11 Jun 2014

The battle to enable cleaner energy markets in Virginia is beginning

Written by Jim Pierobon
  • Monopoly control of electric service prohibits competition along with the innovation and ratepayer savings that can come with it
  • Virginia Advanced Energy Industries Coalition and others are mounting a serious push for more efficiency and renewable sources of power and the jobs that come with it
  • Draft guidelines for Virginia under Section 111(d) the federal Clean Air Act harbor significant reductions in coal-fired electricity opening a window of opportunity for cleaner energy

Take stock of forward-looking policies in the U.S. designed to enable markets for cleaner energy and sustain the environment along with the new jobs that come with them and you’ll find a dwindling number of states resting on their decades-old laurels.

One of those states – the Commonwealth of Virginia – has made relatively small overtures for either efficiency or renewable and the jobs and new tax revenues they create.  Virginia lawmakers and those who elect them haven’t seen the value of requiring a legal commitment to renewable energy; nor have they worked to capitalize on the quickening shift to electric energy efficiency and smart grid technologies along with the money-saving benefits they afford consumers, businesses and the power grid at large.

Some informed observers believe the single biggest reason why Virginia is sticking to its guns is that the majority of elected officials are willing to cede energy matters to electric utilities operating in the state. Policymakers in Virginia once considered but then rejected enabling retail electric competition. As a result, utilities such as Dominion Virginia Power and Appalachian Power (a unit of AEP Corp. in Ohio) and rural electric cooperatives retain monopoly control over supplying, transmitting and delivering power to their ratepayers.

With that monopoly control, utilities are dolling out their campaign contributions and keeping very close tabs on lawmakers in the General Assembly.  Their collective influence on legislation, as well as applicable regulations from the State Corporation Commission, is well-known.   Some would argue that influence is hindering any serious push for more enlightened energy policies.  Campaign finance laws governing campaign contributions are widely considered to be very lax by national standards, enabling utilities and individuals to legally support lawmakers who see things their way with no limits on the amounts provided contributions in excess of $100 are reported.

Out of its own political action committee (PAC), the Dominion PAC has contributed $8.7 million to state and local candidates in both parties since 1993, according to public records organized by the Virginia Public Access Project.

Unlike some states that have opened electricity supply to competition and forced the sale of utility power plants, the rates charged by Virginia’s utilities are relatively low compared to their counterparts in the Mid-Atlantic region and along the East Coast.  Even with favorable rates, the policy ‘winds’ may be poised for a shift due to Democratic gains and a growing awareness of the need to mitigate climate change, especially in Northern Virginia, along the Norfolk – Virginia Beach – Tidewater region dealing with frequent flooding and in pockets of independent and liberal voters in locales such as Charlottesville.

What was once a reliably “red” state in elections for federal offices and state-wide offices, is now widely viewed as “purple,” giving independent and ‘greener’ voices and the candidates they support better traction on the campaign trail and in the General Assembly.

For the first time since 1969, all five state-wide offices are held by Democrats, led by Mark Warner and Tim Kaine as the U.S. Senators.  Last November, former Democratic National Committee Chairman Terry McAuliffe was elected Governor, Ralph Northam became Lieutenant Governor and Mark Herring prevailed in a very tight race for Attorney General.  What’s more, Northam’s and Herring’s successors — both Democrats — helped level the parties’ head-count in the previously Republican-controlled state Senate at 20 each.

Northam had the authority to break any ties there but no longer, as of this week. Phillip Puckett, a Democrat state senator from southern Virginia, resigned his seat leaving Republicans in control 20-19. That might not seem like much, but unless a Democratic wins a special election to fill that seat and regain the tenuous balance, future policy battles will likely be determined by Republicans who have shown little interest in diversifying the state’s economy with clean energy markets. eral Assembly is like to overpower Gov. McAuliffe, as it did in defeating McAuliffe’s bid to expand Medicaid coverage for low-income Virginian under the Affordable Care Act.


All eyes are on whether Virginia’s Governor Terry McAuliffe through January 2017 can forge cleaner energy policies capable of creating jobs and growing the state’s tax base. CREDIT: Appalachian Voices

Clean energy and efficiency advocates throughout the state are hoping some of the fresh faces in the General Assembly and the state’s continuing shift to the political ‘center’ mean more opportunities to make their case. They all recognize the uphill struggle they face. And the window for sustainability-focused policies may narrow or even effectively close with future state elections. But they are maneuvering quickly to engage the McAuliffe administration and allied stakeholders to try to change the resources and tools that utilities draw on to save and generate electricity.

Depending on one’s perspective, a unique challenge / opportunity looms with the release by the U.S. Environmental Protection Agency of its draft  regulations to amend Section 111(d) of the Clean Air Act limiting emissions on existing power plants. If those draft regulations survive what is expected to be a rigorous attack by some utilities and energy-intensive industries, it will become prohibitively expensive to generate electricity over time by burning coal with aging plants that are not fitted with the latest emissions scrubbing equipment. With new nuclear power plants out of financial reach without large taxpayer and ratepayer subsidies, many utilities could face a choice of more natural gas generation, renewable and efficiency initiatives – or pursue all three.

In this recent account of how the 111(d) regulations could change the power generation portfolios of coal-dependent utilities such as Dominion Virginia Power and Appalachian Power, Dominion CEO Thomas Farrell told The Washington Post “We think it’s our job to let the people setting the rules know what their impact will be. I think they have been listening to that.”

Few clean energy advocates believe the outlook has brightened so much that both the state Senate and the Republican-controlled House of Delegates can find common ground to require Virginia’s utilities to meet even a modest percentage of their electricity sales with renewable sources such as solar and wind.  (Thirty-one states have renewable energy requirements (aka “renewable portfolio standards”). Virginia is one of seven states with voluntary targets, without any penalty for falling short.) Virginia ranks 36th in a 2013 assessment of energy efficiency progress among U.S. states according to the American Council for an Energy Efficient Economy.

With this back drop, the odds of success for even modest progress on cleaner energy and efficiency initiatives appear to be better than any time in the recent past.  But don’t get your hopes up, says long-time energy analyst and political strategist Lowell Feld of Arlington, Virginia who blogs at BlueVirginia.us.

“What’s amazing is the continued power, the stranglehold the coal industry and Dominion Power have over Virginia’s political system,” said Feld.  “It’s frustrating because I think there is huge potential for energy efficiency and renewable energy in this state. “These entrenched legacy industries can hang for on a long time. It’s very difficult to uproot them.”

Feld is quick to explain that when legislation that would foster more efficiency and renewable is proposed, the utilities are quick to surround lawmakers with their perspectives, backed by their data, in an apparent bid to cast doubt on the benefits of efficiency and cleaner energy to lawmakers and their constituents.

The General Assembly only meets for several weeks winter and few lawmakers have well-informed aides to help guide them. So whom do they turn to? The parties that would be affected and the leaders in their body, most, if not all of whom have received a lot of support from at least Dominion Virginia Power over the years.

VAEIC logo on web banner

The Virginia Advanced Energy Industries Coalition has at least 50 energy professionals working on recommendations to update the Virginia Energy Plan. CREDIT: Virginia Advanced Energy Industries

At the forefront of the push for efficiency and cleaner energy are individuals and companies participating under the banner of the Virginia Advanced Energy Industries Coalition (VAEIC),left, which is “working to promote open markets for clean and secure advanced energy technologies in order to create jobs and position Virginia as a magnet for talent and innovation in the advanced energy sector.”

Francis Hodsoll, the Founder of VAEIC, who has operated power plants and consulted with several utilities grappling with evolving generation markets, took aim at Dominion Virginia Power’s integrated resource plan (IRP) during hearings April 23-24 at the State Corporation Commission. He asserted the company’s “data and analysis are flawed and, frankly, needs to be redone.”

Hodsoll contends the lack of a competitive market for power supply in Virginia is a “disservice to all ratepayers and I think you [the SCC Commissioners] can change that. You can create market opportunities,” led by energy efficiency and solar power.

Hodsoll cited public data that shows that unsubsidized power purchase agreements are beingcompleted  at 7-8 cents per kilowatt in North Carolina and 8-8.5 cents per kilowatt in Georgia. “That is power coming in at peak (demand hours, when electricity is most expensive during summer weekdays) and it’s displacing (fossil fueled) capacity.”

He urged the commissioners to enable the market to decide what the costs of these resources should be not monopoly providers of electricity. “Let competitive forces come in here and compete for providing electricity to customers. Otherwise you’ll be saying for the first time in history that a regulated monopoly will provide a better cost solution to its customers than a competitive market,” Hodsoll added.


A long-standing slogan has declared Virginia is “Open for Business;” or is it?

It might strike some as odd that Virginia, in trying to draw business to the state, has leaned heavily on sloganeering that proclaims “Yes Virginia is Open for Business” and belives in a “Business One Stop.” Many informed observes that that one stop to mean the utility is the only stop, at least for electricity is its monopoly service territory.

As long as Virginia’s utilities control how electricity is supplied and sold to end-users, they stand to make more money for their owners by selling more power. If ratepayers conserve energy and save themselves money, utilities lose; if someone else supplies power, traditional utilities such as Dominion Virginia Power and Appalachian Power stand to lose unless their rates are decoupled from their profit-making potential.

Professionals who are driving Virginia Advanced Energy Industries Coalition have plenty of allies among environmental activists, but they aren’t marching in lock step.  They do share a growing appetite among many Virginians to minimize utilities’ heavy reliance on coal and to not add a reactor to the four already in operation. Together, coal and nuclear account for about 78 percent of Dominion Virginia Power’s generation mix.


The Institute for Energy Economics and Financial Analysis and Optimal Energy developed this clean energy investment plan as an alternative to the path preferred by Dominion Virginia Power. CREDIT: Institute for Energy Economics and Financial Analysis

Recasting Dominion Virginia Power’s fuel mix will require a lot of heavy lifting and faith in natural gas prices remaining relatively low (e.g. at between $4-$5 per thousand cubic feet), which currently generates 20 percent of its electrical output.  Because natural gas is the lowest-emitting fossil fuel, it would seem to be the principal beneficiary of new EPA regulations. But the economic and political opportunity for efficiency and cleaner energy, many advocates assert, has never held this much potential.

Cleaner energy and efficiency advocates can harness significant data and numerous expert opinions to make their case, that is if policymakers will listen. Perhaps the most thorough assessment was done in 2013 by consultants at Optimal Energy and the Institute for Energy Economics and Financial Analysis.  You can find their report, entitled “Changing Course” and pictured at left, here.

The Report concludes that “Virginia has substantial untapped potential for energy efficiency and renewable energy resources, particularly solar and offshore wind. Even a moderately aggressive Clean Energy Investment Plan would produce significant benefits for Dominion’s ratepayers. However, instead of pursuing this new direction, Dominion has chosen a ‘Preferred Resource Plan’ that continues its historic dependence on large, central-station, fossil-fired and nuclear generating units, thereby maintaining a resource strategy that is fraught with risks and uncertainties for ratepayers.”

Look up and down the Atlantic coast and one can find significant progress toward renewable sources – including offshore wind — energy efficiency, smarter grids, and even micro grids. But there have been few scalable initiatives towards either of those options in Virginia.

If one of Gov. McAuliffe’s early legislative accomplishments is any sign, advanced energy advocates and their allies have reason to hope: he ordered the repeal of a tax on hybrid gas-electric vehicles originally imposed on those owners on grounds that they use less gasoline thereby diluting the state’s gas tax fund for road repairs.

While moves by states such as Maryland, New York and Massachusetts have created robust markets for rooftop solar , they are often dismissed because of their more progressive if not liberal leanings. Republican-controlled states such as North Carolina, New Jersey and Georgia, on the other hand, offer a taste of the economic upside for new jobs and economic development, as well as, for ratepayers who want more control over their energy consumption and to generate some of their electricity.

Control of one’s electricity has inspired Tea Party activists to join with the Sierra Club in Georgia to promote solar energy there. At this writing, there was no similar initiative brewing in Virginia. But stay tuned on that.

Dominion’s talk here and here demonstrates it too has eyes on a greener energy future. Just last week, it announced receipt of $47 million to test two offshore wind turbines on leases it acquired for $1.6 million. Those turbines are slated to begin generating electricity by 2017.

The parent company of Dominion Virginia Power recently purchased solar energy systems in California and Tennessee totaling 212 megawatts and yet it refuses to acknowledge how solar can make sense in Virginia. The utility recent launched a “Solar Partnership Program” designed to install 30 megawatts of solar arrays they own on space rented from customers.

“Cost still poses a serious obstacle to using large solar developments to serve our regulated customers,” spokesman David Botkins said via email. “While solar PV (photovoltaic) costs are declining, they are still too high for our regulated market, where all new generation resources must receive regulatory approval.”

In addition, Botkins asserts Dominion Virginia Power has “some of the largest biomass facilities in the eastern United States, taking advantage of one of Virginia’s most abundant renewable energy sources.”

Even with these initiatives, seasoned lobbyists and solar advocates assert the utility is far from matching its words with substantive actions on a significant scale especially now that solar and wind energy costs continue to decline every year. Industry analysts expect the company’s leaders to do what it takes to retain its monopoly.  That seems to be Job One for utilities.

“Dominion writes our energy laws and shepherds them through the legislative committees it controls,” said Ivy Main, who opines about the lack of, clean energy in Virginia on her blog at Power for the People VA. “It has molded both the rules of the game and the way Virginia regulators apply them: favoring fossil fuel generation such as the expensive Wise County coal plant, ignoring costs to the public from air and water pollution, and block all attempts at reform.”

“Dominion has so shaped Virginia’s energy policy that it wouldn’t get permission from the State Corporation Commission to add a utility-scale solar project to it generation mix today. The company now finds itself a captive within the very walls it built to protect it profit and defend itself from competition, and just at a time when the world outside its walls is offering all kinds of interesting opportunities.”

It’s ironic that one of the world’s leading energy efficiency companies – OPOWER, based in Arlington, VA – is working with 93 utilities throughout the U.S. and the world, but not its own provider, Dominion Virginia Power, nor any other utility in Virginia.  It recently went public on the New York Stock Exchange and is leading a VAEIC working group to recommend to McAuliffe how best to dial into untapped energy efficiency potential in Virginia.

Just down the street from OPOWER you can learn about cutting edge energy management for commercial and industrial buildings from another clean tech company, Gridpoint.  And about a mile west of Gridpoint is global energy storage leader AES Energy Storage  with the capability to meet intermittent peak demands for power in the PJM power grid and store electricity generated from renewable energy systems.  AES Energy Storage has the most comprehensive and accomplished fleet of battery-based energy storage in the world, including one at a 94 megawatt wind farm in Elkins, West Virginia, but alas, not in its home state.

There’s certainly no requirement that utilities have to work with companies in their service territory. But each of these companies clearly is doing something right that makes one wonder what they could learn, and gain, from each other, as well as for ratepayers, the state’s economy and the environment.

The first real test of McAuliffe’s resolve to push for cleaner and smarter energy will come with how his administration updates the state’s Energy Plan and how well it is received this coming Fall. Key lawmakers will be asked to provide their inputs and sponsor his highest priorities for bills to be introduced when the next General Assembly, which runs for only 45 days in odd years, commences in early January 2015.

Efforts to influence the Virginia Energy Plan will play out between June 12 and July 1 when the newly appointed Energy Council conducts six “Listening Sessions” beginning at Mary Washington College in Fredericksburg.

Aides to McAuliffe, who has lost a fight to expand Medicaid for low-income residents of Virginia under the Affordable Care Act, did not respond to requests for information about his energy priorities.

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