Bacon's Rebellion

Democracy Thrives in Sunlight

Power Play

—

by

James A. Bacon
in

In previous posts on this blog, I have developed the theme that Virginia’s energy infrastructure needs to evolve from “Big Grid,” an industrial-wave system of giant power plants and transmission lines, toward a knowledge-wave approach that incorporates (a) “distributed generation,” allowing a greater role for decentralized power sources located close to customers, and (b) variable pricing tariffs that encourage people to conserve.

Virginia may soon face a critical decision point. Concluding that Virginia’s brief experiment with electric deregulation was a failure, Dominion has suggested that the state re-regulate the company. It wouldn’t be the same kind of regulation as before — the company proposes building in incentives for efficiency and conservation. The ideas sound good, as far as they go. The question is, do they go far enough?

The Commonwealth doesn’t get many chances to re-think how it wants to structure the electric power industry. It’s really important to get this right. In that light, it’s worth following the controversy over a high-voltage transmission line that Dominion wants to build through the northern piedmont — a classic case of the “Big Grid” approach. The need for electricity is real. If Dominion does nothing, Northern Virginia could face rolling blackouts by 2011. But if it builds the transmission line, the company could destroy incalculable value of farms and estates along the route.

In my latest column, “Power Play,” I ask if there’s not another way. Electric power is not a subject I know much about, but I did get some help from William W. Berry, former Dominion CEO, who recently served as chairman of ISO New England, a regional organization that makes the market for wholesale electricity. My hopeful conclusion: a combination of conservation measures combined with construction of mid-sized power facilities might buy enough time until solar energy kicks in and transforms the economics of the power industry.

As one of the earliest champions of electric deregulation, Berry also had some insightful comments about Dominion’s move back to re-regulation. In a word, he’s OK with it — but not because it’s the best thing for Virginia. He simply says that Virginia lacks the political will to create a truly competitive electricity marketplace. That’s a topic for a follow-up column if I have time.

Share this article

ADVERTISEMENT

(comments below)

ADVERTISEMENT

(comments below)

Comments

22 responses to “Power Play”

  1. Anonymous Avatar
    Anonymous

    Jim, did you read the state report on the effect of global warming on Virginia?

    We can’t afford to wait on Dominion to change their business. They only care about profits, not citizens.

    We need microsolar and microwind with distributed energy NOW. I can’t even get Dominion to consider burying power lines in my Richmond neighborhood- they are too lazy and the State Corporation still talks about consumer rights rather than citizen rights.

    The technology is here. New Jersey moves ahead with solar schools and offshore wind. What is this state doing? Still playing with coal, offshore oil, and nuclear at the expense of its citizens and neighboring states’ citizens.

  2. Anonymous Avatar
    Anonymous

    http://hosted.ap.org/dynamic/stories/H/HOMEGROWN_POWER?SITE=TXCLU&SECTION=HOME&TEMPLATE=DEFAULT

  3. Reid Greenmun Avatar
    Reid Greenmun

    Okay – here is my plan.

    The commonwealth builds a series of nuclear power reactors across the stae. They sell inexpensive power to the residents of Virignia and surplus pwer on the national grid.

    This forces Dominion Power to compete for customers and would cause them to lower their consts to consumers – because, if they did not, their customers would by less expensive power from the commonwealth.

    All but 10% of the profits are used to fund the state’s most critical transportation bottlenecks – with the sole criteria being to reduce traffic congestion.

    The 10% profits are placed into a fund for developing alternative energy sources.

    The name of each voter in the past ststewide election is placed into a lottery.

    100 names are drawn every four years. Then, on TV, 12 names are drawn from the pool of 100 names.

    Those voters “winning” the lottery are offered the opportunity to sit on the commission that decides which grant applications for alternative energy receive grant funds from the %10 set aside.

    If a voter quits – or moves out of state, another lottery using the remaining names is held to replace them.

    Oh wait – that’s not the free market – it’s socialism or communism, with the trappings of “democracy” only in that every day citizens can sit and decide how to spend the money of a government run enterprise competing with the private sector.

  4. Larry Gross Avatar
    Larry Gross

    There are some curiosities here.

    Jim B’s excellent article ..notes that the power is NEEDED by NoVa and will be imported.

    However, DP is pursuing a 3rd Nuke at North Anna at the same time.

    Also there is already a 500kv line EAST of I-95 that brings power up from Surry and North Anna…

    (see the Free Lance Stars article about the Stafford Co powerlines that will take power WEST from the 500kv line that is EAST of I-95)

    so… as Paul Harvey sez .. “what’s the REST of the story?

    I have to tell you .. I’m a bit suspicious that power plants out WEST are producing power for the EAST.. it’s a long, long way.. that goes right past power plants in Ohio and WVA – that burn coal from WVA and Ohio.

    What does PEC say? If any citizen group has the “juice” to figure out what is really going on – it would be them.

  5. Anonymous Avatar
    Anonymous

    Did you see the big announcement that a coalition of U.S. power companies was taking steps to offset global warming?

    Did you notice that Dominion Resources was not part of this coalition?

    Shameful and disgusting!

  6. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    Yeah, the energy companies are such good guys. They recognize global warming today, when yesterday they were blasting the public with propaganda.

    Why the change? Their cap and allowance program for one. If they have allowances, they can trade them in and just keep on polluting the air, while their competition may not be so lucky. Of couse they want this program pushed through because they have bought large tracts of land in Paraguay and else where that is being designed to pump GHG back into the ground, providing environmental tradeoffs.

    And the green jeans are all over themselves because they ‘got’ the energy companies to join the whacko community. Amazing.

    Gee, didn’t the Bush girls just spend some time down in Paraguay buying land for environmental property? Imagine that! Such foresight for party babes.

    I have more, like where are all the efficient solar home designs, or how come Va doesn’t have a practical net-metering law, but hey the story is about generating power. And it’s abuse.

  7. Ray Hyde Avatar
    Ray Hyde

    Well Jim, I simply can’t tell you how much I hope you are right.

    However, when I was studying energy economics in graduate school, one of my projects was to build a model predicting energy costs far into the future.

    The model was built using a primitive spreadsheet: a precursor to Lotus 123. I still have the model, but I no longer have the engine to run it.

    The model postulated a hypothetical energy company, that was equivalent to 1% of the energy generating capacity at the time. You could assume various levels of the increase in required energy. Then you would pick the kind of power plant you needed to have the energy on line when required. If you picked nuclear, then the lead time was long, the regulatory costs were high, the disposal costs wer high, but the fuel cost was low. Choosing hydro was not a real otion becaus most usable hydro sites had already been developed. Wind turbines were not in the picture yet, and neither was solar.

    Oil and gas generation was cheap and quick to start up, but the fuel costs were high.

    Then there was coal.

    Coal plants took quite some time to bring on line, because of regulatory concerns, but not as long as nuclear. And the disposal costs were lower.

    Now, once you picked your assumed rate of demand increase, the model applied a stochastic variance, just to throw a little uncertainty into things.

    All of the numbers used in the model were actual numbers based on istorical averages of cost, demand increase and variance.

    Your choices were a) rate of demand increase, b) type of plant to build, and c) when to initiate construction planning.

    The goal was to supply sufficient power to meet the assumed demand and variance, at the lowest cost, without dipping below a certain reserve capacity.

    ——————-

    No matter how you played the game, coal came out ahead. Nuclear power is not cheap, primarily because of the safety margins and regulations involved, and also because of that little 30,000 year disposal problem.

    At the end of the project, I concluded that if you wanted to promote nuclear power, the way to do it would be to promote coal power. It wouldn’t take very much of that before people started working on ways to reduce the regulatory burden on nuclear power, without reducing the safety burden.

    —————-

    We are still a long way from there.

    As much as I hate to admit it, Dominion is doing the right thing, economically, in pursuing coal.

    ——————-

    It costs a lot of money to ship electricity, but not as much as it costs to ship coal. Therefore you want to locate your coal burning plants close to where the coal is.

    However, one major reason that it costs less to ship electricity is that you get to use eminent domain to clam the land you ship it over. You get to do that without any regard to the costs assocatied with the adjoining land. You get to do that without any cognizance of what the values might be in the future, because you pay for the easement once, but you ship electricity forever.

    ———————–

    I have exactly the same problem with this as I have with conservation easements: you pay once, and reap benefits forever, regardless of what happens in the interim.

    ———————–

    Now, fast forward a hundred years.

    The Metropolitan Washington areas now reaches as far as Luray, except for Fauquier county, which is still pristine on account of the large number of conservation easements. Bacon’s Rebellion is lamenting about those morons who commute all the way fro Luray to Winchester, where the major Federal Job hotelling sites are located.

    After 20 years, Dominion has written off the expense of building their power line, and from that point forward, the transmission is mostly free.

    My great grandnephews (I have no children) are still petitioning Fauquier county for the right to build one additional auxiliary home on the property.

    I can’t grow hay here any more, on account of desertification caused by global warming. But, thanks to abundant and cheap electricity supporting desalinization plants, I can now have an orange grove.

    And, due to the rise in sea level I can build waterfront grove properties, if only Fauquier will let me. Until then, I’m hanging on by my teeth in the failing orange juice business.

    ——————-

    Finally, the American Farmland Trust wins a lawsuit in the Supreme Court. (They have long since taken over the duties of the now defunct ACLU.)

    They claim that Dominion owes the farm tolls, for all the elctricity that has aver crossed the farm, and Dominion owes triple damages.

    —————-

    Then I wake up from my dream, and it is Ground Hog Day, my deja vu birthday, all over again.

  8. Ray Hyde Avatar
    Ray Hyde

    I believe that it is customary to pay for what you get, and to pay for what you break.

    Dominion is gong to get the ability to transmit power forever. They are going to break the china shop that is the (now), mostly unspoiled piedmont region.

    If you think that tolls are appropriate, now is the time to speak up. Dominion should be required to replace the land that is taken forever, with a similar amont of land that is preserved forever. REGARDLESS of whether the land in question is in easement or not.

    As it stands, Dominion has chosen a path which is longer than required, because it avoids the complications of crossing land under easment. This means they will (ostensibly) spend less because that land is worth less than land under easement. NOT.
    And as a result of th longer route, there will be more electrical losses.

    At the same time, some landowners (myself included) have postponed putting their land under easment because a) Fauquier raised the amount they will pay for easements by 50% last year. This is not exactly a bargain since property values increased by 100% last year, but it isn’t a slap in the face either. Maybe it will go up another 50% next year. b) even if I’m not selling a PDR, the value of the land has gone up substantially, the longer I wait, the bigger a tax break I will get. c) I have no intention of granting an easement: I want the development, whatever it is that I am allowed. I believe the net personal benefit is higher for creating two McMansions or 40 affordable homes than it is for granting a conservation easment and maybe getting 21 Virgins after I die.

    No matter what you believe the outcome will be, you have to believe that ensuring the maximum protection for landowners property rights, also ensures that Dominion will have to pay the maximum amount for what it gets, and what it breaks.

    In turn, that insures that they will empoy the maximum effort in seeking alternative answers.

    I happen to believe that those answers include more local generation and more co-generation. I also believe that it will mean we cannot afford the kind of (environmentally sponsored) activity that shut down a small coal burning plant in Alexandria.

    It is a prime example of what I mean by (well-meaning) and (heartfelt) environmental activism that is (in the end) counter productive.

    We need to be a lot smarter, and we need to demand verifiable metrics. We need to educate the public. Otherwise, entities lik Dominion and SP/I will pull the wool over our eyes.

  9. Ray Hyde Avatar
    Ray Hyde

    It seems to me that efficient solar home designs depend a lot on the site. The site depends a lot on waht the county will alow. Therefore, JB is correct in his frequent refrain that much of what is wrong is a result of the laws we have passed.

    That said, I’ll say ther is much to be said for stupidity, ignorance, and convention (peer pressure, if you will.)

    My home faces north. There are NO windows on the south. The ones on the north have a huge overhanginging wrap around porch. The primary viw of the mountains is to the south.

    More than once, I have thought to myself, WHAT WERE THEY THINKING?

    But, this place was built over a hundred years ago. In those days te driveway (lane, in those days) was a mile long. They were more interested in who might come to visit, than they were in solar power. They were more interested in people than they were in the view.

    All of that is my opinion. I don’t know what drove the people that built this place. All I can do is surmise, based on what evidence remains.

    If the current popular politics continue, there won’t be very much left of that for very long.

  10. Jim Bacon Avatar
    Jim Bacon

    Darrell, Virginia does have a net metering law — but it caps the net-metering impact at 0.1 percent of total capacity (or maybe it’s .01 percent — whatever, it’s a really small number). Do you have criticisms of the law, other than the fact it is so small as to have a negligible impact even if solar generation ever took off?

  11. Larry Gross Avatar
    Larry Gross

    Energy is a money issue.

    We can power many of our homes and busnesses and institutions right now with solar and wind but it costs more than coal and nukes.

    You may not be able to incorporate it directly into some structures not optimally oriented but other alignments and retrofits are not impossible.

    Limited options may be available to “compact” (dense) development but right now solar panels for roofs – both residential and commercial are available on the market.

    Solar panels for “windows” or south facing walls are also available.

    Imagine Malls – with combinations of skylights and solar panels.

    Imagine not only “smart meters” that do exist right now and are used but imagine “smart” (configurable) appliances that are designed to default to non-peak hour use.

    Imagine tankless water heaters.

    Imagine rooms designed to not be cooled/heated if no one is in them.

    ALL of these things are either already available or could be made available (and by the way – marketed to the rest of the world).

    We could reduce nuke waste, mercury emmissions, acid rain, greenhouse gases and improve air quality in our metro areas if we simply exploited what is already available to us.

    It would cost MORE .. on the front end than just letting things go the way they are.

    Imagine also.. thousands, millons of jobs in this country to provide to the market these technologies.

    The simple truth is – that we are so heavily invested in polluting technologies that cost less – on the front end – than less polluting technologies.

    Dominion still will not buy back electricity at the same rate they charge you for it.

    The General Assembly will approve a rate structure where they charge you retail but will only pay you wholesale.

    Just IMAGINE – what would happen – if you could REDUCE your electric consumption AND get net money…

    We’re invested in polluting technologies because that is what our traditional energy providers are invested in – because green power is NOT good for their business and their shareholders.

    As long as they can convince us to buy the technological equivalent of buggy whips.. they will do so.

  12. Groveton Avatar
    Groveton

    Energy is a crucial issue to us all so I am happy to read Jim’s comments on this topic. And I agree with Jim that all options need to be considered.

    However, I find humor in the “ruralists” who oppose the power transmission lines running through their counties. They love Fairfax and Loudoun and Alexandria when it comes time to spend the tax money raised in Northern Virginia. But consider something as normal and understandable as running eletric transmission lines through their “bucolic paradise”? No way!!

    Either get your hands out of our pockets or accept the your role in supporting the economic engine of this state.

  13. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    Well Jim, it’s like this. A component in the decision to convert to solar electricity is the overall cost of installation. If I am spending a large amount of capital to install a system, I expect to see some form of return. One return is the amount of power I generate for my own use. But that isn’t enough to overcome the installation cost in a timely manner. The other return is the opportunity to sell power to the electric company. However the electric company wants to limit the amount of power they are willing to pay for, and only want to pay a reduced price for what power they do buy. After a set limit, anything else going out to them is free for them. I look at solar conversions as a business, and giving power away is not a cost effective way of doing business if I want to recoup my costs. That is effectively what the law is allowing. A cap and limited payment to the benefit of the power company and not the homeowner. Until that attitude changes, all the talk about energy efficiency is merely rhetoric.

    But all of this is moot, if the installation is done on a conventional house. The energy losses quickly overcome the reason for converting. What I have found in the case of home designs, is that most are oriented around large expensive homes or are designed by earth first idiots. I have been looking for some time now to find a design that could easily be built in a modular fashion, that would be closer to a small affordable home with total dedication to energy efficiency. Those designs do not exist outside of some university project. There is no practical alternative to the existing method of building houses.

    Yesterday, the VA Pilot had an article about some company offering to install a solar system for free. What one would pay for is the electricity that is generated. Basically you make a long term contract for a set price, akin to buying options on electricity. Once again, what could be a good deal is hampered by backward thinking net metering laws. Then there are the HOA considerations.

  14. Ray Hyde Avatar
    Ray Hyde

    “We could reduce nuke waste, mercury emmissions, acid rain, greenhouse gases and improve air quality in our metro areas if we simply exploited what is already available to us.

    It would cost MORE .. on the front end than just letting things go the way they are.”

    Absolutely right.

    Now what we need to do is figure out how much more, and how long the payback will take.

    THEN, we can decide which technologies are worth pursuing, and how much we can afford to spend to incentivise them.

    BUT, if the counter argument is that it is worth the price, whatever it is, because we are buying a clean environment, then we simply do not have an environmental argument that we can sell profitably.

    We are going to do a lot better at promoting a good environment when we promote it with profit than we will by promoting it through confiscation.

  15. Ray Hyde Avatar
    Ray Hyde

    “Either get your hands out of our pockets or accept the your role in supporting the economic engine of this state.”

    Ah. Right you are.

    I have garnered no small amount of ire from my neighbors for simpy saying that I AM willing to accept my role in supporting the economic engine of this state. For a fair price.

    The key word in your staement is “supporting” as in a continuing commitment.

    But the way this works out, Dominion comes in, pays once, and transmits electricity forever. After 20 years, their initial investment is free, but I’m still “supporting” their enterprise. I’m still paying the taxes on the land they are using.

    They pay nothing for collateral damage, or damage to neighboring properties.

    Basically, they are using my investment in my land for their own benefit, forever. Taken out enough years, it means they get what they want for free. I don’t see that as supporting growth, I see it as having it stolen from me.

    Now, if they are offering rent, or a portion of the profits, then I’m willing to listen. In Maryland, the state got 7.5% of the gross proceeds from a fiber optic line that was placed on a state right of way. That state right of way was purchased with a one time payment to the original owners.

    What is wrong with this picture?

    And it isn’t uncommon for a right of way owner to seize the land under eminent domain, and then rent part of it at a much higher price, and a percetage of the take.

    Now, I have a friend, a farmer in the south of the county, whos land has already been crossed by a power line. He says he doesn’t notice it any more.

    But then, he is a farmer. His interest in the land is what he can grow on it. For many of my neighbors, the land is secondary to the value of their home. And, the power line isn’t going directly next ot his home.

    I agree, some of the arguments are overblown. I agree that sooner or later we will need power lines. Somewhere.

    All I suggest is that there be a fair compensation, which does not now exist. All I suggest is that a jury of peers set the value, not some panel of judges. All I suggest is that if I have to sue to get fair compensation, then the costs should accrue to them, not me. (Providing I win.)

    Better still, take some small percentage of the profit generated from the electricity, and distribute that among the 400 or so landowners along the right of way, indefinitely, and then I suspect you would see a lot more people lining up to “support” the growth of the commonwealth.

    Support shouldn’t have to mean charity. Whoever gets that electricity should expect to pay fair compensation to those who provide the path for it to arrive, both the power company who provides the structures, and the landowners who provide the space. Not overly fair, but fair. And continuing.

    The power company is guaranteed a return on their investment. How much is my return on my investment after the power company takes part of it from me it from me, and devalues much of the rest?

    The answer is really unknowable. But we know how much electricity is delivered across that line, and what it is worth.

    Call it a toll, if you like. ;-).

    I don’t see that accepting my role in supporting the economic engine of the state means that you should have free reign to put your hands in MY pockets.

    Somewhere, there is a deal that allows us BOTH to come out ahead, and the power company, too.

    The current eminet domain laws don;t provide a path to that deal.

  16. Ray Hyde Avatar
    Ray Hyde

    “Dominion still will not buy back electricity at the same rate they charge you for it.

    The General Assembly will approve a rate structure where they charge you retail but will only pay you wholesale.

    Just IMAGINE – what would happen – if you could REDUCE your electric consumption AND get net money…”

    This is just dreaming, this is the kind of environmental economic nonsense that makes us all look like lunatics.

    Of cousrse Dominion is not going to buy back power at the same price they sell it to you. They still have to maintain the circuits that allow them to sell the electricity to others.

    The price they sell power to you includes the price to maintain those cicuits. If they buy it bak at the same price, they make nothing.

    I’ll agree that the price differential is excessive, but I don’t agree it should be equal.

  17. Ray Hyde Avatar
    Ray Hyde

    When the state built a road across the farm, I at least wound up with a road that I profit from by using.

    With the power line, that isn’t going to be true. I will lose the potential value of the land they use, and much of the potential value of the land they don’t use.

    If the use of the land changes over time, the value of those losses will increase, but I will get paid only once, regardless of what happens in the future.

    This could very well be YOUR home, next time around. It is the third time for my family.

    Pay attention. Call the Governor. Call your representatives. Call the SCC.

  18. Ray Hyde Avatar
    Ray Hyde

    “I have been looking for some time now to find a design that could easily be built in a modular fashion, that would be closer to a small affordable home with total dedication to energy efficiency.”

    I recently read an article about a woman architect who was designing and building modular solar homes. I believe the article was in Smithsonian.

    Otherwise youare right. I can;t imagine what those who built my home were thinking. It faces North with almost no windows on the south, and those covered by a two level wrap around porch.

    The porches and the huge overhaning trees mean that there is almost no cooling costs, but there is no heat gain either.

    And the trees are reaching the end of their lives, so I have had to spend quite a bit repairing tree damage and removing dead trees.

    Taking down a five foot diameter 120foot tall tree, right next to your house, makes for an exciting afternoon, and several weeks of log splitting.

    Nothing, is really free.

  19. Larry Gross Avatar
    Larry Gross

    re: buying back power.

    What you are saying is that ONLY Dominion is given the right to produce power and that it’s whole existence depends on that monopoly.

    So Dominion is INVESTED in polluting power and the state sanctions that arrangement.

    But the bottom line is that YOU and I CAN install wind/solar and choose to NOT generate mercury, nuke waste, etc.

    We do have that option and our response is that it’s “too expensive”.

    Well… you know when you buy a tire – you have to pay a tire disposal fee.

    What if you had to pay a mercury or nuke waste disposal fee?

    Wouldn’t that increase the cost of power such that solar/wind could compete on a more equal basis?

    Why not do that?

  20. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    Under netmetering, they don’t buy back anything. They give you credit based upon your average use of THIER power. If you generate excess, it’s theirs to sell. In order to actually sell them power you must enter into a contract. What homeowner is going to waste a lot of time and money on legal maneuvers?

  21. Larry Gross Avatar
    Larry Gross

    This, in my view, undermines competition and entreprenurial approaches to power generation especially ones that would use renewables.

    It would seem that we are entering an era where roofs and walls and even windows can be made of photovoltaics. The History Channel said that photovoltaic paint is on the horizon.

    The problem is the up-front cost and how to recover/amortize that cost.

    Dominion also has up-front costs – the capital costs of building new plants that are, in turn recouped by incorporating into their retail prices to customers.

    I know so little about this.. it is pitiful… much ignorance but it appears to me to not be a level playing field from a financial perspective.

    I’ll bet that Dominion can, each year, write off some of the plant equipment as it gets older.

    What is the situation with regard to doing that with renewable energy equipment installed by citizens?

  22. Larry Gross Avatar
    Larry Gross

    This, in my view, undermines competition and entreprenurial approaches to power generation especially ones that would use renewables.

    It would seem that we are entering an era where roofs and walls and even windows can be made of photovoltaics. The History Channel said that photovoltaic paint is on the horizon.

    The problem is the up-front cost and how to recover/amortize that cost.

    Dominion also has up-front costs – the capital costs of building new plants that are, in turn recouped by incorporating into their retail prices to customers.

    I know so little about this.. it is pitiful… much ignorance but it appears to me to not be a level playing field from a financial perspective.

    I’ll bet that Dominion can, each year, write off some of the plant equipment as it gets older.

    What is the situation with regard to doing that with renewable energy equipment installed by citizens?

Leave a Reply

Read More