Follow the Money

Keeping it local

by George Harvey

Money used for electric power can flow out of a region’s economy, or it can stay local. If it flows out, other money needs to flow in to replace it, but it need not flow out.

We might consider the example of the Vermont Yankee Nuclear Power Plant (VY). VY claims to produce about 4,700 GWh (4,700,000,000 kWh) per year. They also claim to put about $100 million into the local economy, which includes Vermont, Massachusetts, and New Hampshire.

The power VY produces is sold, mostly in New Hampshire and Massachusetts. The power is sold at varying rates. Some power is sold under terms of a long-term contract, at a price agreed to in advance. When VY was trying to negotiate a deal with Vermont, it offered a reduced rate of 6½¢ per kilowatt-hour. The remainder of what was sold to Vermont would have been on short-term contracts, and the costs would have depended on the price at the time the contract was taken, at the current prevailing price, whatever that may be. For the purpose of this article, I will assume a wholesale rate of 8¢, though the price can vary enormously.

At 8¢, 4,700 GWh would sell for $376 million. That money comes from the utilities that sell to ratepayers. The ratepayers’ cost is probably a bit less than double the wholesale cost, but we could use $750 million as a possible annual cost.

Many of the utilities are local, and when they are, the money that is the difference between wholesale and retail stays local. But the difference between the $376 million Entergy might collect, and the $100 million it claims to put into the local economy is a balance of $276 million, and that would leave the local economy.

Other sources of power have similar stories. Much of our power comes from outside the local area. Even if the power is generated locally, it usually uses fuels that are imported to the area. Parts for power plants are usually not made locally. Companies that are not local take their profits from the area, and distribute them all over the world. All these things represent money that leaves the local economy.

The money that leaves the local economy has to come from somewhere. It comes into this area because of goods and services created here and sold. Tourists bring in money when they visit. Skiers do as well. Dairy products bring in money, and so does maple syrup. Clearly, however, you have to sell a lot of cheese and ski passes to pay for the hundreds of millions of dollars being removed from the economy for power and fuel.

There are ways to stop money from leaving the local economy. One important possibility is to use renewable, local power generation. Vermont is an example, with other area states having similar statistics. According to the US Department of Energy’s National Renewable Energy Laboratory, Vermont has the following local power resources:

According to the DOE, we have enough local resources to supply over 1200% of the power we need. Covering the need would only take 8.3% of the resources we have. I should note that the DOE estimates only count those resources that are currently available, and do not include developing park land or reserved forests, so wind, for example, could only be developed on about 2.5% of the area of the state.

It would appear that we could get all our power from solar, but in truth, we cannot afford to get all our power from one resource. This is why the capacity factor is important. If the sun does not shine for several days during a high demand period, solar will not supply enough power, no matter how much we develop. Biomass and hydro can be reliable power resources, but they are insufficient to fill in for all potential demand. We need to develop at least some of every available resource.

The positive sides of developing renewable power clearly include improved air quality, and improved safety. Cost analysis indicates that they include lower utility bills. Experience in other places indicates they will increase employment. But if we follow the money, we can see a huge improvement in local cash flow when renewable resources are utilized.