When the Virginia General Assembly convenes this week for the 2023 session, Republicans will once again try to undo the commonwealth’s framework for a transition to renewable energy. Led by Gov. Glenn Youngkin, they will attack Virginia’s participation in the Regional Greenhouse Gas Initiative and the Virginia Clean Economy Act (VCEA) and continue seeking ways to keep a money-losing coal plant in Wise County in operation.
Meanwhile, Virginia’s largest utility has already decided that renewable energy, especially solar, is the future. Dominion Energy’s just-released Climate Report 2022 projects that under every set of assumptions modeled, solar energy will become the mainstay of its electricity generation fleet no later than 2040.
As for coal, it disappears from the energy mix by 2030 even in a scenario that assumes no change from present policy, in spite of the fact that the VCEA allows the Wise County coal plant to operate until 2045. As for fracked gas, it hangs on longer but in ever-smaller amounts, mostly to help meet winter peak demand.
Dominion modeled three scenarios for this report. The “current policy” scenario assumes the policy landscape and technology options stay the same as they are presently, and that Dominion does its part in driving a global temperature increase of 2.1°C by 2050. That’s in keeping with Virginia’s climate law, and also with Dominion’s internal commitment to achieve net-zero emissions by 2050.
That much warming is not a good outcome, considering the climate chaos the planet is experiencing today with barely over 1 degree of warming. Yet even under a 2.1°C scenario, Dominion’s model predicts solar energy will provide 40% of the electricity supply by 2040, followed by nuclear at 30% and (offshore) wind at 19%.
The “emerging technologies” scenario also assumes a temperature increase of 2.1°C by 2050, but adjusts for the likelihood that technological change will lead to “advanced dispatchable zero-carbon technology” options that could displace much of the need for energy storage. These might include hydrogen, carbon sequestration and storage, and methane gas produced as the result of poor animal waste disposal practices at factory farms — what Dominion calls renewable natural gas, or RNG.
Small modular reactors, SMRs, are not included in this scenario (and are hardly mentioned at all in the report), perhaps because operating them as peaker plants would be crazy expensive. Even without SMRs, though, the report says overall cost savings would be slight for this scenario, and solar would still be the leading source of electricity by 2040.
Finally, the report models an “accelerated transition” scenario that reduces emissions more aggressively, in line with an effort to keep the global temperature increase to 1.5°C by 2050. This is the upper bound of warming considered tolerable by many climate scientists, but it would require Dominion’s electricity business to reach net zero by 2035. Dominion’s model shows solar would make up nearly two-thirds of the electric supply in that scenario. Offshore wind would be held to just 17%, apparently because at that point more wouldn’t be needed.
I’d argue that offshore wind should carry more of the load to create a more balanced portfolio, but it’s a moot point: The report writers clearly think this scenario is just a thought exercise. The scenario consistent with keeping global warming to 1.5°C is described in a way that seems intended to discourage anyone from pursuing the matter.
“The heavier reliance on renewable capacity in this scenario,” it warns, “would require significantly greater capital investment at a much more rapid pace in preparation for a net zero mix by 2035. … Achieving such a rapid pace of emissions reductions would require predictable, dependable, and rapid wholesale shifts in public policy and technology advancements capable of maintaining system reliability and customer affordability. Also necessary would be supportive regulatory treatment and timely permitting for significant near-term zero-carbon infrastructure development and transmission system enhancements.”
In other words, the report seems to say, fuggedaboutit. It’s just too hard.
If that feels defeatist, it’s worth remembering how far Dominion has come to reach a point where it is even writing climate reports, not to mention declaring on page 1 that “climate change presents one of the greatest challenges of our time, and we take seriously our leadership role in helping to mitigate it.”
This is new, and you have to look back only a decade to appreciate how radical this declaration is. When 2013 opened, Dominion had just completed construction of that regrettable coal plant in Wise County and had begun a fracked gas plant building spree that would continue even after solar emerged as the cheapest source of new electricity in Virginia. Climate activists like myself were dismissed when we warned that new gas plants would be reduced to giant concrete paperweights well before the end of their design life, leaving ratepayers paying off stranded assets.
Even in 2016, when now-CEO Bob Blue was president of Dominion Virginia Power, Blue was proclaiming natural gas “the new default fuel” for electric generation. As late as the spring of 2020, the company’s integrated resource plan still called for building more gas plants. That plan acknowledged the strategy would violate Virginia’s new climate law, so it argued against the law.
Yet I suspect Blue may deserve credit for the remarkable about-face at Dominion beginning in 2020. That summer Dominion Energy began significantly reducing its investments in fossil gas outside of the electric sector, scrapping plans for the Atlantic Coast Pipeline and selling off its gas transmission and storage assets. That year it also sold half of its interest in the Cove Point liquified natural gas export facility. It is reportedly considering selling the other half now as part of what Blue called in November “a ‘top-to-bottom’ business review aimed at ensuring that it is best positioned to generate substantial long-term value for shareholders.”
Maybe Blue got religion on climate, maybe he’s just a savvy businessman. It’s a really good sign of the times that you can’t always tell the difference.
But of course, Dominion is stuck with a heck of a lot of gas generating plants that it has to justify post hoc, which helps to explain its lack of enthusiasm for the 1.5°C scenario. Another part of the explanation lies in Dominion’s remaining gas investments outside the electric sector. Although Dominion Energy Virginia is solely an electric utility and does not supply gas to retail customers in Virginia, a separate Dominion Energy subsidiary sells gas in other states. So far these assets don’t seem to be going the way of the gas transmission business and Cove Point.
Dominion’s climate report tries valiantly to justify holding onto its retail gas business. The report declares, “Natural gas is also part of our long-term vision and consistent with our Net Zero commitment.”
Sure, and the Tooth Fairy is real. Of the greenhouse gas reduction approaches cited — fixing leaks, making “renewable” methane from waste products, blending hydrogen into pipelines, and using creative carbon accounting with “offsets” — none make sense either economically or from a climate standpoint.
Maybe he cares about climate, but apparently Blue doesn’t want to give up yet on a profitable business. Fortunately, at least for the planet, the retail gas business is about to enter a terminal decline as homes and businesses electrify. Getting out now would be the smart move from both the business and climate perspective.
Because what will eventually power all these homes, no matter which scenario you choose? Renewable energy, and especially solar.
This article was originally published in the Virginia Mercury on January 6, 2023.
Pageland Lane is currently rural but would be expanded to four lanes as part of the PW Gateway project. Boosters say increased tax revenues will benefit parks and schools.
Actually, Virginia has several data center problems.
One seems like a good problem to have, at least if you are a locality looking to attract business.
Data centers pay a lot of local taxes while requiring little in the way of local services, and the steady buildout has supported thousands of construction jobs across the region. Indeed, so many data center companies have chosen to locate in Northern Virginia that we now host the largest concentration of data centers in the world. No wonder other regions of the commonwealth are angling to bring data centers to their neck of the woods too.
But there’s more to being the data center capital of the world than just raking in cash. To drive through Data Center Alley is to witness suburban sprawl on steroids, with its attendant deforestation, loss of farmland and loss of wildlife habitat. The environmental destruction doesn’t stop at a facility’s property line; a single building covers acres of land, causing massive rainwater runoff problems that can impact streams and drinking water resources miles downstream.
Other problems are unique to the industry. Cooling the servers requires a single data center to consume as much water as a city of 30,000-50,000 people, and giant fans make the surrounding area noisy day and night. The average data center has so many backup diesel generators onsite that it requires a major air source permit from the Department of Environmental Quality. The generators have to be started up regularly to ensure they will work in an outage. Multiply those startups by the total number of data centers in Northern Virginia, and the result is poorer air quality across the region.
Moreover, data centers require astonishing amounts of energy to power their operations and cool their servers. The industry uses over 12% of Dominion Energy Virginia’s total electricity supply, more than any other business category. Electric cooperatives supply more. Industry sources put Virginia’s total data center load at 1,688 megawatts as of 2021 — equivalent to about 1.6 million homes. Feeding ever more of these energy hogs requires utilities to build new electric generation and transmission lines, with costs and impacts borne by all ratepayers.
Many data center operators have pledged to run their operations on renewable energy, but only a few major tech companies have followed through on building solar facilities in Virginia. Indeed, their energy appetite is so great that if all Virginia data centers ran only on solar energy with battery backup, meeting their current demand would require all the solar currently installed in Virginia, Maryland, DC, Pennsylvania, West Virginia and Delaware put together. (For you energy nerds, I’m assuming a 25% capacity factor for solar; that is, meeting 1,688 megawatts of data center load would take 6,752 megawatts of solar.)
That’s not a reason to send data centers somewhere else — unless, of course, we’re talking about data centers that host cryptocurrency mining (and yes, they exist in Virginia, with more on the way). Those data centers we should certainly send elsewhere, preferably to Mars, unless scientists find life there, and in that case to the nearest black hole in outer space. As for the others, we’d just like them to be part of the climate solution rather than adding to our carbon footprint.
Why are data centers so keen to locate in Northern Virginia? Historically the draws were the fiber-optic network in Northern Virginia, proximity to Washington, D.C., relatively low-cost energy and a concerted early effort on the part of Loudoun County to make locating here as easy as possible.
Then there are the state subsidies. Since 2010, Virginia has offered tax incentives to data centers that locate in the commonwealth. The data center sales and use tax exemption is by far Virginia’s largest economic development incentive. It’s also an increasingly expensive one, rising from $30 million in outlays in 2010 to $138 million in 2020. A state audit showed Virginia taxpayers had provided over $830 million to data center operators through 2020; by now the total is certainly over $1 billion.
A 2019 report of the Joint Legislative Audit and Review Commission found that Virginia received back only 72 cents for every dollar of the data center tax incentive while creating very few jobs. That money-losing proposition was judged “moderately successful.”
Thus far, opposition to data centers has tended to be local and focused mainly on land use issues. Preservationists have been at the forefront of opposition to Prince William County’s proposed Digital Gateway, a data center development across more than 2,100 acres in an area known as the “Rural Crescent.” The development would abut parkland and Manassas National Battlefield, leading opponents to call this a new Battle of Manassas. Citizens have sued the board of county supervisors for approving an amendment to the county’s comprehensive plan that allows the data center expansion.
The battle has spilled across the border into Fairfax County, whose leaders worry that stormwater runoff from the development will pollute the county’s main drinking water source, the Occoquan Reservoir.
The divide on data center siting is polarizing, but it isn’t partisan. The Democratic majority on the Prince William board of supervisors approved the Gateway project over opposition from Republican Supervisor Yesli Vega and state Del. Danica Roem, a Democrat. In a scathing op-ed, Roem argues that there’s no such thing as a green data center.
Since data centers provide essential services and have to locate somewhere, the answer isn’t to ban them from the state (crypto-mining operations excepted!). A better approach would be for Virginia to guide development away from overburdened areas to parts of the state that are desperate for new businesses, and to link tax incentives to energy efficiency and the use of renewable energy and reclaimed water.
Right now Virginia is operating on auto-pilot, paying ever more in tax incentives and fueling conflict, sprawl and carbon emissions. That needs to change.
This commentary appeared in the Virginia Mercury on December 9, 2022. Following that publication, I received emails about a data center proposal in Fauquier County with complaints strikingly similar to those in Prince William County. In addition, a reader in Chesapeake wrote that plans for the development of the Frank T. Williams Farm between a wildlife management area and the Great Dismal Swamp have proceeded with minimal public knowledge or input.
On December 11, Senator Chap Petersen sent an email to constituents criticizing the PW Gateway proposal for its impact on the battlefield and stating, “In the 2023 session, I intend to file legislation to both study and set logical limits on the siting of server farms in historically sensitive areas, as well as on the conversion of agricultural land.”
UPDATE: In its Q3 earnings call, Dominion Energy revealed data centers now make up approximately 21% of its Virginia load (see slide 30). Richmond, we have a problem.
Photo credit Center for Pollinators in Energy, fresh-energy.org
After years of wrangling, Virginia finally allows certain customers of Dominion Energy Virginia to buy solar energy from independent providers of shared solar, also known as community solar.
Don’t applaud yet, though. Dominion has used the rulemaking process and its control over project interconnection to create hurdles for shared solar that lawmakers never anticipated. High minimum bills, prolonged interconnection study requirements and expensive equipment demands are stalling projects and could drive away all but the most tenacious developers.
The blow that received the most attention came during the rulemaking process. The State Corporation Commission decided Dominion could impose a minimum bill averaging $55 per month on most customers. The minimum bill is added to the cost of the electricity itself, making shared solar so expensive that the program simply won’t be offered to the general public.
However, lawmakers had included a provision exempting low- to moderate-income (LMI) participants from the minimum bill requirement. In effect, then, the SCC’s order turned the shared solar program into a program just for LMI residents.
Indeed, the first shared solar project for LMI Virginians launched on Nov. 9 in Dumfries as a partnership between community solar developer Dimension Renewable Energy and low-income housing provider Community Housing Partners. Subscribers are told to expect savings of 10% on their electricity bills. The partners are signing up participants now but have not broken ground on a solar facility to serve them.
Sen. Scott Surovell, D-Fairfax, the author of the law creating the shared solar program, attended the launch of Dimension’s project to share in the celebration. But he still believes the program should be available to everyone. He confirmed to me he is working with the community solar industry to develop legislation addressing the minimum bill problem.
Surovell says he continues to think a minimum bill is necessary; the question is what fee is “commercially feasible to community solar programs” while still capturing “a fair amount of system costs and legacy expenses” borne by Dominion in providing service to participants when the solar facility isn’t generating electricity.
Interconnection woes: delays, high costs and ‘dark fiber’
Even if Surovell can thread that needle, the minimum bill is only the most visible problem facing shared solar in Dominion’s territory. The solar facilities have to connect to the grid, which puts Dominion in charge of the interconnection process. Developers say they are encountering long delays, high costs and unreasonable equipment requirements.
Earlier this year, the State Corporation Commission opened a docket to solicit feedback on the interconnection process — and the result was an outpouring of complaints.
As described in comments from the solar industry, Dominion requires cost-prohibitive “dark fiber” for grid protection in place of a much less expensive industry-standard approach. Dominion also lags in conducting the studies that every new project proposal must undergo at the developer’s cost, resulting in timelines that stretch 16 months or more. Additional facilities that would use the same substation aren’t considered until the study process for the first one is complete, creating further delays.
Developers also aren’t told until the final stage how much Dominion expects to charge them to interconnect their array — and even then, Dominion adds a disclaimer that its estimate is not binding. That uncertainty, says the industry, makes projects hard to finance and risky for developers.
These inefficiencies and unnecessary expenses drive up project costs and make distributed solar more expensive for customers, when it is possible at all. Tony Smith, president of solar developer Secure Futures, told me his company wanted to build a 1 megawatt shared solar facility to serve LMI customers in Augusta County. They secured the site and permits before learning that Dominion would require dark fiber and planned to charge them $1 million for the interconnection, an amount so high as to scuttle the project.
(For context, solar industry estimates put the entire cost of developing community-scale solar at an average of $1.4 million per megawatt.)
Smith says larger projects may be able to absorb exorbitant interconnection fees, but smaller projects cannot. In any case, high interconnection costs inevitably mean higher costs for customers.
Industry comments note areas where Dominion has tried to resolve issues, in particular to speed up the study timelines. But regarding other requirements, particularly those that impose the highest costs, the utility shows little willingness to budge. In some instances, the company even seems to be using its interconnection power to make private developers shoulder its own grid upgrade costs. It’s hard not to suspect that Dominion is perfectly happy making other people’s solar projects more expensive.
The solar industry’s brief describes steps taken in other states to make the process fairer, faster and less expensive. But if the staff report of the Division of Public Utility Regulation is any indication, the SCC is more likely to take a slower approach involving working groups, pilot studies and a multistep process. Smith says all this will take many years, by which time shared solar developers will have given up on Virginia and taken their business to friendlier states. He’d like to see the General Assembly address the worst problems.
Surovell says he has “heard about” the interconnection issues but “ha(s)n’t focused on it yet.” Charlie Coggeshall, mid-Atlantic director of the Coalition for Community Solar Access, told me that “interconnection is a hurdle for shared solar in Virginia and absolutely in need of improvements,” but said his organization is focused on the SCC process and for now has no plans to pursue a legislative fix.
Dominion serves about two-thirds of Virginia customers, so solving the minimum bill and interconnection problems would open shared solar to a broad swath of residents across the state. That still leaves out the other third. Advocates hope to expand the availability of shared solar into Appalachian Power territory and that of Virginia’s electric cooperatives.
A few co-ops launched their own community solar programs pre-pandemic, but most don’t offer one and apparently don’t want to. As for Appalachian Power, it has consistently opposed community solar, saying it can’t afford to lose customers. (On the other hand, Appalachian Power does not require installation of dark fiber as a condition of interconnection, in that respect making it friendlier to distributed generation — just not shared solar projects.)
Multifamily shared solar scores a win, regardless of income level
An apartment building in the Bronx. Under the multifamily shared solar program, apartment buildings in Virginia could host solar arrays for the benefit of tenants. Photo by Bright Power Inc. via Wikimedia.
While shared solar faces an uphill battle, some good news came in a second case implementing a related program, this one authorized by 2020’s Solar Freedom legislation and designed for onsite solar at apartment buildings and condominiums. The multifamily shared solar (MFSS) program makes it possible for a landlord or condo association to install a solar facility to serve just its own residents. This program occupies a middle ground between community solar and net metering, and the enabling legislation allows Dominion to impose an administrative fee but not a minimum bill or any other charges.
Early on, the SCC had indicated a willingness to allow Dominion to shoehorn the components of the shared solar law’s minimum bill into the MFSS administrative fee. That would have certainly been the end of the program right there. In its final order, however, a common-sense definition of “administrative fee” prevailed, and the SCC ruled that Dominion could not stuff its costs of doing business into the fee.
The SCC still set the MFSS administrative fee at a curiously high $13.40 per month, accepting Dominion’s argument that it would have to do all this billing manually. The SCC also decided customers should pay certain “non-bypassable charges” amounting to an average of about $3 per month. The law doesn’t authorize these charges, but the SCC reasoned that it doesn’t prohibit them, either.
Even with Dominion taking $16 or so, the economics would not seem prohibitive. Developers caution, however, that the limited subscriber base for any MFSS project makes this program difficult to work with, even if the building is large and the property can accommodate a fair-sized solar facility. And even onsite solar arrays aren’t necessarily immune to interconnection woes.
Still, there is plenty of customer interest in the multifamily program, especially from condominium associations that may be able to finance the projects themselves. With any luck, they will pave the way for others to follow.
This article first appeared in the Virginia Mercury on November 29, 2022.
Choose your fuel source carefully: you are likely to have to live with your decision for the next 10-20 years. Image: iamNigelMorris, CC BY 2.0 , via Wikimedia Commons
Washington Gas has been emailing its Virginia customers this month to offer them rebates if they buy new gas appliances, including home heating equipment (up to $700) and water heaters (up to $400). What the message doesn’t say is that this is a terrible deal. Customers will be able to get far bigger incentives if they wait until January and buy electric equipment instead.
Under the just-passed Inflation Reduction Act (IRA), Uncle Sam will provide tax credits of up to $2,000 per year for electric heat pumps that provide both heating and air conditioning as well as heat pump water heaters. Lower-income customers will be able to access upfront discounts of up to $8,000 for a heat pump, $1,750 for a water heater, $840 for an induction stove, and other amounts for additional upgrades. If you’re converting from gas and your electric panel isn’t sized to handle the extra electric load, the IRA will help with an upgrade. (For a full rundown of rebates and tax credits for homes, see this list from Rewiring America.)
It used to be that gas furnaces were more efficient and cheaper to operate than most electric heating options, but today the reverse is true: An EnergyStar heat pump uses energy more efficiently and costs less to operate than a fossil fuel furnace or boiler. A heat pump water heater, which I’d never even heard of until recently, is more efficient than either gas or a standard electric hot water heater and, again, saves money on operation.
Advances in heat pump technology and induction stoves, concerns about climate change and growing awareness of the dangers of burning fossil fuels indoors mean the switchover from gas to electricity would have happened without the IRA. But the IRA’s rebates are expected to goose the transition and transform the building sector.
Many consumers haven’t heard about the IRA’s rebates yet, and they may not have given much thought to home electrification. They need this information, but they sure won’t get it from their gas company.
Washington Gas is pushing its gas appliance rebates now for an even bigger reason, though, and one that makes it especially important that customers give them a pass: Installing an expensive new gas furnace locks you into the company’s fond embrace for the life of the furnace, no matter how high natural gas prices go.
It’s true that electric appliances will further tie you to your electric utility (unless you have solar panels), and electricity rates have been going up as well. But electricity rates are going up mainly because fossil fuel costs have skyrocketed. Dominion Energy Virginia, for example, cited a 100% increase in the price of natural gas when it asked for a rate hike this summer. As the electric grid gets greener year by year, lower-priced wind and solar energy will have a moderating effect on electricity prices. Your gas utility, on the other hand, will never have anything to sell you but gas.
It gets worse. Gas companies have to maintain their network of pipelines and other infrastructure regardless of how many customers they have. Those costs will be spread over a shrinking rate base as more and more customers switch over to electricity, raising rates for the remaining customers. If you buy a new gas furnace now, you will be trapped in that shrinking pool of customers, paying ever more to maintain pipelines.
Today, Washington Gas charges customers a flat “system charge” of $11.25 per month, plus supply and distribution costs based on how much gas is used that month. Customers who electrify their homes escape the monthly system charge and gain the convenience of dealing with just one utility. But the real savings come in not being part of a shrinking rate base paying an ever-larger share of the gas company’s fixed costs.
That makes Washington Gas’s rebate offer doubly dangerous for customers who don’t know about the IRA. Someone whose old gas furnace is on the fritz might see the email and decide to use that small rebate to buy a new gas furnace, when they would be far better off keeping the old one limping along for a few more months. Come 2023, they would then reap the benefit of an electric heat pump with a much larger rebate or tax credit.
Consumers are set to save a lot of money and energy under the IRA’s incentives for home electrification — but not if they get locked into fossil fuels first.
This post was originally published in the Virginia Mercury on October 28, 2022.
Protesters outside the Virginia Clean Energy Summit on October 21.
Governor Glenn Youngkin issued a press release on October 3 presenting what he says is his energy plan. Accompanying the press release was 26 pages labeled “2022 Virginia Energy Plan,” but that can’t be what he’s referring to. I mean, the Virginia Code is pretty specific about what makes up an energy plan, and this isn’t it.
Under Virginia law, the energy plan must identify steps the state will take over the next 10 years consistent with the Commonwealth Clean Energy Policy’s goal of a net-zero carbon economy by 2045 “in all sectors, including the electric power, transportation, industrial, agricultural, building, and infrastructure sectors.” Not only does Youngkin’s document not do that, it doesn’t even mention the policy it’s supposed to implement.
It’s also missing critical pieces. The plan is supposed to include a statewide inventory of greenhouse gas emissions, but it’s nowhere to be found. The inventory is the responsibility of the Department of Environmental Quality, which reports previous inventories on its website from 2005, 2010 and 2018. The one specifically required to be completed by October 1, 2022 isn’t there, nor is there any indication it’s in the works and just unfortunately delayed. Did I miss some fine print about how the requirement doesn’t apply if the governor is a Republican?
In fact, there is no discussion about climate change in Youngkin’s energy plan. The word “climate” appears nowhere. He simply ignores the problem: a modern Nero, fiddling while the planet burns.
Instead, Youngkin’s document mostly attacks the laws Virginia has passed in recent years to implement its decarbonization goals, including the Virginia Clean Economy Act, legislation allowing the state to participate in the Regional Greenhouse Gas Initiative and the Clean Cars law. In their place he offers a bunch of random ideas — some with merit, some without, some spinning off on tangents.
I did not really expect a conservative Republican with presidential aspirations to embrace all the recommendations for the energy plan that I laid out last month, or those from the many environmental, faith and consumer groups that support Virginia’s clean energy transition. Going further and faster down the road to decarbonization is a tall order for politicians beholden to fossil fuel interests, no matter how much it would benefit the public.
Yet Youngkin doesn’t have a lot of ammunition to use against the switch to renewable energy. With soaring coal and natural gas prices, it’s hard to keep pretending that fossil fuels are low-cost. The insistence that we need them for reliability is the only straw left to grasp at.
And indeed, underlying Younkin’s attack on the VCEA is a misunderstanding of how grid operators manage electricity. The critique boils down to “baseload good, intermittent bad.” But baseload is not the point; meeting demand is the point. Demand fluctuates hugely by day and hour. If grid operators had nothing to work with but slow-ramping coal plants or on/off nuclear reactors and no storage, they’d have as much trouble matching demand as if they had nothing but renewable energy and no storage. Pairing low-cost wind and solar with batteries makes them dispatchable — that is, better than baseload.
That’s not to say there aren’t good reasons to invest in higher-cost resources, but “baseload” is a red herring that stinks up Youngkin’s entire argument.
To his credit — and notwithstanding his “baseload” fixation — Youngkin supports Virginia’s move into offshore wind energy even with the high cost of the Coastal Virginia Offshore Wind project and other early U.S. developments. (The plan notes that Virginia’s project will be the largest “in the Free World,” a weirdly retro way to tell us China has leapt far ahead in installing offshore wind.)
The plan also supports removing barriers to customer purchases of solar energy, including shared solar and a greater ability for renewable energy suppliers to compete with utilities for retail sales. This is all phrased as a consumer choice issue rather than an endorsement of greater utility investments in solar; regardless, these would be welcome moves.
It’s also good to see the governor’s endorsement of rate reform. Republicans have been at least as much to blame as Democrats for Dominion Energy’s success in getting laws passed that let it bilk ratepayers. It will be interesting to see if Youngkin actually pursues the reforms he touts.
Less encouraging are Youngkin’s desires to jump into hydrogen (I’m guessing not the green kind, since we hardly have an excess of renewable energy) and, worse, to deploy “the nation’s first” commercial small modular nuclear reactor (SMR) in Southwest Virginia within 10 years.
You know what will happen there, right? Ratepayers will foot the bill, and it will be very expensive.
But unlike offshore wind, SMRs aren’t proven technology; they remain firmly in the research phase. The U.S. Department of Energy is hoping for a demonstration project “this decade.” If successful, the industry believes SMRs will eventually be able to produce electricity at a price that’s only two or three times that of solar and wind energy. Which begs an obvious question: Is there a reason to build SMRs?
Nor has anyone figured out the nagging problem of what to do with the radioactive waste, including the waste piling up at today’s nuclear plants because it’s too dangerous to move and there’s no place to put it. So Youngkin’s plan also “calls for developing spent nuclear fuel recycling technologies that offer the promise of a zero-carbon emission energy system with minimal waste and a closed-loop supply chain.” Great idea! But how about focusing on that first, Governor?
That’s not where Younkin is putting his focus, though. Last week, he proposed spending $10 million on a Virginia Power Innovation Fund, with half of that earmarked for SMR research and development. The announcement said nothing about waste.
Look, I happen to know some earnest climate advocates who believe SMRs are the silver bullet we’ve been waiting for. I follow the research with an open mind while also noting the astonishing advances in renewable energy technology announced almost daily. But the climate crisis is here and now. We can’t afford to press pause on known carbon-free technologies for 10 years in the hope that something even better will pan out.
Investing in research and development of new technologies is an important role for government, but kicking the climate can down the road isn’t an option. Rather than attacking our energy transition, Youngkin would have done more for Virginia by using his plan to build on it.
This article appeared first in the Virginia Mercury on October 18, 2022.
Virginia residents who buy electricity from Appalachian Power will see a rate increase of almost 16% this year if the State Corporation Commission approves the utility’s request to recover more than $361 million it has spent on higher-than-expected coal and natural gas prices. APCo proposes to recover the excess over two years, meaning rates will remain elevated even if fossil fuel prices drop. According to the filing, a customer who uses 1,000 kWh per month would see an increase of $20.17.
The SCC is likely to approve the request because it has little room to do otherwise. Virginia law allows utilities to recover their spending on fuel dollar-for-dollar, though they cannot tack on a profit for themselves. Last month, the SCC approved Dominion’s request to increase rates by an average of nearly $15 per month for the next three years to cover past excess fuel costs.
The good news, says APCo, is that Virginia customers will see lower bills in the future because the utility is investing in renewable energy. “Incorporating more renewable sources of power into the company’s energy mix is another step in reducing customer fuel costs,” declares the company’s press release, issued the same day as its SCC filing. “As Appalachian Power adds more renewables, there is less need for coal and natural gas to generate power.”
Well, yes, but wouldn’t it have been nice if APCo had come to this conclusion before now? The current situation was entirely predictable. A supply glut kept natural gas prices low for almost a decade, but drilling companies weren’t making money. Today’s higher prices make it profitable to drill for gas, but oil and gas companies don’t trust that the market will stay strong, so they are returning profits to shareholders rather than investing in new wells. So tight supplies may keep prices high. Or not! Nobody knows. (As for coal, natural gas generation and coal are ready substitutes for each other, so coal prices track natural gas prices.)
For years clean energy advocates like me have been urging utilities and the SCC to value price stability in generation planning, only to be ignored. Other states took the lead in installing price-stable renewable energy, while Virginia added more gas plants. When I dug into the data this summer, it became clear that the great majority of states with lower rates than Virginia also had higher amounts of renewable energy in their generation mix. I’ve reprinted a summary table here.
I compiled this table in July, using then-current Energy Information Agency data. Now EIA has updated its data, and Virginia’s position is worse than ever. As of July 2022, Virginia’s average residential electricity rate has now hit 14.42 cents/kWh. This puts us above every state in the South Atlantic except Georgia. (Poor Georgia comes in at 16.02, but that’s what building nuclear plants will do for your rates.) Meanwhile, the states whose rates increased the least are those with high levels of wind, solar and hydro.
This isn’t rocket science, folks. Wind and solar have lower levelized costs than coal and gas, and they insulate consumers from the volatility of the world oil and gas markets. You don’t have to be a climate advocate to understand this, but apparently it helps.
A murmuration of starlings. Photo by Jeremy Bolwell via Wikimedia
It was the best of summers, it was the worst of summers. It was the summer the United Nations declared a healthy environment a universal human right, and a summer that shattered heat records across the globe. The U.S. enacted a historic climate bill not long after the Supreme Court struck down the Environmental Protection Agency’s Clean Power Plan. Climate scientists said there was still hope for keeping global warming below 1.5 degrees Celsius, while the American West’s worst drought in 1,200 years continued for its 22nd summer.
The struggle to keep climate change from spinning out of control feels nothing short of epic, as if ordinary mortals were powerless observers to a battle between giants that will determine whether and how we survive. Yet if we weren’t collectively doing what modern humans do — burning fossil fuels, clearing land for agriculture, raising and eating billions of animals, driving on the roads we paved, making things in factories, consuming and consuming — there would be no epic struggle. We are the giants.
But being integral to the problem also makes every person integral to where we go from here. Powerlessness is an illusion. Like a murmuration of starlings wheeling through the air in a synchronized but unchoreographed ballet, small choices by individuals cascade across society and shift its direction, unpredictably and sometimes radically.
This is why there remains a case for hope, if not actual optimism, even as climate change accelerates toward climate chaos. Humans, working individually and collectively, have removed the biggest technological barriers to stopping the rise in greenhouse gas emissions. Most of the policy and economic barriers continue to crumble too, especially when it comes to replacing fossil fuels with wind and solar. As a result, our power supply will continue to get cleaner even in states that prefer their air polluted.
Government must still do much more, and many technical challenges still need to be worked out. For the first time, though, a decarbonizing grid finally gives ordinary people a role in determining the continued habitability of our planet, through individual actions that collectively push society in a new direction.
We’ve done this before. Consider the anti-littering campaign of the 1960s that made a once-commonplace behavior unthinkable for millions of Americans. Or take the public response to the ozone hole crisis of the 1970s, when scientists discovered that the chemical aerosols emitted by spray cans were migrating up to the stratosphere and reacting with sunlight to eat away at the Earth’s protective ozone layer. While the federal government dithered, consumers acted. They abandoned aerosols in favor of pump bottles for cleaning products, roll-on deodorants and sprays reformulated to remove the chlorofluorocarbons (CFCs) causing the problem. The public response led to government action, culminating in the 1987 Montreal Protocol phasing out CFCs worldwide.
Individual choices change history when people recognize the need to alter their behavior, but only if they have acceptable alternatives that others can copy easily. Once it becomes commonplace, the planet-friendly choice can even feel like the only morally acceptable option. Individuals and even companies want to avoid the stain of public opprobrium — the reason so many corporations today have adopted sustainability goals.
Many threats are too great to leave to voluntary action, or too hard for enough people to understand or act on individually. We needed top-down policies to decarbonize the electric sector; voluntary investments in rooftop solar alone could never do it. We will always need government agencies like the EPA and the Food and Drug Administration to regulate toxins and dangerous products. Simply trying to empower consumers can backfire, as Californians found when a right-to-know law enacted by proposition led to companies labeling pretty much everything as cancer-causing, just to be on the safe side.
But consumer choice will be a key factor in decarbonizing buildings and transportation now that renewable energy is taking over the electric grid. As people learn about the dangers of using natural gas indoors, they will opt instead for high-efficiency heat pumps and electric induction stoves, and builders will respond to changing demand by no longer connecting homes to gas lines. The new Inflation Reduction Act, with its generous rebatesfor home electrification, sped up the timeline for the demise of gas, but consumer preference will be the deciding factor.
Similarly, the IRA’s rebates for electric vehicle purchases will make consumers the killers of Big Oil. The transportation sector makes up the biggest slice of U.S. carbon emissions, and most of that is attributable to personal automobiles. Getting people out of their cars and on to bicycles or mass transit has been frustratingly hard because most of our communities were built around the automobile. The arrival of electric vehicles finally offers such an attractive alternative to the gas guzzler that it’s just a question of when, not if, the internal combustion engine goes the way of the horse-drawn buggy.
The battery technology that makes electric vehicles possible also allows every gasoline-powered tool to be electrified, including lawn mowers, weed-whackers and leaf blowers. Gasoline-powered lawn equipment is astoundingly polluting, in terms of both carbon emissions and smog-creating volatile organic compounds. It’s also so noisy that neighbors will pressure neighbors to switch to electric as the technology gets better and cheaper. California, Washington, D.C. and many localities have banned gas-powered leaf blowers, but consumer preference alone should eventually eliminate the market for them.
Consumer choice could also lower carbon emissions in sectors of the economy that are famously difficult to electrify. Within a few years you may be able to fly on a plane using biofuel or live in a building made with low-emission steel and concrete that sequesters carbon. As we’ve seen with other technologies, though, mass adoption depends on these alternatives being cheaper, better-performing or both. That will take time.
Eating a plant-based diet stands out as the individual action with the greatest climate impact, according to the climate solutions handbook Drawdown. People are beginning to catch on to the meat industry’s outsized impact on climate change, but it’s the second condition — people having alternatives they really like — that keeps the meat industry in business. Veganism is on the rise (led, of all people, by athletes), but meat consumption continues to grow too.
If some visionary thinkers are right, in a few years we will all happily be eating lab-grown meat and healthy plant-based meat substitutes because they will outcompete animal products on price, taste and convenience. Removing animals from our food supply will have cascading beneficial effects as it frees up land now used to grow animal feed for more planet-friendly uses such as carbon-sequestering forests and wildlife habitat.
For now, as anyone who has tried to stick to a diet can tell you, knowing what you ought to do is the easy part. Getting all of humanity to adopt a carbon diet is the challenge of our time. If we’re lucky and make the right choices, we may still have time to redirect the human murmuration toward a sustainable economy.
This article first appeared in the Virginia Mercury on September 8, 2022.
On Sunday the U.S. Senate passed the historic climate legislation package hammered out between Senate Majority Leader Chuck Schumer and West Virginia Senator Joe Manchin. The House is expected to follow suit this week, giving President Joe Biden a huge win on one of his administration’s priorities and finally making good on his pledge to tackle climate change.
The bill is titled the Inflation Reduction Act (IRA), apparently because the senators think inflation is the only thing most Americans care about right now. But whether it reduces inflation is beside the point. The IRA marks the federal government’s most significant investment in clean energy and transportation ever. Its $370 billion of climate spending will cut U.S. emissions roughly 42% below 2005 levels by 2030, only slightly less than the reductions that would have been achieved through Biden’s signature Build Back Better bill.
This is a huge piece of legislation, though, and some of the compromises Schumer was forced to make are not climate-friendly. Manchin, after all, is a coal baron representing a state so dominated by the extraction industries that it has lost sight of any other future. Climate hawks have to hold their noses (beaks?) to accept some noxious provisions, such as the bill’s requirement for new offshore drilling lease sales. No doubt that one will cheer motorists who wrongly assume the government could lower gasoline prices just by turning on a spigot, if only it wanted to.
The bill also comes with a side deal meant to ensure completion of the Mountain Valley Pipeline, which starts in Manchin’s home state. That news promptly soured many activists in Virginia on the whole package.
Hang in there, people. The pipeline deal isn’t actually part of the IRA, and Manchin knows better than anyone that a promise of some second bill to be voted on in the future is a castle in the air. Maybe he’ll get it, maybe he won’t. Meanwhile, the IRA’s incentives for renewable energy, energy storage, energy efficiency, building electrification and electric vehicles are overwhelmingly more impactful than provisions designed to increase oil and gas production. The business case for new pipelines will only get worse.
Three recurring themes stand out in the IRA. One is the attention paid to ensuring benefits flow to low- and moderate-income residents and communities impacted by fossil fuel extraction. A second is the effort to incentivize manufacturing and supply chain companies to bring operations back to the U.S., using tax credits for manufacturing and requirements for U.S.-made components. The third is job creation and training for career jobs that pay well. The combined effect is that the law will benefit former coal workers in Southwest Virginia looking for employment at least as much as Northern Virginia suburbanites jonesing for Teslas.
Every state will see clean energy investments soar if the bill becomes law, but Virginia is especially well positioned. Though we have embarrassingly little wind and solar in our energy mix today, we have huge potential for both, a strong tech sector and a well-educated workforce.
Just as important, laws passed by the General Assembly in the past few years already provide the framework for our energy transition. Among them, the Virginia Clean Economy Act and participation in the Regional Greenhouse Gas Initiative are pushing our utilities to decarbonize, including through investments in energy efficiency, solar and offshore wind. Solar Freedom removed barriers to private investments in distributed solar, while the Grid Modernization Act authorized upgrades to the distribution grid, and the Clean Cars Act started us down the road to vehicle electrification. For all of these, the IRA’s incentives make compliance easier and less expensive for both utilities and customers.
Renewable energy tax credits with an emphasis on equity and jobs
Photo courtesy of NREL
The IRA is a big bill with a lot of fine print detailing incentives for a wide range of technologies, mostly clean but with a few clunkers. (Hydrogen made from fracked gas, anyone?) Still, the largest share of the renewable energy tax credits will go to companies involved in the wind and solar industries. The credits will remain fixed for 10 years before ramping down, finally providing the business certainty and long planning window that clean tech companies have been begging for.
The more utilities take advantage of the law to install renewable energy, the greater the benefit to electricity customers. Renewable energy helps stabilize electricity costs, dampening the impact of high fossil fuel prices. The IRA’s tax credits will lower the cost of building wind and solar, saving money for Virginia customers as our utilities meet and exceed the VCEA’s targets for solar, storage and wind. (So, yes, the Inflation Reduction Act will live up to its name when it comes to electricity prices.)
For utility-scale projects like solar farms and offshore wind, obtaining the maximum tax credit requires that a steadily increasing percentage of the equipment used be American made. Credits available to manufacturers are intended to draw the supply chain back to the U.S. and will help those parts be cost-competitive. New prevailing wage and apprenticeship program requirements favor union labor and middle-class incomes for careers in green energy.
While large renewable energy facilities will contribute most to decarbonizing the grid, the most generous incentives in the IRA are reserved for distributed generation facilities under 1,000 kilowatts AC (1,300 kW DC), a category that includes most rooftop solar. For these projects, the investment tax credit will return to 30% for the next 10 years, with adders available if the facility is located on a brownfield or in an “energy community” (10%), uses domestic content (10%) or serves low-income residents (10-20%). The credits can be combined, making it entirely possible for a solar project on low-income housing in Virginia’s coalfields, built using American-made equipment, to qualify for tax credits of up to 70% of the cost.
Not only that, but taxpayers will be allowed to sell the credits, so people with no tax liability can still take advantage of the discounts. This feature will make solar affordable for homeowners who don’t owe enough in federal taxes to use the tax credits themselves. It will also make it possible for installers to discount the upfront cost of a solar array by the amount of the tax credit so customers don’t have to wait months for a tax refund.
A final feature is that the tax credits will now also be available as direct payments to tax-exempt entities like local governments, schools and churches. Direct pay will have the biggest impact in states that don’t allow third-party power purchase agreements (PPAs), but it’s a great option anywhere.
The “adder” for brownfields will be of interest to many Virginia localities that want to find ways to safely use closed landfills and old industrial sites, while Virginia’s government has already identified brownfields as a great opportunity for solar.
But the biggest market opportunities would seem to be for solar on low-income housing and in areas impacted by fossil fuel extraction. Carrie Hearne, associate director for renewable energy and energy efficiency at Virginia’s Department of Energy, said the many federal funding programs laid out in the IRA “would provide great opportunities for energy infrastructure investments in communities that are most in need, and in turn, help to lower energy bills. These federal funds could also contribute to the commonwealth’s goal of competitive rates, reliable and responsible delivery of energy alongside rural economic development.”
To understand how the solar industry sees these opportunities, I called the leaders of three solar companies that develop onsite solar in low-income areas and in the coalfields: Dan Conant of West Virginia-based Solar Holler, Tony Smith of Staunton-based Secure Futures and Ruth Amundsen of Norfolk Solar. Not surprisingly, they all predicted stunning growth in both distributed solar and jobs as a result of the IRA.
Solar has made fewer inroads in Southwest Virginia than in other parts of the state, which Conant sees as an opportunity. One of the few unionized solar companies in the area, and the only one I know of focused exclusively on Appalachia, Solar Holler has been expanding into Southwest Virginia and hiring workers at a steady clip. (Disclosure: I own a tiny stake in Solar Holler.)
The company already uses American-made components, so Conant said coalfields residents will be able to take advantage of two of the adders to install solar on their homes and businesses at half price, with low-income residents paying even less. The IRA’s manufacturing tax credits for American solar companies will further reduce the cost of the projects.
Conant was especially excited about the IRA’s impact on jobs in Appalachia. He expects to ramp up hiring significantly once the IRA becomes law. It took no prodding from me for him to add, “I truly believe this bill will let us get to 100% clean energy in 15 years.”
Secure Futures also has projects underway in Southwest Virginia as well as elsewhere across the state. The company uses third-party PPAs to allow tax-exempt customers like schools and nonprofits to go solar with no money down, paying just for the electricity produced by the panels. Although the IRA allows these customers to get the tax benefits without a PPA, Secure Futures president Tony Smith said tax-exempt entities will still do better using PPAs to take advantage of accelerated depreciation.
Smith said the IRA will make an already strong solar market in Virginia even stronger, as the higher tax credits will push down prices and the transferability of the credits will make it easier to attract more investors to solar. At the same time, a provision of the VCEA requiring Dominion Energy Virginia to acquire renewable energy certificates (RECs) from distributed generation facilities has created a strong market for these certificates, helping to finance projects and making solar even more affordable for institutional customers that sell their solar RECs.
On the other side of the commonwealth, Norfolk Solar also installs solar in low-income communities, offering PPAs to both commercial customers and low-income residents in economically distressed areas that qualify for special tax treatment as Qualified Opportunity Zones. (Under Virginia law, residential PPAs are available only to low-income customers.) Amundsen pointed out that the 10-year time horizon of the tax credits is an added benefit of the IRA to both her customers and potential investors because it allows for long-range planning and multi-year projects.
Energy storage will stand on its own
The VCEA established one of the most ambitious goals for energy storage development in the nation. But current federal law offers tax credits for energy storage only when it is part of a renewable energy project. The limitation has led to the proliferation of solar-plus-batteries projects around the country. It’s an ideal combination because it allows solar energy to be used when it is needed, unshackled from the time of day that it’s produced.
But uncoupling storage from renewable energy projects is a more efficient way to manage the grid, said Steve Donches, a Loudoun County attorney who represents battery storage companies and recently served on the Virginia Energy Storage Task Force.
“In many instances, the best location for storage supporting the grid is not where the renewables are located but rather near grid chokepoints or inside load pockets,” he said. “Moreover, site selection flexibility can often be important from a zoning permitting perspective. The new approach allows developers to be more nimble and locate where it is most useful and cost efficient.”
Recognizing this, the IRA provides a tax credit of up to 30% for energy storage whether or not it is part of a renewable energy facility.
This will make grid storage less expensive and easier for our utilities to install, and it will also benefit customers who want to put batteries in their buildings for back-up power. Amundsen noted that her customers sometimes can’t afford to include a battery at the time they install solar; the IRA will let them take the tax credit for storage even if they buy the battery later. This is especially important, she said, for resilience in low-income neighborhoods, where adding a battery to a solar-powered church or community center allows it to “island” during a power outage and provide a refuge for neighbors.
Homeowners will see huge benefits from building electrification
A cleaner electricity grid makes it possible to decarbonize other sectors of the economy by substituting electricity for fossil fuels in transportation and buildings; hence the climate advocates’ mantra “Electrify everything.” Yet while new electric appliances have become more energy efficient and attractive to consumers than the ones they replace, the switch comes with a price tag.
Under the new law, price will no longer be a barrier. The IRA offers rebates to residents to upgrade their homes with new electric technology such as heat pumps for heating and cooling (up to $8,000), electric induction stoves ($840), heat pump water heaters ($1,750) and upgrades to home electrical systems to support all the new load ($4,000). The rebates phase out for higher-income earners. Lower-income families replacing old and inefficient appliances will see the greatest energy savings as well as the highest rebates.
The federal rebates are a fantastic complement to existing Virginia programs for low-income energy efficiency upgrades. A major attraction of Virginia’s participation in the Regional Greenhouse Gas Initiative is the hundreds of millions of dollars it raises for low-income efficiency programs such as those devoted to upgrading multifamily housing like apartment buildings. Coordinating the state programs with the new federal rebates should be an urgent priority to ensure the broadest possible benefits to low-income Virginians.
Meanwhile, gas utilities had better start planning for the end of their business. There is no longer any reason to expand and upgrade gas distribution pipelines, because from here on in their customer base will be shrinking, not growing, resulting in stranded assets.
Electric vehicles aren’t just for the rich any more
Santeri Viinamäki, CC BY-SA 4.0 , via Wikimedia Commons
The IRA provides a $7,500 EV tax credit for new vehicles, including those made by manufacturers like Tesla and Toyota that had reached volume caps in previous law. Restrictions apply, including income limits, vehicle price caps and supply chain sourcing rules. The act also now adds a credit of up to $4,000 for used vehicles, making ownership possible for more people at all income levels.
Virginia is committed to vehicle electrification through its adoption of clean cars legislation in 2021 and a 2022 law requiring state agencies to buy electric light-duty vehicles whenever the total cost of ownership is less than it would be for a vehicle with an internal combustion engines. But further speeding up the transition to EVs will create ripple effects requiring careful planning. Electricity demand will increase and do so unevenly, requiring load management programs and upgrades to parts of the distribution grid.
Charging all these vehicles will also be an issue. Many would-be EV customers lack the ability to charge at home, either because they don’t own the space where they park or because their homes aren’t wired for easy installation of a charger. The problem is especially acute for people who rent apartments in buildings that lack charging stations.
No matter how generous the credits, people won’t buy EVs if they can’t charge them. Virginia must require multifamily buildings to include enough charging stations for all the residents who want them, ensure public charging stations are plentiful and convenient in low-income neighborhoods and improve its residential housing code to ensure new homes are wired to facilitate installation of chargers.
For best results, lean in
Photo credit iid.com
Virginia law requires each new governor to produce an energy plan in October of the first year in office, so Virginia’s Department of Energy is currently in the process of writing a plan that will have Gov. Glenn Youngkin’s stamp on it. The plan must be one that “identifies actions over a 10-year period consistent with the goal of the Commonwealth Clean Energy Policy set forth in § 45.2-1706.1 to achieve, no later than 2045, a net-zero carbon energy economy for all sectors, including the electricity, transportation, building, agricultural, and industrial sectors.”
Governor Youngkin hasn’t shown much enthusiasm for Virginia’s energy transition to date, having tried to gut the VCEA and repeal RGGI. Yet with the IRA making so many incentives available for clean energy and electric vehicles, leaning in to the energy transition now will allow the commonwealth to reap huge rewards in the form of economic development, job growth, cleaner air and lower energy bills.
The opportunities for Virginia are enormous; the governor should make the most of them.
This article originally ran in the Virginia Mercury on August 9, 2022.
Dear readers: Many of you know that although I write independently of any organization, I also volunteer for the Sierra Club and serve on its legislative committee. The Sierra Club’s Virginia Chapter urgently needs funds to support its legislative and political work towards a clean energy transition. So this summer I’m passing the hat and asking you to make a donation to our “Ten Wild Weekends” fundraising campaign. Thanks!
Fossil fuel prices are higher everywhere, and the effect is hitting electric bills as well as prices at the gas pump.
Utilities that generate power from natural gas and coal face fuel costs two or three times as high as they were just a couple of years ago —and those costs are passed on to customers. Some utilities employ hedging strategies and long-term contracts to reduce the impact of price spikes. But as a general matter, how painful your bill increase will be is a function of how much electricity your utility generates from fossil fuels.
Gee, don’t you wish we had more renewable energy in Virginia?
Let’s review the problem. Dominion Energy Virginia, our largest utility, generates most of its electricity from gas and coal, with 29 percent from nuclear and a tiny percentage from solar and biomass. Our second-largest utility, Appalachian Power, derives 85 percent of its power from coal and gas and only 15 percent from renewable energy, primarily wind and hydro.
Both utilities are investing more in renewables now, but for years they lagged other states even as wind and solar became the lowest-cost sources of energy nationwide. Because the “fuel” for wind turbines and solar panels is free, those sources generate electricity at a stable price that looks even better when coal and gas prices go up. (Nuclear reactors are fueled by uranium, so they aren’t affected by the fossil fuel crunch either; even so, most of them need subsidies to compete in the wholesale market.)
As previously reported in the Mercury, Dominion filed a request with the State Corporation Commission in May to increase the “fuel factor” portion of its customer bills, citing the higher prices. In the past year, according to Dominion, the price of the natural gas it bought has gone up 100 percent. High gas prices cause utilities to switch to coal generation when it’s cheaper, so the price of coal also rose by 92 percent. In all, the company said it incurred more than a billion dollars more in fuel costs over the past year than it budgeted for a year ago.
Under Virginia law, Dominion and APCo “pass through” the costs of fuel directly to customers. They don’t collect a profit, but they don’t have to swallow unexpected increases themselves. Customers will have to pay higher rates for as long as it takes Dominion to recoup the extra spending. The only question for the SCC is how quickly Dominion should collect the money.
Consumers in other states are also being hit by higher electricity bills, but the effect is uneven across the country. States that built more renewable energy protected their residents from fuel price increases.
Data collected by the U.S. Energy Information Agency shows that with few exceptions, states with lower electricity rates than Virginia’s have more renewable energy than we do. Since the EIA data doesn’t reflect all the planned increases due to rising coal and gas prices, the disparity will become even more pronounced over the coming year.
States in the Pacific Northwest with a lot of inexpensive hydroelectric power have especially low rates, but wind and solar are the cheapest forms of new energy. The higher fossil fuel prices go, the better wind and solar look by comparison.
States in the Great Plains have been building wind for years because it outcompetes everything else, so their rates are low and increasingly insulated from fossil fuel volatility. South Dakota residents pay less per kilowatt-hour than Virginians do, and the state gets a whopping 83 percent of its electricity from renewable energy, primarily wind. Even North Dakota, a deep red state wedded to fossil fuels, gets more than 35 percent of its electricity from wind and another 5 percent from hydro. Its rates are already much lower than Virginia’s, and its renewable energy will cushion fuel cost increases.
Investments in solar are also paying off. Take Utah for example, where residential rates are also far lower than Virginia’s. Utah has a coal problem, with 61 percent of its electricity from that one dirty source, and another 24 percent from natural gas. But, as EIA reports, “almost all the rest of in-state generation came from renewable energy, primarily solar power.” Moreover, “solar energy powers about 93 percent of Utah’s electric generating capacity added since 2015.” Evidently, Utah spent the past seven years working to future-proof its energy supply, while Dominion kept building more gas plants.
Virginia’s slow start on the transition to renewable energy is the direct result of poor investment decisions by our utilities and a disgraceful myopia on the part of the State Corporation Commission. Environmental advocates pointed out for years that our over-commitment to fracked gas meant we’ve been gambling on fuel costs and undervaluing price stability. But the SCC kept approving new fossil fuel projects, and actually urged Dominion to build more gas plants.
Indeed, our situation would be even worse if the General Assembly had not passed the Virginia Clean Economy Act in 2020. The VCEA requires our utilities to transition to carbon-free electricity by 2050 and establishes wind and solar targets for Dominion and APCo to achieve by 2035. The targets are still too low to meet the climate emergency — but until the VCEA became law, Dominion was planning to build even more gas plants.
Now customers have to pay for Dominion’s folly. Dominion’s filing states that if it recovers the entire $1 billion shortfall over the coming year, residential bills would have to go up by 19.8 percent. Dominion instead proposes to spread the higher charges over three years to ease the shock, making the bill increase 12.2 percent. The effect would be further moderated this year by other adjustments the company proposes, like moving the costs of participating in the Regional Greenhouse Gas Initiative into base rates, where they can be absorbed because those rates are so inflated. (On the other hand, the SCC just granted Dominion a separate rate increase for spending to extend the life of its aging nuclear plants—an undertaking projected to cost nearly $4 billion.)
An SCC hearing examiner heard testimony in Dominion’s rate case on July 6 and 7. A ruling is expected later this summer, and the SCC seems likely to approve the three-year plan.
Spreading the cost of higher fuel prices out over a longer time may reduce the rate shock, but there are drawbacks to this approach. First, Dominion will charge customers the financing costs of deferring collection on the full amount, adding to the total cost burden. (What, did you think the company was offering to absorb that cost itself?) The way it works is that ratepayers will borrow money to pay off our debt to Dominion, then repay the loan with interest over the next three years.
The second problem is that if the high cost of fossil fuel isn’t temporary, extending the recovery period will lead to even greater shocks in coming years. If prices stay high and we keep kicking the can down the road, we will pay more financing costs and pile up more debt. Where does this end?
This is not mere speculation. Dominion’s filing already projects that “fuel costs will remain elevated over the next year,” and expert witness testimony in the case notes that Dominion revised its natural gas price projections upwards after it filed its request, without updating the amount it is seeking to collect to reflect the higher projections.
Over at Appalachian Power the situation may not be any better. APCo typically seeks its fuel factor rate increases in September of each year. Last year the utility sought a $3 average increase in residential bills to cover higher fuel costs, at a time when coal and gas prices were still well below this year’s prices. When the company files for its next fuel factor increase two months from now, the rate increase it seeks is likely to pack a much bigger punch.
What of other Virginia utilities? Our smallest publicly-owned utility, Kentucky Utilities (Old Dominion Power, which serves five counties in southwest Virginia), is also heavily dependent on fossil fuels although now planning to build more renewables. ODP filed for a modest rate increase in February of this year, just before Russia invaded Ukraine and sent world natural gas prices to heights not seen since the start of the fracking revolution.
Chris Whelan, vice president for communications and corporate responsibility, told me ODP is able to dampen the effect of fuel price volatility through a “flexible fuel procurement strategy that includes long-term contracts to help hedge against price swings as well as the ability to purchase fuel on the spot market when prices drop.” Still, ODP will have to seek another increase next February unless prices suddenly plummet. The utility recovers excess fuel costs (or lowers rates if fuel costs fall) on an annual basis, so customers would pay off the full amount over 12 months.
Electric cooperatives that buy electricity from Old Dominion Electric Cooperative also face price increases due to high fossil fuel prices and a paucity of renewables. ODEC’s 2021 energy profile shows it generates 38 percent of its electricity from gas, 14 percent from nuclear, and 4 percent from coal. It purchases the rest from the wholesale market (38 percent) and from renewable energy projects (6 percent). Electricity sold on the PJM wholesale market is generated mainly by natural gas, nuclear and coal, so wholesale market prices are also higher now.
According to Kirk Johnson, ODEC’s senior vice president for member engagement, ODEC has had to raise energy prices twice since the beginning of the year, effective May 1 and July 1. Assuming individual distribution cooperatives passed those costs through immediately, residential co-op customers will have seen a 16 percent increase in their electricity rates since Jan. 1. That’s a really steep increase, but Johnson notes ODEC will collect the full amount of the excess cost by Jan. 1, 2023.
ODEC’s increase for six months is almost four percentage points lower than the increase Dominion would impose for 12 months if it were to collect its full $1 billion in the shortest time possible. Johnson said ODEC engages in a hedging strategy that acts like an insurance policy to limit the effect of fuel price volatility, and that this strategy has saved their ratepayers hundreds of millions of dollars.
So hedging and long-term contracts can smooth out fossil fuel volatility, but rates are going up everywhere in Virginia. The lesson is clear enough: “cheap” fracked gas was a bad bargain. Our utilities should have been building wind and solar over the last several years to protect us from fossil fuel price volatility, rather than waiting for the General Assembly to force them to act.
Going forward, the more we invest in wind and solar, the more price stability we will have in our electricity rates, and the less we will have to worry about high fossil fuel prices in the future.
This article originally appeared in the Virginia Mercury on July 18, 2022. I’ve corrected information for Utah.
*EIA’s webpage lists each state’s average residential price of electricity per kilowatt-hour, but finding the fuel mix for each state requires looking up each one separately. For those of you who like to dive into these details, I’ve assembled the information for you. Note that most of EIA’s data is for 2021, but some state data is for 2020. Unfortunately this includes Virginia.
Dear readers: Many of you know that although I write independently of any organization, I also volunteer for the Sierra Club and serve on its legislative committee. The Sierra Club’s Virginia Chapter urgently needs funds to support its legislative and political work towards a clean energy transition. So this summer I’m passing the hat and asking you to make a donation to our “Ten Wild Weekends” fundraising campaign. Thanks!
I grew up with brothers, so I knew from an early age that the surest way to make friends with guys was to feed them homemade cookies. I took this strategy with me to college, commandeering the tiny kitchenette tucked into the hallway of my coed dorm. The aroma of chocolate chip cookies hot out of the oven reliably drew a crowd.
One fan was so enthusiastic that he wanted to learn to make cookies himself. So the next time, he showed up at the start of the process. He watched me combine sugar and butter, eggs and flour.
Instead of being appreciative, he was appalled. It had never occurred to him that anything as terrific as a cookie could be made of stuff so unhealthy. It’s not that he thought they were created from sunshine and elf magic; he just hadn’t thought about it at all. He left before the cookies even came out of the oven.
I felt so bad about it, I ate the whole batch.
Cookies are practically health food compared to other things we consume without really understanding the dangers.
It’s not just food. Plastic packaging, chemical additives, PFAS, phthalates and numerous other chemicals enter our homes and bodies without our conscious acquiescence, causing havoc for ourselves, our children and the rest of life on earth. It’s hard to know the risks, harder still to avoid them. So maybe you carry reusable bags and water bottles, buy organic if you can, and otherwise, try not to think too hard about it.
Where ignorance is bliss—or at any rate, a state of mind sufficient to keep you from a complete mental breakdown — you could be excused for feeling ‘tis folly to be wise. Why not just eat the cookies?
Well, because sometimes reading the ingredients can make a difference. Public pressure has been the major driver of government action on climate, particularly in decarbonizing the electric sector. People saw the recipe for their power supply and recoiled at all that fossil fuel. Short of installing solar panels on their rooftops, individuals in most states have little control over their source of electricity. It was a collective outcry that led to nearly half of all states setting carbon-free electricity targets.
It seems odd, then, that we have not seen the same outcry when it comes to fossil fuel use in buildings, including natural gas in homes. As our electricity gets cleaner, buildings must become all-electric on the way to a fully decarbonized energy economy.
Turns out, that’s a tall order. About 48 percent of American homes use natural gas for heating, and many also have gas appliances like stoves and hot water heaters. Starting in 2019, a few cities started banning new gas connections in an effort to speed the transition to all-electric homes. But in response, the gas industry persuaded legislatures in 20 states to prohibit localities from enacting such bans. (An industry effort to “ban the bans” in Virginia failed mainly because no localities have tried to go that route.)
For now at least, the industry seems to have public sentiment on its side. Natural gas is truly the chocolate-chip cookie of fossil fuels: it heats the air reliably, chefs love it and it’s lower in calories—I mean, carbon—than coal. Even the name sounds benign. What can be wrong with something “natural?”
Disillusionment sets in only when you read the recipe. (“First, frack one well…”) Understanding the harmfulness of the ingredients is the key to getting people to insist on all-electric homes and businesses. The primary component of natural gas is methane, a greenhouse gas far more potent than CO2. Methane leaking from wellheads, pipelines, compressor stations and storage facilities contributes alarmingly to climate change. Older cities are riddled with leaking distribution pipelines running through neighborhoods, especially those housing low-income and non-White residents. Occasionally, they explode.
Those beloved gas stoves leak methane even when turned off, and burning gas in buildings causes high levels of indoor air pollution. Cooking with gas releases respiratory irritants, including nitrogen dioxide, ultrafine particulate matter (PM 2.5), carbon monoxide and formaldehyde. The effect is particularly harmful to children, with studies showing children living in homes with gas stoves are 42 percent more likely to suffer from symptoms of asthma.
It used to be that gas outperformed electricity in buildings, but no longer. Recent advances in technology mean electric heat pumps provide heating and air conditioning efficiently and effectively even in very cold climates. Every gas appliance has an electric counterpart. Even for cooking, gas has met its match in electric induction stoves, which have been winning over chefs nationwide. In a few years, we will wonder why we ever allowed open flames in our kitchens.
Cost and convenience also favor all-electric buildings. An electric heat pump instead of both a gas burner and electric air conditioning means only one system to maintain and one utility bill instead of two.
The question isn’t why homeowners would give up gas, but why builders still include it. Clearly, no one is reading the recipe.
With so much gas infrastructure already in place, and so little public awareness of the dangers, getting the gas out of buildings will be a slow process. In Virginia, gas companies continue to propose pipeline projects that would actually increase supply, in the hopes of locking in new customers. This is, to use the technical term, nuts. Those pipelines will have to be abandoned within a couple of decades, not “just” because the climate crisis demands it, but because consumers won’t keep buying.
Certainly, it will take time for most people to grasp how harmful methane is and how superior the alternative is. Once consumers begin insisting on all-electric buildings, however, gas utilities will enter a death spiral as they are forced to raise prices for remaining customers, who will then switch to electricity, too.
At that point, electrification of the building sector will be complete, and we will begin to close the (cook)book on gas.
This article originally appeared in the Virginia Mercury on July 7, 2022.
Dear readers: Many of you know that although I write independently of any organization, I also volunteer for the Sierra Club and serve on its legislative committee. The Sierra Club’s Virginia Chapter urgently needs funds to support its legislative and political work towards a clean energy transition. So this summer I’m passing the hat and asking you to make a donation to our “Ten Wild Weekends” fundraising campaign. Thanks!
Power for the People VA 