The final version of a study of the proposed clean heat standard, a policy that would reduce climate-change-causing emissions that come from heating buildings in Vermont, shows an updated overall cost estimate that is roughly half what was previously presented.
State officials are currently moving forward on a number of studies related to the clean heat standard, with a goal of giving lawmakers a clearer picture of the costs and benefits of the regulatory framework ahead of the 2025 legislative session, which begins in January. Lawmakers are expected to decide whether to implement the clean heat standard during the upcoming session.
On Thursday, NV5, a consulting group hired by the state’s Public Service Department, presented the final results of the pre-implementation study. The study concluded that costs would be less than $10 billion while confirming that a clean heat standard could help Vermont meet its heating-related emissions reduction requirements, as defined by the 2020 Global Warming Solutions Act.
That was the study’s “core purpose,” said TJ Poor, director of the department’s Regulated Utility Planning division, “to find out and examine whether it’s even possible to meet the targets in the thermal sector, and whether we’re able to do it cost effectively.”
A clean heat standard would regulate businesses that import fossil fuels used to heat buildings (including fuel oil, propane, kerosene, coal and natural gas) into Vermont. Those businesses would need to offset the climate emissions that their products produce, either by installing heating systems that pollute less, or by paying a fee.
Money collected through the clean heat standard would be used to help Vermonters switch to “clean heat measures,” which include cold-climate electric heat pumps, insulating buildings or sealing windows, installing advanced wood heat or solar hot water systems, using some forms of biofuels and other options.
While the goal of the policy is to reduce emissions and encourage Vermonters to transition to heating systems that pollute less, a conversation about the policy’s cost to heating fuel consumers is at the core of the debate. Advocates for the policy have argued a clean heat standard would provide financial incentives for people to switch to climate-friendly heating systems, but opponents worry the policy could raise heating prices for those who do not make the switch.
In May 2023, state lawmakers overrode Gov. Phil Scott’s veto of S.5, a bill that set up, but did not implement, a clean heat standard. Instead, lawmakers directed the state’s Public Utility Commission to complete a detailed framework that they could analyze and decide whether to pass in the 2025 session.
As part of the study, NV5 conducted an economy-wide cost-benefit analysis of the clean heat standard, which the firm presented on Thursday to members of a technical advisory group that’s charged with ironing out details of the policy before the legislative session.
That estimate is $9.6 billion — about half of the consulting firm’s initial $17.3 billion estimate, presented in August.
NV5’s cost estimate includes “anything that anybody pays, including the federal government, including the customer, including the program, on fuel bills” from the time of its implementation until 2050, according to Poor.
The study does not estimate the additional cost of the clean heat standard on heating fuels as an added price-per-gallon, because, as Poor and others warned at Thursday’s presentation, the cost-benefit study is “not an implementation plan.”
While “there is cost information in the report,” Poor told members of the technical advisory group on Thursday, that cost information should be used to help guide the details of how the clean heat standard policy will be carried out.
The cost estimate changed in response to feedback from members of the public about the data the consulting firm had used. Jared Duval, executive director of the Energy Action Network and a member of the Vermont Climate Council, was among those who recommended changes and said the cost in the consulting group’s first estimate was about twice as high as it should have been.
After the firm’s presentation on Thursday, Duval told VTDigger his concerns had been addressed, and that he was more confident in the group’s estimate this time.
“For me, the main takeaway of this study is the same of every study that has been done on this question,” he said. “It’s possible to achieve our pollution reduction targets in a way that provides net benefits to society.”
The study estimated that a clean heat standard would provide $11.7 billion in societal benefits, which includes the societal benefits of reducing carbon emissions and the energy cost savings that would come from switching to more efficient heating systems, along with other benefits.
After the Public Utility Commission designs the program, the additional per-gallon costs of fuel attributable to the clean heat standard are expected to become clearer, but using the figures in the pre-implementation study to determine per-gallon figures is “not appropriate” yet, Poor said.
The cost-benefit conclusions of the study are a broader type of analysis and “should not be considered a cost of the clean heat standard,” he said.
Asked what members of the Department of Public Service take away from the new study, Poor said affordability is still a concern.
He also pointed to workforce challenges highlighted in the study. Vermont has a lack of people to fill jobs needed for the program, with the largest gap in those available to complete weatherization projects, the study notes.
“Particularly when you think about the other challenges in the state, where would that workforce live?” Poor said. “It’s another thing that we’re going to work through.”
Sen. Chris Bray, D-Addison, who first introduced legislation to create a clean heat standard, told VTDigger that he was in the midst of poring over the study. He plans to work over the session to ensure the policy is affordable for Vermonters, he said.
“I think that’s actually part of my job, right, through the fall and into the session, to say, ‘Look, we are going to maximize the affordability of this program, and so we’re not going to start spelling out costs before we’ve really looked carefully at all the options for designing and running a truly affordable program,’” he said.
Bray said that he saw an analysis in which someone did take numbers from the newly-published study and converted them to a per-gallon price attributable to the clean heat standard. The number presented was around $1.70 per gallon, he said.
“I, for one, am not interested in building a program that adds $1.70 to a gallon of heating fuel,” he said. “That would be a real problem for many Vermonters.”
Bray said he understands Vermonters’ desire to know the cost of the program, but a definitive answer is not available yet.
“It’s hard for everyone, really, to be patient and wait for all the information we need to be assembled in order to do our best work,” he said.
Read the story on VTDigger here: Consultants update ‘clean heat standard’ cost-benefit figures in final version of study.