Category Archives: Environment

A Fourth Force in Virginia Energy Politics

The political economy of energy in Virginia used to be simple. Three main interest groups contended to formulate energy policy in the state: environmentalists, consumers, and electric utilities. Consumers, both homeowners and businesses, pressed for lower electric rates. Environmentalists fought for cleaner air and, more recently, lower CO2 emissions. And utilities — the only parties responsible for keeping the lights on — lobbied for reliability at a reasonable cost (within a framework that preserved profits).

In the last few years, a fourth force has entered the picture, and the political dynamic is changing. The Old Dominion has seen a surge in the number of small, independent solar- and wind-power developers. They have exercised limited political clout, but now large, national corporations embracing a green energy agenda have entered the fray.

Half the Fortune 500 companies have committed to green agendas, and they signaled their desire earlier this year to see policies in Virginia that were friendlier to wind power, solar power and energy efficiency. (See “Clean Energy Options and Economic Development.”) Their message: If Virginia wants to attract outside corporate investment, the state had better get on board the solar-powered electric train.

Then, in an unprecedented flexing of political muscle last week, a green industry group injected itself into the Virginia gubernatorial race. Advanced Energy Economy (AEE), an association of green industry companies, delivered a policy memo to the campaigns of GOP nominee Ed Gillespie and Democratic nominee Lt. Gov. Ralph S. Northam.

“Evolving consumer preferences, dynamic new technologies and aging infrastructure are causing the energy system as we have known it to modernize,” states the memo. AEE outlines four priorities:

  • Allow competitive procurement to attract investment and benefit consumers. Virginia energy policy should open up third-party market alternatives. “While current Virginia law allows competition in statute, more could be done to attract investment and benefit consumers.”
  • Expand access to advanced energy options. The ability to control energy costs is a factor in where many corporations choose to locate. But they’re not just looking for cheap energy — they want green energy.
  • Maximize energy efficiency and demand-response. Under Virginia regulatory regime, electric utilities lose money when customers reduce their electricity consumption, discouraging utilities from investing in energy efficiency programs and demand response. Virginia should “decouple” electricity sales from profitability so utilities don’t lose when they invest in energy efficiency and demand-response programs that cut sales.
  • Modernize the electric grid. Evolving consumer preferences, new technologies, and the need to replace aging infrastructure have created a need to modernize the electric grid. The regulatory system, which inadvertently stifles innovation, needs to be modernized.

AEE wants more wind and solar, more electric vehicles, more energy efficiency, more innovation, and more freedom for entrepreneurs to design solutions for customers. At the same time, the association acknowledges that the way to achieve these aims is not to browbeat electric utilities into submission but to change their incentives, which would take a major re-writing of regulatory law.

Bacon’s bottom line: To advance AEE’s vision, Virginia would need an upgraded electric grid flexible enough to accommodate a less centralized, more distributed grid while still maintaining system-wide reliability. In effect, the green businesses are calling for a deregulation of electric power production. But no one wants to build a competitive and redundant electric transmission-distribution system.

Any viable energy system of the future must allow electric utilities to continue investing in, and earning a profit on, their transmission-distribution systems. Also, deregulation of electricity generation would require grappling with the issue of “stranded” investments — investments in generating capacity that utilities made in good faith under the existing regulatory environment that might not be economical and must be scrapped in deregulated environment.

Like the environmental movement, this Fourth Force in energy politics wants to see a fundamental transformation of Virginia’s electric power system. Unlike the environmentalists, many of whom see Dominion and Appalachian Power as the enemy, the Fourth Force acknowledges the need for a healthy utility sector. This new interest group has plenty of money, which means it can afford to hire lobbyists and spread cash to political campaigns. Plus, these new voices will be more credible to Virginia’s pro-business legislators than the more strident environmentalists had been. 

The politics of electric power in Virginia has reached an inflection point. We are entering a new era.

Workgroup Seeks Compromises to Move Solar Forward

The consensus-building workgroup that fostered 2017 legislation to promote community solar energy in Virginia reconvened Monday to grapple with more intractable issues that stand in the way of widespread adoption of solar power.

Participants in the Solar Policy Collaborative Workgroup had clashed repeatedly in the General Assembly over the years, but decided to pursue a different approach in 2016. Mediated by Mark Rubin, executive director of the Virginia Center for Consensus Building at Virginia Commonwealth University, they worked out a compromise proposal that will allow Virginians to purchase renewable electricity generated by local, independent solar developers and marketed by electric utilities.

The General Assembly enacted the law in the 2017 session, and participants hope to build on the success, tackling issues that they could not resolve last year. “A level of trust and respect has been established among members of the steering committee,” said Rubin when convening the Monday meeting.

This year the ad hoc organization is seeking input from a broader array of stakeholders and inviting the public to attend meetings. Sub-groups will discuss issues relating to land use, large developers, large customers, community development and net metering. Of the five topics net metering — in which utilities pay owners of solar facilities for surplus electricity they supply to the grid — stimulated by far the most interest, inspiring numerous comments from the audience.

“No ideas are off the table,” said Sam Brumberg, counsel for the Virginia, Maryland & Delaware Association of Electric Cooperatives, and a leader of the net metering sub-group. He cited time-of-use rates, charging for usage of the grid, feed-in tariffs (which enable long-term contracts for solar generators) and other options that might be considered to encourage distributed solar development. “No idea is off limits.”

Brumberg was joined by Scott Thomasson, southeast director of Vote Solar. His organization has engaged in some “fierce battles” in other states over solar policy, he said. By participating in the Virginia solar workshop, he added, he hopes to “get better outcomes through dialogue. We want to avoid the melt-downs in other states.”

Net metering. One thing most audience members agreed upon is that the existing net metering law, designed to protect electric utilities, is a hindrance to widespread adoption of solar energy by homeowners, small businesses, and other small users. Current law limits net metering to residential systems up to 10 kW and commercial systems up to 500 kW, with a program cap if generating capacity reaches 1% of an electric utility’s peak load for the previous year. The benefit to generators is that their surplus electricity can be used to offset electricity purchases from the utility during off-peak periods.

Dominion Energy has sought to limit the surplus that generators could use to offset their electricity sales, while both Dominion and Appalachian Power have insisted upon stand-by charges to compensate them for the cost of maintaining the electric grid that solar-generating residences would draw upon for backup. Builders, environmentalists and other advocates say the restrictions make solar less attractive to install and give small, distributed generators no credit for the load they take off the transmission and distribution grids.

The interests of the electric utilities and the others seem starkly opposed, and there is no obvious way to reconcile the two. But Katharine Bond, senior policy adviser for Dominion, sounded an optimistic note, suggesting that new technology and novel rate structures might make the utilities “more agnostic” about solar initiatives that cut into utility revenues.

Another complication is that net-metering advocates are a diverse group and do not agree amongst themselves on the best approach. Charles Guarino, a Richmond-area resident, made a plea for simplicity in the net metering law. “If people don’t understand it, they won’t participate,” he said.

But Tom Hadwin, with Waynesboro-based ACN Energy Solutions, advocated a value-of-solar tariff based on the premise that it made more sense from the perspective of balancing load on the electric grid to put solar in some locations than in others. Electric rates would be less favorable for solar located near where the grid was congested than for locations where grid congestion was not an issue.

“Simplicity is good, but there are trade-offs,” said Thomasson with Vote Solar., who suggested that a tariff that varied by time of day and load demand might suit some better.

“Not everyone can get what they want,” said Brumberg, but “if we’re successful, folks will get some of what they want.” Continue reading

Why Would Dominion Want a $19 Billion Nuclear Plant?

North Anna Power Station

The Nuclear Regulatory Commission has indicated it will issue a license within the next few days to build a third nuclear reactor at Dominion Energy’s North Anna power station, the Richmond Times-Dispatch reported earlier this week.

Dominion has spent $600 million so far on planning, engineering and developing the 1,450-megawatt facility, which has been widely reported to cost an estimated $19 billion. While acknowledging the huge up-front expense, Dominion has argued that it needs to keep open the option of a third nuclear unit in case federal and state regulators impose strict carbon controls on Virginia’s electric utilities.

Robert Zullo has done a fine job of covering Dominion for the Richmond Times-Dispatch, and I rely upon his reporting to keep up with the energy and environmental issues the company is embroiled in. But I would not frame the North Anna 3 issue as he did:

Given the massive cost of the controversial project, which has been opposed by both consumer and environmental groups and has yet to be approved by the State Corporation Commission, it remains unclear whether the utility will actually build the reactor.

True, consumer and environmental groups do oppose the project, and, true, it is unclear whether the utility will build the reactor. But the driver isn’t the cost, which is horrendous. The driver is what kind of regulatory regime federal and state governments enact to reduce carbon dioxide emissions from Virginia power plants. If regulators choose a “mass-based” approach that caps CO2 emissions on existing power plants and all new generation units built in the future, Dominion argues, the only way to meet electricity demand, maintain federally mandated reliability standards and stay within the CO2 limits is to construct a new nuclear unit, which emits zero carbon.

Dominion is not advocating construction of North Anna 3. It is not recommending construction of North Anna 3. There is no indication that it even wants to build North Anna 3. Rather it is preserving the option should political and regulatory developments leave it no alternative.

The company lays out its logic in its 2017 Integrated Resource Report, a planning document that provides a 15-year look into the future. There is so much political and regulatory uncertainty that Dominion examines eight different scenarios predicated on different schemes for restricting CO2 emissions. Building North Anna 3 appears in only one of the eight options, which the IRP refers to as “Plan H.” Here’s how Dominion describes that plan:

Plan H is a Mass-Based program that limits the total CO2 emissions from both the existing fleet of fossil fuel-fired generating units and all new generation units in the future, but also includes the construction and operation of North Anna 3 in 2030. This Alternative Plan was developed assuming that the Company achieves [Clean Power Plan] compliance through portfolio modifications with no market purchase of CO2 allowances. This Alternative Plan limits the generation of [the Mt. Storm coal-fired power station] to a 40% capacity factor.

Key assumptions include:

  • Retirement of up to four coal-fired units at the Mecklenburg and Clover power stations, totaling 577 megawatts, by 2025.
  • 3,360 megawatts of additional solar capacity;
  • 2,290 MW of additional natural-gas, Combustion Turbine capacity;
  • A 20-year extension of the four existing nuclear units at the North Anna and Surry power stations.
  • Addition of 1,452 of nuclear capacity at North Anna 3.

Dominion acknowledges that the compliance costs of Plan H would be extremely expensive — $14.79 billion over the IRP study period compared to $5.71 billion for the next most expensive alternative and $2.3 billion compared to the least expensive alternative.

The impact of Plan H on residential consumers would be considerable. Dominion estimates that average monthly electric rates for a typical residential customer using 1,000 kilowatt hours per month would increase 29.44% by 2030 and subside to 19.01% higher by 2042. That would be more than five times the increase of the next most costly plan in 2030.

Source: Dominion Energy

A key assumption embedded in Dominion’s projections is that electricity demand will increase by an average of 1.5% annually over the next 15 years. The IRP forecasts a compound annual growth rate of 2.04% for the Virginia economy, based upon data supplied by Moody’s Analytics. Thus, a 1.5% load increase implies continued energy-efficiency gains that reduce the energy intensity of each unit of economic growth.

Virginia’s success in attracting energy-intensive data centers plays into the utility’s Virginia forecast. “The Company has seen significant interest in data centers locating in Virginia because of its proximity to fiber optic networks as well as low-cost, reliable power sources,” the IRP says. (See yesterday’s post, “Building on Virginia’s Data Center Boom.”)

Some observers argue that Dominion’s forecast overstates demand growth. Most notably, PJM Interconnection, the regional transmission organization of which Dominion is a part, provides a significantly lower growth forecast for the Dominion transmission zone, as seen here:

Source: Dominion Energy

The IRP addresses this forecast discrepancy at length. Dominion says four factors account for the gap in projected demand growth. First, PJM eliminated new data center growth from its forecast. Second, PJM makes assumptions about Distributed Energy Resources (primarily solar) that overestimate how they would perform during critical system conditions. Third, PJM bases its forecast of appliance saturation and efficiencies on Southeast regional data, while Dominion uses historical data from its own service territory. And fourth, Dominion uses a different methodology to account for public sector energy growth, which accounts for 13% of company sales.

Another unknown is the likelihood that a Plan H scenario will materialize.

The Trump administration has expressed a desire to scrap the Clean Power Plan. Even if it succeeds in neutering the CO2 regulations, though, a future administration could reinstate them. Meanwhile, the Virginia environmental lobby is pushing hard for the CO2 caps contemplated in Plan H, and the McAuliffe administration will announce its own plan later this month to combat CO2. Furthermore, several environmental groups have gone on the record in opposition to extending the life of the existing Surry and North Anna nuclear plants. Should Dominion fail to renew those licenses, it would have to make up nearly 3,400 megawatts of capacity elsewhere. Unable to add fossil fuel capacity under a Plan H scenario, it would be limited to renewables or nuclear. An all-renewables approach could create an unstable grid with major reliability issues. That would leave North Anna 3 as the only alternative.

Many possibilities might obviate the necessity of building North Anna 3 under a Plan H scenario. The electricity load might increase at a slower pace than Dominion forecasts. The utility might succeed in extending the life of its existing nuclear units. Battery storage technology might advance to the point where it is feasible store massive amounts of sunlight-generated energy. There is no way to know at this time what will happen. But as the entity responsible for keeping the lights on, now and far into the future, Dominion is taking no chances. Despite the jaw-breaking cost, it is not taking the North Anna 3 option off the table.

Building on Virginia’s Data-Center Boom

Data centers are the hottest trend in Virginia economic development these days. But the state is only beginning to think through the implications.

Loudoun County, home to 75 facilities, has developed the largest cluster of data centers in the country (and perhaps the world), and next-door-neighbor Prince William County is rising fast. Rural Mecklenburg County has attracted nearly $2 billion in investment as the location of Microsoft’s East Coast hub for online services. QTS has retrofitted an old microchip factory in Henrico County to open a data center, while DP Facilities, Inc., opened a $65 project center in Wise County. Soon, Virginia Beach will enter the data-center sweepstakes when construction is complete on a 4,000-mile transatlantic cable connecting Virginia to Europe.

According to Paula Squires writing in Virginia Business magazine, Virginia boasts more than 650 data processing, hosting and related establishments that employ more than 13,900 people. Since 2006, the industry has announced more than $11.8 million in new investment and 6,600 jobs. The jobs, while relatively few in number, pay well (more than $100,000 a year in Northern Virginia), and generate a gusher of local taxes.

Billions of dollars are flowing into the sector as the global economy embraces cloud computing to handle the massive surge in data collection and storage. A Markets and Markets research report estimates that the cloud storage market will grow from $23.76 billion in 2016 to $74.94 billion by 2021 — a compounded annual growth rate of 25.8%.

Loudoun County was one of the first localities anywhere to see the economic development potential. The county had a built-in advantage — a massive network of fiber-optic cable built by AOL and WorldCom during the heyday of the 1990s Internet bubble. WorldCom went bust and AOL has a much-diminished presence, but the cable infrastructure remained — and high-capacity connectivity is an essential prerequisite for a data center. Loudoun claims that 70% of the world’s Internet traffic passes through the county. The concentration of data centers is so pronounced that economic developers refers to a six-mile radius around Waxpool Road and Loudoun County Parkway as “data center alley.”

The county has built on its infrastructure advantage by learning how to expedite zoning, permitting and construction. CyrusOne completed construction of a 220,000-square-foot data center in Sterling in 180 days — reputedly the shortest construction time fever for a center that size, reports Squires.

To incentivize investment, the state exempts computer equipment bought or leased for a data center from the retail sales and use tax. Henrico County has dropped its business property tax rate on computers and related equipment from $3.50 to $.40 per $100 of assessed value.

Also, Dominion Energy has emerged as a significant partner. The endless racks of servers inside data centers consume electricity and generate heat, which must be cooled by massive HVAC systems. Dominion charges 5.2 cents per kilowatt hour for large facilities, and a slightly higher rate for small ones. “We’re very competitive,” says Stan Blackwell, director of customer service and strategic partnerships for Dominion. “We have some of the lowest data-center rates in the nation.”

Bacon’s bottom line: The rise of the data-center industry raises two pointed sets of public policy questions.

First, how can Virginia optimize this opportunity? What are the critical drivers? Obviously, the existence of high-capacity fiber networks is one consideration. It appears from the map atop this post that Virginia has one of the densest clusters of long-haul fiber capacity in the country. How crucial is that advantage? Does Virginia’s proximity to a relatively fiber-poor Southeastern U.S. give data centers serving that market an edge? Is the competitive advantage bequeathed by fiber-optic infrastructure such that Virginia should consider encouraging investment in more? Conversely, does it do any good for Virginia to invest in its own fiber infrastructure if connections to neighboring states are lacking? Many, many questions.

Electricity is one of the largest costs associated with operating a data center, accounting for roughly 10% of the total cost of ownership — and it is one of the largest costs that vary by location. Dominion’s electric rates confer a significant competitive edge for locations within its service territory.

Graph credit: Dominion Energy

One of the biggest challenges for Dominion — and the further expansion of the data-center industry — is delivering electricity to these data centers. In one particularly controversial case, the utility wants to build a 230 kV transmission line and substation from Gainesville to Haymarket to serve an Amazon data center. Locals have organized in opposition, claiming that the 100-foot-tall towers will disrupt views and harm property values to benefit a single industrial customer. They insist that Dominion bury the line at considerable expense. If Virginia wants to develop the data-center industry more fully, it may need to find ways to resolve the inevitable utility-landowner disputes fairly expeditiously. No company wants to wait years to find out whether a project will get the electric power it needs.

A second big public policy question centers on the implications of the data-center boom for electricity demand in Virginia. According to Virginia Business, data centers represent Dominion’s fastest-growing customer segment: About 7% of the company’s retail portfolio consists of data centers.

This feeds into the debate over Dominion’s future electric generating mix. Dominion’s 2017 Integrated Resource Plan (IRP) assumes that electric load will increase at a compounded rate of 1.5% over the next 15 years — considerably higher than PJM Interconnection’s forecast for the Dominion service territory. Dominion argues that PJM has not taken into account the phenomenal growth of demand by Virginia-based data centers. These projections matter because they influence how much new generating capacity — including nuclear, as I will explore in a forthcoming post — Dominion adds in the years ahead, with tremendous implications for rate payer and the environment.

The data center surge could prove to be an economic development boon for Virginia. But the industry’s growth impacts local zoning and land-use practices, tax policy, fiber-optic infrastructure development, and energy policy. The McAuliffe administration would be well advised to pull together a conclave to determine how to sort through these issues.

Anyone Remember the Coal Ash De-watering Controversy?

Bremo Power Station de-watering test results. Click for legible image.

Environmental controversies are flying so fast and furious in Virginia these days that it’s hard to keep track of them all. As for last year’s disputations, they are quickly forgotten. Remember, for instance, the wrangling over Dominion Energy’s plans for de-watering coal ash ponds at its Bremo and Possum Point power stations?

After intense negotiations, riverkeeper groups, the Southern Environmental Law Center, Dominion, and the Department of Environmental Quality settled upon a protocol for treating and monitoring the quality of effluent before it entered the James River and Quantico Creek. How has the arrangement worked out? The absence of headlines this year is one clue. The water-testing results posted on Dominion’s website provide another.

The tests, which cover pH, suspended solids, oil & grease, hardness and 15 heavy metals and other compounds, show that the water treatment process is cleaning the water to the point where the presence of most pollutants is impossible to detect.

At the Bremo station, only arsenic and chloride appeared in measurable quantities among the three samples taken in early May, and the concentration of both chemicals is less than one-tenth of the Environmental Protection Agency’s permit levels.

Possum Point power station de-watering test results. (Click for larger image.)

At Possum Point, five chemicals appear in large enough quantities to be detectable, but all are safely within prescribed bounds. One chemical, thallium, nudges up close to the permit limit but does not go over.

I don’t purport to have any expertise in these matters, but it looks as if the arrangement is working as it should. If you want to browse through a year’s worth of test results, click here.

This is far from the end of the story, of course. Dominion still must obtain permits for de-watering its Chesapeake and Chesterfield facilities. The results at Bremo and Possum Point suggest that Dominion has the de-watering process firmly under control.

However, the company has yet to receive solid-waste permits for disposing of the coal ash after it has been de-watered. Dominion wants to pursue a cap-in-place approach while environmental groups want the utility to bury the material in landfills. That issue will take longer to resolve. Among the uncertainties is determining the extent to which underground water picks up contaminants while migrating through the coal ash pits. Getting answers will require a different testing protocol than the one used for the de-watering process.

The Nightmarish Complexity of Environmental Regs

As far as I’m concerned, the environmental regulatory process governing the proposed Atlantic Coast Pipeline and Mountain Valley Pipeline is incomprehensible. And that’s a bad thing. If only a handful of regulators, industry players and environmentalist activists can navigate the layers of bureaucracy and thicket of rules, the public is the loser.

In the latest hoo-ha, the Department of Environmental Quality (DEQ) has back-tracked on public statements regarding how it will regulate erosion and sediment control of pipeline construction crossing steep mountain slopes.

On April 6, DEQ issued a press release stating that “in addition to utilizing the U.S. Army Corps of Engineers nationwide permit 12 for wetland and stream crossings, DEQ will be requiring individual 401 water quality certifications for each project.” The next day, DEQ issued another press release stating that the department “has provided water quality certification for the U.S. Army Corps of Engineers 2017 Nationwide Permits.”

Got that? Me neither.

Needless to say, that bureaucratese is unintelligible to the normal human being, and even to spokesmen and reporters whose job it is to translate the gobbledygook. In response to inevitable media inquiries asking what the April 16 press release meant, DEQ spokesman Bill Hayden said that DEQ would require certifications for each individual pipeline segment that crossed or affected any waterway. That meant hundreds of certifications. That is what the Richmond Times-Dispatch understood, what the Roanoke Times understood, and what I understood.

But DEQ Director of Operations James Golden is now saying that Hayden had spoken before he had been briefed by “technical” staff members at DEQ. (So explains the Times-Dispatch today.) DEQ will rely upon a U.S. Army Corps of Engineers national permit. Rather than duplicate the Army Corps’ work, Golden told the T-D, the state’s individual certifications will focus on “upland areas” outside the Army Corps’ jurisdiction.

Asked why DEQ took nearly seven weeks before correcting the widely published remarks, Golden conceded that “in hindsight, DEQ should have tried to provide additional clarity.”

DEQ’s statements never added up to environmental groups, and they made an issue of the seeming discrepancy between the April 16 and April 17 press releases. After endeavoring to understand what it all meant, I headlined the resulting post, “A Brain-Frying Foray into the Regulatory Maze.” In what was surely one of the least-read articles in the history of Bacon’s Rebellion, I tried to sort through the difference between 401 certifications and Permit 12, general permits, individual permits, blanket permits and more. (I never got around to explaining 404 permits, which are relevant somehow.)

Despite the fact that I tediously double-checked information in the article before publishing, I still got stuff wrong — or so says David Sligh with the Dominion Pipeline Monitoring Coalition, a former regulator himself. But I found his correction so incomprehensible that I just appended it whole to the post, and let readers figure out what it meant.

Bottom line: I don’t think harshly of Hayden for disseminating inaccurate information. He was probably as confused as I was. (Well, not that confused. But pretty confused.) Where DEQ fell down was in not correcting the inaccuracies when they began circulating in the media. Frankly, the fact that they didn’t do so makes me wonder if DEQ officials above Hayden knew exactly what was going on.

One conclusion seems unavoidable: When the regulatory system is so full of jargon, is so complex and has so many interlocking pieces that career administrators of DEQ can’t communicate the story accurately to the public, something is wrong with the system.

Where Is Politifact When You Need Them?

“Democracy dies in darkness,” declares the tag-line of the Washington Post, which poses as a defender of the country from fake news peddled by the Trump administration. Perhaps the newspaper should consider fact-checking content on its Opinion page as well.

Mike Tidwell, director of the Chesapeake Climate Action Network (CCAN), and LaDelle McWhorter, chairperson of Virginia Organizing, are certainly entitled to the opinions they expressed in a Washington Post op-ed last week. But someone should call them to account for loose and unsubstantiated assertions they made…. and I’m doubting the Post will do it.

The thrust of their op-ed is to explain why Dominion Energy, the “all-powerful corporation that has ‘owned’ Richmond for decades,” has become a political liability, mostly among Democratic Party candidates for office. In short, they declare that Dominion has behaved in a beastly manner to the environment. To be sure, Dominion has stirred up controversy as it re-engineers its infrastructure to replace coal with natural gas. Critics have raised some legitimate concerns regarding the Atlantic Coast Pipeline, coal ash disposal and electric transmission lines, among other projects. But the issues are complicated. Tidwell and McWhorter don’t do nuance.

Let’s look at four of the more egregious statements.

Dumping liquid coal ash. “Dominion … has dumped highly controversial coal ash liquid into major Virginia rivers (the James, tributaries of the Potomac, the Elizabeth).”

To say that Dominion “dumped” coal ash liquid implies an indiscriminate release of polluted water. Before the enactment in 2015 of new Environmental Protection Agency regulations governing coal ash disposal, Dominion did periodically release rainwater that had accumulated atop coal ash ponds but did not mix with the combustion residue, as permitted by state and federal law. Since then, the company has run rainwater as well as water from the coal-ash slurry through a water-treatment process that reduces pollutants to levels well below EPA limits — indeed, in many cases, to undetectable levels.

That system is working well. Environmental groups, which had a hand in negotiating the rules detailed in a Department of Environmental Quality permit, have not filed any legal complaints regarding the de-watering process at the Bremo Bluff Power Station. A judge struck down a complaint filed at Possum Point. Dominion has not yet begun de-watering its Chesterfield or Chesapeake power stations.

Coal ash burial. “The ash, which has accumulated from decades of coal combustion at nearby Dominion power plants, is already suspected in places to be leaking highly toxic substances into the rivers.

CCAN doesn’t come right out and assert that Dominion coal ash ponds leaked toxic substances into rivers. It says Dominion is “suspected” of leaking. And, technically, that’s accurate because environmental groups do, in fact, suspect that leaks have occurred. What’s missing from the statement is critical context.

For example, in a federal lawsuit, Sierra Club attorneys demonstrated that underground water has migrated through ponds at the Chesapeake power station, picked up contaminants, and emptied into the nearby Elizabeth River. But the presiding judge also found that the volumes were so small and were diluted by such a large volume of river water that the metals posed no danger to aquatic life or human health.

The toxicity of a chemical compound depends upon its concentration. Oxygen, which is essential to human and animal life, also is toxic at elevated percentages and pressures. Likewise, heavy metals that leach from coal ash are “toxic” in the sense that they can be harmful to human and aquatic life above certain levels but are non-toxic below those levels. Some of these “toxic” chemicals are required to sustain human life. For example, according to Wikipedia, zinc, one of the heavy metals leached from coal ash, “is an essential component of a large number (>300) of enzymes participating in the synthesis and degradation of carbohydrates, lipids, proteins, and nucleic acids as well as in the metabolism of other micronutrients.”

The fact that a “highly toxic” substance has leaked into the water in is, by itself, meaningless, and the use of such language is designed to scare rather than enlighten.

North Anna 3. “Adding to Dominion’s unpopularity is its desire to build a $19 billion (yes, with a “b”) nuclear reactor at its North Anna plant. Attorney General Mark R. Herring (D) says it’s unneeded and a bad deal for consumers.”

Dominion does not “desire” to build a third nuclear unit at the North Anna Power Station. The company has spent vast sums keeping open the option to build another nuclear unit should circumstances prove necessary. In its 2017 Integrated Resource Report, Dominion offered eight possible economic and regulatory scenarios framing energy usage over the next 15 years. In only one of those scenarios — the one that cracks down the hardest on carbon emissions, requiring the closure of the Mecklenburg and Clover coal-fueled power stations (577 megawatts of capacity) — does Dominion envision the need for another nuclear unit to maintain base-load capacity. But given the fact that environmental groups such as CCAN are pushing for tough restrictions on both nuclear power and CO2 emissions, that scenario cannot be ignored. Continue reading

McAuliffe Moves to Cap Utility Carbon Emissions

Governor Terry McAuliffe. Photo credit: Associated Press

Big news yesterday: Governor Terry McAuliffe issued an executive order to cap greenhouse gas emissions from Virginia power plants. Unfortunately, I’m out of town on personal business today, so I don’t have time for anything more than a cursory analysis.

Said McAuliffe in a press release: ““The threat of climate change is real, and we have a shared responsibility to confront it. Once approved, this regulation will reduce carbon dioxide emissions from the Commonwealth’s power plants and give rise to the next generation of energy jobs. As the federal government abdicates its role on this important issue, it is critical for states to fill the void. Beginning today, Virginia will lead the way to cut carbon and lean in on the clean energy future.”

McAuliffe’s press release cited the job-creation benefits that would come from a shift from fossil fuels to solar energy. Last year, as solar production took off in Virginia, the solar industry employed 3,236 workers — twice the number supported by coal. McAuliffe said also invoked sea level rise to justify his move:

Virginia is already experiencing the effects of climate change in its coastal regions due to rising sea levels. The threat from frequent storm surges and flooding could cost the Commonwealth close to $100 billion dollars for residential property alone. The impacts extend far beyond our coast, as half of Virginia’s counties face increased risk of water shortages by 2050 resulting from climate-related weather shifts.

The action now moves to the Department of Environmental Quality, which the governor ordered to write the regulations.

Bacon’s bottom line: McAuliffe’s move will generate headlines and plenty of political heat — Republicans have already announced their opposition to what they call the governor’s executive overreach — but it’s far from clear what practical impact the move will have. Acknowledging that the cost of solar energy has plummeted, Dominion Energy and Appalachian Power already have forecast that they will move heavily toward renewable energy sources over the next 25 years.

The press release spoke of a “cap” on greenhouse gases and new regulations that will “reduce” carbon emissions — not merely reduce carbon intensity (carbon dioxide emitted per kilowatt of energy produced). It is possible to reduce the carbon intensity of the electric generating fleet while allowing total carbon emissions to increase, albeit it at a much slower rate, as the economy grows. If Virginia caps carbon emissions, Dominion and Apco might be required to close additional coal-fired power stations, and it is unlikely that Dominion would build a planned gas-fired power plant in the early 2020s. Cancellation of that facility could undermine the economics of the proposed Atlantic Coast Pipeline, construction of which McAuliffe has said he supports.

Expect trench warfare between utilities, environmentalists and consumer advocates in the DEQ hearings discussing how to implement the carbon caps. Also expect General Assembly Republicans to challenge McAuliffe’s legal authority to implement a cap.

Update: Apco spokesman John Shepelwich submits the following correction: “Appalachian Power no longer operates any coal-fueled power generation in Virginia and has not since 2015. Two of the three units of our Clinch River Plant in Russell County were converted from coal to natural gas; that plant is scheduled to be retired in 2026.”

Bristol Home Builder Proposes Solar Subdivision

Developer Aaron Lilly is seeking Bristol planning commission approval to construct 30 upscale townhouses using solar power to offset electric bills. He envisions the project as the first solar-powered subdivision east of the Mississippi, reports the Bristol Herald-Courier.

The project would be built on 12.5 hillside acres near an Interstate 81 exit. The townhomes would have 1,600 square feet of living space plus a 400-square-foot garage. Units can be configured with “smart home” technology for monitoring and control that, among other benefits, can provide medical information to a caregiver. Lilly sees the houses as “age in place” residences. He intends to price the properties in the $200,000 to $250,000 range. Said Lilly:

After seeing solar was at least possible, we’ve been working on this for over a year. It is more affordable than ever before and the price of electricity goes up every year. … There would be two meters on the house – one telling how much power we consume from [Bristol Virginia Utilities] and the other how much power is produced and the person would pay the difference.

If power keeps going up and solar keeps coming down, we’re there. If we’re not there yet, we’re close enough. This is our goal and we’re working feverishly to make sure it happens. … The first ones are an experiment. We don’t know how much power we can make.

Planning commissioners were supportive of the proposal and granted preliminary approval.

Bacon’s bottom line: It’s hard to imagine that this is the first time a developer east of the Mississippi has proposed building new townhouses with solar panels on the roof. But I haven’t heard of anyone doing it in Virginia, so, who knows. If Lilly says it’s true, maybe it is. If so, good for him.

Economically, it may make more sense for home builders to install solar during the construction phase — Lilly will build nine connected units in Phase 1 — than for individual homeowners to outsource the project to solar installers one project at a time. Also, Lilly can pocket the solar credits, which might be worth more to him than to individual homeowners. Another selling point is that homeowners can amortize the construction cost over the life of a 30-year mortgage.

Home builders are always looking for a competitive edge. I’m surprised that we haven’t seen more of this kind of activity.

Shareholders Pressure Dominion on Climate Policy

At Dominion Energy’s annual meeting earlier this month, shareholders submitted numerous shareholder proposals requiring the energy giant to adopt more environmentally friendly measures. I took note of some of them in my story about the event but never bothered to inquire about the vote results. I’ve attended plenty of annual meetings in my time, and I’d never seen a shareholder proposal opposed by management approved, or even come close to being approved. I didn’t expect any differently this time.

My bad. As it turns out, 48% of participating shares voted in favor of a resolution that would require Dominion to publish an annual statement on the financial risks that climate change poses to the company, according to the Virginian-Pilot. That total was up from the 23.5% of the vote for a comparable resolution at the 2015 annual meeting.

It wasn’t just gadfly nuns and hippies owning a few shares who voted for the resolution. That many votes required heavy support from pension funds and other institutional shareholders. It’s entirely possible that a similar proposal could pass a year from now. The proposal must be taken seriously, for its sponsors surely will be back next year.

Backers of the proposal cast the issue in terms of what is best for Dominion, not environmentalists, the environment or Mother Gaia: Climate change caused by CO2 emissions is unleashing more frequent and more damaging storms, which can expose Dominion’s infrastructure to storm damage, and will engender tighter anti-carbon regulations that could endanger its multi-billion bet on natural gas electric plants and pipelines.

“The three costliest storms in Dominion’s 100-year operating history, Hurricane Isabel, Hurricane Irene and the June 2012 Derecho, have occurred in the last decade,” states the shareholder proposal in the 2016 proxy statement. “The consensus among climate scientists is that without significant reduction of greenhouse gas emissions, climate change will continue to result in more severe and frequent storms, among other effects.”

Dominion’s restoration costs were $128 million for Hurricane Isabel in 2003, $59 million after Hurricane Irene in 2011, and $42 million after the derecho. “Additionally, between 2011 and 2012, weather events, earthquakes, and environmental regulations imposed more than $450 million in costs on the company, adversely affecting its earnings.”

Also, argued a memorandum in support of the proposal, the company does not seem to be taking into account federal or state legislation that could “either mandate greater deployment of renewable energy or assess financial penalties for the continued use of fossil fuels.” Dominion could be “betting the company” that changing laws, regulation and consumer tastes won’t leave the company with billions in stranded, uneconomic assets.

“Dominion faces serious financial challenges with regard to climate change risks that are not being addressed,” says the memorandum. “Dominion should be required to provide adequate climate risk assessments, including clearly defined actions the Board intends to take to address these risks.”

Dominion responds. Dominion management advised shareholders to vote against the proposal. Committed to being a good environmental steward, Dominion is pursuing an integrated strategy to reduce greenhouse emissions based on a diverse fuel mix, including gas, nuclear, hydro, wind and solar, the company stated. Between 2000 and 2015, the company has reduced the carbon intensity of its generating fleet by 43%, and it has forecast that carbon intensity will fall another 25% as it expands solar production to 5,200 megawatts over the next 25 years.

Dominion says it is one of the lowest carbon-intensity electricity producers in the U.S. Producers at the lowest end of the scale are pure-play renewable companies.

Also, the company responded in the proxy statement, it already reports on financial risks relating to climate change in its 10-Q forms and in its Citizenship & Sustainability Report. Three years ago, it published the “2014 Dominion Greenhouse Gas Report.”

As for the charge that Dominion isn’t taking into account the potential for tighter carbon emissions, in remarks made during the shareholders meeting, CEO Tom Farrell said that carbon regulation is coming. While some politicians have suggested that the Trump administration will roll back the Obama administration’s Clean Power Plan, Farrell said that the EPA is legally required to regulate CO2 emissions, and that a McAuliffe administration study group will come out with state-level recommendations in June.

Bacon’s bottom line: One can argue with the premises of the shareholder proposal, but it really doesn’t matter if the authors are right or wrong in their particulars. What matters is whether shareholders owning a majority of shares believe they are right. If a few more shareholders agree, joining those in the 48%, they could push through their proposal a year from now.