V. Sustainability of the project: Linking economic and environmental aspects

We have now discussed separately some of the economic and environmental aspects of the proposed project. However, the distinction is largely artificial although it may be useful in identifying the issues. These issues need to be examined together because Vermont's objectives for economic development and environmental conservation cannot be treated in isolation.

In Vermont's Comprehensive Energy Plan of 1998, Fueling Vermont's Future, the objective is defined as maximizing the benefits from energy use through an adequate, reliable, secure, and sustainable energy supply that is both environmentally sound and supports economic vitality. Opponents of the proposed power plants and pipeline might argue that economic interests are being pursued at the cost of environmental conservation. In reality, the projects may undermine both facets of the Vermont's development goals, environmental soundness and economic vitality, at the ultimate cost of sub-optimal benefits to the people of Vermont.

At the very least, linking economic and environmental objectives when evaluating options allows Vermont the chance to weigh alternatives in a meaningful way, given stated priorities, if not envision an optimal approach. This principle could be framed in the following question:

How can Vermont optimally attain its economic development goals while minimizing environmental and social costs to society in keeping with stated priorities?

This question raises the issue that certain non-economic constraints are in place that should be considered when decisions are made about future economic activity. For example, the existence of NOx emission limits places a constraint on Vermont. Whether or not a waiver is granted for an additional 1000 tons per year of NOx emissions, it is clear that that each pound of nitrogen oxides carries certain economic value. Therefore, in order to maximize the benefit of energy use, Vermont needs to carefully consider the relative benefit of each action, weighing the economic and other cost of increased emissions, to name one example. The energy plan calls for efficiency in energy use. Similarly, in the spirit of Vermont's Energy Plan, the principle of maximizing benefits from energy use must include a call for maximum efficiency in allocating all resources, not just energy, but emission constraints as well. Consequently, the question should be asked whether Vermont is making the optimal use of its nitrogen oxides allowance by building a natural gas power plant. Given the fact that Vermont must live with such constraints into the foreseeable future, how should the State pursue its economic development and choices in energy use so that public benefit be maximized from each unit of energy consumed and each unit of allowable emissions used?

An appropriate analogy is the choice facing a region rich in raw materials. The easy way to generate income is to extract the resources and sell them for others to process. The alternative is to add value locally, through industry, and produce goods of higher value. While this latter approach may ultimately be more beneficial, it takes more time and effort. Proponents of the natural gas project probably see it as a means to increase benefits to Southern Vermont through such increased industry. The opposite may be true. While increased industry may increase economic revenue locally, it may be far from optimal use of local resources, and in some way it may be harmful. Southern Vermont's "raw material" is not natural gas. It is quite conceivable that the greatest value over the long term lies not in importing gas to produce electricity, but in Vermont's own assets whose opportunity may be precluded to some extent by the development of a polluting industry.

One example could be tourism. Vermont can and does to some extent promote its image of natural beauty and clean environment to attract tourists. Tourism may conceivably generate greater economic benefit, per unit of energy and emission allowances consumed, than electricity generation. The point here is not to promote particular kind of industries but rather, to emphasize that options exist that may be more beneficial to Vermont in the long run than the proposed project, all things considered. The same clean image that may sustain tourism can also attract commercial operations and lighter industries that are not energy intensive and thus not dependent on the same kind of infrastructure as proponents of the current proposal envision. Such industry may generate greater benefit per unit of energy and emissions allowance than the alternative. If that assumption holds, the benefit is compounded: Greater economic benefit combined with greater ecological benefit. The net result is much closer to an optimal allocation of resources for maximum public good.

Another concern is what may be termed technology lock-in. It is a fallacy to think that a project of the scale proposed has no implications for other options for economic advancement of Vermont. We have identified how pursuing this option may be sub-optimal use of energy and emissions allowances. We have also identified how the environmental impact of such projects can harm other commercial interests such as tourism and siting of other commercial activity. The third issue is the extent to which a large power project of this nature can lock Vermont into a "energy future" that is very different from the one envisioned in the Comprehensive Energy Plan.

Fueling Vermont's Future stresses the need to promote renewable energy sources in Vermont. The primary benefit is seen as reductions in air pollution. Aside from reductions in ground level ozone, acid rain, and greenhouse gas emissions that can be accomplished with development of renewables in Vermont, a variety of other benefits are possible. One benefit is resource diversification, which counteracts the kind of single-resource reliance and vulnerability to fuel price volatility that would likely result from the proposed natural gas project. Another benefit, is the fact that renewable "fuels" are procured locally and avoid the need to purchase fuels from distant regions. Renewable energy technologies can also often be sited in communities, thereby negating some of the need for further development of transmission infrastructure. They can be owned and operated locally, on a small and manageable scale, helping communities to control energy costs and retain energy revenues that otherwise would be siphoned out of the community by a distant generating service provider.

All of these potential benefits can be undermined by a large-scale project like the one proposed for Southern Vermont. Such technology lock-in serves to push out of sight the need to pursue renewable energy options. It creates a disincentive to build any other generating capacity for years to come, particularly as a result of the project's sheer size. It is clear that the scale of the project is the result of the economies of pipeline construction; anything smaller might be economically inefficient in the narrow context of the power plants themselves. On the other hand, it is probably economically inefficient and almost certainly inefficient in the context of the ecological and social needs of Vermont to build a natural gas project so large that other energy options are precluded altogether for the foreseeable future.

The most viable form of new renewable energy for Vermont is wind power. Wind resources are quite good in Vermont and the State is in an excellent position to start pursuing this form of energy. It is an attractive option for all the reasons mentioned above, plus the fact that it can be scaled to the needs of Vermont as energy demand grows. The power plant project proposed for Rutland and Bennington only comes in one size, which is enormous, much larger than what Vermont needs. Conversely, wind power is inherently modular. One wind turbine can be built after another as demand grows. Economies of scale can be pursued by planning wind farms with a large number of turbines in a centralized approach. However, this may not be optimal. Contrary to the conventional approach in the United States, the example of Denmark and Germany may be more appropriate where wind energy has been tremendously successful in a decentralized approach where wind turbines are typically owned by communities rather than grid connected generation utilities.

The fact that Vermont does not have any pressing shortage of capacity allows the State the luxury of meeting its growing energy needs in small increments through a variety of technologies, pursuing its stated goal of advancing renewable energy sources. Otherwise, Vermont might have to rush to build on a larger scale, and thus be forced to focus on large fossil-fueled generation. Vermont has a great opportunity at this moment to define its energy future in the most optimal way, securing the stated principle of maximizing public benefit. Natural gas generation will always be an option to Vermont. There is no opportunity lost there if the State decides to move prudently and focus on smaller scale and renewable technologies for the time being. On the other hand, if the proposed project materializes, the real opportunity of a more sustainable energy future may be lost. A turning point will be the time when the fate of Vermont Yankee is determined. If that plant is retired before its license expires in 2012, the current project or some other version may become a more practical solution than it is now. But even then, with so much new generation capacity already coming on line, this project is not likely to be needed. In the meantime, Vermont should proceed in small increments and stay focused on developing renewable energy technologies.