by Bill O’Keefe
Politicians are not known for engaging in reflection or looking back on legislation, but they should. The experience that Europe is having with its version of the Virginia Clean Economy Act is the reason why. Presently, Europe is experiencing energy shortages and surging prices. Some of this turmoil is due to global forces but some is due to energy decisions that European nations have made, in particular the decision to move rapidly to renewables and eliminate coal, nuclear and natural gas as major sources of electricity.
Green ideology blinded Germany and other European countries to the fact that wind and solar don’t provide around-the-clock reliable sources of energy. This summer there have been extended periods of low or no wind. Last winter, European nations experienced colder-than-normal temperatures which had the effect of reducing both solar and wind power and leading to steep price increases. Without reliable and commercially viable electric storage systems, renewables are vulnerable to cloud and snow cover and periods of low wind.
The General Assembly and Dominion Energy would do well to take a close look at Europe’s experience and determine how Virginia can avoid a similar fate. One important lesson is that major transitions are complex and beset with many uncertainties. Another is that government has at best a mixed record when it comes to industrial policy.
Advocates of the VCEA will claim that the General Assembly set a target and a date and Dominion decided that an enormous wind farm was the way to achieve it. That is an oversimplification. The correlation between the bias of political forces, special interest, and economic incentives foreordained the outcome. Mandating that all electric power by 2050 had to come from renewable energy left Dominion Energy no real choice, especially since it was guaranteed to profit independent of the cost. This a classic case of the Baptist and Bootlegger theory of public choice.
The mistake that the General Assembly made was specifying not only a date three decades in the future but also requiring renewable energy to be 100%. The assumptions behind this mandate treat uncertainty as if it either doesn’t exist or that it is too trivial to make a difference. That is a serious error.
Before the late Secretary of Defense, Energy and CIA Director James Schlesinger entered public service, he was an analyst with the Rand Corporation. He wrote a paper on technology decision making that is relevant to long term energy planning. He described two types of planning: Cook’s Tour and Lewis and Clark. Cook’s Tour planning named after the travel company is like planning a vacation where the itinerary is known with specificity and there is a high degree of certainty. Lewis and Clark named after the famous explorers of the west deals with planning that is dominated with uncertainty. In sending them to explore the west, Thomas Jefferson did not know what was west of the Mississippi. Lewis and Clark had to gather and analyze information as they went along. Decision making was incremental as new information was gathered, it was evaluated and new decisions were made.
In a world where energy technology investments are growing and there is much uncertainty as to what electric power sources will prove the most cost-effective and reliable, it would be prudent for both the General Assembly and Dominion to hedge their bets and go slower. For example, in five years from now, how will natural gas with carbon capture and small modular nuclear reactors look compared with off shore wind? Legislators should remember that their goals are to reduce emissions as much as practical, ensure that Virginians have reliable electric power, and maintain reasonable rates for electricity.
In the real world, politicians can mandate but they don’t bear the costs of being wrong. Those are borne mainly by energy consumers. In 2050, the politicians who gave us VCEA will be long gone and Dominion customers will be left with the bill. Evaluating trade-offs along the way is the best way of making the best long term solution.
William O’Keefe, a Midlothian resident, is founder of Solutions Consulting and former EVP of the American Petroleum Institute.
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