Leveraging Offshore Gas Drilling to Build Offshore Wind

Can allowing this…

The Trump administration is opening up the East Coast of the United States to oil and gas drilling, but it’s not clear how much enthusiasm there is. A recent sale of drilling rights in the Gulf of Mexico has attracted only “moderate” interest, reports the Financial Times, an indication that the oil & gas industry is more focused on expanding production in the country’s vast shale basins.

… help us get to this?

Last year the Department of the Interior cut the royalty rate it had been charged on production from leases in shallow water (less than 200 meters deep) from 18.75% to 12.5% in the hope of stimulating greater interest. But drillers submitted bids for only 148 of 14,000 tracts offered.

If the Trump administration can’t gin up much excitement in the Gulf of Mexico, where a mature oil & gas exploration and drilling infrastructure exists, it’s unlikely to do any better in the southern Atlantic states where no such infrastructure is to be found. Also discouraging interest is the reality than any effort to start drilling would ignite a firestorm of opposition. Why bother when shale can be fracked elsewhere with minimal fuss and muss?

But that’s today. Who can say what economic conditions and public opinion will look like in three or four years? What if public opinion could be swayed to look upon offshore drilling as a pathway to developing a viable offshore wind industry?

Environmental groups and Virginia Beach civic interests oppose offshore drilling, raising the specter of another Deepwater Horizon disaster — even though (a) any drilling off the Virginia coast would be in shallow water, while Deepwater Horizon occurred in… you guessed it… deep water, and (b) most, if not all, of the drilling would be for natural gas. I’ve never heard of a natural gas spill, and neither have you.

Indeed, the Commonwealth’s official energy policy supports offshore oil and gas drilling, with the caveat that no drilling occur within 50 miles of the shore. A 2005 study by the Virginia Secretary of Commerce and Trade found that natural gas exploration was safe, although if oil is discovered that the Commonwealth must “carefully consider the risk of spills.”

Is it not possible to work out a compromise that could allow drilling to move forward when market conditions permit while providing tough environmental safeguards? Here’s how we can do it.

First, let’s just take oil drilling off the table. Let’s make it official Virginia policy to permit no oil drilling because we want zero risk of oil spills. Drilling and production should be limited to natural gas only. (Do some wells produce both oil and gas? Can the gas in such wells be extracted while the oil is kept in the ground? I concede that some technical questions may need to be answered.) The vast majority of the energy wealth off the Atlantic coast is natural gas, so imposing an anti-oil restriction should not cripple the economics of offshore energy production.

Second, Virginia should get the first-mover advantage of establishing an East Coast offshore drilling industry. As the largest metropolitan area on the Atlantic coast between Miami/Fort Lauderdale and New York — and one with a large ship repair industry, at that — Hampton Roads would be the logical location for offshore companies to set up and do business. Thus, Virginia could get a significant economic-development bonus from the opening up of offshore drilling.

Third, an offshore drilling industry was the precursor in Europe to developing an offshore wind industry, and it could be the precursor in Virginia, too. The two sectors share many skills, competencies, services and specialized equipment. If Hampton Roads can develop an offshore drilling industry, it can lower the costs and risks of getting offshore wind companies to locate here. The lack of an existing industry is perhaps the biggest barrier to developing Virginia’s offshore wind resources — a desiderata of environmentalists and economic developers alike.

The immediate hold-up to large-scale development of wind resources is the need to test the performance of wind turbines in the Atlantic Ocean, which has different seabed conditions and is subject to hurricanes. That won’t happen until the State Corporation Commission approves Dominion Energy’s proposed VOWTAP project, two costly test turbines that could never be justified on the basis of their electricity production alone.

But if the SCC approved VOWTAP, and if the turbines proved their efficacy in Virginia offshore conditions, and if a gas drilling business ecosystem had a toehold in Virginia, then the chances would improve immeasurably to persuade European wind companies to invest in Virginia for the purposes of building and maintaining a fleet of offshore wind turbines at an economical price. Virginia then could become the hub of offshore wind production for much of the entire Atlantic coast.

If we play our cards right, it should be possible to fulfill former Governor Bob McDonnell’s dream of making Hampton Roads the energy capital of the East Coast while not only protecting the environment but improving it.

Hey, Uber, Over Here! Over Here!

Dara Khosrowshahi. Photo credit: Fortune

So, Uber decides to use Washington, D.C., as a test bed for its vision for urban mobility. CEO Dara Khosrowshahi visited Washington Wednesday to publicize company plans to expand its ride-hailing app so customers can access and pay for bike share, car rentals from private car owners, and eventually mass transit.

And what does Washington do? Mayor Muriel E. Bowser has proposed increasing the gross receipt tax on ride-hailing companies from 1% to 4.75%. The tax revenue would pay for about 10% of Washington’s $178.5 million share of increased funding for Washington Metro. (Virginia and Maryland and providing the balance — without taxing Uber.)

Interesting economic development strategy Bowser has there: Tax businesses in the growing innovation economy to subsidize enterprises in the stagnant, money-losing old economy.

Uber’s idea is potentially so transformative that slapping $18 million added tax on the ride-hailing industry may not prove debilitating. (Not for Uber anyway. I’m less sanguine about its weaker competitors.) But one thing we can say for sure: The tax will not accelerate Washington’s evolution toward the transportation future.

“What we want to make sure is that you’re not taxing one form of shared transportation for another form of shared transportation,” Khowrowshahi said in a public meeting with Bowser, reports the Washington Post. “We’re in this to promote shared transportation in general. We want to make sure that proposals like this are not unconstructive to that goal.”

City officials, notes the Post, say the ride-hailing services have benefited from Metro’s problems so it’s only fair that they be part of the solution.

 

 

Bacon’s bottom line: Hey, Uber, come look at Virginia — we won’t tax you!

Your one-stop-transportation-shopping app sounds like a fantastic idea. I can hardly wait until you develop AI that allows people to map multimodal trips integrating everything from walking and biking to gypsy vans and buses to hour-long car rentals. I’m eagerly waiting for a full range of transportation services at varying levels of convenience, comfort and price. If you put a few money-losing public mass-transit enterprises out of business, I won’t have a problem with that. I’d love to put an end to the drain on taxpayers. Likewise, if you force public enterprises to adapt by cutting costs and becoming more responsive to customers, I’m totally cool with that, too!

I regard Bowser’s logic — Uber is part of Metro’s problem, therefore you should be taxed to help fix it — as wildly illogical. You should be allowed to compete on a level playing field with all other transportation business models. I hope you understand, however, that does include paying your fair share of the cost of maintaining and building the road and highway infrastructure that you rely upon. Who knows, you might end up paying more in taxes that way. But at least you wouldn’t be subsidizing the competition.

One more thing, Virginia has localities that would love to cooperate with you. Take Virginia Beach. The resort city has plans for development of its waterfront that include a drop-off zone for ride-hailing services. How cool is that? If cities can provide drop-off zones for buses — typically referred to as bus stops — why not drop-off zones for ride-hailing services? That’s something that municipalities can do at next-to-no cost.

Here in Virginia, we want to accelerate the development of a 21st century model for transportation, not tax it. Use us as a test bed. Please!

Put-up-or-Shut-up Time for the Sun Spot Theory

Recent sun spot cycles. The last time the sunspot cycle was almost as weak as the current one was in the 1970s, a period of declining global temperatures that prompted widespread concerns of a new ice age. Image credit: sunspotwatch.com

I have frequently expressed skepticism of dire Global Warming scenarios by noting that the increase in global temperatures over the past 20 years fits the lowest range of forecasts made by the climate models. Sorry, folks, I just can’t get exercised about warming-generated calamities, no matter how many after-the-fact justifications are proffered to explain the failure of reality to conform with theory.

On the other side, the anti-Global Warming crowd has advanced an alternative explanation for climate change. The extreme skeptics suggest that solar activity — sun spots, or the lack of them — have a far greater influence on earth’s climate than the level of CO2 in the atmosphere. According to this theory, solar radiation interacts with the earth’s magnetosphere to block cosmic radiation from penetrating to the atmosphere and seeding cloud formation. Boiling the argument down to its essence, more sun spots predict higher temperatures on earth, fewer sun spots predict lower temperatures. We may have reached put-up-or-shut-up time for that theory as well.

The skeptics are getting excited now because the incidence of sun spots is crashing. Indeed, sun spots have almost disappeared. The last time the sun exhibited similar characteristics was in the 1600s, the so-called Maunder Minimum which coincided with a decline in global temperatures known to history as the Little Ice Age. If the solar warming rejectionists are correct, “global warming” could disappear in a hurry.

Writes Robert Zimmerman with the Global Warming Policy Forum:

If the solar minimum has actually arrived now, this would make this cycle only ten years long, one of the shortest solar cycles on record. More important, it is a weak cycle. In the past, all short cycles were active cycles. This is the first time we have seen a short and weak cycle since scientists began tracking the solar cycle in the 1700s, following the last grand minimum in the 1600s when there were almost no sunspots.

If the planet is entering a new solar minimum, the theory would predict falling temperatures. Perhaps not immediately — there may be buffering effects that aren’t well understood — but in not too many years.

Here’s the nice thing about the sun-spot theory: It’s a testable hypothesis. The theory states in no-uncertain terms that solar radiation as measured by sun spots is a key driver of earth’s climate. The theory says that cycles in earth’s temperatures closely match cycles in sun spot activity. We appear to be entering a phase in which sun spots are going dormant. Temperatures should drop — not just for a year or two but in a sustained matter. We should be able to confirm or disprove the sun-spot hypothesis within a few years.

If the sun-spot hypothesis is confirmed by the data and we see a decisive shift in temperature trends, the theory that posits CO2 as the driving climate variable will be dashed. Conversely, if the sun-spot model  is proven incorrect, a lot of moderate Global Warming skeptics (like me) will be more receptive to the CO2 model — although it still has to explain the two-decade-long pause. (“Pause” is not quite the right word. Global temperatures have crept higher. They just haven’t conformed to predictions.)

Perhaps I’m being naive to think that reality will settle the debate. Reality has a way of being frustratingly complex and ambiguous, and zealots are endlessly creative at devising fallback theories. We didn’t account for the effect of increased particulates in the atmosphere. Or temperatures didn’t rise as expected because the missing heat is lurking undetected deep in the ocean. 

The stakes of this scientific debate are huge. Climate change advocates want to de-carbonize the economy in order to fight what they fear is runaway and calamitous global warming. That means converting motor vehicles to electricity, and it means converting electric power generation to renewable sources. Market forces are pushing the electric power industry toward renewables — especially solar here in Virginia — but not rapidly enough to suit the warmists. The next big debate is whether Virginia should join the Global Greenhouse Gas Initiative a cap-and-trade regime to squeeze out electric-power carbon emissions. Ancillary debates are occurring on how Hampton Roads should deal with the rising sea levels expected to accompany the higher temperatures.

Here’s another hypothesis: The urgency of combating global warming is a driving force behind the insistence of the social engineers to restructure the economy. If global temperatures cool, that sense of urgency will diminish. Hard-core believers won’t change their minds, but the general public will. Conversely, if temperatures rise in the face of a new sun spot minimum, the warmists will be vindicated.

About those Student Loan Default Rates…

The distinction of having the highest student-loan default rate of any higher-education institution in Virginia goes to Everest College in Chesapeake. The default rate at the for-profit college (now doing business as Altierus Career College), which prepares students to be dental assistants, HVAC technicians and the like, is 36%, reports WVTF Radio IQ.

In absolute numbers, non-profit Liberty University took the top spot. A 10% default rate translated into 2,903 students.

The highest default rates tend to be small, for-profit vocational schools. Although the Radio IQ data doesn’t show it, some public colleges have a fairly high default rate as well. Low-income students are disproportionately likely to drop out of college — whatever the institution — and find themselves unable (or unwillling) to repay their loans.

Many progressives purport to be concerned about minorities and the high default rate blame for-profit colleges. The Radio IQ article quotes Diane Standaert with the Center for Responsible Lending (CRL) as noting that many for-profits are converting into non-profits to avoid state and federal regulations aimed at curbing “abusive practices.”

Acccording to CRL’s Virginia state profile, for-profit colleges disproportionately harm: low-income families, communities of color, and women.” Undergraduate enrollment at for-profits is 54% low-income, 45.4% African-American, and 60.9% female. Students at for-profit institutions in Virginia are less likely to graduate, more likely to take out student loans and graduate more indebted, and are more likely to default on their college debt, according to CRL.

What this analysis ignores is that there is considerable variability in the default rate for for-profit, private non-profit, and public non-profit institutions. The best for-profit institutions have lower default rates than the worst non-profits. Public institutions such as Norfolk State and Virginia Union University that cater to lower-income African-Americans have default rates comparable to many for-profits. Conversely, the for-profits cater to adult African-Americans — look at their television ads if you doubt me — who didn’t get a chance to attend college immediately after high school but, as adults, would like to advance their career and obtain a better job.

If mean ol’ fiscal conservatives wanted to shut down for-profit institutions with high default rates on the grounds that they were costing taxpayers, some progressive group would describe the disproportionate impact on upwardly striving African-Americans as racist. But the impetus for shutting down for-profits isn’t coming from the Right. It’s coming from the Left, hostile as always to the idea of someone somewhere making a profit.

The real problem isn’t whether an institution is for-profit or non-profit, it’s the fact that the federal government hands out student loans indiscriminately. Federal loans are not granted on the basis of a student’s likelihood to repay, whether based on SAT scores, class standing, credit score, years in the workforce or any other relevant factor. Why? Because objective lending criteria might impact minorities more than whites, which would constitute a different type of discrimination and invoke the inevitable cries of racism.

So, if you think with a leftist mindset, instead of insisting that the federal government establish standards to reduce the number of students defaulting on their debt, which would be racist, you attack for-profit institutions… even thought, by leftist standards, limiting educational opportunities for minorities by this indirect means also could be construed as racist. But if you think with a leftist mindset, that’s OK because you’re suspicious of for-profit enterprises anyway. Furthermore, you control the commanding heights that shape public opinion formulation — the media, academia, the educational bureaucracy — so you have the power to frame the issue the way you want.

That, folks, is democracy at work in America today.

Subsidies for Thee, but Not for Me

Jamestown Settlement — tax thyself!

The economy of the Historic Triangle — Williamsburg, Yorktown and Jamestown — depends heavily upon heritage tourism. Visitor spending reached $1.08 billionand employed 11,000 workers in 2012, according to one report. But last year tourism and hospitality officials were complaining that growth had stagnated.

So, what do you do to boost the region’s No. 1 industry?

Raise taxes, of course. This year the General Assembly passed a bill backed by Senate Majority Leader Tommy Norment, R-James City County, to impose a 1 percentage point surcharge on the sales tax to raise revenue to be split equally between a new effort to rekindle Historical Triangle tourism and the three Triangle localities of Williamsburg, James City County and York County, reports the Daily Press. Williamsburg would use the funds to roll back the admissions tax and hotel and meals taxes it approved last year.

Sen. Monty Mason, D-Williamsburg, had opposed the tax all along on the grounds that it impacted poor people the most. After the bill sat on the desk of Governor Ralph Northam for three weeks, he prevailed upon Norment to amend the tax. The revised version would exempt the sales tax on food and add a $2-a-night hotel surcharge to recoup the lost revenue.

“I think this could be transformational,” Norment said.

Bacon’s bottom line: I don’t normally agree with Democratic Party politicians, but Mason is absolutely right about this. It’s one thing to tax hotels and restaurants, as Virginia Beach does, to raise funds to pour into marketing, promotion and infrastructure building. Although local residents do pay more for eating out, the tax is largely paid by the industry itself. But levying a sales tax on the general populace to benefit the industry is quite another thing. Such a tax would indeed impact the poor, who spend a disproportionate share of their incomes on food — not eating at restaurants but food purchased at grocery stores.

The workforce of Williamsburg, York and James City is about 70,000. In other words, five out of six people do not work in the hospitality industry. Undoubtedly some businesses provide goods and services to the sector, thus benefiting indirectly from its presence, but major employers like the College of William & Mary and the Anheuser-Busch brewery do not. The tax would represent a massive subsidy for the tourism sector at the expense of everyone else.

Don’t get me wrong — I personally love heritage tourism. I love visiting Colonial Williamsburg. But is that really the future that Triangle localities want to build for themselves? William & Mary, one of the highest regarded public universities in the country is located there. The Kingsmill Resort, which caters to affluent retirees, is located there. NASA Langley and Thomas Jefferson National Accelerator are located a few miles down Interstate 64. For $25 million a year, the community can’t come up with any better economic development initiative than promoting tourism?

As the dominant industry, the tourism sector is converting its political clout into public subsidies in order to perpetuate, even increase, its dominance. While a 1% sales tax surcharge might not seem like a lot, it will have a small dampening effect on economic activity not related to tourism. For example, the surcharge could encourage affluent retirees to select somewhere else to settle down and spend their money, thus impacting Kingsmill Resort-like development in the future and driving away citizens who pay lots in taxes but demand little in the way of government services.

I’m all in favor of not damaging your existing industry by refraining from enacting burdensome regulations and taxes. But if you want to nudge your community into the innovation-driven Knowledge Economy, you don’t do it by taxing the new economy to subsidize the old economy.

Map of the Day: Changes in Probability of Death

Map source: Wall Street Journal

It’s not new news anymore that gains in life expectancy have leveled off in the United States, driven by startling and unexpected declines among young and middle-aged whites. The so-called “deaths of despair,” including drug overdoses, are on the rise. So are liver disease (associated with alcoholism) and suicides. Chronic diseases associated with obesity such as diabetes, heart disease, and stroke are up, too.

The map above shows changes in the probability of death among 20- to 50-year-olds in the 50 states between 1990 and 2016. There is a remarkable divergence — health for this age group has improved significantly for some states, including Virginia, and gotten worse for others.

A breakdown by county in Virginia would be revealing. I hypothesize that western Virginia, especially the far Southwest, would show patterns similar to neighboring West Virginia and Kentucky. Although a more granular look at the data might reveal a different pattern, it appears that Central Appalachia is ground zero for deaths of despair.

NAEP Results Are In. No Answers to Important Questions.

Source: National Assessment of Educational Progress

There is some mildly good news for Virginia from the latest National Assessment of Educational Progress (NAEP) tests, commonly called the Nation’s Report Card. Virginia 4th graders improved their performance in mathematics, while 8th graders made incremental gains in both math and reading. Virginia students also maintained a significant edge over their peers nationally in math and reading in both grades.

“For the first time, 50 percent of Virginia fourth graders achieved at or above the proficient level in mathematics, with 12 percent earning advanced scores,” states the Virginia Department of Education press release. “Students in no other state performed at a statistically higher level.”

NAEP results are based on representative samples of students in each state. The 2017 NAEP sampling of Virginia students included approximately 2,300 fourth-grade students and 2,200 eighth graders.

As is their wont, state officials took note of “achievement gaps between white students and their black and Hispanic peers.” The press release elaborates: “The percentage of black eighth graders achieving proficient or advanced math scores increased by eight points, to 20 percent in 2017, compared with 12 percent in 2015. While this represented a significant gain for black students, the improvement did not translate into a statistically significant narrowing of the achievement gap with white students.”

No mention of Asian students who comprise 8% of Virginia’s population. Why would that be? Perhaps the answer can be seen in the charts atop this page. There we can see that Asian/Pacific Islanders (which in Virginia means Asians because there aren’t many Pacific Islanders here) achieved the top scores. Thus, the “achievement” gap can also be seen as an Asian-white achievement gap, an Asian-black achievement gap, and an Asian-Hispanic achievement gap.

Why do state officials make whites the standard against which blacks and Hispanics measured? In order to advance the dominant narrative about race, of course. Setting Asians as the standard for comparison would confound the conventional wisdom. Perhaps Virginians would be compelled to ask why Asians out-perform other ethnic groups, including “privileged” whites. We would have to ask ourselves, do Asians attend better schools… or do they tend to out-perform in all schools? Don’t they face discrimination? If not, why not? Why are they disciplined at lower rates than other groups, including whites? Are they less likely to be disruptive in class? Do they study harder?

Setting Asians as the standard against which others are measured would force us to consider the role of intact families, personal behavior, and cultural norms and expectations rather than view racial/ethnic disparities through the lens of white privilege and minority oppression.

The focus on the white-black/Hispanic gap also conveniently ignores the English-fluent/English-as-a-second-language gap. For example, according to NAEP data, the score gap between 4th grade whites and Hispanics is 23 points. But the gap between English-fluent and English-as-a-second-language students is 36 points. Given the fact that Hispanics are more likely to not be English fluent, facility with the English language likely explains much of the white-Hispanic gap.

How much of the gap disappears when you compare whites with English-fluent Hispanics? How much of the broader white-Hispanic gap should be attributed to white privilege and how much should be attributed to the influx of poor, ill-educated immigrants from Mexico and Central America who have an immense amount of catching up to do? That question never gets asked.

Unfortunately, the searchable NAEP database does not allow us to make that comparison. What a surprise. I guess it never occurred to NAEP officials that such a comparison would be worthwhile. It would be nice if state educators would get over their black/white obsession and begin asking a wider range of questions.

Alternatives to Traditional Colleges Are Spreading

Image source: Wall Street Journal

Last year Aidan Cary, a bright high school student in Hampton, applied to the University of Virginia and other prestigious universities in the Northeast. But he ended up attending a nearly unknown institution, MissionU, for a very different kind of educational experience.

At MissionU, based in San Francisco, he is enrolled in a one-year, data-science program. He studies between 40 and 50 hours per week and visits high-tech companies in the Bay area as part of the educational experience. And he pays nothing up front. Instead he will repay MissionU with 15% of his salary for three years once he lands a job paying $50,000 or more.

As the Wall Street Journal writes, MissionU is part of a broader movement toward an alternate model of higher education:

A new breed of longer programs such as MissionU has begun to pop up. In California the Holberton School and the “42” program recently opened, and in Indianapolis the Kenzie Academy has begun its second class. While they remain focused on digital skills, they also add a smattering of general education courses—in areas like problem solving and teamwork—and market themselves as college alternatives.

“The degree is dead. You need experience,” says the website for Praxis, a five-year-old digital school based in South Carolina.

These new-breed institutions represent a new challenge for traditional four-year institutions of higher education. Unlike private career schools, MissionU, Praxis, and the Kenzie Academy aren’t targeting an adult population seeking workforce degrees and certifications — they’re targeting youngsters like Cary who would have gone straight from high school to college.

The value proposition is huge: You invest only one year of your life studying before you enter the workforce. The year of intensive study costs as little as $22,500 spread over three years, and only if you make a job paying $50,000 or more. If the program costs you more, it’s only because you’re making more. Plus, the colleges practically guarantee you a job at the end of the line. Cary figures he will come out $250,000 ahead compared to the traditional route.

And what do students lose compared to the traditional four-year, residential college experience? Well, they’re actually expected to work 40 to 50 hours a week, which may preclude a fair amount of partying and goofing off.

They also don’t get an accredited degree. But sheepskins are mainly valuable for signalling to the job market that someone is intelligent enough, diligent enough, and conformist enough to endure the four-year degree-earning process. Instead, Cary will earn a skill in great demand that will land him a job in a technology company, most likely in the Bay area. Once he enters the workplace, the sheepskin credential becomes superfluous — from then on, he’ll be judged by his job performance.

He’ll lose one more thing. While alternative colleges can teach a person how to work, they don’t teach their students why they are working, the Journal quotes Gardner Campbell, an English professor at Virginia Commonwealth University as saying. Without that context, he says, graduates of MissionU-like programs run the risk of becoming well-paid drones.

Ah, poor Mr. Cary will miss the value provided by the vaunted liberal arts curriculum. He can console himself that most graduates forget the vast majority of what they studied within a few years. Also, if Cary’s parents are like many others who find traditional universities to be teaching not the “liberal” arts but the “politically correct” arts, they may be perfectly happy to spare their child a learning experience increasingly resembling an indoctrination camp than an institution encouraging wide-ranging exploration of thought.

Can these alternative institutions be replicated, or do they cater to a narrow slice of elite students? After all MissionU is highly selective — its acceptance rate is in the single digits, comparable to an Ivy League school. Cary scored in the top 5% of the country on his SAT and graduated in the top 10% of his high school class. 

As long as critical skills are going begging in the workplace, I see no reason why these “alternative colleges” can’t proliferate. They offer a fantastic value proposition compared to the four-year college. The only real barrier is the brain-dead preference of H.R. offices for the credential of a four-year degree. But I expect that employers’ desperation to hire employees with critical job skills will overcome that prejudice.

Traditional higher-ed institutions don’t comprehend the degree of animosity they have engendered in the marketplace. First, they have made college nearly unaffordable for the middle class. Second, they have created learning and cultural environments that are ideologically hostile to roughly half the population. Their value proposition has become “Give us your children so we can indoctrinate them with alien values, and by the way, give us all your money.”

That’s not a viable long-term business model.

How Coal Saved the Grid in January

The 2017-18 Bomb Cyclone

The twelve days between Dec. 27, 2017, and Jan. 8 this year saw one of the longest and most intense deep freezes ever recorded for the East Coast. Snow, ice and frigid temperatures plunged much of the United States into winter misery for a seemingly endless period.

The so-called “bomb cyclone” also put the East Coast electric grid under intense stress. The period of Jan. 4-6 accounted for three of the top ten winter demand days in the history of PJM Interconnection, the regional transmission organization of which Virginia is a part. Electricity consumption and output surged 21% over average daily loads.

Were it not for the ability to fire up old coal and oil power plants, many of which are scheduled for phasing out, the regional grid would have been overloaded and the system would have been hit with widespread blackouts, concludes a report, “Reliability, Resilience and Oncoming Wave of Retiring Baseload Units,” issued last month by the National Energy Technology Laboratory.

The Lab’s analysis of the PJM system found that coal generation surged from 20 gigawatts to 51 gigawatts of supplied capacity during the bomb cyclone. By contrast, nuclear power, which typically runs all out with little variability throughout the year, provided no surge capacity.

Natural gas generation averaged about 25 gigawatts, but its surge capacity was limited by pipeline constraints and the necessity of competing with gas as a home-heating fuel during the freeze. As a percentage of total output, gas actually fell. Emphasizes the report: “It was coal, and secondarily fuel oil, fired primarily in fuel switching natural gas units, that provided the electricity crucial for keeping natural gas-fired residential furnace fans operating during the extreme cold of the BC.”

And renewables? Renewable output declined. That’s what happens when clouds and snow blot out solar output. As it happened, wind power declined as well. “Intermittent generating sources experienced a significant decline nearly inverse to growth in demand,” states the report. “As the storm settled over the Mid-Atlantic area, PJM saw decreased output from solar and wind resources.”


Coal, the fuel that everyone loves to hate, saved the day. Had the coal capacity not been available, the report stated, “a 9-18 GW shortfall would have developed, depending on assumed imports and generation outages, leading to system collapse.”

Let that sink in: “Leading to system collapse.”

Should I repeat that for you?

The study authors fear for the future. They write:

The 30 GW of coal that ramped up to meet the surge in PJM load includes the units most likely to retire due to insufficient market support, given those units were not running at baseload levels before the event. As more of these units retire, the ability of the system to respond to extreme events with reliance, let alone economically, deteriorates. To maintain the resilience seen in this event, any retiring units that were dispatched during the event would have to be replaced with other resilient generation sources and their associated infrastructure (e.g. pipelines, transmission).

Bacon’s bottom line: Let me spell out what this means for energy policy in Virginia. Current regulatory policy is hostile to coal-generated electric power, and could become even more hostile if Virginia joins the Regional Greenhouse Gas Initiative. Powerful environmental and activist groups backed by out-of-state money want to phase out nuclear power by blocking the bid of Dominion Energy Virginia to re-license four nuclear units in the years ahead, and they want to halt the construction of any more gas-fired units. And, although it appears to be too late to do so, they opposed construction of the Atlantic Coast Pipeline and the Mountain Valley Pipeline. In effect, they want to build a grid in which in gains from energy efficiency plus increases in intermittent wind and solar power replace all coal and nuclear and account for any incremental increase in demand growth.

If we assume advances in the economics of battery storage, a renewables-heavy grid can be made to work just fine under routine circumstances. In theory, massive banks of batteries can store excess solar wind power to shift electric loads to times of the day when the sun isn’t shining and the wind isn’t blowing. Building all those batteries would be expensive, but it could be done. But it’s one thing to store enough electric power to handle daily load shifts. It’s another to build enough batteries to provide power for a 12-day storm system. It can’t be done. And when the electricity runs out, not only do the 40% of households who rely upon electricity to heat their homes start freezing, so do the households that use natural gas because there’s no electricity to run the fans and blowers.

Massive storm systems like the bomb cyclone and the Polar Vortex of several years ago occur only once every few years. But occur they do. And the energy mix of our electric grid must be built around that reality. Far from increasing resilience — the buzzword of the day — we could be laying the groundwork for self-inflicted disaster.

Pushing Forward Virginia’s Solar Future

Dominion solar facility in Buckingham County.

A couple of years ago, the rap against Dominion Energy Virginia was that it was hostile to solar power. That line of thought is harder to maintain now that Dominion is committed to build at least 5,200 megawatts of solar power — roughly a quarter of its generating capacity — by 2042. Dave Mayfield at the Virginian-Pilot has taken notice:

After many years as a laggard, Virginia has lately been emerging as a leader in the field.

Last year, it placed 10th among the states in new solar capacity installed, up from 17th the year before, according to a report compiled for the Solar Energy Industries Association. North Carolina ranked second, behind California.

The association projects that Virginia’s total solar generating capacity will more than triple over the next five years to roughly 2,000 megawatts – enough to power upwards of 200,000 homes.

Some industry officials and clean-energy advocates expect even-sharper growth during that time frame, and say the solar expansion almost certainly will accelerate across Virginia in the decades beyond.

I nearly fell out of my chair when I read this: “I think you’re going to see a lot more discussion about Virginia being a hot state for solar,” said Ivy Main, affiliated with the Sierra Club’s Virginia chapter who writes the “Power for the People VA” blog. Main has been relentlessly critical of Dominion’s approach to solar over the years.

So the rap against Dominion has changed. Now the criticism is that, yeah, 5,200 megawatts is pretty good, but 25 years takes too long to reach that goal. And, yeah, Dominion is building more solar, but it’s not opening up the grid fast enough enough to homeowners, small businesses and independent solar producers.

Regarding the first criticism: I expect Dominion’s enthusiasm for solar will increase in direct proportion to the falling cost of solar generation, smart grid technology, and battery storage. Just as the utility has gone from a minimal commitment to solar two years ago to a large-scale commitment today in response to changing economics and market forces — especially growing demand by data centers and large corporations for renewable energy — this “problem” will take care of itself. The main brake on solar adoption will be Dominion’s comfort level with integrating a huge solar fleet into its transmission and distribution systems while maintaining grid reliability during periods of peak demand.

The second criticism, opening up solar production to outside competition, is a thornier issue. Many companies would like a piece of Dominion’s electricity market (as well as that of Appalachian Power’s and that of the electric co-ops). These interlopers are nimble and innovative, and, given current price trends, they likely would be able to sell solar for less than the cost of generating electricity from coal, nuclear or even gas — if not now, then five years from now. If competition opened up as critics would like, Virginia’s incumbent utilities stand to lose significant market share.

But here’s the rub: Electric utilities are monopolies, and they are monopolies for a reason. They have the responsibility for maintaining the integrity and reliability of the electric grid. If the lights go out, the North American Electric Reliability Council, PJM Interconnection, the State Corporation Commission, and millions of customers will look to the likes of Dominion, Appalachian Power, and the electric co-ops to get them back on again. They won’t look to homeowners. They won’t look to the independent solar producers. They won’t look to the Sierra Club. The utilities are the ones with skin in the game.

Society and the utilities have struck a bargain: In exchange for ensuring the reliability of the system, society will grant them monopoly service territories and regulate them to provide an assured rate of return on their capital (absent incompetence on the utilities’ part). Reneging on that bargain and opening up the system to wide-open competition would undermine the utilities’ revenues and profits, exposing them to potentially massive write-offs. It should surprise no one that the utilities resist such an eventuality.

Ironically, Dominion led the charge for opening up the utility industry to competition some twenty years ago. The experience was widely judged to be a failure; little competition materialized. Then in recognition of that failure a decade ago, Dominion led the charge to re-regulate the industry in Virginia. We can debate the success or failure of the experience since then, but it does seem apparent that if the industry were deregulated in 2018, there would be plenty of competition on the power-generation side of the business — from merchant producers selling into the wholesale market, from entrepreneurs partnering with big corporations, from intermediaries buying wholesale electricity off the grid and re-selling it to retail customers, and from energy- and eco-conscious homeowners installing their own solar.

One approach to opening up the market for competition is to demonize the utilities. That’s a favorite trope of the Left, which is hostile to corporate power and profits to begin with. Another approach is to give thought to how to realign the incentives for Dominion, Apco and the electric co-ops to do the kinds of things society wants them to do — generate more renewables, allow more competition, invest in energy efficiency, etc. — and to realign them in such a way as to not trigger massive write-offs for power plants made obsolete by the changes. Virginia can choose an ideological route or it can choose a pragmatic path forward.

Under any scenario, building and maintaining the electric transmission and distribution remains a “natural monopoly” and would be subject to continued regulation. But deciding how to restructure electricity generation will be really complicated. In an ideal world, all power generators would sell into PJM’s wholesale market and the winners would be bidders who offer the best combination of price and sustainability. But if the incumbent utilities lose market share and revenues, who pays for cleaning up the coal ash ponds of coal-burning power plants? Who eats the cost of write-offs from obsolete generating units? Who pays to keep aging coal- or nuclear-power plants in reserve for back-up power? What are the implications of Virginia joining the Global Greenhouse Gas Initiative?

We haven’t begun to answer these questions. Indeed, only a handful of people are even asking them. After the exhaustive debate over the Grid Transformation and Security Act this year, there may be little appetite for any such conversations. But allowing for an appropriate respite from the recently concluded General Assembly session, perhaps we should begin the discussion.