Natural gas turbine at Dominion’s Greensville power plant. President Trump might have ended the regulatory “war on coal,” but he can’t change fundamental economics, which still favor gas and solar.
President Trump has never hidden his dislike of his predecessor’s Clean Power Plan, which would have required the 50 states to order their electric utilities to curtail carbon dioxide emissions in the cause of combating global warming. Nine months into the Trump administration, Environmental Protection Agency (EPA) chief Scott Pruitt finally has announced formal steps to repeal the plan. Reports the New York Times:
“The War on coal is over,” Mr. Pruitt said. “Tomorrow in Washington, D.C. I will be signing a proposed rule to roll back the Clean Power Plan.” …
Mr. Pruitt’s proposal for repeal will now have to go through a formal public-comment period before being finalized, a process that could take months. Mr. Pruitt will also ask the public for comment on what a replacement rule would look like, but the E.P.A. has not offered a timeline.
Admittedly, the regulatory battle is far from over. “Environmental groups and Democratic-controlled states are expected to challenge these rules on multiple fronts,” says the Times. Moreover, there is nothing to stop individual states from implementing tough CO2 standards on their own initiative. Indeed, here in Virginia, the McAuliffe administration has vowed to boost Virginia’s commitment to renewable energy.
But a rollback of the Clean Power Plan won’t change market fundamentals. Just as the natural gas fracking revolution led to natural gas displacing coal over the past decade, market forces will dictate that renewable energy assume an increasing role in the decade ahead — regardless of whether states set CO2 emission caps or not.
In its 2017 Integrated Resource Plan (IRP), Dominion Virginia Energy has laid out its vision for the energy future that calls for increased natural gas and renewable energy. Under its least-cost regulatory scenario, which looks increasingly likely, Dominion won’t build any new coal- or nuclear-powered plants. It will renew licenses for its existing nuclear units but will not build a third unit at its North Anna Power Station, which by some estimates would cost $18 billion or more. The utility will build new gas-powered plants to provide base-load capacity, supplemented by a mix of solar (up to 5,200 megawatts capacity) and gas-fired combustion turbines that can quickly ramp up and down in response to volatile solar output. (Since publication of the IRP, Dominion has demonstrated a keen interest in building a pumped storage facility in Southwest Virginia, which could eliminate the need for some natural gas combustion-turbine units, but the economics of such a scheme have not been fully explored.)
Meanwhile, environmental groups have been pushing aggressively for a future electric grid dominated by renewable electricity, using energy efficiency to reduce demand and battery storage to even out fluctuations in solar output. The greens are opposed not only to building a third nuclear unit at North Anna but to re-licensing the existing units, creating a void that would have to be filled by some power source other than coal. The greens also oppose construction of the Atlantic Coast Pipeline, which Dominion co-owns and is counting on to supply its growing fleet of natural gas base-load and combustion-turbine plants. The environmentalists are lobbying for essentially the same power mix advocated by their Green Party counterparts in Europe.
German energy policy: not working out as planned.
Interestingly, the New York Times published an article two days ago highlighting how Germany’s shift to green power has stalled. Since 2000 Germany has spent an estimated 189 billion euros, or about $222 billion, on renewable energy subsidies with the goal of cutting carbon dioxide emissions. Ironically, CO2 emissions have remained stuck at 2009 levels, even as the shift to natural gas has allowed the U.S. to reduce its CO2 output. As the retail cost of electric power has doubled since 2000 with little progress on the CO2 front to show for it, large blocs of the German electorate are getting fed up.
“Julian Hermneuwöhner is one such voter,” the Times reports. “Mr. Hermneuwöhner, a 27-year-old computer science student, said his family paid an additional €800 a year because of Energiewende.”
Germany obtains about one-third of its electricity from wind and solar, about double the rate for the U.S. But a decision after the 2011 Fukushima nuclear disaster in Japan prompted the Germans to accelerate the phase-out of nuclear power. The only other energy source available: coal. A doubling of electricity rates and no reduction in CO2 is not a winning electoral combination.
Chancellor Angela Merkel’s Christian Democratic Union still supports Energiewende, the shift to renewables, but two important parties, the pro-business Free Liberals and the anti-immigrant Alternative for Germany party, do not.
Bacon’s bottom line: If I were a betting man, I would wager that Virginia’s mid-term energy future will be dominated by gas and solar. Wind power will remain a niche contributor unless off-shore wind comes into play a decade or more from now. The North Anna 3 nuclear unit will never be built, although Dominion will succeed over furious opposition in re-licensing its existing Surry and North Anna units. The utility will keep its existing coal-fired units in operation through their design life-times. But all the expansion in capacity will come from gas and solar.
And, yes, Dominion will need to expand capacity, even as energy efficiency dampens electricity demand nationally. The recent announcement of the new Facebook data center in Henrico County demonstrates another side of Virginia’s energy future. That single server farm will consume as much electricity as 32,500 homes. Virginia is highly competitive in the data-center industry, and it could add dozens or more data centers in the next two decades. Other states might experience declining demand for electricity, but as long as data centers represent one of Virginia’s great hopes for economic development, electricity demand will continue to grow.
