The State of Energy in Maine 2007

Joel Alex, Jeff Carroll, and Jake Pinkston

Executive Summary

The State of Energy in Maine, the first of fours chapters in The State of Maine’s Environment 2007, focuses on the state of Maine’s energy policy and its relation to the environment. We characterize historical trends in non-renewable and renewable energy consumption, and we identify and describe the significant laws, institutions, and actors that influence Maine’s energy policy. Climate change is currently one of the most prominent environmental energy concerns. Our study evaluates carbon emissions in Maine and consumer-side policy options for CO₂ reduction.

Our analysis shows that non-renewable energies account for the largest proportion of Maine’s energy consumption. Natural gas is the cleanest option and is currently the largest source of electricity in the state. For home heating however, Maine’s reliance on oil is high. In order for natural gas to supply a greater proportion in this sector, the gas supply and pipeline infrastructure must increase. Renewable energy consumption is rising in Maine, although significant infrastructure and policy obstacles must be overcome before it can be widely accepted and implemented. Wind power shows the greatest potential for future renewable energy resources in Maine. Maine should continue pursuing reductions in CO₂ emissions. This can be accomplished by increasing the state’s Renewable Portfolio Standard to a more challenging level and boosting the underdeveloped market demand for “green energy products”. Energy efficiency is another strategy for lowering CO₂ emissions and is beginning to be successfully promoted in Maine.

We identify three possible scenarios for energy in Maine: the ineffective status quo, a successful implementation of current policies, and finally, an increase in policies promoting renewable energies. We recommend that in the near term natural gas be used as a transition fuel, but in the long term the state should promote the utilization of its renewable energy resources through state incentives. This, in addition to the promotion of green energy products and increased energy efficiency, would help Maine lower its CO₂ emissions in its efforts to mitigate climate change.

Introduction

The State of Energy in Maine is changing due to internal and external pressures. As Maine updates and expands its infrastructure to meet growing demand, it faces important decisions concerning the future sources of its energy. Energy deregulation, integrated regional infrastructures, and changes in federal policy mean that Maine’s supply choices are and will increasingly be made out of state¹. For example, Maine’s current energy portfolio includes petroleum from the Middle East, natural gas from the Caribbean, and hydroelectric power from neighboring Canadian provinces.

Globally, concern about climate change has become a central issue driving changing patterns of energy production and consumption. Today, 80% of the world’s energy needs are met by the combustion of fossil fuels². This combustion releases 25 billion tons of carbon dioxide (CO₂) annually into the atmosphere. This poses a considerable threat to the environment; CO₂ is the major greenhouse gas contributing to current human induced climate change³. Maine’s electricity industry produces 15 million metric tons of CO₂ emissions annually, and in response, the state has begun to take serious steps to mitigate its CO₂ emissions.

In this study we asked: How has energy production and consumption in Maine changed over time? Is Maine making progress towards climate change mitigation? How might Maine’s energy consumption patterns change in the future? What policies are available that could positively influence these trends? We address these questions by focusing on consumption trends of non-renewable and renewable resources over the past half century. We begin by identifying the events which have shaped these trends, and discuss their possible implications for Maine’s energy future. We also identify the laws, institutions, and actors that influence each individual energy source as well as the larger pattern of energy consumption in Maine.

We focus primarily on the electricity and home heating sectors, which account for approximately 80%⁴of Maine’s energy consumption. Energy used for transportation is also important, and accounts for roughly 20%⁴of Maine’s total energy use, but it is not the primary focus of this paper. We compare Maine’s CO₂ emissions to regional and national emissions. Finally, we explore the potential role of Maine energy consumers to influence climate change mitigation efforts through the purchase ‘green’ power and by increasing energy efficiency.

We conclude by presenting three scenarios for Maine’s energy future, and discuss how different political climates and policies could influence these distinct scenarios.

Non-renewable Resources

Trends and Current Status

Historical Consumption Trends and Current Status

The vast majority of the energy consumed in the United States comes from non-renewable sources. For the past 50 years, is has equaled about 94% of the country’s energy consumption (Figure 1.1). In New England, it is a smaller but still significant share, accounting for 82% of energy consumed (Figure 1.2). Maine has a lower dependence on non-renewable energy, with 32% of its energy coming from sources other than fossil fuel and nuclear (Figure 1.3). To further understand these domestic trends, we describe consumption by type of fuel used.

Coal

The use of coal in the US propelled the Industrial Revolution in the 19^th century, but dropped precipitously in the early to mid-1900s with the ascent of petroleum as the nations leading energy source (Figure 1.1). However, coal has remained the leader in the electricity sector, consistently producing at least 50% of the electrical power America consumes for the last 50 years (Figure 1.6). It is the country’s most abundant and inexpensive hydrocarbon resource⁵.

Figure 1.1 US energy consumption by source from 1950 to 2006 (%)⁶

New England and Maine are a stark contrast to the rest of the nation, both consuming on average less than 10% of their energy from coal in the past half century (Figure 1.2 & Figure 1.3). This trend is a reflection of the lack of in-state sources and the proximity to out of state coal mines. The messy nature and high bulk-to-energy output ratio coal compared to other fossil fuels has likely dissuaded use as well⁵. In the 1990s, Maine began consuming electricity from coal fired power plants, but this is generated outside the state (Figure 1.8). There is currently a proposal by Point East / Twin Rivers to build a coal gasification plant in Wiscasset on the site of the now decommissioned Maine Yankee Nuclear Power Plant. Local support is thin however, and considering that initial zoning approval was recently voted down in the November 2007 election referendum, it is unlikely to occur⁷.

Figure 1.2 New England Average Energy Consumption by Source from 1960 to 2006 (%)⁶

Petroleum

Of all non-renewable resources, petroleum is the most versatile. Countless fuel and non-fuel products are derived from petroleum. As a result, it is consumed twice as much as its nearest competitor nationally and regionally. This has been the trend for the last five decades since it overtook coal as the nations most consumed energy source in 1949 (Figure 1.1). Consumption in the US has since tripled, and that steep rise shows no sign of slowing, even with decelerating production⁶.

Figure 1.3 Maine Energy Consumption by Source from 1960 to 2006 (%)⁶

Home heating oil replaced coal in the 1920s as a cleaner, less work intensive, and more efficient alternative fuel. It is part of the distillate fuel family, similar in properties to diesel fuel. While only 9% of Americans use fuel oil to heat their homes, 55% of New England households use the distillate fuel⁸. The state of Maine leads the country with 80% of its households burning fuel oil⁸.

In New England and especially in Maine, fuel oil has been the major source for home heating because of the cold winters, its ease of transportation and storage, and a lack of access to natural gas pipelines. Because of fuel oil’s low national demand, production is not always consistent, especially in the summer months when overall consumption is low. This can cause supply to run low, especially during the winter months, resulting in price spikes and shortages. Maine’s high demand for fuel oil puts it especially at risk, but strategic reserves and prepay programs, which lock in the price before winter starts, have been created to respond to this concern⁹.

Petroleum is also used to generate electricity, although not on a large scale in the United States. The power plants burn what is known as petroleum residuum, the heaviest product from the refining process that has no other real use¹⁰. While it made up about an eighth of US consumption in the early 1980s, petroleum generated electricity has since fallen off to under 2% (Figure 1.6). This trend will likely continue with the rise of oil prices.

In New England and Maine, petroleum has played a much larger role in the electricity sector. New England’s consumption rose sharply to over 70% from 1965 to 1973 as coal use fell. Use has declined since then, congruent to national trends (Figure 1.7). During the 1960s, electricity consumed from petroleum in Maine peaked at 65% but dropped off drastically after the opening of Maine Yankee Nuclear Power Plant (Figure 1.8). The largest capacity power plant in Maine, the William F. Wyman in Yarmouth, runs on petroleum and has a net summer capacity of over 800 MW¹¹. Petroleum electricity made a resurgence to fill the electricity void left after the closing of Maine Yankee, climbing to over 35% of the state’s electricity consumption, but decreased rapidly after the year 2000. It now accounts for only 5% of the state’s total consumption of electricity (Figure 1.5).

Natural Gas

While natural gas was used at a small scale as early as 1816 for street lighting¹², it was not until after World War II that advances in metallurgy and construction technology allowed for commercial development¹³. Its use in the US grew significantly through the 1960s, peaking at a 33% of all domestic energy consumption (Figure 1.1). This led to investment in expanding infrastructure. Price irregularities and a number of gas shortages due to in part to overregulation led to a decline in consumption in the next few decades (Figure 1.4). This fall has stabilized in recent years with gradual deregulation of the industry¹⁰. Natural gas is the preferred fuel for home heating, utilized by 51% of US households⁸. It represents a significant source of electricity production, accounting for nearly 20% of the nation’s consumption (Figure 1.6).

Figure 1.4 US Energy Prices in Nominal Dollars from 1970 to 2006⁶

New England’s consumption of natural gas has been comparatively lower for most of the 20^th century. It rose noticeably in the late 1980s as pipelines began connecting parts of the region to production facilities in the southern US and Canada (Figure 1.5). 37% of the households in New England use natural gas for home heating, well below the nation average.

Maine entered the natural gas market much later than the rest of the nation, consuming almost no natural gas before the new millennium (Figure 1.3). In 1999, the Portland Natural Gas Transmission System, which connects from the New Hampshire border, and the Maritimes & Northeast Pipeline, which enters from the New Brunswick boarder, brought Maine into the North American Natural Gas Pipeline Network^{14,
15}. In 2000, five new electrical generation plants went online, and natural gas became the states most consumed source of electricity in Maine, maxing out at 57% of total electricity consumption (Figure 1.8). High prices in a volatile gas market, however, have resulted in a recent drop in consumption (Figure 1.5). It is currently holding at 42%.

Figure 1.5 Maine Energy Prices in Nominal Dollars from 1970 to 2006⁶

As a source for home heating, natural gas is used by only 4% of Maine households⁶, due to its new status, high cost to change system, and limited infrastructure access within the state¹⁶. Multiple requests to build Liquefied Natural Gas Terminals along the coast of Maine have been submitted to the Federal Energy Regulatory Commission. State license requests have also been submitted, most notably by Quoddy Bay LNG and Downeast LNG, who are planning to build facilities in the towns of Pleasant Point and Perry, and Robbinson, Maine respectively. This has been the source of contentious debate as communities weigh environmental and security concerns against the need for economic development¹⁷.

Nuclear

In the period after the end World War II, the United States developed plans for civilian nuclear power. In 1957, the Shippingport Nuclear Power Plant went online in Pennsylvania, the first of over 100 large-scale commercial nuclear power plants that would be built in the United States over the next 30 years¹⁸. US consumption of electricity from nuclear power jumped from 1% in 1968 to 13% in 1977, then grew more gradually before leveling out around 20% from the early 1980s onward (Figure 1.6).

Figure 1.6 US Electricity Consumption by Source from 1950 to 2006 (%)⁶

New England’s first nuclear plant was built in 1960 on the Deerfield River in Rowe, Massachusetts, and consumption of nuclear power increased rapidly for the next 15 years as more plants came online in the region. Nuclear power has contributed about 30% of New England’s electricity since then (See Figure 7). In 1972, Maine built its own nuclear power plant, Maine Yankee, in Wiscasset¹⁹. Maine Yankee dramatically changed the face of the state’s electricity production, supplying over 60% of the state’s electricity within three years of opening (Figure 1.8).

However, the nationwide flurry of proposals and orders for new plants ceased after a partial meltdown at the Three Mile Island Nuclear Power Plant in 1979 ¹⁸. Fears of nuclear power’s dangers were confirmed a decade later when the Chernobyl disaster devastated the Ukraine.

Figure 1.7 New England Average Electricity Consumption by Source from 1960 to 2006 (%)⁶

Maine nuclear power was also facing a crisis during this period. In response to the apparent dangers, public referenda were introduced to close Maine Yankee in 1980, 1982, and 1987²⁰, but were defeated. Poor maintenance of the facility resulted in the cracking of the plant’s steam generator pipes, forcing the plant to close for repairs in 1995²¹. Although it reopened in 1996, the plant was closed permanently in 1997 because the state’s deregulation of the electric utilities, which began that year, would have made the plant uneconomical to run. Consumption of nuclear electricity in Maine fell to zero (Figure 1.8). In 2005, decommissioning was completed and the site is now looking at proposals for development. However, the spent fuel rods from the reactor still remain on the premises in dry casks, awaiting removal by the US Department of Energy to a yet to be determined nuclear waste dump¹⁹. In March of 2007, the Maine legislature passed LD 1851, Item 7, which established the Maine Nuclear Power Council. The purpose of the council is to investigate the need for carbon-free substitutes for power generation, opening up the possibility of a new nuclear facility in Maine’s future²².

Figure 1.8 Maine Electricity Consumption by Source (%)⁶

Stakeholders

There are several key stakeholders involved in Maine’s non-renewable energy policy. These include federal and state government actors, the regional transmission organization (RTO), power and fuel oil companies, special interest groups, and Maine energy consumers.

National

Several federal departments and agencies are responsible for developing and implementing US energy policy, which impacts energy policy in Maine. They are given their mandate and direction by either the President or the Congress through the subcommittees in the two house’s respective Committees on Energy (Table 1.1). The Federal Energy Regulatory Commission (FERC) regulates the interstate transmission of electricity, natural gas, and oil. It played an important role in the deregulation of Maine’s utilities and the extension of natural gas pipelines into Maine. The construction and decommission of the Maine Yankee Nuclear Power plant was done under the regulations and oversight of Nuclear Regulatory Commission (NRC). Maine is currently negotiating with the Department of Energy over the remaining spent fuel rods that remain at the Wiscasset site, which the DOE was contracted to remove a decade ago. The Energy Information Administration (EIA) compiles national and state energy data, which are cited in many Maine legislative proposals. The EPA regulates emissions under the Clean Air and Clean Water Acts and dictates where new facilities such as power plants can be cited.

Table 1.1 Description of Federal Government Actors in Non-Renewable Energy

Actor

Description

President of the United States

Forms groups cabinet groups to develop initiatives concerning national energy policy direction. These have recently included the National Energy Policy Development (NEPD) Group and the Advanced Energy Initiative

House Energy Subcommittee on Energy and Air Quality

Oversees national energy policy generally, including: non-renewable and renewable energy; energy conservation; information; regulation and utilization; interstate energy compacts; nuclear energy and waste; and The Clean Air Act.

Senate Energy and Natural Resources Subcommittee on Energy

Oversees and legislates non-renewable and renewable, non-water sources of energy, climate change; utility policy; strategic petroleum reserves; oil and gas pipeline transportation systems within Alaska; energy production, refining, distribution, regulation, research, development and conservation.

Senate Energy and Natural Resources Subcommittee on Water and Power

Oversees and legislates power marketing administrations; energy development impacts on water resources; groundwater resources and management; hydroelectric power; low head hydro; and energy related aspects of deepwater ports.

Department of Energy (DOE)

A cabinet level department that sets energy policy, funds research and is in charge of nuclear safety.

Federal Energy Regulatory Commission

(FERG)

An independent agency under the DOE that regulates the interstate transmission of electricity, natural gas, and oil. It also regulates natural gas and hydropower construction.

Energy Information Administration

(EIA)

The statistical agency of the DOE, it provides policy-independent data, projections, and analyses to promote public understanding, solid markets, and good policy making.

Nuclear Regulatory Commission

(NRC)

An independent agency that regulates commercial nuclear power plants and other uses of nuclear materials (nuclear medicine), through licensing, inspection and enforcement of its requirements.

Environmental Protection Agency

(EPA)

Non-cabinet agency charge to protect human health and the environment through development and enforcement of policy, funding grants, education, and research.

State

At the state level, Maine’s energy policy is organized around the Energy Resources Council, which was created in 2002 by the Maine Legislature to facilitate coordination among agencies with regard to energy policy making. The Council is made up of nine agencies (Table 1.2). Their decision making is done according the 10 Principals of Maine Energy Policy, which they drafted when the Council was founded. The 10 Principals promote values of competitive pricing, security, reliability, environmental protection, and public information in regards to energy policy in the state of Maine²³. The Maine Public Utilities Commission (MPUC) has the most hands-on role of the Committee in executing policy, regulating the electrical, natural gas, telephone, water, and ferry services²⁴. The Public Advocate represents the interest of the ratepayers under the MPUC, posting recommendations concerning utilities policy and filing complaints. These two agencies’ work is coordinated through the governor’s office and the state legislature’s Joint Standing Committee on Utilities and Energy.

Table 1.2 Description of Maine State Actors in Non-Renewable Energy²⁵

Actor	Description
Governor of Maine	As head of his administration, works to direct and promote energy policy initiatives for the state and meets with other governors to cooperate in regional projects.
Joint Subcommittee on Utilities and Energy	Committee of three senators and ten representatives that oversees state energy policy, including: energy resources and efficiency; electric industry; natural gas industry; Public Utilities Commission; Office of the Public Advocate; and Energy Resources Council.
Maine Public Utilities Commission	Regulates electricity, gas, telecommunications, water, and ferries in the state. Three appointed members charged with overseeing the operations of utilities and reporting violations to the attorney general
Public Advocate	Represents Maine utility consumers in issues under the jurisdiction of the MPUC, promoting affordable, quality energy.
The Commissioner of Environmental Protection	Head of Maine Department of Environmental Protection. The department is mandated to prevent, abate and control pollution while preserving, improving and preventing diminution of the state’s natural environment.
The Commissioner for Transportation	Head of Department of Transportation, which oversees the construction, repair, safety, and usage of Maine’s roads.
Commissioner of Administrative and Financial Services	Head of Administrative and Financial Services, which performs a host of fiscal, administrative, training, maintenance, IT, and postal services while overseeing the state lottery and alcohol tax.
Commissioner of Economic & Community Development	Head of the Department of Economic & Community Development, which is the umbrella organization to the offices of Tourism, Business Development, the International Trade Center, Community Development, Film and Innovation and Science.
Commissioner of Conservation	Head of Department of Conservation, a natural resource agency that oversees the management, development and protection of forestland, unorganized territories, parks, historic sites and public reserved land.
Director of the Maine State Housing Authority	Head of Maine State Housing Authority, which bridges public and private financing to assist Mainers in obtaining and maintaining decent, safe, affordable housing, targeting low to middle income families.
Director of Main State Planning Office (Chair)	Head of the State Planning Office, which advices the governor, state legislature, regional and local entities on development through research and technical expertise.

Regional Transmission Organizations

The regional transmission organization, Independent System Operator - New England (ISO-NE), operates the region’s bulk electric power system, controlling generation and flow of electricity across high voltage interstate transmission lines. Originally established as the New England Power Pool (NEPool), the central dispatch station of the region, deregulation policies in the mid-1990s expanded its role to managing the newly created power markets and the bulk electric power being bought, sold and traded²⁶. Many Mainers are currently unhappy with the current system. The Maine legislature commissioned a report that was given to the Utilities and Energy Committee in 2007, which investigated perceived transmission, generation and price inequities within the current structure. It also examined and concluded favorably on the proposal to leave ISO-NE and develop a power market with one or more of the Canadian Maritime Provinces, establishing a new RTO. One of the most substantial arguments for such a move is it would increase efficiency and balance within the grid in both regions because peak load occurs in the winter in the Canadian provinces and in the summer in Maine²⁶. ISO-NE is discouraging the withdrawal, and there are several barriers and questions to be answered because of the international nature of the cooperative, such as the implications of NAFTA rules²⁷.

Companies – Power and Oil

The power companies in Maine are split between suppliers and distributors, which was required by deregulation in the late 1990s. The suppliers produce and sell energy to the distributors, who deliver it to the costumers and are required to maintain the electricity infrastructure. Supply is competitive but distribution remains a monopoly, with service divided into regions²⁴. There are three main distributors: Bangor Hydro-Electric Co., Maine Central Power, and Maine Public Service Co. There are a variety of suppliers, the largest including Florida Power and Light, Constellation, Dominion and TransCanada²⁴.

The fuel oil suppliers tend to be small, family businesses that buy from larger suppliers and deliver the fuel oil by tanker. Fifty Maine fuel oil businesses advertise on the Yellowpages.com, and many are members of the Maine Oil Dealers Association, which advocates for its 450 members and promotes the petroleum industry²⁸.

Interest Groups

Interest groups also play a role in Maine’s energy policy. Through grassroots lobbying, political action committees, education campaigns, and media events, these groups have made their views known about how Maine should frame its energy policy, especially concerning nonrenewable sources and the environment. They represent a broad spectrum of positions and politics, including industry groups (Maine Petroleum Association, the Maine Oil Dealers Association), law firms (Pierce Atwood, LLP), economic promoters (the Chamber of Commerce), and environmental groups (Natural Resources Council of Maine, Environment Maine). Interest groups have been particularly active in regards to the LNG proposals along Maine’s coast, advocating strongly on both sides of the argument.

Maine Consumers

The consumer is a very important stakeholder, especially now that they have a choice in what energy they buy. This is discussed in greater detail in the later in this section.

Laws, Institutions and Management

Laws, institutions and management play a key roll in framing Maine’s energy policy with respect to non-renewable sources. We will distinguish them by Federal (Table 1.3) or State (Table 1.4) levels.

Federal

The federal government has taken an active role in regulating non-renewable energy since it passed the Public Utility Holding Company Act in 1935, effectively breaking up large energy conglomerates that were poorly managing the country’s energy and overcharging their customers. As natural gas became economically viable, Congress began regulating it as well. The development of civilian nuclear power was spurred by the federal initiatives. While initially the countries energy policy was rather restrictive, subsequent legislation aimed to open up the energy industry and encourage more energy development. However, the federal government has still maintained a strong oversight power, a source of conflict with the states²⁹.

The Price-Anderson Act in 1957 reduced the liability of nuclear power producers in the event of a nuclear accident, which in part led to a rapid expansion in nuclear plant requests and construction during the next two decades¹⁸. Eager to respond to the oil crises of the 1970s, Congress passed the 1978 National Energy Act, which carried with it five different sections.¹³ The most important to non-renewable energy were the Natural Gas Policy Act and the Public Utility Regulatory Policies Act (PURPA). The Natural Gas Policy Act gave FERC authority over inter- and intrastate gas production and established price ceilings to keep the fossil fuel affordable with the goal of expanding consumption³⁰. PURPA required electric utilities to increase their conservation and efficiency while providing equitable rates for consumers. It was instrumental in breaking the monopoly that the large utilities had on the power grid and paved the way for the expansion of renewable energy, which will be discussed later in this chapter ²⁶.

These new players in the market were further encouraged by the passing of the 1992 Energy Policy Act. The act created a new category of electric producer, the exempt wholesaler, further opening up development of non-utility electrical generation.³¹ The subsequent FERC Order 888, in an attempt to reduce consumer costs, required that the wholesale transmission of electric energy be unbundled from the sale of power, essentially separating the power lines and the power plant. This initiated the nationwide deregulation of utilities that Maine took part in. The year 2000 marked the creation of the Northeast Fuel Reserve to guard against shortages in the event of an unexpectedly harsh winters, an important piece of legislation for the state that consumes more fuel oil than any other³².

The latest major piece of federal energy legislation concerning non-renewable resources is the Energy Policy Act of 2005. It is heavily supportive of fossil fuels, allocating a large amount of funds to oil and gas exploration and production, coal technology, and nuclear expansion. It also empowers FERC with even greater oversight capabilities, a reflection of the recent disaster with the California utilities. Controversially, the act revokes PUHCA, with the hope that it will open utilities to much needed investment and encourage expansion of infrastructure³³. There are current proposals in the Maine legislature revoke similar state laws. However, any new mergers will have to be monitored lest there is a regression back to the oversized, poorly run utilities of the past³⁴.

Table 1.3 Description of Federal Laws and Statutes Relevant to Non-Renewable Energy

Law	Year	Description
Public Utility Holding Company Act (PUHCA)	1935	Broke up large, corrupt PUHC trusts that controlled the electric industry, giving what would be FERC regulatory control over them and requiring transparency and complete focus on utilities, pushing out non-utilities from the market.
Natural Gas Act	1938	Gives FERC authority to set rates for transmission of natural gas in interstate commerce. FERC may give permits for companies to charges customers for some of costs of building pipelines.
Atomic Energy Act	1946	Establishes Atomic Energy Commission to control nuclear energy development (Powers expanded in 1954)
Price-Anderson Act	1957	Provides system which significantly reduces liability in the event of a nuclear accident.
National Energy Act (NEA)	1978	Passed after OPEC oil crisis. Contains PURPA, the Energy Tax Act, the Nation Energy Conservation Policy Act, the Power plant and Industrial Fuel Act, and the Natural Gas Policy Act.
Public Utility Regulatory Policies Act (PURPA)	1978	Requires increased conservation/efficiency by electric utilities with equitable rates, improved whole sale distribution and reliability of electricity and increased hydropower. Utilities must interconnect and buy whatever amount and capacity is offered by qualified facilities.
Natural Gas Policy Act	1978	FERC has authority over inter and intra state gas production. Established price ceilings with eventual phase out, which resulted initially in shortages farther from the source and later extremely high prices.
Natural Gas Wellhead Decontrol Act	1989	Removed all price ceilings, although effect minimal as most prices below ceiling at this point.
Energy Policy Act (EPACT)	1992	Creates new category of electric producer, the exempt wholesaler, further opening up development of non-utility electrical generation.
FERC Order 888	1996	Requires wholesale transmission of electric energy be unbundled from the sale of power.
Energy Policy and Conservation Act	2000	Established Northeast Home Heating Oil Reserve.
Energy Policy Act of 2005	2005	Mandates cleaner coal use, increased oil and production, technological development improving extraction of oil and in finding ways to use coal to replace oil, encourage nuclear energy expansion. FERC is given expanded authority it to prevent abuses. Streamline PUHCA to open up utilities to investment and encourage expansion of infrastructure.

State

Maine’s recent legislative initiatives have been focused on moving away from non-renewable resources³⁴. This trend is largely due to concerns over climate change and energy security but would not be possible without deregulation. The deregulation of Maine’s utilities, which required the power companies to sell off their generation assets so that consumers could buy competitively priced energy, began in 1996 with the goal of retail competition by March of 2000. In 1997 the plan went on the legislation docket. The three major power companies submitted plans for divesting, which were then approved by the PUC. New itemized billing systems separated generation and delivery costs. The standard service price would be set by bidding, rather than the typical predetermined command price. This failed in the first round because the prices were too high. While prices initially rose after deregulation, they have since fell to below previous rates, although Maine continues to have some of the highest energy costs in the country¹².

The legislation that Maine has enacted with respect to non-renewable fuel has focused primarily on protecting Mainers (See Table 4). In the pursuit lowering consumer costs, the Legislature has passed a resolve in 2007 that the Maine Public Utilities Commission should promote the use of “smart meters,” which will charge different electric rates depending on the time of day, and report their findings. They have also empowered the MPUC to enter into long term contracts with transmitters and distributors, thus preventing unfavorable regional capacity requirements, which could increase prices for Maine consumers. The state Senate and House of Representative have funded programs to subsidize low income and elderly heating costs across the state as well³⁵.

Table 1.4 Description of Maine State Laws and Statutes Relevant to Non-renewable Energy

Law	Year	Description
An Act to Restructure the State's Electric Industry CHAPTER 316 H.P. 1274 - L.D. 1804	1997	To provide effective competition in the generation and sale electricity market, each investor-owned electric utility must divest all generation assets and business activities, thus creating a competitive generation market while retaining a monopolistic transmission system.
Resolve, To Reduce Energy Costs for Consumers H.P. 948 - L.D. 1339	2007	MPUC will promote the use of smart meters and report back by January 2008 to the Joint Subcommittee on Utilities and Energy, who may then propose legislation.
An Act To Ensure That Maine Residents Have Reliable Winter Heating Assistance H.P. 385 - L.D. 502	2007	Appropriates $17 million per year in fiscal year 2007-08 and 2008-09 to the Maine State Housing Authority for the Low Income Home Energy Assistance Program,

Renewable Resources

Trends and Current Status

The United States suffered two severe shortages of oil imports in 1973 and 1979. The Organization of Petroleum Exporting Countries (OPEC) restricted oil supplies in 1973 to states which supported Israel in the Yom Kippur War, the result of which drove the price of oil to a point where people felt a considerable strain. In addition to the expensive prices posing a problem for consumers, many politicians felt that relying on foreign imports of fossil fuels posed a considerable national security threat. This movement developed the beginning of renewable resource use for energy production in the US. After the OPEC oil embargo was lifted in spring 1974, the pressure to research and implement renewable resources was lessened. Again in 1979 towards the end of President Carter’s administration the Shah of Iran was overthrown temporarily disrupting the oil industry causing oil prices to increase significantly once again. The Iranian infrastructure eventually increased, bringing more oil into the US when the prices receded in 1979, once again slowing the development of renewable resources. However, in the 1980s and 1990s, that drive regained momentum when it was determined that renewable sources were not as detrimental to the environment as were fossil fuels. This change in perception can be attributed to a shift in national consciousness of the environmental damage being caused by humans.

Renewable energy is derived from harnessing sources naturally occurring on Earth. They are either used to directly heat, or to generate electricity. This study focuses on the following renewable energy sources: hydroelectric, biofuels, solar, wind, and geothermal. Other sources of renewable energy exist, however, these five represent the major components of the current alternative fuel market both nationally and in Maine.

While it is possible to tie both the development and rapid expansion of most renewable sources of energy to the OPEC embargos of 1973 and the elevated prices of 1979, hydroelectric power has been used in the US, and Maine, in particular well before the use of fossil fuels. Currently there are 88 hydroelectric dams in Maine, which produce roughly 22% of the state’s energy production⁸, yet accounts for only about 14% of Maine’s total energy consumption³⁶.

Biofuels are the other major renewable energy which played a significant role in Maine energy before the birth of the renewable resource movement. “Biofuels” is a catchall term for every type of fuel which is non-fossil derived and is burned to produce energy to turn turbines or produce heat energy. They have a considerable impact on Maine’s energy use because Maine has such a natural abundance of wood products: 90% of the state is forested land³⁷. Traditionally, biofuels have been wood fuel; however, since the 1980s, other products have been developed which fall into three broad categories: wood, waste, and alcohol fuels³⁸. Biomass is a significant portion of Maine’s renewable energy use however, it is difficult to regulate what is being used as fuel. For this reason, we will not put forth in this report any recommendations on biofuel usage, but focus on other technologies.

Wind power is a rapidly growing sector of Maine’s energy production and was the quickest growing renewable energy source in the United States, rising from 2.8 billion kWh in 1990 to 10.7 billion kWh in 2003, a 282% increase³⁹. There is currently only one large scale wind project in Maine, but Maine is slated to increase the amount of energy produced by wind power significantly by 2010. Wind is a compelling source of energy because it has zero carbon emissions. Compared to conventional fuel sources, as well as some renewables, wind-derived energy is vastly cheaper because the majority of costs are associated with the installation process, and once that is completed the energy sold is essentially free. There are however, some concerns associated with wind power. Wind is an intermittent energy source because the wind does not always blow steadily. Wind turbines are loud and have disturbed local residents, which is why they should be placed out of hearing range. In addition, they are quite large and many feel that they are not aesthetically pleasing. They should be located in an area in which they do not obstruct the view of a landscape.

Solar energy is another new sector of renewable resources which plays an important role in the state of Maine. It is broken up into two major sectors: solar thermal heating, and solar electric. Solar thermal heating systems use sunlight to heat air or water to provide internal heating for houses, while solar electric systems convert sunlight directly to electricity. One method of solar electric uses photovoltaic (PV) systems. These systems can provide electricity for residential and industrial buildings, but can also be used on a much larger scale to produce electricity for regional and national distribution.

Lastly, geothermal heating involves tapping into the natural heat of the earth to provide heating for houses. Geothermal energy is harnessed by using ground source heating pumps to tap into the ground. These pumps provide a double service for Maine’s heating needs. First, they provide a constant source of heating during the winter when Maine uses a significant amount of energy in heat production⁴⁰. Second, quite recently Maine has become a summer peaking state⁴¹ reversing the historical trend. That is to say currently, residents of Maine are using more energy in the summer than in the winter to cool their homes and other summer related activities⁴¹. Geothermal energy is perfectly situated to deal with this shift in demand because it can provide cool air during the summer. The temperature of the air brought up from the ground remains at a fairly constant temperature all year long, providing heat during the winter and cooling during the summer⁴⁰. Geothermal is used on a very small scale in Maine, but has the potential to become a larger source of energy for the state

Trends

Nationally, renewable resource consumption has steadily increased over the past half century. In 1960, national consumption of all renewable energy sources was approximately 3,000 trillion British Thermal Units (Btu), roughly 6%⁴ of national consumption, and has since reached 6,000 trillion Btu, doubling in size, yet remaining only 6% of national consumption⁴ (Figure 1.9). This is important because while it demonstrates that more and more renewable resources are being used nationally, the proportion of renewable energy relative to total consumption of all energy sources is remaining constant.

New England has mirrored the national trend. From a baseline 1960 value of roughly 150 trillion Btu, energy consumption peaked in 1995 at roughly 400 trillion Btu and has dipped back down to roughly 325 trillion Btu (Figure 1.9).

Figure 1.9 Total National, New England, and Maine Renewable Energy Consumption from 1960 to 2004³⁶

Maine’s renewable energy consumption over the past half century has also mirrored national and regional trends. Maine consumed about 50 trillion Btu of renewable energy in 1960, increasing to 150 trillion Btu in 1990 (Figure 1.10). As of 2004 Maine consumes almost 155 trillion Btu of renewable energy³⁶.

Figure 1.10 Maine Renewable Energy Consumed by Source from 1960 to 2004³⁶

Increasing Renewable Use: Portfolio Standards

Maine has signed onto the Regional Greenhouse Gas Initiative (RGGI), and has stipulated a plan to complete the emissions standards set out in RGGI. RGGI established specific regulations on states in New England with the purpose of controlling and mitigating the amount of anthropogenic pollutants released into the atmosphere to address concern caused by climate change. In 2003, Maine passed the Maine Climate Action Plan (MCAP) to help the state reach its RGGI standards which include reducing emissions to 1990 levels by 2010, reducing a further 10% by 2020, and 75% by 2050. Maine is not currently meeting its requirements, and will require significant reductions in emissions if it hopes to remain in compliance with RGGI⁴². While initially, most of the major laws impacting renewable energy were federal, state governments are beginning to play a larger role in promoting alternative energy sources. In 1997, as part of an Act to Restructure the State’s Electric Industry, Maine adopted a renewable portfolio standard (RPS), which mandated that 30% of the energy sold in Maine must come from eligible renewable resources by 2000⁴³. The purpose of this bill, LD 1804, is to “ensure an adequate and reliable supply of electricity for Maine residents and to encourage the use of renewable, efficient and indigenous resources”⁴³. Under the authority of the Maine Public Utilities Commission, Maine’s RPS required that by 2000, “[e]ach competitive electricity supplier, including standard offer suppliers, must provide no less than 30 percent of its total kilowatt-hour sales to customers”⁴³ from renewable resources. Maine’s RPS is larger then any other state in the country as a percentage of total energy sold. However, this figure is misleading because over 30% of Maine’s energy already came from renewable resources³⁶, indicating that while the RPS level is higher then any other state, it is not imposing a change in energy production in Maine, in direct contrast to some states which are forced to make significant changes in energy production to achieve their RPS standards, such as California which has set an RPS 200% higher than current state renewable production at the time of inception⁴⁴.

While this bill was aimed at setting a standard for the amount of renewable resources used in Maine it was not designed to increase the amount of renewable energy generated in Maine⁴³. In response, the 2006 State Legislature passed a new bill, LD 2041, stipulating that “‘the share of new renewable capacity resources as a percentage of the total capacity resources in this State on December 31, 2007 increase by 10 percent by 2017’”⁴³. This amendment promotes growth in the renewable energy production industry while providing environmental benefits to Maine. Under LD 2041 a source is eligible for the RPS as long as they are a “qualifying small power production facility under the Federal Energy Regulatory Commissions (FERC) rules or a generation facility whose nameplate capacity does not exceed 100 megawatts,” and produces power from one of the specified pre-approved sources ⁴³. These sources include various types of fuel cells, different solar arrays installations, wind and geothermal power installations, hydroelectric generators [which meet all state and federal fish passage requirements], biomass generators, high efficiency cogeneration systems of any size as well as other smaller sources⁴³. While these all qualify under the amendment, “generators fueled by municipal solid waste (MSW) in conjunction with recycling” do not, despite the fact that they are considered a renewable energy source under the original RPS bill. In addition, self-generation of electricity is not eligible either under the amendment.

Electricity generators are required to have a New England Power Pool Generation Information System certificate indicating that they are in compliance with all RPS regulations. In addition, the PUC has the authority to audit any electricity provider at any time, confirming that they are in full compliance with the regulations of RPS. If an electricity provider is not in compliance with the RSP standards during the prescribed period, indicating that it has not sold the minimum 30% renewable energy, but has instead only sold between 20 and 29%, it is allowed to fix the imbalance during the second period as long as at the end of both periods the aggregate amount of energy from renewable energy is 30%⁴³.

LD 2041 is an important bill for the future of Maine in many ways. First, it provides incentives for the increase in production of renewable energy, and second it promotes a shift in overall energy production. While a RPS of 40% by 2017 is still lower than the current amount of energy sold in state from renewable resources, the mandate for new and additional energy source use will propel Maine further into the forefront of renewable energy production. This situation could provide an economic benefit for Maine. The state is currently one of the largest producers of energy supplying southern New England and the greater Boston area. It has been shown that certain individuals will pay a significant premium for green energy⁴⁵ ⁴⁶. The demand for clean non-polluting energy at the doorstep of Maine is an economic force which could be harnessed.

Figure 1.11 Portfolio Standards and Renewable Energy as a % of Total Energy Produced in Maine⁴³

Wind Programs

Maine has a high potential for wind power. The mountain areas of central Maine along the Appalachian Mountains, and areas of the coast are perfectly situated for wind farms. The inland high wind potential sites are situated in area of low population and are ideal locations. While the majority of the state provides weak potential, these highlighted sites offer more then enough power to drastically alter Maine’s energy profile.

The Mars Hill Wind Farm (Table 1. 5) is currently the only wind farm in Maine. It provides an amount of energy equivalent to approximately 4% of all the homes located in the incorporated municipalities as of 2000 (Figure 1.13).

Aside from Mars Hill, there are seven other wind farm proposals in Maine, each in different phases of development. However, only three projects are close to final approval and construction. The Black Nobble and Kibby Mountain Projects are currently undergoing public hearings, and the Stetson Ridge project has already received approval from Land Use Regulation Committee (LURC)⁴⁷ (Table 1. 5). These three projects if constructed, could along with the Mars Hill Wind Farm, provide enough energy for roughly 19% of all homes in the incorporated municipalities as of 2000 (Figure 1.13).

Of the other 4 projects proposed for Maine, two seem likely to be developed, one has had its permit overturned, and the other has not yet provided enough information to be discussed here. The Freedom Project, a relatively small wind farm, only slated to provide 3.4 MW of energy had its permit overturned by the local Appeals Board in early 2007⁴⁸. The project in Prentiss Township on Passamaquoddy land is in the process of collecting wind data and has not indicated the number of turbines or expected MW produced (Table 1. 5). The last two proposals are The Partridge & Flathead Mountains and Record Hill Project (Partridge Project), and the St. John Valley Projects (Table 1. 5). If these two projects are passed along with the Black Nobble, Kibby Mountain, and Stetson projects, the amount of wind energy produced in Maine will rise from only 4% of homes in the incorporated municipalities (from the Mars Hill Project), to a staggering 50% ( Figure 1.13). These numbers indicate a significant shift in energy production for Maine which could occur within the next five years.

Figure 1.12 Wind Power Potential in Maine⁴⁹

Figure 1.13 Houses in the Incorporated Municipalities Complied Supplied with Wind Energy from Current and Pending Wind Projects

Table 1. 5 Current Wind Projects Nov. 2007⁴⁷ ⁴⁸

Status	Name	Size (MW)	Turbines	Equivalent Homes Energy Use	CO₂ Offset (tons)	NO_X Offset (tons)	SO_XOffset (tons)
Completed	Mars Hill	42	28	24,000-25,000	120,000	288	420
Close to Approval	Black Nobble	54	18	21,500	73,000	17	45.5
	Kibby Mountain	132	44	40,000*	201,470	99	358
	Stetson Ridge	57	38	27,500	N/A	N/A	N/A
Information Gathering	Partridge	50*	25	15,000*	N/A	N/A	N/A
	St. John’s Valley	500-600		180,000*	N/A	N/A	N/A

* Estimated ⁵⁰

Solar Rebate Program

As part of Governor Baldacci’s 2005 Solar Initiative, the Maine Solar Energy Rebate Program was created and was made a law under the title “An Act to Encourage the Use of Solar Energy” 35-A MRSA §3211-B⁵¹. This program was created to provide incentives for the use of solar energy. Rebates became available for the installation of both solar electric and solar thermal systems such as: photovoltaic (PV), solar hot water, and solar air systems. Solar electricity generating systems, or photovoltaics, are eligible for a $3/watt rebate on the first 2000 watts of installed capacity, and a $1/watt rebate for the next 1,000 watts, providing a potential incentive of $7,000⁵¹. The solar thermal systems (solar hot water and solar air) are eligible for a 25% rebates on the installation process or $1,250, whichever costs less⁵². This program was allocated $500,000 annually through 2008; however, the cap for the program is $1.75 million, and it is stipulated that “25% ($437,500) of the total funding be allocated to PV systems and 75% (1,312,500) be allocated for solar thermal systems” ⁵¹. From July 1, 2005 to June 30, 2006, 69 systems were installed, and 26% of the allocated funds were used. There is a significant demand for all the systems, but PV systems were extremely popular, using roughly 30% of the allocated funds in the first year. Those 69 systems installed in the first year have an annual CO₂ savings of 123.1 metric tons, (a lifetime savings of 2,463.0 metric tons), and these PV systems produced a predicted 3,463kWh per year ⁵¹. The solar rebate program is important for two reasons. First, it increases the amount of solar energy being used in Maine and reduces the state’s dependency on non-renewables. Second, this rebate program expands the infrastructure supporting solar energy in Maine, because not only does it provide money for individuals to use solar power, but it also increases the number of certified installers of solar technology. By increasing the number of certified installers, the state facilitates future expansion of the sector.

Stakeholders

There are two main sectors of stakeholders involved with renewable energy use in Maine. First are the independent producers who physically create the energy distributed throughout the state and the region. Second are the associations which facilitate the purchasing of renewable energy for third parties.

The primary association representing the various producers of energy is the Independent Energy Producers of Maine (IEPM), which is comprised of 18 energy producing members, and 19 non-producing members⁵³. IEPM members produce electricity in a “sustainable manner from hydro, biomass, wind, and waste”⁵³. This non-profit organization represents its members in the state legislation and to the PUC.

The second group of actors assembles energy from different sources, and makes it readily available to consumers in Maine. There are two main players in this group, Maine Power Options (MPO), and Maine Interfaith Power and Light (MIPL). MPO negotiates prices for renewable resources for different governmental and non-profit entities in Maine, serving as a mediator between a number of energy providers and the customer. MIPL is a non-profit organization which aggregates energy from a number of different producers and provides energy packages to individual consumers, as well as carbon offset opportunities.

Case Study 1.1 Upcoming Energy Choices: Presidential Implications

The State of Maine’s energy could be significantly impacted from the federal level with the upcoming presidential election. Energy has quickly moved to the forefront of national politics, and there is a considerable divide between the presidential candidates over the direction the nation should head.

For the most part, the presidential hopefuls are towing their party’s line. The Democratic candidate’s energy policy focuses mainly on reducing domestic oil consumption, linking the issue to the need to mitigate climate change. The Republican candidate’s policy on the other hand concentrates on domestic energy production, opening up drilling in the Arctic National Wildlife Refuge (ANWR) and developing coal gasification. They are divided on the issue of taxation and regulation, the Democrats support repeals on tax breaks for oil and gas companies and a significant increase in CAFÉ standards, while the Republicans oppose such measures. Only Republican John McCain has broken ranks, opposing tax breaks, drilling, and ethanol subsidies, while supporting fuel economy increases.

These policies are directly tied to Maine’s own energy policy, especially in regards to oil and gas prices and whether carbon emissions reduction will become a major issue of the Federal government or remain largely a state initiative. The direction of energy for Maine and the rest of the nation will be largely decided this coming November⁵⁴