If the power grid goes down, blame the war on solar

More, please. Photo credit Christoffer Reimer/Wikimedia

More, please.
Photo credit Christoffer Reimer/Wikimedia

A large number of electric utilities across the country are famously engaged in a war against customer-owned solar. Using policy barriers, “standby” charges and other tactics, utilities from Arizona to Virginia are doing everything possible to short-circuit a revolution that threatens their control of the electric sector. It won’t work. Trying to keep electric generation out of the hands of the rabble is a stop-gap solution, doomed to fail within a few years when battery storage allows customers with solar arrays (or wind turbines) to defect en masse.

But utilities won’t be the only ones hurt in the process. Stifling distributed generation and forcing grid defection is the worst possible outcome for the economy, the climate, and the security of the electric grid. The more utilities succeed, the more everyone loses.

With all its problems—and they are growing—the modern electric grid remains an efficient way of delivering competitively-priced power to American homes and businesses. Utilities, generators, and grid operators engage in a complicated dance that delivers power economically where it is needed, when it is needed, with no shortfalls and nothing left over, better than 99.9% of the time. If one generating plant suddenly breaks down, others are swiftly brought online. When demand for electricity peaks, grid operators call up “peaker” plants or pay some customers to curtail use. The balance is maintained.

But the sheer size and interdependence of the grid, and its reliance on large, centralized generating plants, makes it vulnerable to massive power disruptions resulting from weather events, electromagnetic pulses, solar storms or physical attack. Aging infrastructure, climate change-driven mega-storms, more intense heatwaves, drought, and potential cyberattacks are growing threats to the reliability of our power supply.

Distributed generation using renewable energy offers the simplest and most efficient way to reduce many of these threats. A power grid that includes thousands of solar and wind installations scattered across a service territory is inherently more secure than one reliant on a handful of huge generating plants and transformer stations. And when the fuel is wind or solar, supply lines can’t be disrupted.

Distributed solar is especially useful when the grid is under stress. Researchers found that just 500 megawatts of widely dispersed solar energy could have prevented the massive blackout of the Northeast in August of 2003.

Add in battery storage, and some small systems can be combined to form microgrids. Microgrids can be “islanded” when the larger grid fails, producing power continuously to ensure that critical needs are met—and decreasing the incentive for hackers and terrorists to target the grid in the first place.

The businesses and residents who are installing solar arrays today aren’t just saving money on energy bills and reducing their carbon footprint. They are buying the building blocks of a more resilient power grid that will serve all of us in the future. Some utilities like NRG and Vermont’s Green Mountain Power recognize the value of distributed solar to the grid and work to encourage customers to stay connected. Others, like Dominion Virginia Power and Appalachian Power in Virginia, NV Energy in Nevada, and the Arizona Public Service Company, are energetically working to impose barriers and punish solar owners with higher costs. If they succeed, the result will be less distributed generation and greater grid vulnerability.

Worse, customers who face these utility barriers and cost penalties will have an incentive to cut themselves off from the grid. Affordable battery storage is beginning to make that an option. Within a few years, disaffected customers could be leaving in droves. Rather than pay a punitive “fair share” of the wires that cross their property, they could opt to pay no share at all.

Then, instead of a stronger grid, we’d have a weaker one. Instead of increasing the security of our power supply, we would increase our vulnerability to attack. In place of a highly efficient, low-cost, interconnected grid, we’d move towards an inefficient, high-cost, Balkanized grid.

This is the worst possible direction for our grid—and it’s the logical conclusion to the war on solar that utilities are waging today. That makes it critical that regulators, customers and state legislatures push back hard in support of customer-owned solar. Protecting the grid is too important to let utilities win this war.

Dominion shareholder votes reflect growing concerns on methane, climate

Protesters lined the road leading to the Dominion shareholder meeting in Richmond. Photo credit Corrina Beall.

Protesters lined the road leading to the Dominion shareholder meeting in Richmond. Photo credit Corrina Beall.


Shareholders attending Dominion’s shareholder meeting last week once again raised questions about the utility giant’s dependence on fossil fuels in a carbon-constrained world. Guest blogger Seth Heald brings us this view from inside the meeting.

News coverage of Dominion Resources Inc.’s May 6 annual shareholders meeting focused on the demonstration held outside the company’s suburban Richmond training facility. More than 150 people had traveled from all over Virginia and beyond to wave signs and banners protesting Dominion’s planned Atlantic Coast Pipeline for fracked natural gas and its unhealthy dominance over Virginia politicians (on full display during this year’s General Assembly session). Other signs condemned Dominion’s role as a major carbon polluter and its membership in the American Legislative Exchange Council (ALEC).

But developments inside the meeting, which I attended, were newsworthy too.

Like all publicly traded corporations, Dominion holds an annual meeting where shareholders vote on significant issues and have a chance to hear from and question corporate management. Most shares are voted online or by mail, but some shareholders choose to come to the meeting in person. Over the years Dominion has encouraged its electricity customers to buy stock, so many company shareholders live in Virginia.

Only shareholders or their proxies may attend the meeting, and this year security was exceptionally tight. Attendees had to show their admission ticket and driver’s license at three separate places and then go through a metal detector before getting to the meeting. No cameras, cell phones, or recording devices were permitted.

This was my third straight Dominion shareholder meeting. Perhaps most notable this time was the large number of people who lined up to address Dominion CEO and board chairman Thomas F. Farrell II, who told shareholders the company had allotted 30 minutes for their comments and questions. In previous years half an hour was more than enough time for all shareholder comments. But this time it was immediately clear that Farrell would have to allow more time or else those at the back of the line wouldn’t be able to speak. To his credit he allowed all waiting in line a chance to speak. The whole comment process took about an hour, causing the meeting to run significantly longer than in previous years.

Under Dominion’s standard meeting procedure, Farrell stands on the stage facing the audience, and people with comments or questions must deliver them from a microphone at the back of the large room, perhaps 50 feet away from Farrell. Members of the company’s board of directors all sit together in the front row, with their backs to the audience. Several of the shareholders this year spoke against the proposed Atlantic Coast Pipeline, describing how it would harm their land or their region or the planet. One woman movingly described how the pipeline would ruin land that had been in her family for hundreds of years. Many shareholders in the audience turned in their seats to look at the speakers, but not the board members. They sat in the front row and looked straight ahead.

Shareholders voted on a number of resolutions that asked the board or the company to take various actions. The ballot indicated that the board opposed all resolutions that had been submitted by shareholders. Nevertheless, three climate-related shareholder resolutions improved their vote count this year over last. For the first time ever one of them—seeking a report on emissions of the potent greenhouse gas methane—got 25 percent of voting (i.e., non-abstaining) shares, up from 21 percent a year ago.

Doing almost as well were shareholder votes seeking reports on climate-change business risk (23.5% this year versus 21 percent last year) and burning wood to generate electricity (22 percent this year versus 21 percent last year).

These are far from a majority of voting shares, it’s true, but these percentages represent close to $6 billion worth of shareholder value, and the totals are impressive when one considers that many large mutual funds routinely vote against resolutions that are opposed by a company’s board.

In opening comments to the board and shareholders Farrell spoke about efforts to reduce “carbon intensity” in electric power generation. That’s a measure comparing quantity of carbon-dioxide emissions to quantity of electricity produced. Dominion representatives always like to talk about how they’re reducing carbon intensity. They rarely if ever talk about reducing the company’s total carbon emissions.

Reducing carbon intensity is a fine thing, but the trouble is that you can reduce carbon intensity modestly just about forever while still increasing total carbon-dioxide emissions. That’s particularly true if, like Dominion, you resist meaningful efforts to make energy efficiency a significant part of your generation mix. As the Washington Post’s Chris Mooney has noted, doing something about climate, even doing a lot, isn’t the same as doing enough. Dominion and its ALEC partners who reflexively attack the EPA’s climate efforts are still resisting doing much of anything significant on climate, much less doing a lot, or enough.

What affects the climate is the total amount of carbon dioxide (and other greenhouse gases, like methane) in the atmosphere. At some point—and climate science tells us we’re well past that point—you can’t claim to be serious about climate change unless you’re willing to talk about (and commit to) reducing total carbon emissions, not just carbon intensity.

That was the subject of a shareholder question from Lindsay Mendoza of Mercy Investment Services, Inc., which manages assets of The Sisters of Mercy, the 180-year-old Catholic order renowned for its work in social justice, health care, and education. Mendoza asked Farrell when Dominion would begin to reduce total carbon-dioxide emissions, as opposed to carbon intensity. Farrell quickly responded: “That’s a good question.” (An overused cliché, no doubt, but Farrell seemed sincere in saying it, and he did not give that response to any other shareholder.) He went on at some length to discuss the company’s activities, but he didn’t specify a year, or decade, or even a century in which Dominion’s total carbon-dioxide emissions might actually begin to decline. That’s particularly disappointing in light of Dominion’s ranking, based on emissions reported to the EPA, as Virginia’s top carbon polluter.

Shareholders can try to press Farrell for a more specific answer at next May’s annual meeting. But in the meantime, asking Dominion and its board when the company will begin to reduce the company’s total carbon-dioxide emissions is a “good question” that Virginia’s governor, legislators, and the State Corporation Commission (Dominion Power’s state regulator) ought to be asking.

Besides being a Dominion shareholder, Seth Heald is Vice Chair of the Virginia Chapter of the Sierra Club and a student in the MS in Energy Policy and Climate program at Johns Hopkins University.

In reversal, Virginia AG says localities may ban fracking

fracking signVirginia Attorney General Mark Herring issued an official advisory opinion on May 5 holding that Virginia localities have the right to prohibit hydraulic fracturing (or “fracking”) as part of their power to regulate land use within their boundaries. The letter reverses a two-year-old opinion by former Attorney General Ken Cuccinelli.

Herring’s opinion cites §15.2-2280 of the Virginia Code, which grants broad zoning powers to localities. These include the power to “regulate, restrict, permit, prohibit, and determine” land uses, such as “the excavation or mining of soil or other natural resources.” Thus, writes Herring, “I conclude that the General Assembly has authorized localities to pass zoning ordinances prohibiting fracking. The plain language of the stature also authorizes localities to regulate fracking in instances where it is permitted.”

Herring’s opinion comes in a letter to Senator Richard Stuart, who had asked whether Virginia law allows localities to prohibit “unconventional gas and oil drilling,” commonly known as fracking, and whether they may use their zoning authority “to regulate aspects of fracking, such as the timing of drilling operations, traffic, or noise.”

The letter overrules a January 11, 2013 opinion by then-Attorney General Ken Cuccinelli, which held that the General Assembly had preempted localities’ right to regulate or ban drilling when it passed the Virginia Gas and Oil Act. Under §45.1-361.5, localities may not “impose any condition, or require any other local license, permit, fee, or bond to perform any gas, oil or geophysical operations which varies from or is in addition to the requirements of this chapter.”

But, Herring notes, the statute “also includes a savings clause stating that the Act does not ‘limit or supersede the jurisdiction and requirements of . . . local land-use ordinances.’” Thus, it explicitly preserves local zoning authority to prohibit or limit fracking.

Herring concludes, “To the extent that the 2013 Opinion conflicts with this conclusion, it is overruled.”

Interestingly, if localities choose to restrict fracking but not prohibit it, they may actually leave themselves more open to challenge. Herring’s opinion reaffirms that portion of Cuccinelli’s opinion that upheld the right of localities to impose some restrictions on fracking, short of outright prohibition. However, the restriction must be “reasonable in scope” and “not inconsistent with the Act or regulations properly enacted pursuant to the Act.” As a result, a fracking company might have a better shot at challenging a restriction than it would an outright ban.

Herring adds, “Determining the extent to which particular zoning restrictions on fracking may possibly be preempted by state law will be governed by the particular facts, restrictions, and regulations at issue. Consequently, I can express no opinion on whether any particular zoning restriction has been preempted.”

McAuliffe vetoes coal subsidy bills, but Republicans vow to keep the corporate welfare flowing

Your taxpayer dollars at work!

Your taxpayer dollars at work!

Governor Terry McAuliffe has vetoed the two bills that would have extended Virginia’s coal subsidies through 2019. It’s a laudable act of fiscal responsibility, and surely no more than Virginia taxpayers had a right to expect in a time of tight state budgets. And yet it was also an act of courage in a coal state where mining companies have had far too much political power for far too long.

You’d like to think legislators would now focus on working with the Administration to help southwest Virginia communities shift away from their unhealthy dependence on coal mining and instead develop new, cleaner industries. The tens of millions of dollars that have been spent annually on coal subsidies could be much better directed to job diversification efforts. Unfortunately, legislators representing coal companies—I mean, coal countieshave already vowed to reintroduce bills next year to keep the taxpayer largesse flowing. They have time; the subsidies won’t actually expire until January 1, 2017.

It’s been 20 years since Virginia began subsidizing coal mining via these two tax credits, bleeding the state treasury of more than $500 million in all. And it’s been three years since the Joint Legislative Audit and Review Committee (JLARC) issued a critique of the various Virginia tax credits that included an especially harsh assessment of the handouts to coal companies. Yet instead of canceling the credits in light of the report, the General Assembly promptly extended them. Even Governor McAuliffe didn’t actually try to end them completely this year. Legislators rejected his efforts simply to scale them back, leading to this veto.

So if we didn’t get jobs for our $500 million, what did we get? Most of the money has gone to enrich coal companies, but a portion went to fund the Virginia Coalfields Economic Development Authority (VACEDA). VACEDA’s board includes coal executives, a fact which has served to intensify rather than lessen coal’s hold on the area.

Perhaps VACEDA’s economic diversification mission would prove more successful if the state were to fund it directly, with money not tied to coal, and were to insist on reforms to VACEDA to ensure board members don’t have a conflict of interest.

In addition to propping up the coal industry, the tax credits also serve to lower the price of Virginia coal purchased by our utilities. This shifts energy costs from ratepayers to taxpayers, but it also makes it easier for coal to compete against other forms of energy, including renewable energy like wind and solar. And since making taxpayers subsidize electricity rates artificially cheapens electricity, it also lessens the incentive to conserve energy. In an age of climate change, this is simply bad energy policy.

Most economists agree that energy policy should seek to make electricity rates reflect the true cost of producing energy. This should include costs imposed on the public in the form of higher health care costs for asthma and heart disease as a result of power plant pollution—costs known as “externalities.” The coal subsidies do the exact opposite; instead of making utilities and coal companies internalize pollution costs, they actually shift more costs onto the public.

All this was done in the name of supporting employment in the Coalfields areas. However, the coal subsidies aren’t linked to jobs; they are based on coal tonnage, so mining companies that increase mechanization while cutting jobs don’t lose anything. And cutting jobs is exactly what has happened in Virginia. As the Governor’s veto statement noted, coal mining jobs declined steadily from their highs in the early 1990s to about 3,600 today, notwithstanding the subsidies.

A reading of the JLARC report also shows that most of the drop occurred before President Obama took office and the EPA imposed tighter pollution standards. The fact is, coal is in decline, and Virginians will be better off not throwing good money after bad.

Indeed, the coal jobs number is barely twice the number of people working in Virginia’s tiny solar industry, which gets no state subsidies. Just this year a House subcommittee killed a bill that would have provided $10 million a year in support for renewable energy projects.

Solar is growing by leaps and bounds across the country, while coal fades. Governor McAuliffe has taken the right lesson from that. It’s too bad so many Virginia legislators have not.

McAuliffe touts gas and nuclear, says it’s not his job to worry about risks

And he'll have to, given the hash we adults are making of it.  Photo courtesy of Glen Besa.

And he’ll have to, given the hash we adults are making of it. Photo courtesy of Glen Besa.

A forum on climate change held last Wednesday in Richmond was supposed to be about moving to clean energy, but it sometimes seemed to be more of a platform for Governor Terry McAuliffe to tout plans for more natural gas and nuclear energy in the Commonwealth. It wasn’t that he neglected energy efficiency, wind and solar—he had plenty of good things to say about these, and even a few initiatives to boast of. It was just that they paled against the backdrop of massive new natural gas and nuclear projects, to which he seems even more firmly committed.

The event was a conference called “The Next Frontier of Climate Change,” organized by The New Republic magazine and the College of William and Mary. Moderator Jeffrey Ball of Stanford University shaped the conference as a series of interviews, beginning with Governor McAuliffe. You can see video of the interview here.

Ball started out asking about the politics of climate change, which gave McAuliffe a chance to reiterate his convictions that climate change is real, that we can see it happening today in Hampton Roads, and that part of meeting the challenge involves supporting the kind of 21st century technologies that will also make Virginia an exciting and attractive place to live. That includes offshore wind and solar.

But McAuliffe also made it clear he sees everything through the lens of economic growth, and his top priority is attracting new business to fill the gap left by shrinking federal spending in the state. “When I ran for governor,” he explained, “I tried to put everything in an economic issue: what is good for the Commonwealth, how do you grow and diversify. I preside over a commonwealth that, we are the number one recipient of Department of Defense dollars, number one. Now, that’s great when they’re spending, but when they’re cutting like they’re cutting today, it has a dramatic impact.”

He is also persuaded that renewable energy, even with all its job benefits, won’t get him as much economic growth as cheaper fossil energy can, and his friends at Dominion Resources and its subsidiary, Dominion Virginia Power, have convinced him that means backing their plans for natural gas and nuclear.

McAuliffe said he supports EPA’s Clean Power Plan, and said in the course of the interview that he thought it would result in lower electricity rates for Virginians over the long run; but he’d still like it to demand less of our utilities. He echoed assertions from legislators and utilities that the draft plan’s treatment of existing nuclear plants makes it “unfair” to Virginia. Repeating a line that is now standard among Virginia politicians, he claimed the Clean Power Plan doesn’t give us “full credit” for reducing our carbon emissions by building nuclear reactors back in the 70’s. He has been raising the issue with the Obama Administration, and feels confident EPA will make the changes he requested.

Neither McAuliffe nor anyone else has explained why we should get credit for doing something 40 years ago for entirely different reasons, at a time when very few people had climate change on their radar screens. But never mind that; according to this theory, which he asserted again at the conference, the Clean Power Plan’s failure to credit us for our nukes puts us at a disadvantage compared to coal-heavy states like West Virginia and Kentucky that haven’t done diddley-squat.

(You know, I hope someone is passing all this along to the folks in West Virginia and Kentucky, who have been screaming bloody murder about how tough it will be for them to comply with the Clean Power Plan. I don’t get the sense they are aware they have this terrific advantage over Virginia and can expect shortly to begin luring away our businesses. Mitch McConnell, for one, seems entirely oblivious of the favor the EPA is doing his state. What a shame it would be if all of McConnell’s anti-EPA rhetoric were based on a simple misunderstanding!)

Maybe our governor needs to put a few items on his reading list, like the PJM analysis that shows the Clean Power Plan puts Virginia at an advantage over neighboring states, especially if it joins a regional compliance program. He should also check out a new report from Virginia Advanced Energy Industries Coalition and the Advanced Energy Economy Institute that describes the tremendous job growth in renewable energy and energy efficiency that will flow from compliance with the Clean Power Plan. Given the opportunities presented, the Governor should embrace more stringent goals, and should look to clean energy rather than nuclear as the money-saving, job-creating approach to compliance.

However, McAuliffe’s enthusiasm for nuclear goes beyond using it to wangle a softer carbon reduction target out of the EPA. He told Ball repeatedly that he is a “huge fan” of nuclear energy, thinks a new nuclear plant should be part of Virginia’s compliance with the Clean Power Plan, and expressed delight over Dominion’s plans for a third reactor at North Anna.

And yet, when confronted with a question from the audience about the wisdom of building another nuclear plant on an earthquake fault line, he said cheerfully that the Nuclear Regulatory Commission won’t approve a plant that isn’t safe. Worrying about it isn’t his job.

We’d better hope his confidence in the NRC is well placed—and hope too that the NRC successfully resists the political pressure to approve the plant that it will no doubt receive from Governor McAuliffe.

Ball suggested that what was behind the question on nuclear was a contention that if the state ramped up its investments in efficiency and renewable energy it would not need to build a new nuclear plant. McAuliffe assured Ball that wind, solar and efficiency couldn’t do that yet. He knew that because—ahem—he’d heard it from Dominion.

I guess no one has told the Governor that asking Dominion for its take on efficiency is like asking Exxon about electric cars.

McAuliffe’s enthusiasm for big projects that promise more business for Virginia (and Dominion) has also caused ongoing friction between the Governor and members of the public over natural gas pipelines. This led to the incident at the conference that grabbed headlines, with an angry protester trying to shout down the Governor.

At issue was McAuliffe’s support for Dominion’s controversial Atlantic Coast Pipeline. The proposed 550-mile natural gas transmission project will require the seizure and clear-cutting of a 125-foot wide right-of-way across Virginia from West Virginia to the coast in North Carolina, through national forests and private land. And of course, it will increase Virginia’s carbon footprint by enabling the burning of more fossil fuel here.

Pipeline opponents had brought into the New Republic event a banner reading “McAuliffe: Pipeline will be Climate Chaos.” During the Q&A period the protester reminded McAuliffe that he had once opposed natural gas fracking in Virginia.

But McAuliffe remained unruffled even as the protester hurled insults at him, until she was escorted from the room. “We’re not doing the fracking here,” he said, by way of explaining his support for the pipeline. “The fracking is done elsewhere. I’m not, as the governor of Virginia, going to stop fracking in America today.” Therefore, he concluded, we might as well take advantage of the fracking going on elsewhere to “bring cheap gas to parts of Virginia that can open up and build the economy.”

It seemed no one had alerted him to research indicating the gas boom will start to go bust just five years from now. If that happens, of course, higher gas prices will make the Governor’s manufacturing renaissance go bust, too, leaving Virginia worse off than before. Coupled with Dominion’s plans to bring online a staggering 4,300 MWs of new natural gas generating plants by 2019, Virginia is putting itself at the mercy of a natural gas market that is entirely outside our control.

But when I asked the Governor if he wasn’t worried about the risks of over-investing in natural gas, he shrugged off the concern. It’s not his job to review Dominion’s plans, he said.

Well, sure. But there’s a problem with cheerleading for every big energy project that comes along and taking no responsibility for their downsides. This is the “all of the above” strategy that brought us the climate crisis. From a governor who knows climate change is happening before our eyes in Virginia, we’re still hoping for better.

Virginia Attorney General weighs in on HOA efforts to ban solar

Photo courtesy of Solarize Blacksburg

Photo courtesy of Solarize Blacksburg

Virginia Attorney General Mark Herring has issued an opinion letter in response to concerns of some residents that their homeowner associations (HOAs) won’t let them install solar panels, in spite of recent state legislation nullifying most solar bans. Herring’s letter confirms the plain language of the 2014 law that HOA bans on solar installations are valid only if they appear in the association’s “recorded declaration.” Otherwise the association is prohibited from banning solar panels, although they can impose “reasonable restrictions” on their “size, place, and manner of placement.”

The letter, dated April 14, 2015, is in response to a request for an official advisory opinion from Delegate Joseph Yost, a Republican who had supported last year’s launch of Solarize Blacksburg. Some homeowners who sought to join the cooperative buying program ran into resistance from HOAs (more broadly called property owner associations, or POAs) unfamiliar with the new law.

Two parts of the AG’s opinion are worth quoting here:

What is noteworthy about the current language of this statute is that it permits only one procedure by which solar panels may be prohibited by community associations: by inclusion in the recorded declaration. The maxim ‘expressio unius est exclusio alterius’ “provides that mention of a specific item in a statute implies that omitted items were not intended to be included within the scope of the statute.” Applying this maxim, the current language of the statute must be viewed as meaning that any attempt by a POA to prohibit solar panels on private property by means other than a recorded declaration—such as rules, regulations, bylaws, policies, or other unrecorded instruments—is unenforceable.

(Footnote omitted.) The letter then adds:

When read as a whole, the statute also means that, with the sole exception of recorded declarations, existing prohibitions against solar panels on private property are no longer enforceable.

The opinion goes on to consider the constitutionality of the law and finds that it “does not violate the constitutional prohibition against legislation impairing the obligations of contract.”

Notably, the AG did not address the question of what kinds of HOA restrictions short of a ban meet the law’s “reasonableness” criterion. To date, the only guidance I know about on that question is a guide put together by the Maryland, DC and Virginia Solar Energy Industries Association—or MDV-SEIA, as the trade association is known.

As for Solarize Blacksburg, it proved a huge success in spite of isolated HOA issues, with a total of 55 solar installations. Since then, 20 other communities across the state have followed its lead to launch their own solarize efforts. The Blacksburg team is now helping to launch Solarize Montgomery with a party to be held at 5:30 today, April 22, at the Montgomery County Government Center in Christiansburg.


Update: After I put up this post I learned about a nice little segment that WVTF Radio did yesterday on the HOA dispute and the AG’s opinion. You can check it out here.

 

Dominion’s natural gas gamble looks risky for ratepayers

Opposition to Dominon's planned Atlantic Coast Pipeline has spurred protests from landowners and environmental advocates and led to more than 5,000 comments to the McAuliffe Administration opposing the pipeline. Photo courtesy of Linda Muller.

Opposition to Dominon’s planned Atlantic Coast Pipeline has spurred protests from landowners and environmental advocates and led to more than 5,000 comments to the McAuliffe Administration opposing the pipeline. Photo courtesy of Linda Muller.

Dominion Resources and its regulated subsidiary, Dominion Virginia Power, are gambling big on natural gas. But while the utility giant will be a winner if gas prices stay low over the next 20 years, the risk of losing this bet is very real—and the risk is being borne disproportionately by Virginia consumers.

Ever since the shale gas boom sent natural gas prices into a tailspin beginning in 2008, Dominion has increasingly been putting its chips into gas. Its Virginia subsidiary just completed a 1,329 megawatt (MW) natural gas plant in Warren County, began construction last year on a 1,358 MW gas plant in Brunswick County, and last month announced plans for a 1,600 MW plant in Greenville County, to be operational in 2019. Virginia ratepayers will foot the bill for construction costs, plus the cost of operating and fueling these mammoth plants for decades to come.

But while Virginians tend to think of Dominion as an electricity provider, its bigger business line is in natural gas transmission and storage. According to the Dominion website, its subsidiary Dominion Transmission, Inc. maintains 7,800 miles of pipeline in six states and operates what it says is one of the largest underground natural gas storage facilities. Another subsidiary operates 1,500 miles of pipeline in South Carolina and Georgia. The company is moving aggressively to add and upgrade compressor stations and build additional pipeline capacity in West Virginia and Pennsylvania.

It is also angling to add a massive 42-inch diameter, 550-mile gas pipeline to run from West Virginia through Virginia to the coast in North Carolina. Promising a vast new supply of cheap fracked gas for industrial users, Dominion has won the support of lawmakers like Virginia Governor Terry McAuliffe while galvanizing opposition from landowners and environmentalists.

Meanwhile, Dominion has another game afoot, with plans to begin exporting liquefied natural gas from its Cove Point, Maryland facility. Upgrading the facility will cost the company $3.8 billion, and running the liquefaction facility will require 240 MW of power (using more natural gas). Natural gas is so much more expensive in foreign markets that Dominion considers the gamble worthwhile, even as it cites a U.S. Energy Information Administration study for the proposition that little or no natural gas would be exported if the U.S. price “increases much above current expectations.”

All of these ventures depend on one crucial assumption: that natural gas prices will remain low for as many years as it takes to fully recover the cost of these investments, and then some. For electric generation, moreover, gas has to be able to outcompete other fuel sources. That includes not just coal and nuclear, both of which are being abandoned in droves in the face of cheap gas, but also new sources like solar and wind, which have trended steadily downward in price over the past two decades. In some regions of the country (although not yet Virginia), wind and solar prices already outcompete natural gas.

Gas does have the advantage of dispatchability—the ability to provide power according to the peaks and valleys of demand, allowing it to fill in around variable energy sources like wind and solar. That makes gas vital for backup generation, at least until power storage technologies become cheaper. But it wouldn’t justify the large-scale shift to gas for baseload generation, as Dominion’s plans envision, unless the company is right that gas prices will stay low.

If Dominion’s assessment of the market is wrong, its shareholders will take a hit. Higher natural gas prices could make the export business fizzle, and there might not be enough customers to justify the pipeline buildout. That’s why the company is moving so quickly to build the three massive new natural gas generating plants in Virginia under the ownership of its regulated subsidiary. Dominion is protecting its bet by locking Virginia electricity customers into gas for the long term, guaranteeing itself a market not just for its natural gas generating plants but also for its pipeline business. If the shale boom becomes a bust, or if prices rise to pre-boom levels, it will be Virginia ratepayers who pay through the nose or get stuck with stranded assets.

How big the risk is depends on whom you ask. The gas industry claims supplies will be sufficient to meet demand for decades to come. The U.S. Energy Information Agency, that voracious consumer of yesterday’s news, largely agrees (though it has more recently begun tempering its enthusiasm). If the optimists are right, production from the major shale gas plays will increase 40% by 2030 over today’s production levels, enough to support the mad rush to gas by Dominion and other utilities like it, without upward pressure on prices.

But a more pessimistic view is gaining adherents. As described in the December 2014 issue of the journal Nature, a team of a dozen geoscientists, petroleum engineers and economists at the University of Texas at Austin (UTA) has been analyzing assumptions behind the industry’s rosy outlook, and concludes it is wrong. Instead, the UTA study indicates production of natural gas from the “big four” shale plays will slow significantly after 2016, peak by about 2020, and then decline, dropping 20% from current levels by 2030. If so, the amount of natural gas coming to market in the U.S. will be less than half of what the optimists expect. The upward pressure on prices will be enormous.

The UTA team joins a growing chorus of doubters, whose studies suggest that the shale juggernaut can’t be maintained profitably. If these pessimists are correct, we should begin seeing evidence of it well before 2020. For now, there is at the least a very serious risk that cheap gas won’t last, and anyone who can’t afford to lose big would be well advised to wait it out.

IMG_0634There are other reasons Virginians should be wary of over-investment in natural gas infrastructure, both generating plants and pipelines. The need to fill pipelines will put pressure on the state to welcome fracking companies, both in the Marcellus shale in the western part of the state, and in the Taylorsville Basin in the east. Until 2010, Dominion itself owned gas drilling leases, and according to the Center for Media and Democracy, “Dominion is a member of several special interest groups that push for expanded drilling rights and limited or no regulation of fracking.”

With pollution of air and water a serious concern, and given the state’s tradition of lax regulation on industry, some localities are already looking for ways to exclude drilling companies from their borders. If we are going to have this fight, it shouldn’t be because one powerful corporation made a bad bet.

Finally, of course, there is the climate cost of natural gas. As we congratulate ourselves for leaving coal in the rear-view mirror, we need to recall that we have a long way to go to reach the carbon-free grid, and stalling out at the halfway point isn’t grounds for celebration.

Natural gas has a role to play in the transition period before wind, solar, and other carbon-free sources take over permanently, and it will remain useful as a back-up source when wind and solar aren’t producing power. But a wise energy policy today focuses on developing those renewable sources as fast as possible, reducing demand through investments in energy efficiency, and using natural gas as a backstop rather than as a primary source of power.

This approach reduces risk to the national economy if shale gas production declines, and it reduces risk to ratepayers stuck paying whatever the price of natural gas may be when demand outstrips supply.

Dominion Resources is an investor-owned corporation. As such, it is entitled to place risky bets in the hopes of making a killing for its shareholders. What it is not entitled to do is to shift the risk of losing the bet onto its captive ratepayers in Virginia.

With the odds so stacked against consumers, Virginia should refuse to play.

Thanks go to Richard Ball, PhD., Energy Chair of the Virginia Sierra Club, for his research and analysis of shale gas supplies.