a recent Wall Street Journal report, the higher LNG price in Europe means that global producers are going there first. Even Canadian Prime Minister Justin Trudeau has expressed willingness to cut regulation and red tape in order to export more LNG to Europe to take advantage of the situation.
The United States has the wherewithal to produce, sell, and distribute much of the natural gas the region needs in these tough times, which could help lower winter prices, but a 100-year-old federal law is standing in the way.
The Jones Act requires that any ship traveling between two US ports be not only based in the US, but be fully staffed by American crews. This means that most tankers picking up LNG from the Gulf of Mexico cannot bring it directly to another American port.
As reported by the Financial Times, “a vessel laden with liquefied natural gas will land in Massachusetts — but the federal law preventing foreign vessels sailing between US ports means the gas will come from Trinidad, not the US export plants along the Gulf of Mexico that are shipping record amounts of fuel abroad.” This absurd arrangement should not be necessary.
ISO-NE must ultimately compete in the global market for LNG anyway, but is it possible that Jones Act prohibitions may be keeping potentially cheaper domestic shipments away from the New England grid? Effectively, instead of protecting American industry as it was intended, the Jones Act has raised both costs and worries for New Englanders, especially in anticipation of winter. Thankfully, the National Oceanic and Atmospheric Administration predicts a slightly warmer one than usual for the region.
ISO-NE’s overreliance on LNG is a problem simply because it does not have a sufficiently diverse power generation portfolio to withstand the volatility of natural gas markets.
Grid resilience means embracing reliable nuclear power
Even though many politicians’ agree that increasing renewable energy input in the grid will help control for LNG price spikes, they often overlook the most efficient and reliable form of renewable energy: nuclear power. A nuclear reactor splits uranium atoms to create steam which turns turbines to produce energy. It uses less land, less fuel, and emits less carbon than most, if not all other sources of energy. In contrast with wind and solar, it can run nearly all the time. When taking all of these factors into account, nuclear is a clear choice for a regional grid which desires both cleaner power and more stable energy prices.
According to the Nuclear Energy Institute, an industry-led policy organization, U.S. nuclear plants were operational over 93% of the time in 2019. In that year, nuclear facilities generated nearly 55% of the nation’s carbon-free electricity, and nearly 20% of total power generation. When accounting for carbon emissions generated among different energy sources, nuclear beats out solar and is comparable with onshore wind per gigawatt-hour of power produced.
Nuclear is also an incredibly energy-dense power source. Uranium fuel pellets, the building blocks of nuclear power, each create as much energy as one ton of coal, 149 gallons of oil or 17,000 cubic feet of natural gas. Each pellet is about the size of a fingertip, which considerably simplifies storage of spent fuel. Wind and solar are among the least dense, and therefore least cost-effective sources of energy.
Nuclear reactor plants would give Maine more bang for the buck. They would more directly meet emissions goals, while retaining the benefits of reliability which wind and solar cannot support.
It will take years to bring a new nuclear power plant online in Maine, given the requirement of a public referendum to begin construction and other regulatory hurdles. Small-scale nuclear reactor technology, while potentially revolutionary, is still in its early stages. In order to bring prices down, or at least to stabilize them, the grid needs to generate more power as quickly as possible.
While Gov. Mill and legislators may pursue short-term gimmicks like another round of payments to Mainers, they cannot hope to solve the long-term issue of energy prices without welcoming more efficient and effective energy sources to the grid itself. Without greater and more efficient supply, prices will keep on climbing.