In a Jan. 12 release, and again in his state of the Commonwealth speech, Gov. Timothy M. Kaine outlined the details of his “green jobs” initiative. For the most part, it is a worthy policy thrust, containing some very good ideas, some inoffensive ones, and only one worrisome proposal. The package is modest in scope, constrained by Virginia’s budget straightjacket, but considered as a whole, it would nudge the Commonwealth in the right direction.
Let’s be clear about what the green jobs initiative is not. While there are strong conservation components, the Kaine initiative is not a comprehensive approach to reducing energy consumption and greenhouse gas emissions across the economy. “Green jobs” does not address key drivers of energy intensity in Virginia’s economy, such as the auto-centric system of transportation and land use. But provisions of the program, if enacted, would get us closer to creating sustainable, energy-efficient regions.
The most far-reaching – and laudable — provisions would promote energy conservation in two ways: (1) raising energy-efficiency standards for state buildings, and (2) promoting electric utility investments in conservation.
In his state of the Commonwealth address, Kaine cited the top recommendation of his Climate Change Commission: to reduce electricity consumption in Virginia by 19 percent of current levels by 2025 (with adjustments for population growth). That goal won’t reduce total consumption by 19 percent, but it would reduce per capita consumption. It’s an ambitious goal but an achievable one.
Kaine has already issued an executive order requiring all new state buildings be constructed to high energy-efficiency standards. This year, the governor proposes extending that idea by amending the Code of Virginia to require “all state and local government buildings meet either LEED or Green Globes standards for efficiency.”
He’s not talking about new buildings only. He’s talking about retrofitting existing buildings. Retrofits, he notes, would put a lot of carpenters, electricians and installers back to work – a good thing in a recession. Fair enough. What he didn’t do in the speech was say how he intends to pay for the retrofits.
If the plan relies upon the routine allowances for building maintenance and improvements in the state budget, the sums available to pay for the energy-efficiency retrofits will be meager indeed, and the impact on jobs would be minimal. This strikes me as an instance in which the state should exercise its AAA bond rating to borrow money.
Let’s say, for purposes of illustration, that the Department of General Administration has identified $250 million worth of worthy energy-efficiency projects in public buildings, including only projects that generate a payback of 20 percent per year or more. The Commonwealth could borrow that $250 million, paying 5 percent or so on its bonds. Not only would the expenditure of those funds create work for the construction industry at a time it desperately needs it, the expenditures would more than pay their way. Every dollar the state devotes to debt payment, it makes back through a reduction in energy costs — with an ample “profit” to spare. That’s just good business, and a good tactic for addressing the state’s long-term budget challenges.
Of course, state and local government account for only a tenth or so of Virginia’s economy, so these measures leave 90 percent of the economy untouched. Kaine’s proposed changes to utility rate structuring would address that problem. Said Kaine:
Under current law, we guarantee a rate of return for a utility building a new coal plant, but not for investments that promote conservation. That just makes no sense. Our long-term planning should recognize that conservation is just as important an energy source as new construction. We should treat conservation investments at least as favorably as new generation investments, and my bill will do that.
This measure would address a fundamental flaw in Virginia rate-setting policy. (I haven’t read the bill, so I cannot comment on the specifics, but the broad idea behind it is sound.) Despite the many opportunities available, Dominion, Appalachian Power and the smaller power companies have little incentive to invest in energy efficiency and conservation. One idea currently under consideration is Dominion’s proposal to install smart meters in every home. Smart meters would give consumers the means to carefully monitor their electricity consumption. Pilot programs around the world have demonstrated that people utilize electricity more efficiently when they can measure the impact of their activities.
These proposals are “slam dunks” and warrant the full and fair consideration of the General Assembly. Gov. Kaine proposed some other measures, which don’t seem like the “slam dunks” that may require more thought. I will address them in a future post.
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