“Cow Power” producers suffer losses
ADDISON COUNTY — Central Vermont Public Service’s “Cow Power” program, which enlists farms to convert manure to electricity using on-farm anaerobic digesters, has been lauded in recent years as a revolutionary way to generate renewable energy and support local farms.
But wholesale energy prices plummeted earlier this year. With Cow Power rates contractually tied to the price of wholesale energy, farmers participating in the fledgling program found themselves producing two commodities at a loss: milk and electricity.
Now, CVPS, Cow Power farms, Lt. Gov. Brian Dubie and Rep. Chris Bray, D-New Haven, are among the hodge-podge coalition pushing for fair, sustainable prices paid to Cow Power energy producers. Their goal is to help the first generation of Cow Power farmers, who have seen the prices for the power they produce fall, continue to take part in the program.
This effort comes after a new law was passed that encourages new farms to build anaerobic digesters by guaranteeing a higher rate for the energy they produce.
CVPS spokesman Steve Costello said the incentive is great for new generators, but doesn’t apply to the farms that already have digesters.
“Here you have farms that were the pioneers, who through contracting were paid less,” he said. “That’s one of the things that also precipitated (recent conversations).”
The precipitous drop in wholesale energy prices — a result of a down economy and the summer’s cool temperatures, according to Costello — put families like the Audet family in Bridport between a “rock and a hard place,” said Marie Audet.
Back in 2005, the Audets’ Blue Spruce Farm was the first farm in the state to start selling electricity produced in an anaerobic digesters, and now, in addition to the 24 million pounds of milk the Audets produce each year, the farm also generates more than 1 million KWHs of electricity each year.
The Audets loved the value-added benefits of their digester — like the dry solid byproducts from the process they use for bedding for their animals, and the reduced odor of their fertilizer — but the dollars and cents reality meant that operating the machinery just wasn’t making sense when energy prices dropped.
“It was not sustainable,” Audet said.
That’s because, though methane digesters convert manure on the farm (a free resource) into energy, the process is expensive. In addition to the initial, seven-year investment in their methane digester, the Audets spend a lot of money every year keeping the technology going.
The system needs regular oil changes, and the motors, pumps and other equipment running around the clock need maintenance. Just replacing the screens that separates liquids from solids in the digester costs the farm $15,000 annually.
Blue Spruce processes upwards of 30,000 gallons of manure every day in its digester. The manure is pumped into a concrete holding tank and then heated up to produce methane gas. The methane is collected and burned to fuel a generator, which in turn creates electricity.
The family sells that power to CVPS, and it’s marketed through the Cow Power program. Right now, the Audets are one of six farms selling power this way. CVPS customers can pay a premium — four cents per KWH — to run their home or business using that renewable energy.
This summer, the Audets were losing money in the process but they couldn’t just turn the system off. Their digester wasn’t fully paid off, and they were locked in to a contract with CVPS.
That contract stated that the Audets — and other Cow Power farms — would be paid 95 percent of the wholesale energy price per kilowatt hour for their electricity. Marie Audet said these first six “pioneer” producers knew all along that their earnings would be tied to the wholesale market. What they didn’t anticipate, she went on, was that energy prices would ever drop so low. At their worst this year, prices dropped to 3.5 cents per KWH.
Costello made it clear that CVPS wasn’t expecting that sort of a drop, either.
“It’s worked well, but over the last six months or so the market price of electricity in New
England has dropped precipitously,” Costello said. “Combine that with the fact that milk prices are in the tank, and our farms are really not getting paid what they had hoped or what we had hoped they would be making.”
FINDING A FIX
The good news is that CVPS and Cow Power farms are looking for a solution, Audet said.
“It has been a community effort from the start,” Audet said. “Then we ran into a snag, and the community came together to fix it.”
That “fix” isn’t nailed in place, and it certainly wasn’t as simple as changing the farmers’ contracts. Those contracts had to be approved by the Department of Public Service (DPS), which regulates what CVPS can charge customers for electricity. Plus, any changes will need to be approved by the Public Service Board.
But Costello said he thinks the parties have struck a compromise that, for the time being, will help the Cow Power families. First, CVPS appealed to the independent board that oversees the CVPS Renewable Development Fund to see about setting up reimbursements to the farms in the utility’s service area.
That request was approved, and now three farms — including Blue Spruce — will get a total of $65,000 in reimbursements. The money is intended to make up the difference between the market price these farms received between May and August and what CVPS and the farms agreed is a “reasonable price.”
The next step — which CVPS pursued this week — is to ask the DPS to sign off on an “interim” price for Cow Power energy. Rather than tying producers’ rates to the wholesale energy market, this interim price would pay farms eight cents per KWH. In addition to that rate the farms would also receive the four-cent-per-KWH premium from Cow Power customers, bringing the total farms like Blue Spruce are paid to 12 cents per KWH.
Audet said the interim price would hold the line until Blue Spruce and the other producers negotiate new contracts with the utility. In Blue Spruce’s case, the Audets are already due to negotiate a new contract in this month.
The farmers and CVPS were reluctant to pin down a break-even rate for producers of Cow Power, but they agreed that the interim rate was a good compromise.
“We’ve made really good progress,” Costello said. “It’s been a very collaborative process.”
Costello said he didn’t know when the DPS would sign off on the proposal. Given that the DPS and CVPS have been collaborating on the issue Costello was confident that they would come up with a proposal to take to the PSB that will work for everyone.
NEW POWER PRODUCERS
Meanwhile, the state Legislature this year passed new “feed-in tariff” legislation that became law in May. It’s the first legislation calling for a full system of advanced renewable tariffs in the United States, and it’s designed with the goal of encouraging more renewable energy development in Vermont.
The program, whose costs are borne by ratepayers, sets up long-term rates for renewable energy projects in the state. The tariffs are differentiated by technology, and based on the cost of generating energy — plus a reasonable profit.
For farms that commit to building anaerobic digesters before Jan. 1, the tariff will set rates at 16 cents per KWH for farm methane projects.
Audet said the new tariffs added fuel to the fire when it came time to push for higher rates for Cow Power electricity, and said she hopes that the original Cow Power farms won’t be left behind in the push to encourage new producers.
In the meantime, Costello said CVPS is committed to keeping Cow Power profitable for the farms enrolled in the program.
“We want to be fair with any kind of generator,” said Costello. “Not just fair: we want our suppliers to be successful. In this specific case, the value of Cow Power, not just to the farmer but to Vermont as a whole, is so important. The benefits of this program extend way beyond the people who participate.”