Category Archives: Economic development

The Rise of the New Artisan Class

Botanical etching made by oak and mimosa leaves

Botanical etching made from oak and mimosa leaves. Photo credit: Tracery 157

Cathy Vaughn took the big leap a couple of years ago of going into business for herself as an artisan working in copper. While fabricating trellises, tryptics, candelabras and chinoiserie, she developed a new technique, which, as far as she knows, is a first — creating images upon copper plate from the chemicals found in leaves. The result has been a series of extraordinary images, as seen above, that look as if they could have been lifted from a modernist New York art gallery.

She arranges leaves upon the copper, wraps them in cellophane and sets them aside for about two weeks. Leaves from different species of trees have different chemical signatures, which interact with the copper to leave a wide array of colors. Art meets science as Vaughn arranges different species of leaves in varying patterns to create novel effects.


Vaughn in her studio. Photo credit: Tracery 157

It’s too early to tell if the “botanical etchings” will become a big moneymaker, Vaughn told me at a recent arts and crafts exhibit in Richmond, but early signs are encouraging. I’m no art critic, and I’m not even a fan of modernist art, but I found many of her creations visually arresting, even beautiful. Given the fascinating narrative behind her creations, I would venture to predict that she will enjoy considerable success — not just in Richmond but far beyond.

Richmond is hardly unique in having a vibrant arts community — Charlottesville and Staunton craftsmen were well represented at the particular event I attended — but the arts and crafts movement is growing. Many Richmond-area artists have a connection with Virginia Commonwealth University’s school of the arts, while others with a graphic arts background come from the advertising/ marketing sector. Budding artists are supported by a soft infrastructure: numerous art galleries, an artists’ guild, the Art Works and Plant Zero artists’ studios and the Richmond Visual Arts Center.

It’s easy to be dismissive of arts & crafts as an engine of economic growth — the term “artsy fartsy” suggests eccentricity and dilettantism — but a fundamental shift in consumer preference to “mass customization” suggests that artists, craftsmen and the so-called “makers” are a rising economic force. Not only will the revival of artisan create employment opportunities in a slow-growth economy, there is an inherently egalitarian aspect to the movement. Artists, craftsmen and makers are self-employed. They could become the new yeoman class of the post-industrial economy.

An analogy that I draw, and other observers readily accept, is with the beer industry. A couple of decades ago, three or four monster brewing companies dominated the U.S. beer market. The main competition came from major foreign brands. Then the micro-brewery phenomenon took off as consumers revolted against the sameness of the national brands and embraced the individuality of home brews, with their novel tastes, feisty branding and personal connection with consumers. The Brewers Association counted 1,871 microbreweries, 1,412 brewpubs and 135 regional craft breweries in 2014. That year saw the opening of 615 new breweries and only 46 closings. Craft brewers provided 115,469 jobs, an increase of almost 5,000 from the previous year.

The efflorescence of the beer industry is matched, in Virginia at least, with a veritable explosion in the number of wineries, not to mention artisinal producers of meats, cheeses, breads, seafoods, pastas, dressings, sauces, and confections. The Virginia’s Finest website lists 43 categories of made-in-Virginia products from herbs and honeys to soups and nuts.

The revolt against mass standardization is nothing new. The so-called “arts and crafts” movement originated in the late 1800s in reaction to machine production, and it never disappeared. But arts and crafts appear to be undergoing a resurgence, fueled by the growing hunger for unique, hand-crafted products and the rise of the Internet as an inexpensive distribution and marketing channel. In the future, inexpensive 3-D manufacturing will open up new fields for creative expression and the invention of entirely new products.

The rise of the arts-and-crafts economy is something devoutly to be wished for. Politicians will be tempted to jump on the bandwagon and “help” by doling out subsidies of some kind or another. Arguably, the fastest way to kill the movement is to make it dependent upon government largess. However, public policy probably can contribute to the movement by enabling artists, craftsmen, artisans and makers to form co-ops and mutual assistance societies to provide for common needs such as health care, disability insurance and the like. Tax policy should cease discriminating against the self-employed by extending the same tax breaks for health care provided to corporations, labor unions and other large entities.

For the most part, though, we just need to leave the artisans alone. They are creative people, and we should trust them to figure out what’s best for themselves.

Striking a Balance on Municipal Broadband

broadbandby John Szczesny

Changes in latitudes, changes in attitudes… towards municipal broadband, that is. As officials in the Roanoke Valley move forward with plans for a municipal fiber network the state of North Carolina is busy suing the FCC to prevent its local governments from doing the same.

To be fair, municipal broadband is no cakewalk in Virginia. Commonwealth regulators at the SCC require localities to essentially tax their own operations in an amount they would charge an incumbent Internet Service Provider (ISP) for such things as licenses, pole attachments, and street opening permits. They also prohibit cross-subsidizing telecommunications from other government operations, except when no other competitors are vying to offer similar services. Municipal networks must provide open access to other providers. And they can forget about cable TV.

Rules like these typically raise hackles from those on the left who see no problems with municipal broadband, since they relish the expansion of government control.  In their view such telecom legislation is nothing more the genesis of greedy cable companies, and while there’s no denying the influence of the cable lobby in state legislatures — apparently cable companies run the show in N.C. — there are, in fact, dangers in stripping all restraints from municipal network providers.

As long as government entities have a monopoly power on taxes and absolute control over land use, there is a need to hold them in check. Just ask the incumbent providers. Too many communities have abused their authority by exacting unreasonable fees for right-of-way permitting, and have bogged down network deployments through bureaucratic inertia. Much like developers seeking zoning approvals, the ISP network is viewed as another revenue stream.

Virginia regulators will need to find a middle road so municipal networks can fill voids where private sector ISPs are not competing, while also ensuring that municipalities and their network partners aren’t conferred unfair advantages.

Dominion’s Proposed Six-Year, Virginia Infrastructure Spend: $11.7 Billion


Source: Chmura Economics & Analytics

by James A. Bacon

Dominion Resources proposes to expend $11.7 billion over the next six years on energy infrastructure serving Virginia, including new generating plants, electric transmission lines, a gas pipeline and environmental clean-up, the company announced today. Of that amount, an estimated $5.7 billion will be spent in Virginia, producing a direct and indirect economic impact averaging $1.68 billion per year over the six-year period.

“Our growing Commonwealth requires an expanding and reliable energy infrastructure,” said Paul Koonce, CEO of Dominion’s Energy Infrastructure Group and president of Dominion Virginia Power. “Our capital investment program over the next six years is designed to meet that need and achieve environmental goals of the federal Clean Power Plan.”

Governor Terry McAuliffe weighed in with a favorable comment upon the investment program. “In order to build the new Virginia economy, we must have low-cost, diverse and reliable energy resources. These investments not only build upon an already solid foundation for economic growth in Virginia, they also create tens of thousands of jobs and produce billions of dollars in capital that benefits the Commonwealth today.”

Only one project on the list, construction of the Brunswick County gas-fired generating plant, has received regulatory approval. Others are at various stages of development, from being “on the drawing board” to moving through the regulatory process, according to Dominion spokesman David Botkins. Especially controversial are the proposed Atlantic Coast Pipeline, a natural gas pipeline; continued pre-construction development of the proposed North Anna 3 nuclear power plant; and several proposed electric transmission lines; all of which are opposed by landowners and/or environmentalists. Also controversial, because of potential impact on rate payers, is a proposal to put vulnerable electric distribution lines underground.

Assuming all the projects go forward, the economic impact on Virginia would be considerable. According to a study commissioned by Dominion and conducted by Chmura Economics & Analytics, Dominion’s capital investment would inject $771 million directly into Virginia’s economy in the first year, 2015, and would generate an additional $579 million in indirect and induced impact for a total impact of nearly $1.4 billion. Total impact would peak in 2017 at $2.5 billion and then level off around $1 billion annually in subsequent years.

About half the impact would come from construction spending, the press release stated, while “the rest would result from growth in other sectors of the economy as spending spread.”

Frank Rambo senior attorney with the Southern Environmental Law Center, responded in an email communication that Dominion should reallocate its investments from capital-intensive projects, which “produce high shareholder profits at the ratepayers’ expense,” into more labor intensive energy resources such as renewable technologies and energy efficiency. A shift from an over-reliance on natural gas to clean energy, he said, “will not only create more jobs but also help lower electric bills and create healthier communities.”

Bacon’s bottom line: The impact of Dominion’s proposed energy projects on Virginia’s economy would be considerable. More important than the short-term stimulus of the design, engineering and construction work is the necessity of expanding the capacity of Virginia’s energy infrastructure to meet the anticipated growth of Virginia’s population and economy — a critical point made in the press release by Virginia Chamber of Commerce CEO Barry DuVal. That benefit, not captured by the Dominion numbers or the Chmura study, would dwarf the impact of the capital expenditures themselves.

However, not all energy projects are created equal. Some offer a higher risk-adjusted Return on Investment than others. Is it worth $808 million to keep open the option of a third nuclear power unit at the North Anna power station that even Dominion concedes would cost rate payers $19 billion — with no guarantee that the project ever will be built? Is it worth spending $1 billion to bury roughly 20% of Dominion’s local distribution system to reduce the number of electric outages and shorten recovery times during major storm events?

Perhaps more fundamental is the question of what kind of electric grid Virginia wants to build. Dominion’s vision of the energy future is one in which Dominion continues to play a major role, building the power plants (including nuclear, natural gas, solar and wind), the electric grid, and the natural gas pipeline to supply the gas, all embedded in the larger, multistate PJM Interconnection system in which Dominion would swap electric power with out-of-state power producers as needed to meet peak demand and ensure reliability. Dominion’s critics envision a decentralized future with more wind and solar generated by independent, small-scale power producers less dependent upon large-scale transmission lines that shuttle electric power long distances. The costs and benefits of the competing visions are all but impossible to estimate with econometric models.

No Easy Route on the Jeff Davis Highway

jeff_davis_highwayby John Szczesny

Kudos to the Richmond Times-Dispatch for putting a human face on Chesterfield County’s plan to revitalize the Jefferson Davis Highway corridor. The RTD’s Pathway to Poverty feature is a sobering look at how poverty and homelessness have made life a daily struggle for so many in the area. It also begs the question of how Chesterfield’s plan will impact the lives of these individuals and families.

The visible signs of blight along the roadway make it easy to overlook how the surrounding area buzzes along as a hive of industrial activity. Not far from the trailer parks and run-down motels exists the most vital cluster of manufacturing employment in the Richmond metro: Dupont, Philip Morris, Kaiser Aluminum and other companies will soon be joined by Chinese-owned Tranlin Paper, which state officials expect to create 2,000 jobs at an average salary of $45,663. There is also the massive Defense Supply Center Richmond (DSCR) complex, scheduled for further expansion by the feds. And just a few miles to the south is the Amazon fulfillment center in Chester which opened in 2012.

County officials deserve their share of credit for these economic development successes. Through incentives and other means they have created an environment conducive to business and job creation.

Yet the industrialization on the edges of Jefferson Davis Highway has not done much to improve conditions for the 11,000 residents in the County’s study area, where 30% of the population lives below the poverty line. Chesterfield officials have gone a long way to offer assistance and resources for corporations in the Bermuda district. It is only fair that they offer a similar helping hand to area residents by connecting them with the employment opportunities in their own neighborhood. Workforce training programs would be a win-win for employers and job-seekers, and would help bridge the skills gaps needed for these positions.

Perhaps the thorniest issue for County planners is what to do about land use. It will be tempting to call for zoning revisions to invigorate the Jeff Davis area with new housing and retail projects. Redeveloping underutilized properties along the corridor would make economic sense, create jobs, and boost county tax coffers. But allowing these changes would probably also lead to the demolition of the motels and trailer parks where some of the poorest residents live, often just one missed rent payment away from homelessness. A redevelopment plan that throws these people out on the street without a suitable housing option is immoral and unacceptable.

Chesterfield has taken a noble first step in developing a plan to reverse the decline of the Jefferson Davis Highway corridor. It is now imperative for county officials to make future decisions with an eye towards improving the lives of area residents as opposed to just the built environment.

John Szczesny is a Chesterfield resident, urban planner, and telecommunications consultant.

The Terry McAuliffe Show

Governor McAuliffe checks out a made-in-Virginia three-wheeler outside the Virginia Beach Conference Center.

Governor McAuliffe checks out a made-in-Virginia three-wheeler outside the Virginia Beach Conference Center.

by James A. Bacon

Terry McAuliffe doesn’t just fill the room — he fills the banquet hall. He’s loud, he’s animated,  he’s funny and he’s prone to superlatives. Economic development success, he proclaims, comes from superior salesmanship and the art of the deal. Indeed, if he doffed a wig of thinning blond, slicked-back hair, you’d be hard pressed to tell him apart from Donald Trump.

The governor regaled the audience at the 2015 Governor’s Transportation Conference in Virginia Beach around noon today. Among some of the more notable quotes:

Referring to Transportation Secretary Aubrey Layne, McAuliffe said with typical enthusiasm: “He’s the greatest transportation secretary in the history of Virginia!”

Similarly, John Rinehart, CEO of the Port of Virginia is “the greatest port director in America!” The recent increase in container traffic, the governor added, is “an absolutely extraordinary record! … Ladies and gentlemen, we are going to have the greatest port in America!”

Touting the benefits of the Interstate 95 tolled HOT lane project, he proclaimed the awesomeness of private-sector concessionaire Transurban. “Give Transurban a great round of applause!” he urged the audience.

As for those opposed to paying tolls on the proposed Interstate 66 megaproject in Northern Virginia, they’re not just misguided or mistaken. What they’re saying about tolls is “an absolute lie! It’s a fiction! It’s misleading to voters!”

McAuliffe said he has probably spent more time promoting Virginia overseas than any other governor. Ever. And one could surmise from his remarks that he’s given foreigners the hardest sell. He told a story about talking to some wine stewards in France. “I spent an hour convincing them that Virginia wines are better than French wines.”

The governor has made self-driving cars and unmanned aerial vehicles a major economic development priority for Virginia. His goal, he said: “I want a clone in every home in Virginia. And I wanted it manufactured in Virginia!”

Agree with him or disagree, McAuliffe is never dull.

Woolly Headed Thinking about Transportation

Woolly headed

Baaah! Baaaaaaah!

by James A. Bacon

Virginia Beach’s ongoing debate over light rail is emblematic of everything that is wrong with Virginia’s system for determining which transportation projects get built. While the Virginia Department of Transportation is implementing a mechanism for ranking road and highway projects, there is no mechanism for ascertaining the proper balance between roads/highways and mass transportation or even to prioritize mass transit projects. Those choices remain as muddied and politicized as ever.

The latest episode in the long-running saga of Virginia Beach light rail, which would extend Norfolk’s existing The Tide rail line to the Virginia Beach resort area, revolved around a bid yesterday by Virginia Beach Councilman John Moss to use $10 million dedicated for light-rail plans to plug a projected $33 million budget hole. City Council rebuffed the measure, but a vocal minority of citizens continue the fight against the rail line. (See the Virginian-Pilot coverage here.)

Foes oppose a rail line that will require heavy up-front subsidies to build and ongoing subsidies to operate. They make a legitimate point. Rail supporters retort that building and maintaining roads also entail taxpayer subsidies. They, too, make a legitimate point. Ever since Virginia abandoned the user-pays principle of transportation funding in the bipartisan transportation-funding legislation of the McDonnell administration, all forms of transportation are subsidized to a greater or lesser degree. Because everything is subsidized, it is exceedingly difficult to determine whether any project is economically justifiable. Anyone can make any claim without any effective way to test it.

In an ideal world, Virginia Beach’s mass transit project would pay for itself through (a) fare revenues, (b) ancillary revenues such as advertising, and (c) revenues from special tax districts surrounding rail stations to capture some of the increased real-estate value created by the rail service. A transit authority would issue bonds to be repaid from those revenue sources, and bond buyers would exercise an independent, non-political judgment as to whether they were likely to earn a competitive, risk-adjusted return on their investment.

But it’s not an ideal world. Mass transit advocates argue rightly that rail competes against subsidized roads. No longer does Virginia pay for its roads mainly through the gas tax. But, rather than hold road funding to a higher and stricter standard, Virginia carves out a percentage of transportation allocations for mass transit. Funds are spread around to appease regional constituencies and ideological enthusiasms.

To see where fuzzy logic of transit funding leads us, read this op-ed by Nelson Reveley, a co-coordinator for the Richmond Clergy Committee for Rapid Transit. Reveley invokes social justice, the environment, public safety and economic development in support of a “comprehensive transportation system for the sake of all our citizens” in the Richmond region. Writes Reveley, a doctoral candidate in religious studies at the University of Virginia:

This isn’t about any singular neighborhood. It’s about all our neighborhoods, as we appreciate and celebrate our intimate interrelation as one metro ecology of education and commerce, employment and leisure, justice and mercy, beauty and creativity, vulnerability and mutuality.

My stomach heaves in rebellion against such treacly sentimentality. Nowhere in his op-ed does Reveley wonder how much this majestic mass transit system might cost. Obviously, the concept of “alternate opportunity cost” is not taught in the UVa religious program, for nowhere does Reveley wonder what could be accomplished by expending the same sum in other ways. Nor does he much care who will pay for this vision of his, although we can be certain it will not be the people who ride the buses or otherwise benefit from the transit lines through the higher property values he insists will occur or workforce benefits accruing from the young talent he suggests will be attracted to the region.

Further, nowhere does Reveley acknowledge the emergence of an alternative, private sector-driven model as epitomized by companies like Uber, Lyft and Bridj, which, given sufficient time and dismantling of regulatory barriers, could provide a shared-ridership transportation alternative far more robust and comprehensive than a public system.

The prevalence of blinkered, woolly headed thinking in the Old Dominion is just staggering. It goes a long way towards explaining our stagnation and relative decline among the 50 states.

Environmentalist Update on Offshore Wind

Alstom wind turbine like that contemplated for installation off Virginia Beach.

Alstom wind turbine like that contemplated for installation off Virginia Beach.

by James A. Bacon

Judging from comments made in a Environment Virginia-sponsored webinar held this morning, environmentalists, the McAuliffe administration and Dominion Virginia Power are operating on the same wave length when it comes to developing offshore wind power in Virginia. If environmental groups have big differences with Dominion on how to proceed, no sign of criticism surfaced in the webinar presentations.

The main focus of environmentalists, as it is for Dominion, is bringing down the cost of offshore wind power. The top priority nationally is building a big enough pipeline of wind power projects off the Atlantic Coast to persuade manufacturers, specialty vessels and others in Europe’s established wind-power supply chain to create a presence on the U.S. East Coast. The existence of a supply chain, along with continued technological development, could make offshore wind power far more cost competitive in the U.S. than it is today.

Here in Virginia, the top priority is ensuring that Dominion builds two experimental turbines off Virginia Beach that will provide the data needed to optimize the development of hundreds of wind turbines in a subsequent project potentially large enough to power 700,000 homes. The big hurdle is persuading the State Corporation Commission that such a massive investment would constitute an acceptable trade-off between cost, reliability and environmental goals.

David Carr, general counsel for the Southern Environmental Law Center, provided an overview of Dominion’s offshore wind initiatives. Dominion solicited bids to build a two experimental turbines off the Virginia coast. (The turbines would test an unproven hurricane-resilient design and a new turbine foundation.) The original plan was to seek SCC approval in 2015, said Carr, but the low bid of $375 million to build the two turbines far exceeded the original estimate of $230 million. Dominion has restructured the contract by breaking it into four components in the hope of stimulating more competitive bidding and reducing the risk premiums bidders build into their offers. The new goal is to file with the SCC by June 2016.

Hayes Framme, advisor for infrastructure and development with the Secretariat of Commerce and Trade, said the McAuliffe administration played a key role in moving the Dominion’s experimental-turbines project forward by negotiating a complex lease with the Bureau of Ocean Energy Management and other federal agencies to lease the ocean bottom where the turbines would be located. “Without this lease,” he said, “we would not be able to get these turbines in.”

An offshore wind farm would advance two McAuliffe administration goals: increasing the state’s commitment to renewable energy and also promoting economic development. A study completed this summer found that Virginia is “uniquely positioned” to house “at least a portion, if not most, of the supply chain” supporting an East Coast offshore wind industry, Framme said. Virginia ports are located in the Mid-Atlantic, providing convenient access to projects to the north and south, and it has a large existing ship-repair infrastructure.

“Having a commercial deployment off Virginia’s coast sends a signal that we are serious,” Framme said. “If we don’t lay the foundation now, it will be more difficult for us to take advantage of that opportunity when it does come.”

Virginia’s projects are not sufficiently large by themselves to coax the offshore wind supply chain to bolster its U.S. presence. That will take commitments from multiple states. Fortunately, that commitment seems to be forthcoming, said Stephanie McClellan, director of a special initiative on offshore wind housed at the University of Delaware. The states of New York, Massachusetts, Rhode Island, Maine and Maryland all are actively exploring offshore wind opportunities. The state of New York has set a goal of 50% renewables by 2030, while New York City has established a goal of 100% renewables for electricity consumed by municipal operations.

To build a supporting infrastructure for offshore wind, said McClellan, eastern U.S. states need to provide market visibility and revenue certainty for a volume of projects over time, as well as more data on site-specific conditions such as wind speeds and wave size. The cost of wind power dropped “precipitously” in Europe as the industry gained scale; it will do so in the U.S. as well, she said.

Bacon’s bottom line: I posed one question to the presenters: Given the intermittent nature of wind production, has anyone studied the impact of a massive wind farm on the reliability of Virginia’s electric grid? The short answer: No. However, presenters noted that European countries have integrated large off-shore wind projects into their power grids, and PJM Interconnection, the group that ensures grid reliability in the Mid-Atlantic and parts of the Midwest, including Virginia, has looked into the issue.

Update: Regarding the impact of massive off-shore wind power on the electric grid… a Dominion planning department study published in 2010 concluded, “It is possible to interconnect large scale wind generation facilities up to a total installed capability of 4500 MW with the existing transmission system in the Virginia Beach area.  The study also indicates that when the actual output of the wind farm or farms approaches 2700 MW, there are greater probabilities that the output will have to be limited due to transmission constraints unless transmission infrastructure improvement are made.” Those improvements could cost between $30 million and $70 million.

Building an “Unmanned” Industry Cluster

Virginia Tech's smart road simulates a wide variety of driving conditions.

Virginia Tech’s smart road simulates a wide variety of driving conditions.

by James A. Bacon

Two decades ago the Virginia Tech Transportation Institute (VTTI) had two sponsors, fifteen employees and a dream of becoming a major player in testing new automotive technologies. Sixteen years ago, it opened a literal road to nowhere — a 2.2-mile “smart road” cutting through the hills of Montgomery County that ended in a dead-end loop.

Today, according to John Ramsey writing in Sunday’s Richmond Times-Dispatch, VTTI has 75 sponsors and 475 employees. The institute has helped attract $300 million in research funding to the state. VTTI is by most measures the largest transportation institute in the country.

The McAuliffe administration is hoping to turn that into a magnet for attracting autonomous-related corporate investment to Virginia. The autonomous vehicle initiative is one of the more sophisticated — and promising — economic-development efforts launched by Virginia in recent years. It encompasses more than smart cars. It includes drones, another up-and-coming industry — earlier this year, the first delivery of a humanitarian package by drone took place in Wise County — and autonomous boats.

“They seem like disparate industries, but when you start to think about sensor technologies, aerodynamics, there’s a lot of overlaps in capabilities that will support a land vehicle as well as an air vehicle or marine,” said Secretary of Technology Karen Jackson.  She says Virginia has the eighth largest concentration of autonomous-related companies in the country, including those that build sensors and analyze data.

Virginia formed an unmanned systems commission this summer with the following goals:

  • Identify the state of all unmanned systems industries in Virginia. This review should look comprehensively at the industry, including the supply chain from pre-competitive research and development through production and operation.
  • Identify challenges and needs of the unmanned system industry that may be met with Virginia assets for each domain of unmanned systems (aerial, land, maritime) including but not limited to workforce, research and engineering expertise, testing facilities, manufacturing facilities, and economic development opportunities within the Commonwealth.
  • Provide recommendations, develop a value proposition for economic-development marketing purposes, and submit periodic reports on its activities and findings.

Virginia can do much without showering subsidies and tax credits on the industry. For instance, the state has designated 70 miles of highways as “Virginia Automated Corridors” where fully automated cars can be tested on public roads. The state has implemented a simpler process for getting vehicles certified and on the road for testing. The Wallops Island spaceport is building a runway for drone testing, while an initiative is underway in Hampton Roads to develop autonomous boats.

Bacon’s bottom line: Google, Tesla and conventional automobile manufacturers are, and will continue to be, dominant players in developing and manufacturing autonomous cars, but there’s no reason that Virginia can’t get a share of the spoils from this emerging industry. The technology is new and in flux. The sector is big and sprawling, and hasn’t established a geographically centered clustered yet.

From a 10,000-foot perspective, Virginia seems to be going about this the right way, combining Virginia Tech’s R&D strengths with targeted economic-development marketing and the Virginia Department of Transportation’s (VDOT) opening up of state roads for real-world testing.

The only piece not mentioned in Ramsey’s story is evidence of any study of the state’s liability laws. If anything holds back the development of autonomous vehicles in Virginia, and other states, it will be a hostile tort climate. Given the fact that 90% of all traffic accidents occur as the result of human error, autonomous vehicles will likely make the roads far safer. But if accidents occur involving autonomous vehicles, as inevitably they will, it will be virtually impossible in some instances to disprove plaintiff claims that the fault resided somewhere in the millions of line of code. (See the “Demon in the Machine.”) Sorting out liability issues in a way that both promotes the public welfare and compensates accident victims from genuine wrongs would give Virginia a huge competitive advantage.

One thing Virginia is indisputably good at is producing lawyers. We ought to bring our best legal minds together — I nominate Chris Spencer, one of the top automobile liability attorneys in the country — to craft model tort legislation. If we can add that to our list of assets, we truly can make Virginia a national leader in unmanned vehicles.

Incubating Big Ideas

Wei Zhang in his lab.

Wei Zhang in his lab.

by James A. Bacon

Wei Zhang, a research scientist at the Virginia Commonwealth University School of Engineering, concluded that the polymer coatings he was studying had commercial potential. The chemical, when applied to power lines, aircraft wings or wind-turbine blades, would prevent ice from building up. By affecting the surface bonding at a molecular level, the coating would release the ice before it became too heavy.

The science was promising enough that he won a $150,000 Small Business Innovation Research (SBIR) grant to develop it further. He needed a business incubator with low overhead and business support that would allow him to pursue the technology. Fortunately, he found a suitable location — the Dominion Resources Innovation Center. The incubator, founded in a partnership between Dominion Resources, Hanover County and the Town of Ashland, specializes in the technology and energy sectors, providing early-stage companies with inexpensive office space, mentoring, guidance and business support.

“Scientists running a company don’t do well by themselves,” said Zhang yesterday at a re-launch of the innovation center at a new location in Ashland. But the board of directors gave him valuable advice, and he got a useful letter of support from Dominion stating that the electric power industry needs his product. Zhang even worked with Town of Ashland staff to develop applications for protecting landscaping from freezing.

The work went so well that Zhang’s company, Polymer Exploration Group (or PEG for short), won a second-phase, $750,000 SBIR grant take the product to the next stage, as well as a National Institutes of Health grant to use the polymer to develop an anti-microbial coating. At present, Zhang can produce only small volumes of the polymer — a half-liter at a time — and a major challenge is to ramp up his production capability. He sees huge markets anywhere ice is the enemy. At the moment, he says, the most immediate market appears to be fishing boats in the North Atlantic and North Pacific.

PEG, which now employs five, including Zhang, is only one of several promising enterprises to emerge from the incubator, which initially was housed in an old warehouse. The new facility, shared with town public works employees, is located in downtown Ashland in the old volunteer fire department building. The incubator provides nine single-room offices, including three wet labs. The mentoring and support is just as important as the space, if not more. The hands-on board provides a network of contacts and relationships that someone like Zhang, a Chinese national who has lived in Richmond since 2000, would find incredibly time consuming to replicate.

Mary Doswell, Dominion’s senior vice president for alternate energy solutions, said the company committed to support the incubator in 2009 to “send a signal to the community about our interest in innovation.” Now, she said, the incubator is being integrated with Virginia Commonwealth University, the Virginia Biotechnology Research Park and the Innovation Council to create “a regional innovation ecosystem.”

Although Dominion does not insist that tenants work on technologies that interest the power company, things have worked out that way. Dominion could be a customer eventually for Zhang’s ice-shedding polymer, and it could be a partner of Analytics Corp., to commercialize what founder Weston Johnson calls a high-efficiency, high-torque motor that operates at low speeds. That particular cluster of attributes, says Johnson, has applications ranging from industrial fans to wind turbines.

Johnson, who earned a Ph.D. in electrical engineering from the University of Kentucky, launched an earlier business — a hand-held spectrometer to be used by law enforcement — that didn’t turn out so well. But the experience taught him a lot and prompted him to move back to Richmond, where he started work on an idea he had developed in his Ph.D. dissertation. Johnson’s insight is that new materials invested by the semiconductor industry for use in microelectronic circuits make it possible to run motors with electric fields rather than magnetic fields. The process eliminates parts and drives down costs. He claims that the technology, if perfected, could drive down the installation cost of a wind turbine by 40%.

Johnson launched his business with $200,000 raised from family and friends. Locating in the Innovation Center was critical to his success, says Johnson. “The Center provided skill sets that I didn’t have to hire.” Zhang, he says, was an especially valuable sounding board. He has nearly completed his prototype, which he hopes will provide proof of concept ideas and win him another round of investment that will let him build a field-demonstration model.

Only a handful of enterprises emerging from incubators ever create enduring businesses. Zhang and Johnson, both of whom have acquired their own facilities, still have many obstacles to surmount before creating sustainable business models. Whatever their prospects, there is no denying that the Dominion Innovation Center succeeds in incubating big ideas.

Fuzzy Thinking at the Top

Woolly headed

Woolly headed

by James A. Bacon

Governor Terry McAuliffe views the implementation of the Clean Power Plan as a great opportunity for Virginia to create “green” jobs in solar energy and energy-efficiency while also reducing carbon emissions and head off global warming. “I am working hard with Virginia businesses and environmental leaders to seize this moment to lead for our planet and for our economy,” he wrote in an op-ed piece published in the Richmond Times-Dispatch today.

That’s a fine sentiment. Virginia does need to create more jobs. And McAuliffe correctly perceives that the commonwealth faces momentous decisions regarding its electric system. But there was so much platitudinous thinking in the op-ed that I found it thoroughly discouraging. At the highest level of Virginia government, banalities have replaced substantive thought. Let’s take a look at some of the assaults on reason in the piece.

Job creation. Yes, if Virginia builds more solar plants, installs more solar panels on roofs, and builds more wind-powered turbines, it will create jobs related to the construction and operation of wind and solar power. However, the State Corporation Commission staff said last year that implementing the Clean Power Plan could drive electric rates 20% higher. Higher electric rates would discourage industrial development and take money out of the pockets of business and residential customers, all of which would result in job destruction. The difference is that the new energy jobs would be highly visible while the lost jobs, distributed in dribs and drabs across economy, would be largely invisible. Which effect would outweigh the other? Nobody knows, and anyone who pretends to is just making stuff up.

Environmentalists claim that, if implemented properly, the Clean Power Plan would nudge rates only a little higher, and ratepayers would save enough money through energy conservation that their bills actually would be a little lower than today. Perhaps that’s so. It certainly would be a much more desirable income than a 20% increase in electricity rates. So… let’s see the plan! What combination of programs and strategies will lead to this ideal outcome? How would the McAuliffe administration propose implementing the Clean Power Plan differently than the SCC would, while taking care to ensure a reliable supply of electricity, to avoid that 20% rate increase?

There was no hint in McAuliffe’s op-ed that such hard-nose thinking is even necessary. Chanting, “Rah, rah, green jobs,” is not a plan.

Norfolk flooding. If I hear one more invocation of rising sea levels and increased flooding in Norfolk as justification for spending billions of dollars overhauling Virginia’s energy infrastructure, I think my brain will explode. Here’s what the governor had to say on the subject:

Even before the hurricane headed toward Virginia’s coast, the city of Norfolk was bracing for a greater number of nuisance flooding days over the next year due to higher sea levels and more frequent storm surges. Because Norfolk houses the largest U.S. naval station in the world, this is also an issue of national security.

The Clean Power Plan is recognition of the need for action.

This logic is so woolly headed that if we could shave it, we could put the world’s sheep farmers out of business. The increasing incidence of flooding is a justification for building flood walls, hardening infrastructure, upgrading building codes, eliminating subsidies for flood insurance and reforming land use — not for restructuring Virginia’s electric grid.

The reality is that anything Virginia does to re-engineer its electric grid to reduce CO2 emissions will have an impact on global warming and rising sea levels too small to measure. According to estimates using the National Oceanic and Atmospheric Administration’s MAGICC/SCENGEN climate model, the Clean Power Plan will reduce global temperatures about one-one hundredth of a degree (Centigrade) by the year 2100. Virginia’s implementation would account for roughly 1/40th that amount (based on its proportion of the U.S. GDP). To suggest that Virginia, by reducing global temperatures by 1/4,000th of a degree Centigrade, will slow the rate of rising sea levels enough to reduce the impact upon Norfolk is fantasy thinking.

As it happens, there is an argument for implementing the Clean Power Plan: By making the investment, the U.S. can thereby exercise the moral leadership to induce other countries, particularly China, India, to curtail their greenhouse gas emissions. You can choose to accept that argument or not based upon your own partisan and ideological inclinations. But that’s not the argument that McAuliffe offers for supporting the plan.

The future grid. The Obama administration is imposing the Clean Power Plan upon America at a time when the electric power industry is in extraordinary flux, with new technologies and business models threatening to up-end the regulatory structure that has prevailed over the past 80 or so years. The pace of change, and the uncertainty it brings, is unprecedented during the era of regulated utilities. New technologies show enormous promise for replacing fossil fuels. At the same time, given the inherently intermittent nature of those power sources, there are many issues to work out for ensuring the reliability of the electric system, upon which our entire civilization is built. There is little room for error.

There are many profound questions to ponder. Should we invest in large nuclear- and gas-powered power plants with 40-year life spans when solar technology might produce electric power more cheaply within a 5- to 10-year time frame? Should we invest in the current generation of renewable fuels today when the next generation could well cost far less? In either case, we risk saddling Virginia’s electric power system with antiquated and uneconomic capacity. Do we want a big-is-better power system built around large power plants and a robust transmission system, or do we prefer a decentralized, small-is-beautiful approach that may not be as efficient but could be less vulnerable to catastrophic failure? What trade-offs are we willing to make between cost, reliability and the environment?

What path would McAuliffe urge us to take? We don’t know. The Governor offers no clue in his op-ed. Indeed, there are no simple answers to these questions. One way or the other, either we decide what future we want, or we will have a future thrust upon us.