To Understand Pipeline Economics, Follow the Money

By Thomas Hadwin

I have worked for electric and gas utilities in other states, so I am interested in seeing a modern energy system developed in Virginia. I prefer to find solutions where everyone wins, but Virginia is currently split between those who want to protect our land and waters and those who want the lower cost energy and jobs they think pipelines will bring. We can find ways where all interests are served, but we will have to reshape the plans that have been proposed.

The promised economic benefits are what have motivated many political and business leaders to support the Atlantic Coast Pipeline (ACP). Let’s set aside the environmental issues and focus on the economics. In dealing with contentious issues, it’s often hard to find agreement on the “facts.” We can avoid disagreement by using information that the pipeline owners (Dominion Energy, Duke Energy, and Southern Company, the parent company of Virginia Natural Gas) have filed with the Federal Energy Regulatory Commission (FERC).

To show FERC that a new pipeline would be needed, the pipeline owners had their utility subsidiaries in Virginia and North Carolina sign 20-year firm transportation agreements with the Atlantic Coast Pipeline. FERC’s own guidelines say that this is not enough to prove true market need for a new pipeline, especially if the companies signing those contracts are owned by the pipeline developers. U.S. Department of Energy studies and reports from independent consultants show that existing pipelines can provide all of the gas we need in Virginia and North Carolina. Unfortunately, FERC has not requested any substantive data to prove the need for a new pipeline. Signed contracts are all that have been used to approve pipelines for the past several decades and it appears that this substandard practice will continue.

Dominion claims that the cost savings provided by the ACP are enough to prove it is necessary. Will the ACP actually save ratepayers money in Virginia and North Carolina? Enough to spur new job creation, as has been advertised? The truth is revealed by examining who pays for the $5 billion ACP, and how much it costs compared to other options.

Data filed with FERC show the ACP will cost customers more than existing pipelines

Pipelines charge a fee to transport natural gas. The gas itself is purchased separately. Traditionally, large users of natural gas, such as utilities, have signed long-term contracts to reserve capacity on a particular pipeline. These contracts must be paid in full, whether or not all of the capacity is used. Having the capacity reserved assures that natural gas can be delivered when it is needed and reduces the price volatility compared to paying for pipeline transportation only as it is needed.

Capacity reservations can be a good idea, but not when the cost of the long-term contract is far higher than other alternatives. Based on the fee and the capacity reservation filed with FERC, Dominion’s utility customers could be obligated to pay over $4 billion during the next 20 years to the ACP for the long-term transportation agreement.

Existing pipelines, currently serving Virginia, can transport the same or greater amount of gas as the ACP for a much lower cost, because existing pipelines have been mostly paid for by previous customers. Using gas prices from May of this year, which show a price advantage at the Dominion South zone (the source of supply used by the ACP), the total price of gas delivered by the ACP to Dominion’s Brunswick plant would be 28% more expensive than gas delivered by the connection to the Transco pipeline built in 2015. The fee to use the ACP is over three times more expensive than using the Transco connection. Using existing pipelines in other parts of the state would save even more money compared to the ACP.

The ACP will be one of the most expensive pipelines on the East Coast. The fee to transport gas using the ACP is over 60% of the current price of natural gas. If this seems like a lot to pay just for transportation, it is. A fee this high raises the delivered price of gas compared to what can be delivered by other pipelines.

Dominion study shows savings from the ACP, but doesn’t tell the whole story

The study used by Dominion to publicize the presumed $377 million per year cost savings from the ACP examined a short-term phenomenon that was over in 2016, but was assumed to last until 2038. The calculation of savings during that anomalous period was extended over twenty years and subjected to a magic multiplier to increase the apparent savings even more. But the study left out one important factor, the cost of transportation. If the FERC rate for using the ACP to transport the gas was added to the savings in the price of gas during this especially favorable period, there would be no savings, just added costs.

The ACP is more expensive than using existing pipelines

As new takeaway pipelines are added in 2017-2018 to the production zone used by the ACP, it is expected that the gas price in this zone will equalize with other regions, so that the difference in the price of delivered gas will be due mainly to pipeline transportation costs. This will put the ACP at a considerable disadvantage to other alternatives. Using the ACP to deliver gas over the long-term is far more expensive than using existing pipelines.

Long-term agreements with existing pipelines cost money too, and differences do occur from time to time between production zones. An independent analysis identifies that using the ACP in Dominion’s territory compared to existing pipelines will create a net cost to ratepayers of $1.6 to $2.3 billion over the next 20 years. Perhaps about half that amount would be an extra cost to Virginia Natural Gas customers to use the ACP rather than connections to existing pipelines during that same period. In general terms, the ACP would add about $3 billion in costs to Virginia energy consumers over the next 20 years. The ACP will raise energy costs and therefore, diminish job creation, exactly the opposite of what has been claimed.

Can existing pipelines deliver the gas? Dominion’s actions say yes.

Dominion argues it can’t get enough gas from other pipelines, but its actions indicate otherwise. The ACP’s FERC application identifies that the Columbia Gas Pipeline can deliver Dominion’s full allotment of gas from West Virginia to Virginia for use in power plants. Columbia Gas is adding about 87 percent of the capacity of the ACP to its system in the region. Transco is adding 400 percent of the capacity of the ACP to its corridor moving southbound through Virginia and North Carolina. Dominion says the capacity being added to the Columbia Gas and Transco systems isn’t available. Yet Dominion obtained capacity from Transco for use at the Cove Point LNG plant that it claims is “unavailable” for use in power plants.

Cabot Oil & Gas Corp., the gas supplier over the Transco Pipeline to Cove Point, plans to increase production by 1.7 Bcf/d (more than the capacity of the ACP) in the next two years. Dan Dinges, Cabot’s CEO, says Cabot is getting calls “from various people looking to secure . . . long-term supplies . . . and we are definitely answering those calls.”

It certainly appears that Dominion could receive its full allotment of 0.3 Bcf/d using existing pipelines, much cheaper than using the ACP, if only it was willing to ask.

Gas service to southeast Virginia and to North Carolina could be accomplished with connections to existing pipelines, mostly over existing rights-of-way, at a fraction of the cost and impacts associated with the ACP. Southeast Virginia could obtain as much, or more, natural gas using a connection to existing pipelines, entirely over existing rights-of-way. The region could have its own source of supply for 80 years for a fraction of the price it would pay for the 20-year contract with the ACP.

North Carolina would receive as much, or more, capacity to supply the same customers in the same locations as proposed by the ACP. A connection to Transco would be made over 105 miles of the Cardinal Pipeline corridor, then connect to the last 90 miles of the ACP right-of-way to serve the same delivery points. This shorter pipeline would meet the same needs but save North Carolina residents billions of dollars compared to the ACP and avoid disruption of West Virginia and Virginia mountains and pristine streams, as well as national forest lands.

Connections to the Transcontinental Pipeline corridor serve the same customers in North Carolina as the ACP, saving billions.

With demand for natural gas slowing, rushing to build the ACP risks making a costly mistake

Dominion and Duke have been scaling back the number of gas-fired units that require service from the ACP and pushing back the expected dates for initial operation. Just this year, the two companies cut in half the number of large gas-fired power plants needed in the next 15 years. The first unit is not needed until 2025, in Virginia. There is no need to rush through the regulatory process. We have time to do a thorough evaluation of the need, costs and impacts of new pipeline projects.

Growth in U.S. natural gas use has slowed markedly, further undermining the ACP’s need argument and the artificial sense of urgency to gain regulatory approvals. An industry analyst says, “With domestic demand gains slowing across power burn, residential, commercial, and industrial, the North American gas market must find new levers to pull. It is likely that the biggest demand lever for the U.S. gas market over the next five years and beyond will be LNG exports.” This statement indicates that the rapid growth in natural gas use is not shaping up as policymakers were led to believe. The industry is looking to greater LNG exports as a way to increase natural gas prices and rescue Wall Street’s failing investments in natural gas developers.

As the red line of the chart shows, pipeline capacity in the Appalachian Basin is growing much faster than the supply of natural gas.

The Appalachian Basin is not producing enough gas to fill all of the pipelines that are currently in front of FERC for approval. The production of natural gas would have to increase by 50 percent in the Marcellus/Utica shale plays to fill the pipelines currently proposed over the next several years. Rather than reducing the number of pipelines built, the industry is suggesting that we need to drill for more gas.

Australia tried to use its ample reserves of natural gas to increase domestic use and LNG exports. They converted many factories to natural gas in hopes of creating more jobs. Instead of greater prosperity, domestic gas prices rose 3-4 times in 10 years, factories closed or converted back to coal, and utility bills skyrocketed.

Learning from others’ mistakes: Florida’s example

The ACP is not the only pipeline project to overestimate demand. Further south, Sabal Trail, the most recent pipeline to go into operation, is running at 25% capacity, all of it taken from existing pipelines. This new pipeline, in rapidly growing Florida, was promoted as being absolutely necessary to meet growth in natural gas demand by its utility holding company owners, NextEra and Duke Energy. Yet, total natural gas usage in Florida is down 4% over last year, undercut by cheaper renewables.

If Virginia’s families and businesses lose, who wins?

It can be puzzling to understand why utility holding companies want to build a pipeline if it isn’t needed. It seems unlikely that an unregulated, private corporation would invest billions of dollars in a project the market doesn’t support. The answer has to do with the way the utility subsidiaries are compensated. Our utilities get paid more when they build more. Today, there is little reason to build new power plants, because demand for electricity is no longer growing nationwide, even though there is growth in our economy and population. Demand for electricity in Virginia is growing only because of new data centers and Dominion’s studies show that growth from that source will taper off by 2023.

FERC offers a 50% higher return for gas pipelines than for interstate transmission lines. The holding company executives are making what they see as a prudent decision to chase this extra money, while revenues from their utility subsidiaries are flat, and shift the risk and higher costs to the utility ratepayers.

A choice that is good for the shareholders but bad for the ratepayers is not one that we should encourage. A company cannot be successful in the long run setting the interests of its owners against the interests of its customers. If Dominion builds the pipeline and successfully convinces the SCC to pass on the full costs of the 20-year agreements to the ratepayers, customers will pay billions more for no benefit. This would give them a reason to do less business with Dominion in the long run (using energy efficiency and self-generation with solar to reduce their usage). The higher costs due to the pipeline would create a less healthy state economy and a less healthy utility.

We need to create different approaches where everyone can benefit. To do that, we must reset the role of our utilities and pay them differently so they can prosper when they serve us better, as other states are doing.

Given that the economic benefits we have been promised will not materialize, we should ask the state and federal regulators to fully analyze the need for this project and make a thorough assessment of its impacts. We have the time. The process could take two more years and still not affect the operation of any of the new power plants in Virginia or North Carolina that were used to justify the pipeline.

 

Thomas Hadwin

Waynesboro, VA

Thomas Hadwin worked for electric and gas utilities in Michigan and New York.  He led a department which was responsible for the site selection and approval of multi-billion dollar projects working with state and federal agencies, as well as assuring that all company facilities complied with existing environmental regulations.  He founded a computer and telecommunications business about which the Wall Street Journal wrote an article describing its innovative business model.  As a “healer of businesses” he helped ailing companies throughout the U.S. get back on their feet.  He is currently working to help establish a 21st century energy system for Virginia.

 

UVA Prof. Vivian Thomson’s “Climate Of Capitulation” is Essential Reading In This Election Year

capitulationbook

When University of Virginia environmental science professor Vivian E. Thomson researched and wrote her thoughtful account of environmental battles during her years on Virginia’s Air Pollution Control Board (2002 to 2010), she could not have known how fortuitously timed her book’s eventual publication would be. But as luck would have it, the just-published Climate of Capitulation: An Insider’s Account of State Power in a Coal Nation (MIT Press) comes out at a particularly opportune moment.

Donald Trump’s election, and his administration’s efforts to dismantle federal climate and environmental protections, means the states have a more important role to play than ever before as the U.S. tries to address the climate crisis. A primary theme in Thomson’s book is the outsized power of the commonwealth’s largest utility, Dominion Energy, over Virginia politicians and regulators. That is also fortuitous, since 2017 appears to be the year when, finally, Dominion’s unhealthy influence over Virginia politics could be a significant election issue. More than 50 candidates for the Virginia House of Delegates this year have pledged to refuse Dominion campaign contributions, as has gubernatorial candidate Tom Perriello. And Dominion’s proposed Atlantic Coast Pipeline for fracked gas is a significant issue in the Democratic gubernatorial primary.

Adding to Climate of Capitulation’s uncanny timeliness is Governor Terry McAuliffe’s executive directive this month requiring Virginia’s Department of Environmental Quality to draft proposed regulations to limit climate-disrupting carbon-dioxide emissions from electric-power plants. DEQ must submit its proposal to the state’s Air Pollution Control Board by December 31, just before McAuliffe’s term expires. Electric utilities and environmental groups will be watching that process closely, hoping to influence the final result. And of course the outcome of this year’s gubernatorial race will greatly affect the ultimate fate of McAullife’s effort to reduce carbon emissions.

Another main theme in Climate of Capitulation is DEQ’s lackluster environmental enforcement record over the years, and efforts by politicians of both major parties, including then-governor Tim Kaine, to rein in the Air Board’s efforts to strengthen environmental enforcement. Citing contemporaneous emails obtained from the Library of Virginia’s database, Thomson describes how the Kaine administration, DEQ director David Paylor, and state legislators worked to limit the Air Board’s effectiveness and expand it from five to seven members. According to Thomson, the size increase was specifically designed to weaken the power of the board’s three-member majority, which threatened to run afoul of business interests in pushing for pollution limits well within legal requirements, but significantly more stringent than what DEQ proposed to allow.

With DEQ and the Air Board likely to be in the spotlight for the rest of 2017 and beyond, Climate of Capitulation is must reading for Virginians concerned about climate change and carbon reduction.

Thomson notes that the part-time nature of Virginia’s legislature, combined with a chronically underfunded DEQ, deprives the state’s legislative and executive branches of the technical expertise needed to enforce complex air-pollution laws. As a result, Thomson argues, government officials too often end up relying for technical expertise on the large corporations that are regulated by those laws. The corporations, of course, are more than happy to oblige, and the result is predictable.

Perhaps the most provocative and insightful aspect of Thomson’s analysis is her description of what she calls “the third face of power.” The concept comes from the New York University sociologist Steven Lukes’s “three dimensions of power,” where the third, almost invisible dimension of power is the ability, in Thomson’s words, to shape people’s “perceptions over time without conscious knowledge.” She finds this third dimension of power in Virginia’s “traditionalistic political culture, which devalues public participation and civil servants,” “protects the status quo,” and too often favors corporate interests over citizens. This culture is encapsulated in an expression heard often in Richmond—“the Virginia Way,” although Thomson doesn’t use that term. The Virginia Way sometimes involves politicians in both major parties working to maintain the status quo, especially when that serves to favor large polluters. Thomson says “strong, sustained leadership” is needed to avoid capitulating to such a powerful, inertia-favoring force.

I wish Thomson had devoted more space to fleshing out this dimensions-of-power concept as applied to Virginia, for it seems key to understanding the commonwealth’s slow pace in deploying clean energy and addressing climate change. It further explains DEQ’s failure to take more aggressive, science-based positions that might conflict with powerful polluters’ interests. Inertia and the Virginia Way may not be bad in all situations. But inertia is not our friend in dealing with the climate crisis and multiple threats to clean air and water.

Vivian Thomson has done a great service in describing the sometimes-hidden influences that hinder enforcement of our environmental laws and slow efforts to address climate change. Virginia’s current political leaders, as well those hoping to replace them in this important election year, should read Climate of Capitulation. So should Virginia voters.

Seth Heald received a master of science degree in energy policy and climate from Johns Hopkins University this month. He is chair of the Sierra Club’s Virginia chapter.

 

Sierra Club files petition with SCC seeking Affiliates Act review before Dominion commits to Atlantic Coast Pipeline deal

 

By Pax Ahimsa Gethen – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=55451003

Today the Sierra Club filed a petition with the Virginia State Corporation Commission seeking a Declaratory Judgment that Dominion Virginia Power’s arrangement to obtain gas capacity in the Atlantic Coast Pipeline is subject to Commission approval under the Virginia Affiliates Act. That law requires a public service corporation to get the approval of the Commission before it enters into a “contract or arrangement” with an affiliated company.

The Affiliates Act applies, according to the Sierra Club, because Dominion Virginia Power’s parent corporation, Dominion Resources, is a partner in the Atlantic Coast Pipeline joint venture, and Dominion Virginia Power’s (DVP) fuel procurement subsidiary, Virginia Power Services Energy Corporation (VPSE), contracted for capacity on the pipeline. Put more simply, a utility—Dominion Virginia Power– and two of its corporate affiliates have negotiated a business deal, and the Affiliates Act directs the Commission to carefully review that deal to ensure that consumers don’t get the short end of the stick.

If the Commission grants Sierra Club’s petition, DVP will have to submit its agreement with Atlantic Coast to the Commission for formal review and approval. Sierra Club and other interested parties will then have a chance to weigh in on whether the agreement will actually benefit consumers.

There is good reason to think it won’t benefit consumers. Bill Penniman, a retired energy attorney who serves as Conservation Co-Chair for the Virginia Chapter of the Sierra Club, has studied Atlantic Coast’s filings with the Federal Energy Regulatory Commission (FERC). He notes that as of now, the amount of money that DVP (via VPSE) will pay Atlantic Coast for pipeline capacity is secret. The public filings reveal, however, that the maximum amount Atlantic Coast can charge any customer is more than three times the amount that another company, Transcontinental, can charge for pipeline capacity that services the exact same power plants as Atlantic Coast. And as it happens, says Penniman, DVP already has twenty-year shipping agreements with Transcontinental. The fact that DVP is now trying to enter into a whole new contract to ship gas to the same power plants via a much costlier pipeline ought to raise a lot of eyebrows.

If this talk of parent companies and subsidiaries is confusing, it might help to picture Dominion Resources as a giant spider with DVP as one leg and other Dominion-owned companies as other legs. Some of those legs have hairs on them; they are subsidiaries of the subsidiaries, but still part of the spider. VPSE is a hair on the DVP leg; its job is to buy fuel and whatever else the utility needs to run its power plants and make electricity.

In this case, VPSE has contracted with Atlantic Coast to buy a big chunk of space on the pipeline. DVP will use this pipeline capacity to deliver the gas needed to fire its Greenville and Brunswick facilities. Yet another leg on the spider, Dominion Transmission, has been hired to build and operate both Atlantic Coast and a connecting line called the Supply Header (which ups the price of the whole system).

To top it all off, the spider itself, Dominion Resources, owns 48% of the Atlantic Coast venture, along with Duke Energy and Southern Company. You can picture the Dominion spider teaming up with its spider buddies on the project, but I don’t recommend that if you tend towards arachnophobia and are already not happy with this analogy.

Having VPSE contract for capacity on Atlantic Coast is absolutely critical to the success of the whole pipeline venture. Atlantic Coast can’t get permission from the Federal Energy Regulatory Commission (FERC) to build the pipeline unless it can show the pipeline is needed, and the only way to show need is by having customers lined up to buy the capacity. If VPSE didn’t sign that contract, Atlantic Coast couldn’t get built.

But here’s the thing: while FERC has final authority for approving or rejecting the pipeline itself, Virginia’s State Corporation Commission has authority to decide whether any agreements between regulated utilities and their corporate affiliates are in the public interest. In fact, the law says that the Commission must review and approve inter-affiliate agreements before they take effect.

However, even though DVP has directed VPSE to buy pipeline capacity on Atlantic Coast for DVP to use at its power plants, DVP has never submitted VPSE’s arrangement with Atlantic Coast for Commission review. Atlantic Coast has assured FERC it has enough customers to justify building the pipeline, but the fact of the matter is, one of its key customers—VPSE (and, by extension, DVP)—may not have had authority to enter into the deal in the first place.

This is what the Affiliates Act is supposed to prevent. Virginia Code section 56-77 says that any “contract or arrangement” between a public service company and an affiliated interest for goods, property, or services requires prior approval from the Commission. The fact that VPSE is acting as a contractual middle man between DVP and Atlantic Coast makes no difference: this is an arrangement between DVP, VPSE, and Atlantic Coast that is made specifically for the benefit of DVP. They’re all the legs (and leg-hairs) of the same spider, and they are likely to put the spider’s welfare above anyone else’s. And that’s exactly the reason the General Assembly passed the Affiliates Act.

The Atlantic Coast Pipeline is a big deal for Dominion Resources. The company is all-in on natural gas, and building this $5 billion pipeline is expected to generate a lot of profit for shareholders. What’s missing from this equation is the public interest, and there are good reasons for the Commission to be skeptical. How does it benefit Virginians to construct an extraordinarily expensive pipeline when much cheaper pipeline capacity already exists? That’s the question the Sierra Club will pose to the Commission if grants the petition and requires DVP to submit its Atlantic Coast agreement for review.

Furthermore, why should DVP commit itself (and its customers) to a huge amount of natural gas capacity over twenty-year period when there are better, cleaner options available? While Dominion and all its spider legs may think that burning more gas is a great idea, the reality is, natural gas increasingly looks less like a long-term energy solution and more like a trap for companies that made the wrong bet. At the same time, renewable energy and efficiency resources are growing ever cheaper. The Commission might well question Dominion’s plan to lock its customers into a bad investment in fossil fuels over the next twenty years at the expense of smarter renewable alternatives.

There’s a reason the Affiliates Act exists, and this is it. Here’s hoping the Commission grants Sierra Club’s petition and gives the Dominion spider a good, hard look under the microscope.

 

Dominion Power promises huge solar investments and a lower carbon footprint—or does it?

Dominion Virginia Power says energy from solar farms is now a low-cost option. Photo credit Kanadaurlauber.

Dominion Virginia Power released its updated Integrated Resource Plan (IRP) this week with a press release that promised thousands of megawatts (MW) of new solar power and a dramatically lower carbon footprint. In a remarkable turnabout, the Executive Summary declares, “The Company must now prepare for a future in which solar PV generation can become a major contributor to the Company’s overall energy mix.”

Alas, a closer look reveals Dominion will actually increase its carbon emissions over the period studied. Meanwhile, the solar would be built at a rate of only 240 MW per year over the 15-year period covered by the IRP, about the same amount being installed in Virginia this year. (Over 25 years, Dominion says its solar could reach 5,200 MW, which means the pace of installation would actually drop in the out years.) That should elicit yawns, not excitement.

The solar numbers pale in comparison to the more than 4,600 MW of new natural gas combined-cycle plants Dominion has been building just in this decade. (Remember that solar farms generate electricity at about 20-25% of “nameplate” capacity on average, while combined-cycle gas plants nationally average 50-60%, and can achieve 70% or higher.*) And even come 2032, the new solar will make up only a tiny fraction of a generation portfolio that consists almost entirely of coal, gas and nuclear.

I’ll be interested to see the numbers analyzed, but my guess is that all the renewable energy Dominion proposes to build over the next 15 years represents no more than 5-10% of its total electric generation. That’s too little, too late, in a state that can do so much better.

So the more things change, the more Dominion stays the same. Behind the hype being offered to the press stands a utility that is still committed to fossil fuels and nuclear power.

Virginia utilities file IRPs with the State Corporation Commission (SCC) every year. The plans are supposed to reflect the utilities’ best sense of how they will meet consumers’ needs for electricity while complying with state and federal laws and policies. This involves some guesswork about the direction of future regulations, including regulations of CO2 emissions.

In spite of President Trump’s determination to roll back climate protections while he is in office, Dominion’s IRP assumes an eventual price on carbon. Most utilities nationwide are doing the same thing. But given the uncertainties, Dominion has chosen (as it did last year) to model different scenarios instead of committing to a single plan.

Even the low-cost plan that wouldn’t comply with the EPA Clean Power Plan contains just as much solar as the other plans, reflecting the company’s assessment (on page 3) that solar is now “cost-competitive with other more traditional forms of generation, such as combined-cycle natural gas.”

Yet the carbon reductions Dominion promises in its press release appear to be something of a sleight-of-hand. For one thing, Dominion has chosen to compare its CO2 output in 2032 to its output in 2007, not 2017. CO2 emissions were markedly higher in 2007 than now, with the shale gas boom and the rise of renewables leading to massive coal retirements in the interim.

Moreover, a careful reading of the press release reveals the reductions Dominion promises are per-capita, not overall. A chart on page 115 of Dominion’s IRP shows every one of the scenarios Dominion studied will actually increase the company’s total CO2 emissions between now and 2042.

That reality exasperates climate activists. Glen Besa, former Director of the Virginia Chapter of the Sierra Club, comments, “The only impression you could have reading Dominion’s release was that it was making dramatic reductions in carbon pollution, which obviously is not the case.”

CO2 emissions would not increase if Dominion were simply shutting down coal and building more solar. But all of the alternative scenarios Dominion models for its IRP contain more gas plants: at least another 1,374 MW of gas combustion turbines in all plans, and 1,591 MW of combined cycle gas in some scenarios. Combustion turbines are more flexible than combined-cycle plants and so are better for meeting spikes in demand and integrating renewable energy like solar, but while they run less often, they are typically higher-polluting. Many utilities are using demand response or installing battery storage instead; Dominion appears to prefer gas.

All this gas means higher CO2 output. Not incidentally, burning more gas also means more business for Dominion’s parent corporation, Dominion Resources (soon to be known as Dominion Energy), which is heavily invested in gas transmission. And crucially, Dominion Energy needs more gas power plants to justify building the Atlantic Coast Pipeline. So building more gas plants serves the interests of Dominion’s affiliates, not its customers.

The problem with building new gas plants is that it lowers carbon only so far compared to coal, and then you’re stuck at that level for the life of the gas plants, unless you’re willing to abandon them early. That’s why any utility that’s serious about protecting ratepayers from stranded costs has to invest in wind, solar, energy efficiency and storage, not natural gas.

Speaking of wind, the IRP includes the 12 MW pilot project known as VOWTAP in all of the plans, even though Dominion lost millions of dollars in federal funding when it would not commit to building the two test turbines by 2020, three years past the original deadline. But none of the scenarios studied include any land-based wind, and none include a build-out of the federal offshore wind energy area Dominion bought the rights to, which could support at least 2,000 MW of offshore wind power. This is a strange omission given that Dominion continues to include a scenario in which it would build the world’s most expensive nuclear reactor, known as North Anna 3.

Polls consistently show overwhelming public support for renewable energy. Yet right now, ordinary Virginia ratepayers have no access to renewable energy unless they put solar on their own rooftop. Corporations like Amazon Web Services and Microsoft account for the bulk of the solar energy being installed in Virginia, with most of the remaining going to the military, state government, universities, and schools.

So 3,200 MW over 15 years won’t even begin to satisfy consumer demand. North Carolina installed almost 1,000 MW last year; I’d like to see Dominion set that as an annual target, bringing it up to the 15,000 MW over 15 years it modeled for last year’s IRP (before hiding the encouraging results from pubic view). Round out the solar with other cost-effective clean energy options, and we will see the kind of carbon reductions that don’t have to be fudged in a press release.


*On page 88 of the IRP, Dominion provides it own capacity factor forecasts: solar 25%, combined cycle gas 70%, gas combustion turbines 10%, nuclear 96%, onshore wind 42%, offshore wind 42%. The chart does not include a number for coal.

While U.S. leaders were worrying about coal jobs, clean energy snatched the lead: even Virginia now has more people working in solar than coal.

 

va-electric-sector-jobs

Jobs in electric generation do not include fuel jobs, so for example, the coal jobs in the two charts have to be added together to get total employment. Wind and solar, of course, have no fuel costs. Charts come from DOE.

Jobs in electric generation do not include fuel jobs, so for example, the coal jobs in the two charts have to be added together to get total employment. Wind and solar, of course, don’t need employees to produce their “fuel.” Charts come from DOE.

A new report from the U.S. Department of Energy takes stock of energy employment in the U.S. and comes up with fresh evidence of the rapid transformation of our nation’s electricity supply: more people today work in the solar and wind industries than in natural gas extraction and coal mining.

According to the January 2017 U.S. Energy and Employment Report, 373,807 Americans now work in solar electric power generation, while 101,738 people work in wind. By comparison, a total of 362,118 people work in the natural gas sector, including both fuel supply and generating plants.

Total coal employment stands at 160,119. And while renewable power employment grew by double digits last year—25% for solar, 32% for wind—total job numbers actually declined across the fossil fuel sectors, where machines now do most of the work.

If generating electricity employs a lot of people, not generating it employs even more. The number of Americans working in energy efficiency rose to almost 2.2 million, an increase of 133,000 jobs over the year before.

Those are nationwide figures, but the report helpfully breaks down the numbers by state. For Virginia, 2016 was a watershed year. In spite of the fact that our solar industry is still in its infancy and we have no operating wind farms yet, more Virginians now work in renewable energy than in the state’s storied coal industry. A mere 2,647 Virginians continue to work in coal mining, compared to 4,338 in solar energy and 1,260 in wind.

Dwarfing all of these numbers is the statistic for employment in energy efficiency in Virginia: 75,552.

Dominion Resources embraces a post-truth world

A sign at a protest against the Atlantic Coast Pipeline

A sign at a protest against the Atlantic Coast Pipeline

This post was co-written with Seth Heald, an attorney currently serving as Chair of the Virginia Chapter of the Sierra Club.

Donald Trump’s campaign for president upended the conventional wisdom that politicians must treat voters with honesty and respect. For Trump, no amount of lying, bullying, pettiness, crudeness and erratic behavior proved too much for an electorate hungry for change.

Indeed, some of his followers feel Trump succeeded because of his vices, not in spite of them. These trolls, bigots and bullies make up what historian Patty Limerick calls the Jerk Pride Movement, and they think they’re having their moment in the sun.

And lest anyone forget that corporations are people, the fossil fuel industry and its apologists have set out to prove that corporations can be jerks, too. Fossil fuel interests seized on the election as a mandate to gut the EPA, strip away clean air and water protections, open up public lands for exploitation, and renege on international climate commitments.

Since fake news and conspiracy theories served the Trump campaign so well, the anti-regulation crowd is stepping up its own use of half-truths, diversionary tactics and outright lies. Sure, they risk undermining the very foundations of American democracy, but fossil-fuel interests smell profit; nothing else matters.

Decent Americans should be outraged no matter who they voted for—and even more so when they see it happening in their own back yards, involving the people and institutions they deal with. We may not be able to staunch the flood of falsehood flowing across the internet, but we can hold our own leaders and institutions accountable when they add to it.

The corporate parent of Virginia’s own largest electric utility was already one of these corporate jerks, working with the American Legislative Exchange Council on state legislation undermining federal clean air and water protections. But recently Dominion Resources has gone further, adopting disinformation tactics in claiming its proposed fracked-gas pipeline will actually lower carbon emissions, and implicitly endorsing spurious reports and lies on a blog it sponsors. Dominion has gone from spinning facts to its own advantage, to actively misleading the people of Virginia.

Dominion is one of the partners in the Atlantic Coast Pipeline (ACP), which if built will bring massive amounts of fracked gas from West Virginia through Virginia and down to North Carolina. An analysis of the ACP’s climate change impact and that of the Mountain Valley Pipeline, conducted for the Sierra Club by physicist Richard Ball, showed that building these two pipelines would result in the emissions of twice the climate pollution of Virginia’s entire current greenhouse gas footprint.

Yet in a recent Facebook posting, Dominion claimed the Atlantic Coast Pipeline would “play an instrumental role in reducing carbon emissions in Virginia and North Carolina, which will allow both states to meet the requirements of the federal Clean Power Plan. In fact, the ACP alone could contribute as much as 25 to 50 percent of the carbon reductions necessary to meet interim goals in 2022.”

In the words of the Virginia Sierra Club’s former director, Glen Besa, “This is just not true and does not pass the sniff test. My personal rating is: Liar, Liar, Pants on Fire. Both of Dominion’s new gas plants in Virginia are fueled by existing pipelines. The ACP will bring in more fossil fuel for burning. At the same time Dominion has made NO new commitments to retire existing coal plants. Dominion can meet the Clean Power Plan without the ACP, but more importantly, the ACP will markedly increase carbon emissions, not decrease them.”

This bogus claim that a fracked-gas pipeline will help lower carbon pollution is in keeping with Dominion’s history of playing to both climate-concerned liberals and moderates on the one hand, and climate-denying conservatives on the other. Promising lower carbon emissions and Clean Power Plan compliance is intended to mollify the left, while Dominion courts the right through its work with ALEC, its lavish contributions to lawmakers, and its sponsorship of the libertarian Jim Bacon’s blog, Bacon’s Rebellion.

Even before Dominion signed on as his sponsor, Bacon exhibited an exasperating credulity when examining claims by Dominion and other fossil fuel companies. No doubt that endeared him to Dominion CEO Thomas Farrell, II and Company. If I were selling poison under the guise of medicine, I too would value a man who advertised my wares while proclaiming his independence.

But since joining the Dominion team and featuring its bright blue logo with every post, Bacon has adopted tactics familiar from the Trump campaign. These include promoting a sham “report” slamming a supposed new renewable electricity mandate that Virginia does not have and defending fake news about voter fraud. (Suppression of minority voting is a historic ALEC priority, along with opposition to wind and solar and promoting climate-science disinformation.)

Bacon’s post about supposed voter fraud is particularly instructive, as it adopts the “alt right’s” tactic of putting the onus on others to disprove absurd, baseless claims. Recall that Trump recently claimed, with no evidence, that he would have won the popular vote but for two million fraudulent votes supposedly cast against him. On the one hand Bacon (in perhaps the understatement of the year) acknowledged that Trump’s claim is a “huuuge stretch.” But then Bacon chastised “the news establishment” for not “distinguishing itself in debunking” Trump’s allegation. Indeed, Bacon posits, the national media’s reaction to Trump’s baseless allegation was “unhinged.” This, Bacon reasons, lends credence to Trump’s claim that the media is biased.

So now, according to a blog post with Dominion’s blue logo at the top, a president-elect’s lie about vote fraud is a stretch, but calling it a lie is unhinged. Welcome to the post-truth world.

Fossil fuel companies and their minions spreading disinformation is hardly a new tactic, of course. Read Naomi Oreskes and Erik Conway’s Merchants of Doubt for a compelling account of how the tobacco, chemical, and fossil fuel industries have used industry-funded “studies” and science-for-sale to stave off regulation for decades or longer.

If Americans aren’t in a panic about climate change, the reason isn’t a paucity of information about what is happening and why. It is due to a calculated disinformation campaign by the fossil fuel industry and a cadre of front groups like ALEC to make people believe the science is unsettled, exploiting the natural human tendency to do nothing in the face of uncertainty. As one internal tobacco company memo explained, “doubt is our product.”

Dominion Resources is a special case. Its Dominion Virginia Power subsidiary is a regulated public utility that is supposed to act in the public interest. Sham reports, fake news and false claims undermine the ability of regulators, legislators, and the public to understand and address the true nature of the energy choices facing us. Virginians should demand better.

 

Why Trump won’t stop the clean energy revolution

A protest in Manhattan against the presidency of Donald Trump, held the day after the election. Photo credit Rhododendrites - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=53011447

A protest in Manhattan against the presidency of Donald Trump, held the day after the election. Photo credit Rhododendrites – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=53011447

It is not an overstatement to say that Donald Trump’s win over Hillary Clinton horrified everyone who is worried about climate change. Reading the news Wednesday morning was like waking up from a nightmare to discover that there really is a guy coming after you with a meat cleaver.

You might not be done for, though. You could just end up maimed and bloodied before you wrest the cleaver away. So with that comforting thought, let’s talk about what a Trump presidency means for energy policy over the next four years.

I’ve had a lot of time to think about this. As a career pessimist, I’ve been worried about the possibility of a Trump win since last spring. I can fairly say I was panicking before panic became mainstream. But even with the worst-case scenario starting to play out, I’m convinced we will continue making progress on clean energy.

There is no getting around how much harder a Trump presidency makes it for those of us who want the U.S. to meet its obligations under the Paris climate accord. It’s not clear that Trump can actually “cancel” the accord, as he has promised to do. On the other hand, a man who puts fossil fuel lobbyists and climate skeptics in charge of energy policy is hardly likely to ask Congress for a carbon tax.

Nothing good can come of it when the people in charge relish chaos and embrace ignorance. Destroying the EPA will not stop glaciers melting and sea levels rising.

But just as politicians can’t repeal the laws of physics driving global warming, so there are other forces largely beyond their control. Laws and regulations currently in place; state-level initiatives; market competition; technological innovation; and popular attitudes towards clean energy have all driven changes that will withstand a fair amount of monkeying with. It’s worth a quick review of these realities.

Coal is still dead

Donald Trump’s promise to bring back coal jobs is about as solid as his promise to force American companies to bring jobs back from China. Even if he’s sincere, he can’t actually do it.

The economic case for coal no longer exists, and that remains true even if Trump and anti-regulation forces in Congress gut EPA rules protecting air and water. Fracking technology did more than the Obama administration to drive coal use down by making shale gas cheap. A glut of natural gas pushed prices down to unsustainable levels and kept them there so long that utilities chose to close coal plants or convert them to gas rather than wait.

What gas started, renewables are finishing. Today, coal can’t compete on price with wind or solar, either. That leaves coal with no path back to profitability. Not many utilities want to pollute when not polluting is cheaper.

Nor will the export market recover. China doesn’t want our coal, and a president who pursues protectionist trade policies will find it hard to get other countries to take our products.

It’s also hard to find serious political support for coal outside of a handful of coal states. Politicians say they care about out-of-work coal miners, but they care more about attracting industry to their states with cheap energy. That is certainly the case in Virginia, where Governor McAuliffe didn’t even include coal mining or burning anywhere in his energy plan.

If there is a silver lining for coal miners, it’s that without an Obama bogeyman to blame for everything, coal-state Republicans will have to seek real solutions to unemployment in Appalachia.

Solar and wind are still going to beat out conventional fuels

Analysts predict renewable energy, especially solar, will become the dominant source of electricity worldwide in the coming decades. Already wind and solar out-compete coal and gas on price in many places across the U.S. As these technologies mature, prices will continue to fall, driving a virtuous cycle of escalating installations and further price reductions.

While federal policies helped make the clean energy revolution possible, changes in federal policy now won’t stop it. Today the main drivers of wind and solar are declining costs, improvements in technology, corporate sustainability goals, and state-level renewable energy targets.

As the revolution unfolds over the next decade, the folly of investing in new fossil fuel and nuclear infrastructure will become increasingly clear. Natural gas itself is cheap right now, but new gas infrastructure built today will become worthless before it can recover its costs and return a profit. Corporations like Dominion Resources and Duke Energy are investing in gas transmission pipelines and gas generating plants only because they think they can profit from them now, and force captive utility customers to bear the cost of paying off the worthless assets later.

Advocates fighting new gas infrastructure have mostly had to work at the state level, since they’ve received little help from the Feds. That much won’t change. The cavalry isn’t coming to save us? Well, we are no worse off than we were before. We just have to do the job ourselves.

Dominion’s gas build-out is still a bad idea

Dominion Power is enthusiastic about natural gas, but we’ve seen this movie before. Environmentalists and their allies tried, and failed, to stop Dominion’s newest coal plant in Wise County from being built. Regulators approved it in spite of Dominion’s cost projections showing a levelized cost of energy of 9.3 cents per kilowatt-hour. That’s about twice the wholesale price of energy today, and well above where wind and solar would be even without subsidies.

Approval to construct the plant came in the fall of 2008. A mere eight years later, that looks like a terrible decision. Dominion Virginia Power shows no further interest in building coal plants. Instead, it has since built two huge natural gas plants and received approval to build a third. Its sister company is building the Atlantic Coast Pipeline to lock ratepayers into even more gas.

Eight years from now, those will look like equally bad decisions.

Renewable energy is popular with everyone

One of the most remarkable pieces of legislation passed during the last few years was the extension of the Investment Tax Credit and the Production Tax Credit, subsidies that have underpinned the rapid spread of solar and wind power. It turns out that Republicans don’t actually hate subsidies; they only hate the ones that benefit other people.

Wind energy is one of the bright spots in the red states of the heartland. Farmers facing volatile markets for agricultural products appreciate the stable income they get from hosting wind turbines among the cornfields, and they aren’t going to give that up.

And everybody, it turns out, loves solar energy. There’s a simple, populist appeal to generating free, clean energy on your own roof. The failure on Tuesday of a utility-sponsored ballot measure in Florida is especially notable: the constitutional amendment would have ended net metering and led to steep declines in solar installations in the Sunshine State. Voters said no. The lesson will resonate across the South: people want solar.

Indeed, public polling for years has shown overwhelming support for wind and solar energy, across the political spectrum. Even people who don’t understand climate change think it’s a good idea to pollute less. And the energy security benefits of having wind and solar farms dotting the landscape are simple and intuitive. So while the fossil fuel industry may use a friendly Trump administration to launch attacks on renewable energy, no populist army will back them.

The Clean Power Plan was important, but not transformative

Congressional Republicans have talked smack about the EPA for years, and the Clean Power Plan raised the needle on the right wing’s outrage meter to new levels. Most EPA rules have a layer of insulation from Congressional meddling as long as Senate Democrats retain the ability to filibuster legislation that would repeal bedrock environmental laws like the Clean Air Act. And laws protecting the air and water have such broad public backing that it is hard to imagine even the Chaos Caucus going there.

The Clean Power Plan could be different. Trump’s choice of a new Supreme Court justice will produce a conservative majority that might well strike down Obama’s most important carbon rule. For a handful of states that rely heavily on electricity from aging coal plants and aren’t compelled to close them under other air pollution rules, this will buy them a few years. (But see “Coal is still dead,” above.)

For most states, though, the Clean Power Plan was never going to be a game-changer. Many states were given targets that are easy to meet, or that they have already met. As I’ve pointed out before, Virginia’s target is so modest that the state could meet it simply by adopting a few efficiency measures and supplying new demand with wind and solar. That’s if the state decided to include newly-built generating sources in its implementation plan, which it doesn’t have to do.

By its terms, the Clean Power Plan applies only to carbon pollution from power plants in existence as of 2012. Newer generating plants are regulated under a different section of the Clean Air Act, under standards that new combined-cycle gas plants can easily meet. That’s a gigantic loophole that Dominion Virginia Power, for one, intends to exploit to the fullest, and it’s the reason the company supported the Clean Power Plan in court.

Regardless of whether it is upheld in the courts, however, the Clean Power Plan has already had a significant effect nationwide by forcing utilities and state regulators to do better planning. It led to a raft of analyses by consulting firms showing how states could comply and actually save money for ratepayers by deploying cost-effective energy efficiency measures. If the Clean Power Plan doesn’t become law, states can ignore those reports, but their residents should be asking why.

For Virginia, nothing has changed at the state level. Or has it?

Virginia has off-year elections at the state level, so Trump’s election has no immediate effect on state law or policy. Most significantly, Terry McAuliffe is still governor of Virginia for another year, he still knows climate change is real, and his Executive Order 57, directing his senior staff to pursue a strategy for CO2 reductions, is still in effect. McAuliffe has disappointed activists who hoped he would become a climate champion, but Trump’s win could light a fire under his feet. He has an opportunity to put sound policies in place, if he chooses to do so.

Offshore drilling in Virginia probably isn’t back on the table

Trump has promised to re-open federal lands for private exploitation, reversing moves by the Obama administration. His website says that includes offshore federal waters. However, the decision by the Bureau of Ocean Energy Management to take Virginia out of consideration for offshore drilling isn’t scheduled to be revisited for five years. Trump’s people could change the process, perhaps, but there’s not much demand for him to do so. With oil prices low, companies aren’t clamoring for more places to drill.

Environmental protection begins at home . . . and the grassroots will just get stronger

I would hate for anyone to mistake this stock-taking for optimism. The mere fact that the clean energy revolution is underway does not mean it will proceed apace. Opportunities abound for Trump to do mischief, and nothing we have heard or seen from him during the campaign suggests he will rule wisely and with restraint.

But advancing environmental protection has always been the job of the people. Left by itself, government succumbs to moneyed interests, and regulators are taken captive by the industries they are supposed to regulate. Americans who want clean air and water and a climate that supports civilization as we know it have to demand it. It will not be given to us.

Sound economics, common sense, and technological innovation are on our side. Most important, though, is the groundswell of public support for clean energy and action on climate. That never depended on the election, and it won’t stop now.