Example: Nantucket Embracing Community Empowerment (hypothetical numbers in use)

1. Town of Nantucket decides to make use of Community Empowerment and establishes, or authorizes, an energy committee to gather information and explore options:

  • The average annual usage of Nantucket’s 9,000 residents is 10 MWh each year, for a total of 90,000 MWh / year
  • Nantucket municipal and school properties use another 10,000 MWh/ye

2. Nantucket’s Energy Committee puts out an RFP and receives proposals from a land based wind developer in Western Mass:

  • The project generates 10,000 MWh per year, i.e. 10% of Nantucket’s total usage
  • Offer is for a 15 year contract (PPA) for differences on wholesale energy price in MA, using model Community Empowerment contract provided by the state
  • The “Strike Price”: $80/MWh if RECs are included, OR $50/MWh for the contract for differences only
  • The Energy Committee holds a public hearing to describe the project and proposal, answer questions, and gets input from the community

3. The Energy Committee recommends to the Selectman that the Town accept the contract offer:

  • Buying the RECs so that the residents can claim to be using more “renewable, wind energy”
  • Town Meeting votes to enter into contract on behalf of town: this is same authorization process for a town to form a municipal aggregation under MGL Chapter 164, Section 134
  • Residents and businesses are notified of vote and given a one-time 60 day window to opt out
 

4. In the first year of the contract the project developer receives an average weighted wholesale price, “Reference Price” of $67 perMWh

  • Therefore, Nantucket’s residents owe to the wind project $13 per MWh ($80 - $67 = $13), which is 1.3 cents per KWh
  • Because the wind project generates 10% of the town’s usage, each user pays 10% of this amount owed to the project, on a per KWh basis
  • 10% of 1.3 cents is .13 cents, so each user is charged .13 cents per KWh on their distribution utility bill
  • The RPS requirement in this year was 10%, so with the additional 10% from the wind project, Nantucket residents used 20% renewable energy

5. In the second year of the contract, the average weighted wholesale price, “Reference Price”, is $90 per MWh

  • Therefore, Nantucket’s residents are owed from the wind project $10 per MWh ($80 - $90 = -$10), which is 1.0 cent per KWh
  • Because the wind project generates 10% of the town’s usage, each user is entitled to 10% of this amount owed from the project, on a per KWh basis
  • 10% of 1.0 cent is 0.1 cents, so each user is credited 0.1 cents per KWh on their bill
  • The RPS requirement in this year is 11%, so with the additional 10% from the wind project, Nantucket’s residents use 21% renewable energy

6. Benefits from Nantucket’s contract

  • Nantucket’s residents, businesses and government have 10% of their electricity cost stabilized at 8 cents / KWh, for 15 years
  • The price could also have been stabilized at 5 cents/KWh, if the town decided they didn’t care about using more renewable energy than the RPS
  • A new wind project is able to be built in Mass. which wouldn’t have been built otherwise, because the project is able to secure financing on the basis of its contract with Nantucket
  • All of New England benefits from lower electric and gas costs, because there is that much less demand for gas, and because of the wholesale price suppression from the wind project being a “price taker” in the wholesale electric market