Category Archives: Economic development

Easy Come, Easy Leave

virginia_migration

Image credit: Atlas Van Lines

Virginia has not been one of the nation’s fastest growing states but it has consistently enjoyed a healthy net in-migration from other states. In other words, for years more people have moved into Virginia than moved out.

That likely changed in 2014. According to Atlas Van Lines moving records based on nearly 77,000 interstate and cross-border household relocations, more households moved out of Virginia — 66 to be precise — than moved in last year. Now, that’s just Atlas Van Line customers, not everyone. Atlas’ sample size is so small compared to total migration and the margin of out-migration is so tiny, that it’s conceivable that Virginia actually gained population through in-migration. Of course, it’s also possible the Atlas sample was biased the other way and that the Old Dominion lost more than indicated by the numbers.

What really matters is the trend. I’ve reformatted the numbers from the table above: inmigration_trend

Declining movement between states is a national trend, usually attributed to people being locked in by the prices of their houses. Still, there are two obvious inflection points in the Virginia numbers: between 2009 and 2010, outbound migration took a jump up, and between 2011 and 2012, in-migration took a nose dive. The latter can be attributed to sequestration and federal cuts. I have no ready explanation for the former. Any ideas?

— JAB

Hospital Rankings and Economic Development

VCU Medical Center complex in downtown Richmond, a driver of the regional economy.

VCU Medical Center complex in downtown Richmond.

by James A. Bacon

U.S. News & World-Report has issued its 2015-2016 ranking of the nation’s “best hospitals,” and Virginia has four hospitals with at least one adult specialty receiving a “national” ranking. The online publishing company bills the ranking as a tool to help patients select hospitals that can best treat complex illnesses. But it also prompts questions about the role of hospitals as agents of economic development.

Hospitals are major employers and generators of economic activity in every community they serve. While some hospitals cater to local markets exclusively, some have such a reputation for excellence in certain specialty practices, from cancer to heart disease, that they draw patients from around the state, the nation or even the world. To the extent that a hospital draws patients from elsewhere, it can be said to be “exporting” services and making a contribution to local jobs and economic activity.

Thus, Massachusetts General, rated the best hospital this year, excels in everyone of the 16 specialties covered by U.S. News & World-Report and three pediatric specialties. The hospital employs 2,889 doctors, many of whom are highly compensated specialists, not to mention a host of nurses, technicians, administrators and others. Its reputation as one of the best research hospitals in the world brings in “thousands” of international patients — so many that the hospital maintains a dedicated “international patient center.” No wonder that Mass General is an anchor of the Boston regional economy.

Accepting the proposition that hospitals can be big contributors to regional economies over and above their contribution to public health, how do Virginia’s hospitals shake up? Here’s the score:

Virginia Commonwealth University Medical Center
National ranking in 3 adult specialties, one pediatric specialty
Doctors: 454

Sentara Norfolk General
National ranking in 2 adult specialties
Doctors: 694

Inova Fairfax
National ranking in 1 adult specialty, two pediatric specialties
Doctors: 1,689

University of Virginia Medical Center
National ranking in 1 adult specialty, 4 pediatric specialties
Doctors: 609

Sentara_Norfolk_General

Sentara Norfolk General Hospital

How significant are those rankings? That’s hard to say. There are nearly 5,000 hospitals across the United States. U.S. News & World-Report uses a methodology that combines metrics such as hospital volume and risk-adjusted survival rates for complex cases and supplements them with a physician survey of hospital reputations. To be awarded a “national” ranking, a hospital must score within the top 50. In other words, that puts VCU in the top 1% for three adult specialties and one pediatric specialty. The publication does not publish the numbers behind the scores, so there is no way to tell if VCU’s specialties rank No. 1 in the country or No. 50.

U.S. News and World-Report focuses on 16 adult specialties. With 50 hospitals recognized for each specialty, a total of 800 total hospital specialties are recognized. Only seven of those are located in Virginia. To put that in perspective, Virginia has 2.6% of the nation’s population, 3.3% of its GDP but only 0.9% of its nationally ranked hospital specialties.

These are very rough numbers that are undoubtedly subject to criticism. But they suggest to me that Virginia’s hospitals are an under-performing economic sector. If hospitals achieved a level of excellence commensurate with Virginia’s population and GDP, there would be far more centers of excellence in the state, along with more highly compensated doctors, nurses and technicians employed.

That’s not meant to be a put-down of Virginia’s hospitals. The ability to expertly handle highly complex medical cases does not tell us much about the ability to handle routine cases. It doesn’t tell us how much the hospitals charge for their services or whether they’re providing value for the dollar. It doesn’t mean that Virginia hospitals aren’t serving their community. What the numbers mean is that Virginia is missing out on an economic development opportunity to provide services outside the community.

What U.S. News & World-Report does not tell us, and I don’t know, is what it takes to become a national-class hospital. I suspect that it takes a long time to build a top oncology or heart program, so longevity is probably a requirement. It also helps to live in a community that can afford to pay the high salaries of top medical talent. And it probably helps to have wealthy philanthropists willing to endow new buildings, medical school professorships and R&D. Undoubtedly, there are other factors of which I am unaware. I think it would be interesting to know what the key drivers are, and whether building institutions known for their medical excellence is something that communities can influence through government policy and/or philanthropic endeavors.

Virginians still think of economic development either as big game hunting for corporate investments or venture capital-driven business creation. But economic development comes in many forms, and hospitals are one. It strikes me that this is an area that warrants more attention here in the Old Dominion.

Alpha Natural Resources: Running Wrong

Alpha miners in Southwest Virginia (Photo by Scott Elmquist)

Alpha miners in Southwest Virginia
(Photo by Scott Elmquist)

 By Peter Galuszka

Four years ago, coal titan Alpha Natural Resources, one of Virginia’s biggest political donors, was riding high.

It was spending $7.1 billion to buy Massey Energy, a renegade coal firm based in Richmond that had compiled an extraordinary record for safety and environmental violations and fines. Its management practices culminated in a huge mine blast on April 5, 2010 that killed 29 miners in West Virginia, according to three investigations.

Bristol-based Alpha, founded in 2002, had coveted Massey’s rich troves of metallurgical and steam coal as the industry was undergoing a boom phase. It would get about 1,400 Massey workers to add to its workforce of 6,600 but would have to retrain them in safety procedures through Alpha’s “Running Right” program.

Now, four years later, Alpha is in a fight for its life. Its stock – trading at a paltry 55 cents per share — has been delisted by the New York Stock Exchange. After months of layoffs, the firm is preparing for a bankruptcy filing. It is negotiating with its loan holders and senior bondholders to help restructure its debt.

Alpha is the victim of a severe downturn in the coal industry as cheap natural gas from hydraulic fracturing drilling has flooded the market and become a favorite of electric utilities. Alpha had banked on Masset’s huge reserves of met coal to sustain it, but global economic strife, especially in China, has dramatically cut demand for steel. Some claim there is a “War on Coal” in the form of tough new regulations, although others claim the real reason is that coal can’t face competition from other fuel sources.

Alpha’s big fall has big implications for Virginia in several arenas:

(1) Alpha is one of the largest political donors in the state, favoring Republicans. In recent years, it has spent $2,256,617 on GOP politicians and PACS, notably on such influential politicians and Jerry Kilgore and Tommy Norment, according to the Virginia Public Access Project. It also has spent $626,558 on Democrats.

In 2014-2015, it was the ninth largest donor in the state. Dominion was ahead among corporations, but Alpha beat out such top drawer bankrollers as Altria, Comcast and Verizon. The question now is whether a bankruptcy trustee will allow Alpha to continue its funding efforts.

(2) How will Alpha handle its pension and other benefits for its workers? If it goes bankrupt, it will be in the same company as Patriot Coal which is in bankruptcy for the second time in the past several years. Patriot was spun off by Peabody, the nation’s largest coal producer, which wanted to get out of the troubled Central Appalachian market to concentrate on more profitable coalfields in Wyoming’s Powder River Basin and the Midwest.

Critics say that Patriot was a shell firm set up by Peabody so it could skip out of paying health, pension and other benefits to the retired workers it used to employ. The United Mine Workers of America has criticized a Patriot plan to pay its top five executives $6.4 million as it reorganizes its finances.

(3) Coal firms that have large surface mines, as Alpha does, may not be able to meet the financial requirements to clean up the pits as required by law. Alpha has used mountaintop removal practices in the Appalachians in which hundreds of feet of mountains are ripped apart by explosives and huge drag lines to get at coal. They also have mines in Wyoming that also involve removing millions of tons of overburden.

Like many coal firms, Alpha has used “self-bonding” practices to guarantee mine reclamation. In this, the companies use their finances as insurance that they will clean up. If not, they must post cash. Wyoming has given Alpha until Aug. 24 to prove it has $411 million for reclamation.

(4) The health problems of coalfield residents continue unabated. According to a Newsweek report, Kentucky has more cancer rates than any other state. Tobacco smoking as a lot to do with it, but so does exposure to carcinogenic compounds that are released into the environment by mountaintop removal. This also affects people living in Virginia and West Virginia. In 2014, Alpha was fined $27.5 million by federal regulators for illegal discharges of toxic materials into hundreds of streams. It also must pay $200 million to clean up the streams.

The trials of coal companies mean bad news for Virginia and its sister states whose residents living near shut-down mines will still be at risk from them. As more go bust or bankrupt, the bill for their destructive practices will have to borne by someone else.

After digging out the Appalachians for about 150 years, the coal firms have never left coalfield residents well off. Despite its coal riches, Kentucky ranks 45th in the country for wealth. King Coal could have helped alleviate that earlier, but is in a much more difficult position to do much now. Everyday folks with be the ones paying for their legacy.

Pipelines and Property Lines

Charlotte Rea. Photo credit: All Pain, No Gain

Charlotte Rea. Photo credit: All Pain, No Gain

The Atlantic Coast Pipeline wants to inspect land along a proposed 550-mile route. Legal challenges from landowners could re-write a 2004 law governing property rights in utility surveys.

by James A. Bacon

Charlotte Rea decided when she retired that she wanted to live near where she grew up near Charlottesville. She found “a little piece of heaven” in Nelson County: a 29-acre spread on the north fork of the Rockfish River. With her retirement savings, she purchased the land with the idea of keeping it undeveloped if things worked out but selling two lots if she needed the cash. “All of my money is in the land,” Rea says. “It’s my long-term care insurance.”

She never imagined that someone would want her land for industrial purposes. But her homestead, as it turns out, came to be situated on the proposed route of the Atlantic Coast Pipeline (ACP) linking the natural gas fields of West Virginia with markets in Virginia and North Carolina. The 125-foot pipeline right-of-way would cut a swath across the river and through forested wetlands on her property that host a species of rare orchid. An ag-forestal district designation restricts development and prohibits industrial uses, she says. “Except it appears Dominion can industrialize it by running a pipeline through it. My property  will become an underground natural gas storage site.”

Since announcing its original plans, ACP has redrawn its proposed route, leaving her property untouched. But Rea doesn’t consider the new route to be definitive, and she is little reassured. “My future is totally blown up, not knowing what’s happening to my property. No one wants to buy land with a natural gas pipeline going through the middle of the view shed. I stand to lose $50,000 in property value. I couldn’t sleep at night worrying about the darn thing coming through.” 

The 63-year-old career Air Force veteran decided to fight back, signing up as co-chair of the “All Pain No Gain” group opposing the pipeline. Not only does Rea not want to see the pipeline built, she objects to ACP or its contractors even coming onto private property to survey the land. And she is just one of dozens of landowners who view the pipeline the same way.

Dominion Transmission, ACP’s managing partner, filed suit this spring in local courts against more than 100 property in order to gain access to their land. Many, like Rea, were clustered near the Blue Ridge mountains in Augusta and Nelson Counties. A local judge ruled that the notice letters had been improperly issued by Dominion Transmission, so the pipeline company withdrew the pending cases and started re-filing lawsuits as ACP. As of early July, says Rea, she knew of 27 re-filed lawsuits. Meanwhile, pipeline foes have filed two of their own lawsuits in federal court challenging the constitutionality of the state law.

The lawsuits are shaping up as the Old Dominon’s biggest battle over property rights in years. The courts will be called upon to define the balance between landowners like Rea who wish to be left alone and utilities like the four corporate partners of the $5 billion Atlantic Coast Pipeline — including Virginia energy giant Dominion, Duke Energy, AGL Resources and Piedmont Natural Gas — who argue that there is a compelling public need to build more gas pipelines as electric utilities replace coal with gas in their fuel mix. The legal outcome could influence other pipeline projects as well. Three groups besides ACP have expressed possible interest in building pipelines from the West Virginia shale fields to markets in Virginia and points south.

Pipeline foes make two overarching arguments. First, the Federal Energy Regulatory Commission (FERC) has not yet issued a certificate declaring the ACP project to be in the public interest, says Joe Lovett, an attorney with Appalachian Mountain Advocates. Because ACP cannot yet argue that the pipeline is for “public use,” it has no right to survey land without the consent of property owners.

Second, pipeline foes say, landowners deserve compensation for survey crews tramping over their property. The right to exclude others from entering your property “is one of the most important rights in the bundle of property rights,” says Josh Baker, an attorney with Waldo & Lyle, one of the preeminent landowner rights firms in Virginia. When multiple survey teams — ACP lists five different categories of crews — enter the property, they can cause considerable inconvenience. While the Virginia code allows for “actual damages” resulting from a survey, it allows nothing for inconvenience.

Dominion asserts that it is fully within its rights to conduct the surveys as long as it complies with requirements to request permission in writing to inspect the land and then provide a notice of intent to enter. Obtaining a certificate of public convenience and necessity from FERC is necessary to acquire land through eminent domain authority but not to survey land, says Jim Norvelle, director media relations for Dominion Energy. Surveys are governed by state law.

As for land surveys constituting a “taking,” there is plenty of legal precedent to support ACP’s position, Norvelle says. “We do not expect to damage anyone’s property when surveying. In the unlikely event there is some damage, we will reimburse the landowner.”

A half century ago, pipelines in Virginia were either intrastate pipelines under State Corporation Commission jurisdiction or they were segments of interstate pipelines built and “stitched together over time,” says Jim Kibler, who was active in eminent domain litigation in Virginia before joining Atlanta-based AGL Resources as senior vice president-external affairs. Local public utility commissions, including Virginia’s SCC, provided most regulatory oversight. Continue reading

Renewable Energy: A Tale of Two Virginias

Apologies to Mr. Dickens

Apologies to Mr. Dickens

By Peter Galuszka

Call it a tale of two Virginias – at least when it comes to renewable energy.

One is the state’s traditional political and business elite, including Dominion Resources and large manufacturers, the State Corporation Commission and others.

They insist that the state must stick with big, base-loaded electricity generating plants like nuclear and natural gas – not so much solar and wind –to ensure that prices for business are kept low. Without this, recruiting firms may be difficult.

The other is a collection of huge, Web-based firms that state recruiters would give an eyetooth to snag. They include Amazon, Google, Facebook and others that tend to have roots on the West Coast where thinking about energy is a bit different.

Besides the Internet, what they have in common is that they all vow to use 100 per cent of their electricity from renewable sources. What’s more, to achieve this goal, all are investing millions in their own renewable power plants. They are bypassing traditional utilities like Dominion which have been sluggish in moving to wind and solar.

So, you have a strange dichotomy. Older business groups are saying that the proposed federal Clean Power Plan should be throttled because it would rely on expensive renewables that would drive away new business. Meanwhile, the most successful and younger Web-based firms obviously aren’t buying that argument.

I have a story about this in this week’s Style Weekly.

In Virginia, the trend is evidenced by Amazon Web Services, which sells time on its cloud-computing network to other firms. It is joining a Spanish company, Iberdola Renewables LLC, in building a 208-megawatt wind farm on 22,000 acres in northeastern North Carolina, just as few miles from the Virginia border. Three weeks earlier, on June 18, Amazon announced it plans a 170-megawatt solar farm in Accomack County on the Eastern Shore.

Dominion, which has renewable projects in California, Utah and Indiana and the beginnings of some small ones in Virginia, says it is not part of the projects. It could possibly get electricity indirectly from them. Amazon’s power will be sold on regional power grids to business and utilities.

When they complete such sales, the Net-focused firms will get renewable energy certificates that can be used to show that they have put as much renewable energy into the electricity grid as they have used, says Glen Besa, director of the Virginia chapter of the Sierra Club.

This will be especially important in Northern Virginia where there are masses of computer server farms used by Amazon and others. These centers used 500 megawatts of power in 2012 and demand is expected to double by 2017. Also, for years, the region has hosted such a large Internet infrastructure that at least half, perhaps 70 percent, of the Net’s traffic goes through there.

Part of the back story of this remarkable and utility-free push for renewables is that environmental groups are shaming modern, forward-looking firms like Amazon to do it.

Amazon Web Services was the target of criticism last year when Greenpeace surveyed how firms were embracing renewable energy. The report stated that the firm “provides the infrastructure for much of the Internet” but “remains among the dirtiest and least transparent companies” that is “far behind its major competitors.”

Dominion also got bashed in the report. Greenpeace says, “Unfortunately, Dominion’s generation mix is composed of almost entirely dirty energy sources.” Coal, nuclear and natural gas make up the vast majority of its power sources.

Its efforts to move to renewable sources have been modest at best. In regulatory filings, Dominion officials have complained that renewable energy, especially wind, is costly and unreliable although they include it in their long-term planning.

Dominion has plans for 20-megawatt solar farm near Remington in Fauquier County and is working on a wind farm on 2,600 acres the utility owns in southwestern Virginia. It has renewable projects out-of-state in California, Utah and Indiana. The output is a fraction of what Amazon plans in the region.

In a pilot offshore wind project, Dominion had planned on building two wind turbines capable of producing 12 megawatts of power in the waters of Virginia Beach. It later shut down the project, saying new studies revealed it would cost too much. It says it might continue with a scaled down project if it got extra funding, such as federal subsidies.

The utility says it must build more natural gas plants and perhaps build a third nuclear unit at its North Anna power plant to make sure that affordable electricity is always available for its customers.

As Amazon announced its new renewal projects, Greenpeace has changed its attitude about the company. Now it praises Amazon for its initiatives in Virginia and North Carolina. “I would like to think we have pushed Amazon in the right direction,” says David Pomerantz, a Greenpeace spokesman and analyst. He adds that Amazon has some work to do in making its energy policies “more transparent.”

One unresolved issue is that two neighboring states, North Carolina and Maryland, have “renewable portfolio standards” that require that set percentages of power produced there come from renewables. West Virginia had such a standard but has dropped it. In Virginia, the standard is voluntary, meaning that Dominion is under no legal obligation to move to solar or wind. It also gives the SCC, the power rate regulator, authority to nix new power proposals because they might cost consumers too much, providing Dominion with a handy excuse to move slowly on renewables.

Another matter, says Pomerantz, is whether Virginia’s legislators will enact “renewable energy friendly policies” or watch hundreds of millions of dollars in renewable project investments go to other states, such as North Carolina.

So, you have a separate reality. Traditionalists are saying that expensive renewables are driving away new business, while the most attractive new businesses are so unimpressed with traditionalist thinking that they are making big investments to promote renewable energy independently.

It isn’t the first like this has happened.

The Ironies of Virginia’s Growing Diversity

Midlothian’s New Grand Mart taps state’s growing diversity

 By Peter Galuszka

Suddenly immigration is popping up as a major issue in Virginia and the nation.

Virginia Beach has been dubbed a “sanctuary city” for undocumented aliens by Fox News and conservative Websites. GOP presidential hopeful Donald Trump is scarfing up poll number hikes by calling Mexicans trying to enter the U.S. illegally “rapists” and proposing an expensive new wall project to block off the southern border. Pro-Confederate flag advocates are pushing back against anti-flag moves, but they can’t escape the reality they are conjuring up  old visions of white supremacy, not their version of respectable Southern “heritage.”

So, if you’d like to look at it, here’s a piece I wrote for The Washington Post in today’s newspaper. When I visited a new, international food store called New Grand Mart in Midlothian near Richmond, I was impressed by how large it was and how many people from diverse backgrounds were there.

Looking further, I found one study noting that Virginia is drawing new groups of higher-income residents of Asian and Hispanic descent. In the suburbs, African-Americans are doing well, too.

The Center for Opportunity Urbanism ranked 52 cities as offering the best opportunities for diverse groups. One might assume D.C. and Northern Virginia would rank well, and they do. More surprising was that Richmond and Virginia Beach rank in the top 10 in such areas as income and home ownership. True, mostly black inner city Richmond has a 26 percent poverty rate but it seems to be a different story elsewhere.

Stephen Farnsworth of the University of Mary Washington says that economic prosperity and jobs that had been concentrated in the D.C. area, much of it federal, has been spread elsewhere throughout the state. It may not be a coincidence that New Grand Mart was started in Northern Virginia by Korean-Americans who undertook research. It revealed that the Richmond area was a rich diversity market waiting to be tapped. They were impressed and expanded there.

Other areas that do well in the study are Atlanta, Raleigh, N.C. and ones in Texas, which show a trend of job creation in the South and Southwest outpacing economic centers in the Northeast, Midwest and in parts of the West. Another story in today’s Post shows that there are more mostly-black classrooms in Northern cities than in the South. The piece balances out the intense reevaluation of Southern history now underway. A lot of the bad stuff seems to have ended long ago, but somehow similar attitudes remain in cities like Detroit and New York.

This progress is indeed interesting since old-fashioned American xenophobia is rearing itself again.

In Virginia, the long-term political impact will be profound as newer groups prosper. They may not be as inclined as whites to embrace Virginia’s peculiar brand of exceptionalism, such as their emotional mythology of Robert E. Lee and Thomas Jefferson. Their interest in them might be more dispassionately historical.

And, as the numbers of wealthier people from diverse backgrounds grow, they may be less willing to keep their heads down when faced with immigrant bashing. That’s what people of Hispanic descent did in 2007 and 2008 when Prince Williams County went through an ugly phase of crackdowns on supposed illegals. They could strike back with their own political campaigns.

Whether they will be blue or red remains to be seen. It’s not a given that they’d be Democratic-leaning. Farnsworth notes, however, that as more diverse people move to metropolitan suburbs, whites in more rural, lower-income places may become more reactionary out of fear. Hard-working and better-educated newcomers might be out-classing them in job hunts, so they might vote for politicians warning of a yellow or brown peril.

In any case, New Grand Mart presages a very crucial and positive trend in Virginia. It shows the irony of the hard right echo chamber peddling stories designed to inflame hatred and racism, such as the one about Virginia Beach being a “sanctuary” for illegals. In fact, the city is attracting exactly the  well-educated and hard-working newcomers of diverse backgrounds upon whom it can rest its future.

But we’re in an age of bloated billionaires with helmet hairdos and no military experience claiming that former Republican presidential candidate John McCain, a shot-down Navy pilot who spent five years in a brutal North Vietnamese prison, is not a hero. If Virginia can ignore such time-wasters and embrace diversity, it will be a better place.

Why Can’t Dominion Do Big Wind Projects?

A wind farm in Texas

A wind farm in Texas

 By Peter Galuszka

Down in the swamplands and farmlands of northeastern North Carolina, construction has begun on a huge new wind farm that will be the largest so far in the southeastern U.S.

Iberdrola Renewables LLC, a Spanish firm, has begun construction on the long-awaited $600 million project with financial help from Amazon, which also plans a solar farm on Virginia’s Eastern Shore. The Tar Heel project will stretch on 22,000 acres and could generate about 204 megawatts of power.

The curious part of this is that the farm is only about 12 miles of the Virginia line northwest of Elizabeth City, N.C.

That’s not far at all from the Old Dominion. But Dominion Resources, Virginia’s leading utility, has been sluggish in pushing ahead with wind, citing concerns about cost. It pulled the plug on an offshore pilot project involving only two wind turbines that would have a relatively tiny power output off of Virginia Beach.

So why were renewable energy firm executives and public officials celebrating yesterday in North Carolina and not Virginia?

That’s an easy one. North Carolina has a renewable portfolio standard that requires utilities to produce at least 12.5 percent of their power from renewables. Virginia has a similar plan, but being a “pro-business” state, Virginia has made it voluntary. So, Dominion doesn’t really have to do anything at the moment to push to wind, solar or other renewable.

It might have more incentive to do so when the U.S. Environmental Protection Agency finalizes rules on its Clean Power Plan later this year, but no one really knows what the final form will be.

Nonetheless, Dominion has marshaled its money and its lobbyists to change how regulators over see it in this regard. The General Assembly, some of whose members get huge contributions from Dominion, hurriedly passed a bill this session changing the rules in ways that Dominion wants.

To be sure, Dominion has some wind farms in other states. But here in Virginia, it is pitching the old saw that wind power is too expensive and unreliable and so on.

It may have been at one time. When Iberdrola pitched the plan to put 102 wind turbines on 22,000 acres in N .C., the common wisdom was that the southeast just doesn’t have the natural wind power. The winds are too light, usually.

But this changed when new technology allowed wind turbines to go from about 260 feet into the air to more than 460 feet or almost as much as the Washington Monument. Once that happened, the Carolina wind farm became a go. Of course, critics say that wind turbines have negatives such as their capacity to slice apart birds and be an eyesore.

What’s better for humanity, however? Coal or even natural gas plants or ones that have no pollution, especially carbon, footprint?

Another interesting aspect of this story is how Amazon is getting involved. The retailing giant is becoming an electric renewable utility in its own right. It wants to have renewable power run the massive servers that it relies upon to do business. But instead of screwing around with hidebound, traditional utilities like Dominion that are often reluctant to warmly embrace renewable energy, Amazon is doing it itself.

Amazon is also putting in a 170 megawatt solar farm in Virginia’s Accomack County which has terrain similar that of Perquimans and Pasquotank Counties in North Carolina that will host the wind farm.

To be fair to Dominion, the utility has a legal responsibility to supply its customers with electricity on a 24/7 basis. It needs a diverse energy mix to be able to do that.

But one wonders why Dominion keeps pushing this bugaboo about wind. Its sister utilities have raised the same cry. That could be why wind represents only 5 per cent of the electrical mix in the U.S., even though there are wind farms in 36 states.

It’s different in other countries. Denmark gets 28 percent of its power from wind. Spain, Portugal and Ireland each get 16 percent from wind.

Isn’t it time for Dominion to get off the dime and do more with wind, rather than using its deep pockets to get paid-for Virginia politicians to do its bidding and change regulatory rules at its whim?

Big City Advantage in Innovation Not What It Used to Be

agglomeration

Image credit: “Cities and Ideas,” National Bureau of Economic Research.

by James A. Bacon

Maybe the Internet is allowing innovation and creativity to break free from the confines of geography after all. Economists conventionally argue that large metropolitan areas are better incubators of inventions and innovations than smaller cities and rural areas. However, a new study, “Cities and Ideas,” by Mikko Packalen and Jay Bhattacharya, finds that the relationship between city size and inventiveness is not as strong as it once was.

I partially jest when I refer to the impact of the Internet. In the 1990s, starry-eyed dreamers theorized that the Internet would enable people to plug into global commerce from a mountain cabin or small town coffee shop. As rural America continues to empty out and population migrates to the bigger cities, that promise now seems a cruel joke. But something is changing. As Packalen and Bhattacharya demonstrate, big cities are far less dominant than they were a century ago. Furthermore, the geographic de-concentration of invention long preceded the rise of the Internet. Other trends — the proliferation of telephones, the spread of roads and the automobile, the rise of land-grant universities in out-of-the-way places — may have played equally critical roles in diffusing the capacity for invention.

Scholars first theorized about the correlation between city size and innovation, which they called an “agglomeration effect” in the 1920s. There was a solid basis for the theory then — large cities were the dominant incubators of innovation; rural areas were backwaters. But even as agglomeration-effect theory became more deeply rooted among scholars studying urban geography, the reality upon which the theory was based was steadily eroding.

To measure invention, Packalen and Bhattacharya built a database of U.S. patents between 1836 and 2010, identifying the inputs for each patent from previous patents, how old those inputs were, and where the inventions took place. The study gives great weight to the age of the patents, distinguishing between patented inventions that draw upon new ideas and inventions that draw upon older ideas. The authors explain:

If we find that inventors in large cities build on fresh ideas more often than inventors in smaller  cities, the evidence would quantify a specific benefit to locating inventive ideas in large cities. On the other hand, if we find that inventors in large cities are no more likely to try out new ideas in their work than inventors in smaller cities, the evidence would suggest that location may be largely irrelevant for inventive performance.

The dominant theory in academia today is that size and density matter. The bigger and denser a metropolitan region, the greater the number of people who can interact on a face-to-face basis. Proximity to other people allows innovators to conceive, discuss and test new ideas, and commercialize them in the marketplace. As can be seen in the chart above, which compares idea inputs of patents between cities in the 95th and 50th percentiles (large versus midsized cities) that was certainly true a century ago. But the dominance of big cities has declined, despite a few ups and downs, since then. Today, adjusted for the margin of error, there is very little difference at all.

Bacon’s bottom line: I am not equipped to dissect the statistical methodology employed to reach these conclusions, although I do have a couple of questions. Why the focus on the newness of the ideas behind the patents? Are patents based on newer ideas necessarily more consequential than those based on older inputs? Why not measure the frequency of patents? Surely the number of patents, adjusted for population size, is also an important indicator — perhaps the most important indicator — of inventiveness.

Those questions aside, “Cities and Ideas” would seem to provide hope for America’s small towns and rural regions. In this blog, I have frequently written about the tremendous disadvantages facing smaller communities when competing with big cities for human capital and corporate investment. The odds seem hopelessly stacked against the little guys. But if it turns out that it’s just as easy to keep up with the latest technology in Small Town USA as it is in Big City USA, a lot of people — and that includes me — may have to adjust their thinking.

Capitalism Triumphs Again!

RAM clinic, Pikesville Ky., June 2011. Photo by Scott Elmquist

RAM clinic, Pikesville Ky., June 2011.
Photo by Scott Elmquist

By Peter Galuszka

If there were any questions about just how capitalism has failed, one need look no farther than Wise County, where, this week, hundreds, if not thousands, of people will line up for free medical care.

The event is ably noted in The Washington Post this Sunday by a young opinion writer named Matt Skeens who lives in Coeburn in the coalfields of southwestern Virginia.

This week, the Remote Area Medical clinic will come to the Wise County fairgrounds to offer free medical and dental care to anyone who needs it.

You might ask yourself a question: why do so many people in one of the parts of the United States that is fantastically wealthy with natural resources need free medical care? Where is the magic of capitalism so often lauded on this blog?

A few insights from Mr. Skeens:

“Local representatives of Southwest Virginia will travel to the fairgrounds to stand on a coal bucket and assure us they’re fighting against President Obama and the ‘war on coal.’ These politicians won’t mention that with their votes to block Medicaid expansion, they ensured that the lines at RAM won’t be getting any shorter. But hating Obama in these parts is good politickin.”

Skeens runs through a list of mountain folk who can’t afford health care. One is a breast cancer survivor who hasn’t had a screenings in years. His grandfather, a retired electrician and coal miner, had also camped out at RAM clinics to get help.

Odd that this is the way I found neighboring West Virginia when I moved there with my family from suburban Washington, D.C. in 1962. Just as it was then, the riches that should have helped pay for local medical care went out of state. Much of the coal left by railcar or barge. Now, natural gas released by hydraulic fracking will find its way to fast-growing Southeastern cities or perhaps overseas thanks to new proposed pipelines such as a $5 billion project pitched in part by Dominion Resources.

While I have never been to the Wise County RAM clinic, I did happen to drop by one in Pikesville, Ky., a coalfield area that is one is Kentucky’s poorest county. It is not far from Wise. I was busy researching a book on Richmond-based Massey Energy, a renegade coal firm, in June 2011.

Photographer Scott Elmquist and I were on our way from Kentucky to an anti-strip mining rally in West Virginia when we noticed the RAM signs. More than 1,000 people had started lining up at the doors around 1:30 a.m. at the local high school.

It was packed inside. A Louisville dental school had sent more than 50 dental chairs that lined the basketball court. Some of the patients said they were caught in a bind: they had jobs but didn’t have enough health coverage and couldn’t pay for what they needed.

Since then, there’s been some good news. Unlike Virginia, whose legislature has stubbornly refused to expand Medicaid to 400,000 residents who need it (supposedly in a move to tighten federal spending), Kentucky expanded Medicaid last year. Now, 375,000 more people have health insurance.

Not so in Virginia. People continue to suffer while those with comfortable lives laud the miraculous benefits of capitalism.

How to Bring Broadband to Your Community

broadbandBroadband access is increasingly critical infrastructure for every community, a critical element for government efficiency and responsiveness, economic development, education, public safety, healthcare and the conduct of peoples’ personal lives. What can a rural community or small city do if the dominant broadband providers aren’t in any hurry to build broadband infrastructure?

The Center for Innovative Technology has just published a manual, “Improving Broadband Access and Utilization in Virginia,” that lays out a roadmap and highlights examples of how several communities have taken matters into their own hands.

The most prominent is the City of Bristol in Virginia’s far southwest, which deployed its own fiber-to-the-premises in 2001, reaching 6,000 customers within the first two years. Bristol Virginia Utilities was the first municipality in the country to build a fiber network to deliver the triple play of phone, Internet and cable television. Though not as far along, the City of Danville built a fiber system connecting 120 local government and school buildings, and then expanded it to serve more than 100 businesses and, more recently, residential customers.

Other models include rural co-ops, like the one in Floyd County, and public-private partnerships, as seen in Franklin County and King and Queen County. The report suggests that communities begin with a citizen survey to identify unmet needs, form a stakeholder group that can aggregate demand and hold discussions with Internet Service Providers.

As an aside, the Tobacco Commission, much criticized on this blog (by me among others), helped fund a number of these initiatives. Accelerating the deployment of broadband infrastructure in under-served areas is one of the most worthwhile investments the Commission could make. Unlike a foot-loose manufacturing plant that comes then leaves ten years later,  fiber-optic cable doesn’t pick up and move away.

— JAB