Monthly Archives: December 2014

Virginia’s amazing year in energy: gas rises, coal falls, and solar shines (but it’s still not okay to say “climate change”)

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Virginians rally in front of U.S. EPA Headquarters in Washington, DC in support of the Clean Power Plan

Virginians rally in front of U.S. EPA Headquarters in Washington, DC in support of the Clean Power Plan

Nobody laughed a few years ago when former governor Bob McDonnell dubbed Virginia the “Energy Capital of the East Coast”; we were all too astounded by the hyperbole. And today, even “Energy Suburb” still seems like a stretch. Yet, if you measure achievement by the sheer level of activity, Virginia is making a play for importance. The year’s top energy stories show us fully engaged in the worldwide battle between fossil fuels and renewable energy. Of course, while the smart money says renewables will dominate by mid-century, Virginia seems determined to drown rather than give up its fossil fuel addiction.

Coal falls hard; observers disagree on whether it bounces or goes splat. Nationwide, 2014 was a bad year for the coal industry. Coal stocks fell precipitously; mining jobs continued to decline; and the one thing electric utilities and the public found to agree on is that no one likes coal. Even in Virginia, with its long history of mining, coal had to play defense for what may have been the first time ever. So when Governor McAuliffe released the state’s latest energy plan in October, what was otherwise a paean to “All of the Above” omitted the stanza on coal. And this month, the governor proposed a rollback of the subsidies coal companies pocket by mining Virginia coal.

Of course, coal is not going quietly; Senator Charles Carrico (himself heavily subsidized by Alpha Natural Resources) has already responded with a bill to extend the subsidies to 2022.

EPA opens a door to a cleaner future, and Republicans try to brick it up. Speaking of hard times for coal, in June the EPA unveiled its proposal to lower carbon emissions from existing power plants 30% nationwide by 2030. Instead of targeting plants one-by-one, EPA proposed a systemic approach, offering a suite of options for states to reach their individualized targets.

The proposal drew widespread support from the public, but Virginia’s 38% reduction target set off howls of protest from defenders of the status quo. The staff of the State Corporation Commission claimed the rule was illegal and would cost ratepayers $6 billion. Republicans convened a special meeting of the House and Senate Energy and Commerce Committees, where they tried out a number of arguments, not all of which proved ready for prime time. The rule, they said, threatens Virginia with a loss of business to more favored states like—and I am not making this up—West Virginia. Also, Virginia should have received more credit for lowering its carbon emissions by building nuclear plants back in the 1970s when no one was thinking about carbon emissions.

Meanwhile, the Southern Environmental Law Center analyzed the rule and concluded that actually, compliance will not be hard. Virginia is already 80% of the way there, and achieving the rest will produce a burst of clean-energy jobs coupled with savings for consumers through energy efficiency.

Undaunted, Republicans have already introduced a thumb-your-nose-at-EPA bill developed by the fossil fuel champions at the American Legislative Exchange Council.

The “solarize” movement takes Virginia by storm. For the last few years, solar energy has been exploding in popularity across the U.S., but Virginia always seemed to be missing the party. So it surprised even advocates this year when pent-up consumer demand manifested itself in the blossoming of local solar buying cooperatives and other bulk-purchase arrangements. “Solarize Blacksburg” made its debut in March, going on to sign up hundreds of homeowners for solar installations. It was followed in quick succession by the launch of similar programs in Richmond, Charlottesville, Harrisonburg, Northern Virginia, Halifax, Floyd, and Hampton Roads.

The main reason for the solarize programs’ success was the steep decline in the cost of solar energy. 2014 saw the cost of residential installations in Virginia fall to record low prices, making the investment worthwhile to a broad swath of homeowners for the first time.

Utilities say maybe to solar, but only for themselves. Virginia still boasts no utility-scale solar, but utilities elsewhere signed long-term power purchase contracts for solar energy at prices that were sometimes below that of natural gas: under 6.5 cents/kilowatt-hour in Georgia, and under 5 cents in Texas. Compare that to the estimated 9.3 cents/kWh cost of power from Dominion Virginia Power’s newest and most up-to-date coal plant, the Virginia City Hybrid Energy Plant, and you’ll understand why Dominion has suddenly taken an interest in solar projects. Sadly, it’s own foray into rooftop solar so far stands as an example of what not to do, and a testament to why the private market should be allowed to compete.

Yet Virginia utilities continued their hostility to customer-owned solar. Dominion put the kibosh on a bill that would have expanded access to solar energy through community net-metering, while Appalachian Power matched Dominion’s earlier success in imposing punitive standby charges on owners of larger residential systems.

Fracking, pipelines, and gas plants, oh my! Renewable energy may be the future, but the present belongs to cheap natural gas. Yes, the fracking process is dirty, noisy and polluting, and yes, methane leakage around gas wells is exacerbating climate change. But did we mention gas is cheap?

2014 saw proposals to drill gas wells east of I-95, while the Virginia government began updating its regulations to govern fracking. Dominion Power started construction on a second new gas power plant, and talked up its plans for a third. The utility giant, a major player in the gas transmission business, also got approval to turn its liquefied natural gas import terminal in Cove Point, Maryland, into an export terminal. With visions of customers dancing in its head, it also announced plans for a major new pipeline to bring fracked gas from West Virginia through Virginia and into North Carolina—one of three proposed pipelines that would cut through the Virginia countryside and across natural treasures like the Appalachian Trail. The pipeline created an instant protest movement but gained the wholehearted approval of Governor McAuliffe.

Flooding in Hampton Roads becomes the new normal; it’s still not okay to ask what’s causing it. A cooler-than-normal year for the eastern United States gulled many landlubbers into believing that global warming was taking a breather, but meanwhile the ocean continued its inexorable rise along Virginia’s vulnerable coastline. It’s one thing to shrug off the occasional storm, said residents; it’s harder to ignore seawater that cuts off your parking lot at every high tide. 2014 will go down as the year everyone finally agreed we have a problem—even in the General Assembly, which passed legislation to develop a response to the “recurrent flooding.” But while the bill recognized that the problem will just get worse, it avoided noting why.

The public gets it, though. The Richmond Times-Dispatch reports that climate change was the number one topic of interest to writers of letters to the editor in 2014. And loud cheers greeted Governor McAuliffe’s announcement that he would reestablish the state’s commission on climate change, which Bob McDonnell had disbanded. As one environmental leader quipped, “People in Tidewater are tired of driving through tidal water.”

Public corruption: in Virginia, it’s not just for politicians. Everyone can agree that it was a really bad year for the Virginia Way, that gentlemanly notion that persons of good character don’t need no stinkin’ ethics laws. But we also saw plenty to prove the adage that the real scandal is what’s legal. As we learned, Virginia law allows unlimited corporate contributions to campaigns, and puts no limits on what campaigns can spend money on. So if some legislators act more like corporate employees than servants of the public, well, that’s how the system was set up to work.

But the system only works when corporations get their money’s worth from the politicians, and that quid pro quo usually comes at the public’s expense. For example, take Dominion Power’s North Anna 3 shenanigans (please). In an exceptionally bold exploitation of the Virginia Way, Dominion Power secured passage of legislation allowing it to bill customers for hundreds of millions of dollars it had spent towards a new nuclear plant that it is unlikely to build. (And the irony is that ratepayers will still be better off throwing the money down that rathole than they will be if Dominion does manage to build it.)

So as we look ahead to 2015’s energy battles, anyone wondering who the winners and losers will be needs only one piece of guidance: in Virginia, just follow the money.

Fiscal and environmental sanity get a boost as McAuliffe proposes to roll back coal subsidies

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Your taxpayer dollars at work!

Your taxpayer dollars at work!

Thanks to the state’s budget deficit, Virginia may finally scale way back a notorious fossil fuel subsidy that currently transfers tens of millions of dollars annually from taxpayers to the pockets of corporations that mine Virginia coal. The Richmond Times Dispatch reports that if Governor McAuliffe has his way, the Virginia Coal Employment and Production Incentive Tax Credit and the Coalfield Employment Enhancement Tax Credit will be limited to $500,000 per year, saving the government $20 million per year.

The refundable tax credits were intended to make Virginia coal cheaper for utilities to buy, and thus more competitive with coal mined in other states. In theory, that was supposed to mean more coal mining jobs in southwest Virginia. In practice, the subsidies meant some coal companies paid no state taxes, and actually received significant cash handouts, even as coal jobs declined. And because the subsidies are based on tons of coal mined and not on the number of people employed, mining companies suffered no penalty from capital investments that maximized production while cutting jobs.

Critics of the subsidies thought they had won their point three years ago when the Joint Legislative Audit and Review Committee (JLARC) issued a critique of the various Virginia tax credits that was especially critical of the handouts to coal companies. As it describes beginning on page 67, the subsidies did not stop coal employment from falling 54% since 1990, or slow the steady decline in production:

“The precursor to one of the current coal credits was in place before the decline began, while the other was enacted shortly thereafter. It is important to note that with or without the credits, the decline in Virginia coal production was predicted by numerous analysts because over two-thirds of recoverable coal reserves in Virginia have already been mined.”

Indeed, the report continued, coal employment and production was actually worse with the credits in place:

“In the process of developing and refining the credit, analysts projected that coal employment and production would decline by 28 percent between 1996 and 2005 without the credit. However, actual mining employment was substantially lower than expected during this period, declining 36 percent.”

In spite of this damning analysis, in 2012 the General Assembly actually extended the expiration date of the coal subsidies until 2017. Insiders say Senate Democrats were persuaded to vote for the extension as a favor to coalfields senator Phil Puckett, who needed the backing of coal companies to hold his seat in 2013 and keep Democrats in control of the Senate. (Some might say he failed to return the favor.)

The coal subsidies have long infuriated environmentalists and community activists in the Coalfields region. In their view, Virginia taxpayers should not be forced to reward mining companies for blowing off the tops of our mountains, filling ancient stream valleys with rubble, poisoning wells and rivers, and destroying homes to get at the last, thin seams of Virginia coal.

So Coalfields activists welcomed the Governor’s proposal as a “good first step” in planning a future where coal is no longer the economic engine it once was. “We need to take our heads out of the sand and invest heavily in diversifying our economy in Southwest Virginia,” said Wise County resident Jane Branham, Vice President of Southern Appalachian Mountain Stewards. “Supporting outdoor recreation, tourism, sustainable agriculture, reforestation and a new generation of entrepreneurs is the path forward in the mountains, not subsidizing bad actor coal companies that continue to poison the natural resources our future depends on.”

Renewable energy advocates have also complained that by making coal cheaper, the subsidies make it harder for other forms of energy to compete. One would expect this argument to resonate with free market advocates, a category that supposedly includes all Virginia Republicans and a lot of the Democrats. Yet in spite of criticism from some Democrats, the subsidies have not faced serious opposition before now.

Acquiescence in such an expensive and counter-productive corporate welfare program mostly reflects the influence of the Virginia coal industry. (See last week’s post for a sampling of how coal companies work to buy votes with campaign cash.) But the drafters sweetened the deal with a provision that siphons off a portion of the excess cash to fund the Virginia Coalfield Economic Development Authority (VACEDA), which is supposed to help the region diversify beyond coal. (It might work better if coal executives didn’t sit on the board.)

Under McAuliffe’s proposal, VACEDA would get a direct appropriation of $1.2 million to replace the money it would lose by the scaling back of the tax credits. That should satisfy those legislators whose primary concern is helping residents of southwest Virginia.

Those whose primary concern is helping coal companies, however, aren’t likely to be happy. Congressman Morgan Griffith has already been quoted as suggesting Governor McAuliffe’s proposal to scale back the coal subsidies amounts to a “war on coal.”

He expressed no concern about coal’s war on the people of southwest Virginia. For those who care about that, Governor McAuliffe’s move feels like a breath of clean air.

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Addendum: Senator Bill Carrico (R-Alpha Natural Resources) has now filed a bill, S741, to extend the coal subsidies until 2022. 

Tiny Virginia subcommittee tasked with deciding future of bills related to EPA’s Clean Power Plan; meeting set for December 17

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Photo credit: Sierra Club

Photo credit: Sierra Club

The EPA’s proposed Clean Power Plan could reshape Virginia’s energy future for the next fifteen years, and possibly permanently. If the state takes advantage of this opportunity, it will reduce carbon pollution, improve human health, save money for consumers, drive job creation in the fast-growing technology sector, and make our grid stronger and more secure.

If the state doesn’t act, EPA will design its own plan for Virginia, ensuring reduced carbon emissions but without the flexibility the state would have by doing it for itself.

This presents a conundrum for Virginia’s General Assembly, which is not known for embracing federal environmental regulations. The usual skepticism was on display on November 19, when the Senate and House Commerce and Labor Committees met in a joint session to take up the Clean Power Plan—or more precisely, to give utilities and the State Corporation Commission staff the chance to attack it.

At the conclusion of that meeting, the two Republican committee chairs, Senator John Watkins and Delegate Terry Kilgore, named three members of each committee—two Republicans and one Democrat from each chamber—to a special subcommittee tasked with deciding what kind of legislative action the General Assembly should take in response to the Clean Power Plan. Kilgore also put himself on the subcommittee, which will now take up any bills that Virginia legislators introduce related to the Plan.

This subcommittee has scheduled its first meeting for December 17 at 1:00 p.m. in Senate Room A of the General Assembly building in Richmond. By law, all committee meetings are open to the public.

According to General Assembly procedure, before anyone else in the entire legislature can consider a bill, it will have to pass muster with these seven men. So who are these hugely important people, and what is the likelihood that they will seize this historic opportunity to make Virginia a leader in clean energy?

The Senate members consist of Republicans Frank Wagner and Benton Chafin and Democrat Dick Saslaw. Wagner and Saslaw were obvious choices given their seniority on the committee and active role on energy issues. Chafin—well, we’ll get to him in a moment.

Frank Wagner is from Virginia Beach and is known for his interest in energy generally, and especially in promoting new projects. He sponsored the legislation that led to the Virginia Energy Plan in 2006 and has been an important supporter of offshore wind development, perhaps reflecting his undergraduate degree in Ocean Engineering and his Tidewater residence.

The General Assembly website says Wagner is the president of Davis Boatworks, a vessel repair facility whose principal customer is the Defense Department. Living in the Hampton Roads area, Wagner is aware of how real sea level rise is; presumably he understands the connection to climate change.

In spite of his interest in offshore wind, coal rules when it comes to funding Wagner’s political campaigns. The Virginia Public Access Project shows coal giant Alpha Natural Resources was Wagner’s second-best donor over the years, with a total of $43,643 in campaign money since 2003, ahead of Dominion Power’s $37,350. Energy and mining interests combined gave gifts totaling $188,152. Of this, $350 came from Highland New Wind Development LLC back in 2008 and $250 came from the offshore wind company Seawind in 2010.

Of course, who gives money to an elected official does not necessarily dictate how that official votes. But it probably should be mentioned that for the 2014 session, Wagner earned an F on the Sierra Club’s Climate and Energy Scorecard, disappointing clean energy advocates who have sometimes had reason to see him as an ally.

Also a low performer on the energy scorecard is Dick Saslaw, scraping by with a D. Saslaw is a career politician who was first elected to the GA in 1976, when he was 36. (He is now 74.) His biography lists his background as an owner and operator of gas stations.

Saslaw is the Senate Democratic Leader and used to be Chair of the Senate Commerce and Labor Committee, until his party lost the Senate. In theory, his leadership position in the Democratic Party should make him a defender of President Obama’s climate initiative. In practice, not so much.

Although he is a Fairfax County Democrat, Saslaw does not share his constituents’ enthusiasm for wind and solar, nor in general, their concern for the environment. Somebody once told him that renewable energy costs a lot; that’s been his story ever since, and he’s sticking with it, facts be damned.

Saslaw is proud of his close ties to Dominion Virginia Power, whose interests reliably predict his votes on any given bill. The Virginia Public Access Project reports that Dominion has given more money to Saslaw than to any other legislator. In 2014 alone, Dominion gave Saslaw $25,000. Over the years, Dominion’s contributions to Saslaw have totaled $240,508, making the utility Saslaw’s top donor.

Saslaw has also received more money from Appalachian Power than any other Democrat–$44,000–even though that utility does not provide service anywhere in his district. In addition, coal interests gave him $90,250, natural gas companies ponied up $50,250, and the nuclear industry chipped in $28,000.

A single contribution of $250 makes up the only entry under “alternative energy.”

This brings us to new Senator Ben Chafin, the Republican delegate from Southwest Virginia who replaced Democratic Senator Phil Puckett (he of the Tobacco Commission scandal). Chafin is a lawyer and farmer, and as his website informs us, “Ben Chafin has a proven record fighting for the coal industry. Ben sponsored successful legislation (House Bill 1261) to fight against Obama EPA’s effort to kill the industry through over-regulation. Ben will continue to work in Richmond to protect coal and grow other Southwest industries like natural gas.”

Not surprisingly, coal interests led all other industry donors to Chafin’s 2013 campaign for Delegate and his 2014 campaign for Senate ($59,000 altogether), though he did pretty well by natural gas, too ($14,150). As a delegate, Chafin earned a gentleman’s C on the Sierra Club scorecard, but it would probably be a mistake to pin our hopes on his becoming a clean energy champion. His role on the subcommittee is surely to give Coal a voice.

On the other hand, Chafin must recognize that the economics of fracked gas and ever-more competitive wind and solar means Virginia coal has no chance of ever regaining its former glory. Southwest Virginia now needs to craft a strategic retreat from mining and work on economic diversification. That’s not inconsistent with the Clean Power Plan.

On the House side—but here I have to digress for a moment to comment on the seemingly random composition of the House Commerce and Labor Committee. The Senate side is bad enough; any Democrat who has evinced environmental sympathies over the years has been dumped from the Senate Commerce and Labor, and when he was in power, Saslaw did a lot of the dumping.

But it’s worse over at the House. The leadership keeps reshuffling its energy committee, as if in a frantic effort to make sure nobody learns anything, while the delegates who actually came to the job with an interest and knowledge of energy never seem to get a turn. Energy law is a hard area to learn. It’s complicated, and if you don’t have time to master it, you are even more likely to accept guidance from either the party leader who tells you how he wants you to vote, or the glib industry lobbyists who assure you they have the public’s welfare at heart just as much as you do. (Plus they give you money!)

So Chairman Terry Kilgore had little enough to work with on his committee. The three delegates he named to this incredibly important subcommittee, though they are undoubtedly smart and hardworking people, bring no discernable expertise on either climate or energy to the General Assembly’s review of the Clean Power Plan.

Well, digression over.

Terry Kilgore himself is a lawyer and a 20-year member of the House from the coalfields region of southwest Virginia. Dominion is his top individual donor, at $122,000, but coal interests together make up the single biggest category of givers to his campaigns, at $243,188, with electric utilities at $218,680, natural gas at $97,830, the oil industry at $16,400, and nuclear energy at $8,500. Just since 2013, he’s taken in over $136,000 from energy and mining interests.

That’s awfully good money for a safe seat, and his votes have reflected it. His energy votes earned him a D on the Sierra Club scorecard. It’s unlikely that he will abandon his coal friends, but like Senator Chafin, he will serve his constituents best if he works to attract new business to his struggling region. Home weatherization and energy efficiency programs would be popular there, and solar energy is one of the fastest-growing industries in America.

The other House subcommittee members Kilgore appointed are Republicans Jackson Miller and Ron Villanueva and Democrat Mathew James. Jackson Miller is a Manassas Realtor and former police officer who has been in the House since 2006. The bills he has introduced primarily reflect his interests in real estate and criminal law, although he also introduced legislation supporting uranium mining. He has received a total of $79,252 from energy and mining companies since 2010, primarily electric utilities, natural gas, coal, nuclear, and uranium. He earned a D on the Climate and Energy Scorecard. Why he is on this subcommittee is anyone’s guess, but certainly Northern Virginia stands to gain a lot of technology jobs if the state develops its clean energy industries as it should.

Virginia Beach Republican Ron Villanueva has not been as popular with the energy and mining companies, whose donations to his campaigns have totaled $20,550. Villanueva’s website says he was the first Filipino-American elected to state office in Virginia when he became a delegate in 2009. Villanueva has been friendly to the solar industry, and while he received a D on the scorecard, he also received an award from the Sierra Club for his work on a bill to provide a tax credit for renewable energy projects. (The bill was converted to a grant in the Senate but not funded.)

Like Delegate James and Senator Wagner, Villanueva lives in an area that is feeling the effects of climate change sooner than any other part of Virginia, so his constituents know how much the Clean Power Plan matters. For that matter, his day job as a partner with SEK Solutions, a military contractor, should mean he’s aware of the Pentagon’s focus on climate change as a national security issue, as well as a threat to its coastal assets.

Portsmouth Democrat Matthew James also hasn’t been especially popular in the energy industry. Since 2009, when he first ran for delegate, he has accepted a mere $5,000 from Dominion, $3,500 from coal interests, and $3,350 from the natural gas companies—token amounts by Virginia standards, but they may be due for a sudden increase.

James does not seem to have introduced any energy-related bills. However, his votes earned him an A on the Sierra Club scorecard. James is listed as the President and CEO of the Peninsula Council for Workforce Development. Maybe he will see an opportunity in the Clean Power Plan to develop jobs in the solar, wind, and energy efficiency industries, which have outperformed the economy generally.

So there you have the five Republicans and two Democrats who get first crack at any bill either facilitating Virginia’s compliance with the Clean Power Plan, or hostile to it. If they like a bill, it moves to the full Commerce and Labor committees. If they scuttle a bill, no one else in the entire legislature will get to vote on it.

That’s how it works, or doesn’t, in the Old Dominion.

Virginia regulators approve Appalachian Power’s “solar tax”

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Virginia homeowners had better tell their solar installers to keep it under 10 kW. Photo credit Gray Watson

Virginia homeowners had better tell their solar installers to keep it under 10 kW. Photo credit Gray Watson

The State Corporation Commission has granted Appalachian Power Company’s request to be allowed to impose “standby” charges on residential customers with solar systems over 10 kilowatts. The charges can range up to more than $100 per month, regardless of how much electricity the homeowner actually draws from the grid.

In its Final Order in case number PUE-2014-00026, dated November 26, the SCC ruled that APCo’s standby charge complies with § 56-594 F of the Virginia Code, which provides for standby charges for net-metered residential systems between 10 and 20 kW. (The law does not allow for net metering of residential systems over 20 kW.)

Environmental groups intervened in the case and ran a grassroots campaign that generated over 1500 comments to the SCC, opposing what has been dubbed a “tax on the sun.” The result, however, was never in much doubt. The SCC has repeatedly demonstrated a willingness to accept without scrutiny utility assertions that solar customers impose costs on other customers.

Attorneys at the Southern Environmental Law Center, who argued against the standby charges on behalf of the Sierra Club and other groups, say the SCC’s reasoning is flawed. According to Cale Jaffe, Director of the SELC’s Virginia office, “Appalachian Power actually conceded during the hearing that it was ‘not in a position’ to determine whether solar customers had ‘a positive or negative impact to the distribution cost of service.’  In other words, Appalachian Power said that solar customers might be having a positive impact in helping to reduce APCo’s distribution costs, but that the power company didn’t have the data and didn’t know one way or the other.”

Jaffe added, “We saw that piece of evidence as a fatal concession, at least with respect to the distribution portion of the charge.” Yet a reading of the Final Order suggests the Commission never even considered the point.

The SCC allowed APCo, like Dominion before it, to consider only transmission and distribution costs, ignoring generation costs for now. Advocates urge that solar systems produce power at times of peak demand, reducing the need for utilities to buy expensive peak power, and therefore actually saving them money. The utilities dispute this, but it is worth noting that APCo’s most recent Integrated Resource Plan from March of this year projects that solar power will be cheaper than its avoided cost of energy by 2019. But of course, the point of standby charges isn’t about the cost of solar, but about preventing customers from generating their own power.

In spite of all the time and money APCo has spent to get approval for the standby charges, the utility has said that only five existing customers will be affected. The real impact will be to limit the number of homeowners who choose to install large solar systems going forward. The prospect of paying high standby fees will likely discourage APCo customers from buying systems over 10 kW, as has happened in Dominion’s territory after the SCC allowed Dominion Virginia Power to impose similar standby fees a year ago.

Although a 10 kW system is bigger than the average Virginia home needs by itself, people with electric cars can find their demand exceeds that limit. Moreover, Dominion Virginia Power has signaled that it would like to impose standby charges on all of its solar customers, regardless of system size.

The actions of Virginia utilities and the SCC put the commonwealth in the thick of a nationwide battle over customer-owned, “distributed” solar. While most studies analyzing the value of solar have concluded that distributed solar benefits the public and the grid, utilities fear it will eat into their profit margins. They see Virginia as a good place to establish a precedent friendly to the utility viewpoint, due to the commonwealth’s history of allowing its utilities to dictate energy policy. So far, this episode proves them right.