Renewable Portfolio Standards: To Mandate or Not to Mandate?

Renewable wind-powered turbines off the New Zealand coast.

Wind-powered turbines off the New Zealand coast.

This blog posting represents the first in a debate series developed by authors of Bacon’s Rebellion and Blue Virginia on actions that Virginians can take to address climate change.   All articles will be simultaneously posted on both blogs.


Introduction.
Renewable Portfolio Standards (RPS) are laws or regulations designed to increase the percentage of energy made from renewable sources. This change is intended to reduce pollution including the CO2 emissions responsible for global climate change. Renewable portfolio standards are usually directed at electrical generation companies. RPS regulations vary from state to state. There are no federal RPS rules.

A typical RPS specifies a percentage of electricity in a state that will be generated from renewable sources by some time in the future. For example, California has an RPS of 33% of its electricity generated by renewable inputs by 2020. Renewable portfolio standards may be either mandatory standards or voluntary goals.

Presently, 29 US states have mandatory RPSs. Eight states have voluntary RPS goals. Thirteen states have no RPS regulation.

Virginia is among the eight states that have adopted voluntary RPS goals.  The Commonwealth has set an RPS goal to generate 15% of the state’s electricity from renewable sources by 2025.  This goal is one of the least ambitious among the 37 states that have RPS standards or goals.

RPS regulations are controversial. In the recent Virginia governor’s race Terry McAuliffe supported a move to make Virginia’s RPS mandatory and to increase the percentage of electricity produced from renewable sources from 15% to 25%. Ken Cuccinelli opposed McAuliffe’s plan claiming that mandatory RPS legislation would raise electricity prices and eliminate jobs. However, both Ken Cuccinelli and Virginia environmental groups agree that the existing RPS legislation has been ineffective.

The question before the debaters is this: Should Virginia make its RPS standard mandatory?

Yes – Leading Virginia to a Clean Energy Future
Lowell Feld and “Kindler,” Blue Virginia

The U.S. government is at its most effective when it sets big, forward-looking goals for society – sending a man to the moon, overcoming the Great Depression, eliminating slavery, creating the national parks system.  In each of these cases, we could have said: “no problem, the free market will take care of it!”  But that wouldn’t have gotten the job done, and all of us would have been worse off as a result. 

The ongoing battle against global climate change, caused largely by   the use of fossil fuels, is a classic case of systemic “market failure” necessitating strong governmental action to correct it. In this case, most of the enormous environmental, health and social costs of fossil fuels are simply unaccounted for in their price.  So fossil fuels are priced far lower than they would be if those costs were accounted for — meaning that the oil, gas and coal industries get a free lunch, while we pay for all the damage they cause.

Renewable Portfolio Standards (RPSs) are a highly effective way to begin to level the playing field in ways that make it easier for renewable energy sources to compete.  But since it requires the government to take a stand, we can already hear our conservative friends saying  NO: government must not interfere with the “free market,” government must not “pick winners and losers”,  government screws up everything it touches, we should let the market figure it all out.  So let’s just be clear on  a few key points: Read more.

Yes - Fossil, Nukes Got Support, Why Not Renewables?
Peter Galuszka, Bacon’s Rebellion

Virginia is typically behind the rest of the country when it comes to addressing new problems and finding solutions. Renewable energy is yet another example.

In the middle part of the past decade, undeniable evidence of the threat of climate change became obvious across the globe. A movement began to shepherd a shift to renewable energy-sources – solar, wind, geothermal and others –  by passing laws making it mandatory that utilities obtain a specific percentage of their energy from such sources by set deadlines.

Thirty states and the District of Columbia  — including all of Virginia’s neighbors -– joined the movement for Renewable Portfolio Standards (RPS) as have other countries, such as the United Kingdom, Poland and Belgium. True to form and genuflecting to big business interests, Virginia made its RPS voluntary. Read more.

No – How a Renewable Portfolio Standard in Virginia Will Punish Electric Customers and Erode Competitiveness
James A. Bacon, Bacon’s Rebellion

What would Henry Howell think of Virginia’s liberals and progressives today? Howell, the populist candidate whose watchword was “Keep the big boys honest,” came within a whisker’s width of defeating the conservative Mills Godwin in the 1973 race for governor. The “big boys” against whom he railed were the senior executives of Virginia’s electric power companies and their minions around the state. The 1970s were a period of soaring electricity prices, and Howell championed the cause of the little guy who saw his paycheck eroded by higher electric bills.

There is no way to know what “Howling” Henry would think of modern-day liberals and progressives if he were alive today, but there is a good chance he would be dismayed by their push for a mandatory Renewable Portfolio Standard (RPS) in Virginia. In contrast to the voluntary goal in place today, a mandatory standard would require power companies to derive a major share of their electric-generating capacity from renewable fuels such as solar, wind or biomass. The reason it is necessary to mandate the use of these power sources is that they are far more expensive than fossil fuels. Mandating an RPS would add billions of dollars to the rate base of Dominion, AEP and the smaller power companies, resulting in higher electric bills for all Virginians.

A new, multibillion-dollar industry of politically connected insiders – ethanol producers, wind generators, solar power producers, electric car manufacturers — has arisen around the renewable movement on the grounds that the United States and Virginia need to reduce fossil fuel combustion and carbon-dioxide emissions implicated in global warming. Rather than compete on the basis of cost, these rent seekers work the political system to force their uneconomic technologies upon a reluctant populace. They are the unaccountable Big Boys of the early 21st century but there is no Henry Howell to keep them honest. Read more.

43 Responses to Renewable Portfolio Standards: To Mandate or Not to Mandate?

  1. Note to readers: The original premise behind this debate series is to have one progressive point of view and one conservative. Due to a snafu in communications, we ended up with two progressive perspectives on this particular issue. Yes, I do feel outnumbered. I hope our conservative readers will leap to my defense in the comments!

    – JAB

  2. Actually – it would behoove Dominion Resources and other utilities to adopt their own renewable portfolio standards as a proactive way to keep from being destroyed by disruptive technologies:

    to wit:

    Lights Flicker for Utilities
    Email

    Dec. 22, 2013 6:18 p.m. ET
    What if the stock market’s safest sector was doomed?

    Utilities seem indispensable. Yet suddenly there is talk on Wall Street of a looming “death spiral” for the business, with solar power being the culprit.

    http://online.wsj.com/news/articles/SB10001424052702304773104579270362739732266

  3. Interesting article, Larry. I believe it supports my point. The economics of renewable energy sources are becoming increasingly favorable. It won’t be that long before they become competitive with fossil fuels in many instances. Why saddle ourselves with not-ready-for-prime-time technologies and business models to meet a mandatory Renewable Portfolio Standard when the next generation of these technologies might be significantly more competitive?

    The article also touches upon the idea of a distributed model for electric generation and transmission. That also holds promise — a distributed model would create a framework where renewable energy sources could plug into more readily. Instead of cramming renewables down the throat of electric utilities that really don’t want them, we should apply our energies to restructuring the electric grid. The RPS is a simple-minded solution to a complex problem.

    • I attended the Virginia Environment Symp. 2 years ago. One of the big discussions in a break out was Dominion had sent a representative to talk about their renewable projects. Well there were also two groups there who were currently in law suits with Dominion because Dom El had sued them over a solar plant project for a college (forget which) they created which somehow bypassed some state agreements yada yada yada.

      Essentially Dominion wanted to use their defacto monopoly and state agreements to crush competition.

      Power companies see renewables as an attack on their hold on the market. Decentralized systems mean the consumer gets choice, and that is what they are afraid of.

      A home owner in VA actually has a non-subsidized economic incentive right now, to switch to a system like a geotherm heat sink with backup solar for depeak if they can still be on the grid for non-charge periods. Even if they can’t sell back the extra energy, that system pays back faster than the life cycle without any government help. And that scares the hell outta energy providers.

      • and utility companies are going to end up like Blackberry, Blockbuster Video, Kodak and a long list of failed businesses that failed to recognize fundamental changes in their business.

        One blockbuster breakthrough in SOLAR is going to doom Dominion unless they get on the train now and be part of the evolution.

        • To be fully decentralized and off the grid you have to have more than just solar but it is possible. More interesting will be to see if subdivisions/towers in the future will go off grid. It is a huge marketability item to be able to tell home owners they will not have any electrical bill and makes for the ability to centralize between multiple users (helps reduce the cost and provide the ability to be fully disconnected). Considering annual electric bills for a typical home owner can easily surpass $3000 it would certainly be something that garners interest. But again, these are the scenarios (like the solar plant being created at the university) that Dominion freaks out and begins litigation on.

          • Read the WSJ article.. the utilities have fixed capital costs .. that count on every household buying using their share.

            even if just a few homeowners start using alternative systems – even just part of the time – the utilities will still have to recover their fixed costs and those who still still pay will have to make up the shortfall.

            that will cause more of them to cut back on electricity.. do other things to help cut back…

            and the spiral keeps on turning…

            the gist of the WSJ article was that it don’t matter if solar is minuscule and growing slowing.. it will still upset the capitalized costs cart by accelerating a shift.. that forces the utilities to raise prices and people to find ways to try to pay less… this will increase demand for solar and other devices to use less electricity.. etc..

          • Tysons Engineer

            I think if that spiral were to begin they would come to an agreement with the state that there is a minimum base fee regardless of use to be applied to any customer who used any amount of energy off their network.

            In otherwords payment for the basic infrastructure and connection that Dom Power has to maintain, create, etc in order for that customer to have power.

            So it breaks into 3 classes

            1) Those without any municipal power(completely off the grid which is really just survivalists at this time, though could expand to HOAs/larger developments)

            2) Those with partial usage of the grid. Eventually these people will likely lose their incentive of being able to sell back to the grid (something Dom Power has been lobbying to enact) and will likely see an infrastructure base fee.

            3) Those who use full power (will likely see their payments go up by use of this base fee for infrastructure which will act as a clawback).

  4. Jim, I cannot believe we agree!

    but let me give you the reason why Dominion should be proactive and you mention it in your response.

    distributed power generation – controlled by a smart network grid.

    “dumb” solar panels cause problems for the utilities because they have no control over them and yet they’re supposed to accept their input to the grid no matter what.

    If Dominion got into the business itself of solar panels – it would begin the deployment of a smart(er) grid and head off the installation of a bigger and bigger “dumb” distributed solar infrastructure grid.

    If Dominion does what Blackberry and Blockbuster Video did – someone else is going to take the ball and run with it and you can bet it won’t be to Dominion’s advantage.

    Now is the time for Dominion to get into the solar game – and basically render moot the idea of a voluntary or mandatory renewable portfolio.

  5. I haven’t talked to anyone at Dominion for a couple of years, so I don’t know what the company’s strategy is regarding the grid. But I would expect that, as the entrenched incumbent, Dominion probably feels that it has more to lose than gain by moving to a smart grid. Or, if we do move to a smart grid, Dominion will use its lobbying clout to do so on terms that are advantageous to it.

  6. Pingback: Should Virginia Make its Renewable Portfolio Standard Mandatory? | The Penn Ave Post

  7. I have a funny feeling about this series of debates. I suspect that the series will end up with far more agreement between the conservative and progressive positions than anybody imagined.

    The progressive arguments make a fair point about the subsidies for nuclear and fossil fuel. Of course, compounding ill-advised subsidies in two sectors isn’t remedied by implementing subsidies in a third sector.

    The conservative view also makes an important point. A voluntary RPS will almost certainly raise electricity prices in the near term. This becomes effectively a regressive tax to fund the deployment side of renewable energy R&D. Meanwhile, the rent seekers who benefit from these regressive subsidies are well heeled global manufacturing concerns who see artificial demand for their windmills, solar panels, etc.

    I also believe both sides recognize that the full costs of pollution are not borne by the polluters (in this case power generators) of the consumers of the polluters’ product (in this case electricity consumers). I believe that both sides also recognize that the maze of tax breaks and overt subsidies at play in this debate are almost too complicated to unravel. For every “RPS-like” idea there are multiple accelerated depreciation tax credits in the oil and gas industry, for example.

    Finally, the longevity of the natural gas bonanza we have recently seen must be considered. My understanding is that natural gas based electrical generation creates about 1/2 the CO2 of coal based electrical generation. So, a surplus of cheap natural gas is a big step in the right direction. But how long does that surplus last? Ay, matey – that’s the question.

    • I agree with you, Peter and Lowell that we should eliminate subsidies for fossil fuels and nuclear. All forms of energy should compete on a level playing field. I would gladly join with the liberals and progs if they advanced the proposition to eliminate all energy subsidies at the state, federal and local level. Gee, could we make that one of the propositions we debate?

      • I have a question for Peter and Jim and others.

        would you support subsidies for NUKES if we could create a NUKE that would not be subject to meltdown and could be scaled to serve a local community – safely?

        subsidies or no subsidies to do that?

  8. The alternative energy industry is dominated by scolds. It needs to think of ways to disrupt the industry and offer better, more reliable energy at lower cost than Dominion. Bill McGowan and John Goeken did to the Bell System. What’s stopping it from doing the same thing? Perhaps, they enjoy being scolds.

    • what’s a “scold” TMT? I’m clueless.

      • A scold is one who is trying to shame or scold others to change their behavior. In this case, you need to pay more for your energy to minimize greenhouse emissions, something that keeps the speaker awake at night. Or “I don’t like guns, so you need to support gun control.”

        I think alternative energy will be successful if and when it reduces consumer’s energy costs. There is a prototype of a new hearing device that is supposed to provide better results for the hearing impaired at a lower price than traditional hearing aids. This is potentially disruptive technology that could be very successful. The Internet has allowed me to get more news without subscribing to a newspaper. Disruptive technology. The alternative energy folks need to think like this, rather than try to shame people into paying more for energy. I don’t know why they cannot be successful too.

  9. Dominion needs a smart grid. A smart grid gives them not only significant flexibility in dealing with the potential “mix” in the future but it gives them a preemptive competitive advantage to potential solar/wind “disruptive” technology innovations.

    the big problem with fuels these days is the volatility of sources and an inability to dynamically load-balance in response to not only demand – but how that demand is met.

    Dominion used to be able to run a coal base load and top it off with strategically-positioned nat gas turbines – that would cost a lot more than coal but no more … it may actually be cheaper to run nat gas but most nat gas generators are not the coal-fired behemoths but rather more localized.

    that in and of itself causes problems with manually trying to modulate an every growing herd of smaller deployed nat gas generators while trying to
    keep the base load low but not too low that a surge in demand could not be entirely fulfilled by the natgas units.

    In other words – the nat gas units (as long as gas is cheap and available) are actually functioning as a network of base load generators but unlike one or two big coal plants – ramping up and down dozens of remote deployed nat gas units is a trickier thing to do.

    ” Some analysts have even posited the idea that baseload power could be phased out on a grid “smart” enough to quickly redistribute the intermittent flows of renewable energy.

    “Base load is a 20th-century concept. Heck, it’s a 1950s concept,” said Mark Cooper, a senior research fellow for economic analysis at the Vermont Law School Institute for Energy and the Environment. “We’re going to have a system that uses intelligence, communication, micro control. We are living through a third industrial revolution” — with digitization and communications technologies standing in for the steam engine — “and not a bit of it has made its way into our electrical system. But it will.”

    http://www.eenews.net/stories/1059990270

    so like quite a few things “environmental”.. it’s not capitalism vs the environment – they have common goals .. efficiency …. using less fuel and using less dirty fuels…

    To me the obvious question here is – will the free market pursue this or will government have to nudge them?

    • Larry wrote, “To me the obvious question here is – will the free market pursue this or will government have to nudge them?”

      A better question: “Will government allow the free market to pursue this?”

      Electric power is a government-regulated utility. No one can make a move in Virginia without the SCC’s approval. Dominion will do everything in its power to stack the rules in its favor.

    • I want to add to this that the concept that “renewables are intermittent” and therefore a problem is a fallacy. Take a neighborhood where 25% of the home have a solar panel on their roof. At the output of that neighborhood the utility will always see a net load; power flowing into the neighborhood. This load might go up when several people in the nighborhood chose to take a shower or dry their laundry at the same time, or down when several people turn off their ovens at the same time. Or the load might go down when several solar panels are making power that offsets some of the load. However, it is indistinguishable to the utility if the load in that neighborhood dropped due to homeowners turning off appliances or several solar panels offsetting the load. The utilities already have unpredictable demand and have since electric distribution began. Distributed solar does no more to impact this than electric ovens or dryers.

      • totally agree… but… ”

        ” At the output of that neighborhood the utility will always see a net load; power flowing into the neighborhood. This load might go up when several people in the nighborhood chose to take a shower or dry their laundry at the same time, or down when several people turn off their ovens at the same time. Or the load might go down when several solar panels are making power that offsets some of the load. ”

        how does locally-generated power flow back into the grid especially if it is not a Smart Grid?

        surges caused by power lines going down and then taking down transformers …

        I’m not sure most of us know …

  10. no one is stopping Dominion right now … what keeps Dominion from making the proposal as part of it’s renewal energy portfolio?

    more than that – why in the world would the SCC want to stop them?

    Dominion needs to show free market vision .. it’s better to initiate and support your proposal, sell it to the public.. do it and let the SCC take the hit if they get in the way.

    If Dominion makes a proposal that clearly benefits consumers and pursues a real Smart Grid vision – they will gain the support of the public and in turn the SCC.

    let’s not make the govt the excuse why companies allowed themselves to be harmed by disruptive technologies.

    A real smart grid would allow Dominion to sell not only solar but nat gas backup units that would be a controllable part of the grid.

    Don’t say the SCC would stop them because right now the Rappahannock Electric Cooperative provides a water heater box that allows them to turn the water heater off in high demand periods – and they do that not only free but in exchange for allowing it – they will repair and replace the heating elements in the water heater for free. It’s a win-win …

    Smart Meters are also a reality right now in some parts of the country.

    Dominion can use the renewable energy portfolio – as a vehicle to upgrade their grid.. in a way that benefits the environment, consumers and their stockholders.

    I just think we’re making excuses for the industry defending the status quo and worrying about their potential “stranded” investments – that we’re going to pay for anyhow.

    • I’m not convinced we will ever see any real disruption in the small customer electric market so long as customers must rely on the incumbents for power distribution. We experimented with competitive generation and it was a big flop. Consumers were given the choice to pay more for green energy.

      Dominion and other incumbents are heavily invested in fossil fuel and coupled with a duty to serve all, they won’t move from the status quo easily or quickly. And the VSCC is fearful of taking some action that messes up life for consumers.

      This leads me to some guess that the disruption will come when consumers can buy or rent a widget that generates enough power to run a household. Or maybe, a huge breakthrough in battery technology that allows long-term storage of energy. But, in any event, the alternative energy folks need to be a helluva lot more creative than they are today. If the telecom guys and gals were like the energy people, we’d still see Ma Bell and rotary dial phones.

      • it’s closer that folks think.

        A nat gas backup generator and a solar panel can reduce your use of utility electricity as can a house full of LEDs and 98% heat pumps and on-demand hot water heaters… etc…

        huge change is underway.. as sensors are becoming dirt cheap and become “smart” controllers for all kinds of formerly dumb technologies.

        anyone who thinks the utilities are not subject to the same forces that have fundamentally changed things like newspapers, phones, MOOC, etc is missing the boat… IMHO.

  11. as you can see from this discussion – there is not a “left” or “right” issue on the core question.

    I support the free market but acknowledge that when it comes to electricity that the govt is involved.

    but I reject excuses blamed on the govt.

    If people on TV can sell you and me suspect drugs or reverse mortgages, bad value insurance or outrageously-priced shipping and handling for a “free” second item… all of them regulated by the govt……

    why can’t Dominion and electric utilities “sell” a smarter grid, smart meters, etc…???

  12. Yes – Virginia should have a mandatory RPS and it should be strengthened. Consumers want clean energy. That’s been demonstrated in national polls and in Virginia, Dominion won an EPA award because of customer participation in their clean energy program.

    In other states, mandatory RPS are not just creating clean energy, they’re creating jobs. For example, Massachusetts reportedly has more solar jobs than Pennsylvania has in the booming natural gas (fracking) industry.

    In addition to the environmental and health benefits, the economic benefits are significant in Virginia. We can look right over the boarder to North Carolina to see hundreds of solar projects under way. And if we want to see offshore wind developed an RPS, or similar legislation, will have to be in place if the power produced off our coast is going to be used here.

    Legislation mandating a national standard has been introduced. More info at http://www.TidewaterCurrent.com.

    • Figure out how to reduce consumers’ bills and you will have overwhelming success.

      • it’s the opposite TMT. as people start using more solar, LEDs, etc and cutting back on electricity use – the utility has to still recover it’s fixed, sunk capital costs so they’ll get rate increases on everyone including those who have not cut back…

        the way this is going to happen is counter-intuitive…

        they won’t offer you cheaper rates.. they’re going to raise your rates!

        • Larry, I understand sunk costs. But setting them aside as they will be paid to some extent (see the Duquesne Power case), Dominion offers a kwh for $0.07, the alternative energy folks need to come in below that rate to be successful. I won’t be guilted into paying $0.10 per kwh. I don’t think the alternative energy folks really understand that.

          • re: sunk costs…

            well if a regulated monopoly has sunk costs and the regulators say “too bad”.. the company has no real reason to continue to contentiously operate, i.e. to do what is necessary to have a reliable, cost-effective system.

            I think under almost any condition, that’s a deal-breaker.

          • I think the alternative energy folks only need to get a certain amount of increased solar installed to threaten the current business model.

            I don’t think they need to show lower costs – just show that if they ignore solar, their own costs will rise if the result of increased solar adoption reduces their revenues below their ability to pay off their capital investments.

            Investors will flee if they think the company cannot pay pay for it’s capital investment – i.e. misjudged the amount of power they would sell.

        • The SCOTUS held in 1989 that a state could prevent a power company from recovering the costs for plant not yet put into operation (i.e., used and useful). One can even make an argument that investment in plant no longer needed for the provision of service to consumers should not be recovered. That’s a bit tougher argument to make if the power company can show the investment was prudently made.

  13. The challenge with renewals like wind and solar is that they are unreliable, because the wind doesn’t always blow and the sun doesn’t always shine.

    Currently, such renewable’s represent a small source of excess capacity for the electrical grid which are only able to replace nuclear, coal, natural gas, and hydro (a reliable renewal), when conditions exists that are conducive to their use.

    Mandating large amounts of solar and wind capacity on the grid will inevitably degrade America’s electrical grid to third world status, complete constant with rolling brownouts and blackouts.

    There might be ways around this in the future — for example by using Wind and Solar to produce hydrogen that can be stored and used when the wind isn’t blowing and the sun isn’t shining. However, the technology to do this isn’t quite ready for prime time today.

    As always, “well meaning” politicians will invariably create laws that make matters worse. They should let the market evolve, but I’m pretty sure that they won’t.

    • re: the unreliability…

      totally true from a dumb grid perspective.

      and also totally true that such problems on the part of a utility using
      an obsolete grid – won’t stop people from installing “dumb” solar and in doing so still end up making the dumb grid unstable by varying their demand for grid power according to the performance of their solar panels.

      the thing about disruptive change – if you try to not be part of it, to avoid it, – it will just go around you.

      If solar improves, people are going to install it no matter what the utility does and they’ll do it even if the utility refuses to buy the excess and the net result of more and more solar installations will be, in effect, the same problem – demand that will vary when the sun shines bright and sudden increases in demand when the sun goes away.

      but as the WSJ article speculated.. utilities have fixed stranded capital costs that they have to recover and those costs were incurred on the basis of how much growth in electricity demand they thought there would be. Their capital cost model did not really factor in a percent of homes having an ability to alter their demand.

      If actual demand comes in low – they still have those costs and will ask for rate increases to maintain recovery of their investment in generation facilities. So the more people install solar (and other efficiencies), the higher the price of grid power especially to those who do not install solar.. and that will accelerate more installation of solar and other technologies to decrease use – and cost.

      the basis for the capital investments in grid power generation may end up like the gas tax as more and more efficient cars are decimating the gas tax’s ability to generate sufficient and reliable revenues for new roads.

      Virginia just got a “rate increase” for transportation revenues because of more and more fuel efficient cars …. in the end – people are not going to pay less gas taxes because they got more fuel efficient cars.. the taxes just increase to make up for less use.

      I think the same thing is going to happen to utilities like Dominion – as technology provides more and more options for consumers to reduce their electricity consumption – Dominion will be forced to seek rate increases to maintain their ability
      to pay their stranded capital costs.

      So I actually agree with the “con” folks in the debate. Requiring utilities to adopt a renewable portfolio will not help consumers.. reduce pollution and it may result in increases in rates as additional costs are incurred by the utility if they are also not simultaneously pursuing a smart grid that allows them to actually use the renewable power.

      People want the renewable portfolio on the premise that the utility should be using it to reduce pollution and harvest less dirty “fuels” but unless they actually pursue a smart grid.. it’s like ordering them to use a certain amount of a kind of fuel that varies wildly in price… and availability… no matter what.

      they will do it .. but they’ll pass the increased cost on to ratepayers… and it won’t affect really have the effect of reducing pollution if they continue using baseload and just not use renewable sources because of their unstable nature.

      you cannot force a regulated monopoly to be more efficient. There is no incentive for them to become more efficient… it requires more capital investment and their is no way to recover that cost if people actually end up using less power.

      In my view.. what we should be requiring is not a renewable portfolio but instead a smarter grid that can dynamically adapt to varying load demands … and pursue what is known as load-following technologies that only are possible in smart grids.

      A regulated monopoly runs like a government agency with no incentive to be efficient, to modernize, to seek higher profits.

      we give up a lot when we regulate … and one might argue that when utilities are regulated, there is no real basis for them to modernize the grid and pursue more efficient and less polluting alternatives unless we put additional restrictions on the total amount of pollution they can emit.

  14. Thanks to you all for inviting us to participate in this debate. This has spurred some interesting conversation that, as DJ and others have noted, could unite the left and right in interesting ways.

    It does not sound like any of us like Dominion’s position as the dominant force in Virginia, controlling both the market and the government, and regularly stifling both policy and market alternatives to its stranglehold. A “regulated” monopoly like this (which is in political reality the one regulating our government rather than vice versa) is pretty much the worst of all worlds.

    It also sounds like there’s a lot of agreement that subsidies to Big Oil, Gas and Coal are unnecessary, wasteful and distort the market. We disagree in that progressives see a role for government to initially stimulate the renewables market, although I think we would agree that to the extent government plays a role, it should be more along the line of setting performance standards than on getting into the weeds of making decisions that entrepreneurs will make much more efficiently and effectively.

    I’d be curious to hear what others think of the approach that former Republican Congressman Bob Inglis is pitching from his Energy & Enterprise Initiative at GMU (http://energyandenterprise.com/about/). Basic idea is: Institute a carbon tax that is fully paid for by lowering payroll taxes by the same amount; no more subsidies for any industries; let the market incorporate the price signal from higher costs for carbon pollution and figure the rest out by itself.

    I think it at least takes the conversation in an interesting, constructive direction….

    • first, Keep Commenting! we need the diverse views!

      second.. anything that smells even a whiff of “carbon” and “tax” is
      deader than a door-nail even at a raising-of-the-dead religious deal!

      just my view.. I’m sure others will “share” also? ;-)

      but you did make quite an insightful observation about what all of us give up when we have a regulated monopoly and the primary purpose is to regulate prices.

      we give up a lot because the regulated monopoly then no longer functions like a free-market business and instead functions like a a government agency that has no real competition, no need to respond to competition, indeed will fend off innovation and things that could benefit consumers, even act like a government agency in terms of no profit motive because no matter what they do – they cannot increase their profit.. and they are guaranteed recovery of all of their expenses even ones that a competitive company would find a threat to their ability to compete …

      there.. I’ve said it .. and Jim Bacon should be proud of me!

      it’s not that a carbon tax is such a terrible idea.. it’s just that it’s political poison on so many levels…these days.

      and Dominion … has no reason to do anything like that and every reason to see it as further interference to their tidy little protected monopoly.

      I think the way that Dominion “moves” is if people – customers start changing.. but even then Dominion will go to the SCC and ask for a rate increase.. and rules to squash those getting solar..making it sound like
      it’s a threat to other ratepayers…

    • Kindler, I like the idea of a carbon tax. That’s an idea that many conservatives could support, even if they don’t get stressed out by the prospect of Global Warming. Conservatives do agree that fossil fuel combustion releases pollutants into the atmosphere and that air pollution imposes costs on society. There is a legitimate question of how big those externalities are and what would be a fair and reasonable tax to offset them. But in concept, I find the idea of a carbon tax attractive, especially if, as Bob Inglis proposes, the proposal is revenue neutral. Another big issue that would have to be resolved is how to make the tax non-regressive. Clearly, such a tax would increase the burden on the poor. I’m not sure how you could structure it in such a way as to please liberals.

      Those are sticky questions — so sticky that they probably explain why the carbon tax idea hasn’t gotten more traction. Still, in theory, it’s the best way to approach the problem of atmospheric pollution and CO2 emissions.

      • I like the carbon tax proposal from Inglis, and I believe the offset through a cut to the payroll tax is supposed to limit the burden on the poor, but in reality there are a number of seniors, unemployed, disabled, and others who wouldn’t receive the tax benefit from a lower payroll tax. I believe that an expansion of the EITC and/or the personal exemption and standard deduction would be the way to go, and/or the creation of a new tax credit (maybe refundable) for all Americans.

        In fact, in Virginia, I wish the transportation plan had taken a similar approach through some type of increase in the gas tax, indexed to inflation, with some offsets for lower income Virginians. Probably would need to find general funding cuts too to make it all work out, but it would have been worth it.

  15. Commented at Blue Virginia, but I wanted to share this here too:

    My concern is that a RPS could become a ceiling, not a floor, without fostering a culture of energy entrepreneurship in Virginia.

    A top-down mandate will be written by and imposed by well connected insiders, with special rules that target what Dominion believes is possible. How do you treat the Bath County Pumped Storage Station owned by Dominion? During low demand hours, it uses power from the grid to pump water to a higher elevation (potential energy) to be released later for energy production. Is this renewable or not?

    That’s just one issue off the top of my head, and I haven’t worked on energy production in Virginia in four or five years. I’m sure there are others, not to mention obvious questions about biomass, ethanol, and other questionably green projects. Oh, and nuclear too, of course.

    The idea that getting all of this going is about changing the cost curve needs to address if Virginia is really a large enough market to have that sort of impact.

    I think more “energy” should be put into energy conservation efforts and retrofitting of low income homes.

  16. First, let me say that I am NOT always opposed to government subsidies for important projects that help the country.

    It is how the U.S. has managed such colossal things as the interstate highway system, several World Wars, the Cold War, the electrical system, the gas and oil pipeline system and so on. It is called “industrial policy” and there is nothing inherently wrong with it.

    Europe, Brazil and Japan and now China and India and formerly the USSR are and have put gobs of resources into industrial policy projects and do not have the puritanical view that this is wrong, not what Thomas Jefferson or the Cato Institute wanted. It is often necessary to tap government funding to start and sustain such big deals. The pay off in terms of industrial expansion is the pay off.
    To say I unequivocally oppose funding for fossil or nukes is the invention of the person proposing I think that. I am just pointing out that while conservatives whine about government funding for renewables, they deny or forget the fact that more traditional forms of energy have always had them.
    It is immature and naive the thing that a massive set of new renewable energy sources can be built without subsidies. This assumes that EVERY SUBSIDY IS WRONG which is the fantasy of some on this blog.

  17. re: the carbon tax

    maybe I’m wrong – but I’m of the belief that the folks who oppose Obama would oppose a carbon tax and that’s about 1/2 of voters at this point.

    I’m seen polls by the pro-carbon-tax folks like FOE but I’m skeptical…

    some of this goes to how much the average American knows about the pollution that does come from burning coal but again, we hear vocal critics talking about the folly of treating carbon dioxide as a pollutant.

    I just don’t see this succeeding without a knock-down, drag-out fight.

    In terms of subsidies for “safe” nukes… this is a tricky issue with the public.

    The Japan experience has almost completely killed support for conventional nukes ( my apologies to Breckenridge) but I think they would support Nukes that could not melt-down if they failed.

    the question is – would it be a good idea for the Fed to do with Nukes what they did with Solyndra because that kind of investment is not a slam dunk in either case.

    but Conservatives tend to be more supportive of Nukes than they are of “green” technologies.. I think.

    “energy” is a darkhorse with Americans… lots of fire and fury on Education, Transportation, taxes, global warming.. but energy … public attitudes about energy tends to act like “jello” or “chewing gum” some times.. i.e – “elastic” with a lot depending on HOW you ask the question.

  18. re TE:

    ” So it breaks into 3 classes

    1) Those without any municipal power(completely off the grid which is really just survivalists at this time, though could expand to HOAs/larger developments)”

    rare…

    “2) Those with partial usage of the grid. Eventually these people will likely lose their incentive of being able to sell back to the grid (something Dom Power has been lobbying to enact) and will likely see an infrastructure base fee.”

    for using less electricity ? does Dominion know WHY they are using less electricity and even if they did know.. why would justify increased rates? rates increase because you don’t use “enough”?

    “3) Those who use full power (will likely see their payments go up by use of this base fee for infrastructure which will act as a clawback).”

    I think the use of that word “clawback” would not be a good thing for Dominion to use in their SCC filings!

    but I do wonder if Dominion, in the future, were to go to SCC and tell them that electricity usage has declined to the point where they are not able to pay back the loans – what would happen.

    It wouldn’t be the first time that a utility increased rates to compensate for less use -that undermines their payback ability…

    my suspects is that they’d ask for smart meters and target the high end users ….

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