Category Archives: Economic development

Reports at Forty Paces

pistol_duel

Dueling reports

by James A. Bacon

How do citizens know whom to believe in the debate over the Atlantic Coast Pipeline (ACP), a proposed 550-mile natural gas pipeline between West Virginia gas fields and markets in Virginia and North Carolina?

Dominion, managing partner of ACP, has commissioned studies from Fairfax-based ICF International, a technology and management consulting firm, and Chmura Economics & Analytics, a Richmond econometrics firm, to analyze the pipeline’s economic impact. Both  reports buttressed the utility’s case that the project would be overwhelmingly beneficial.

In “The Economic Impact of the Atlantic Coast Pipeline,” ICF concluded that over the next 20 years Virginia and North Carolina could expect to gain $377 million a year in energy cost savings,  2,200 permanent full-time jobs, $131 million in annual labor income, and $218 million in annual gross state product. Likewise, in “The Economic Impact of the Atlantic Coast Pipeline in West Virginia, Virginia, and North Carolina,” Chmura said the project would inject $456 million annually into the three-state economy between 2014 and 2019 and support 2,873 jobs.

Yesterday the Southern Environmental Law Center (SELC) and the Allegheny-Blue Ridge, which oppose the pipeline, released its own report. That document, “Atlantic Coast Pipeline Benefits Review,” prepared by Synapse Energy Economics Inc., out of Cambridge, Mass., contends that the alleged pipeline benefits are “overstated, lack sufficient supporting data, and fail to account for environmental and societal costs.”

The Synapse report doesn’t make any economic forecasts of its own; rather, the authors point out limitations and weaknesses in the Dominion-sponsored reports and enumerates negative impacts that those reports did not take into consideration. Among the criticisms:

  • Assumed differential in gas prices. ICF argues that gas from Marcellus shale in West Virginia and neighboring states, to be transported by the ACP, will be cheaper than so-called Henry Hub gas from the Gulf Coast, which Virginia and North Carolina consume now. But Synapse questions whether that price differential will last.
  • Assumed savings to electric customers. ICF assumes that cheaper natural gas prices will be passed to Virginia consumers as lower electricity prices. But due to the nature of inter-regional power sharing, Synapse says is it unclear whether those savings would be passed on to Virginia consumers or shared regionally.
  • Assumed job creation. ICF assumes that Virginia consumers will spend that energy savings, stimulating local economic activity. But “the study did not provide any underlying data to support this claim,” says Synapse. “Critical inputs and assumptions — such as the assumed direct energy savings by sector — are necessary to satisfactorily review this finding.”
  • Are permanent jobs really permanent? The ICF study estimates that 2,225 jobs will be supported over 20 years (for 44,600 total job years). But the study doesn’t break down the impact year by year, so it is impossible to know if the jobs are sustained over time or if they start strong and dribble out over time.

Synapse also argued that ICF and Chmura failed to take into account negatives such as the pipeline impact on property values, damage to wildlife habitat and clean water, and the risk of accidents.

The SELC report holds ICF and Chmura to a high standard — it insists that  consultants provide sufficient detail in their data and assumptions to allow third-party review and verification, and that studies be more transparent with their numbers. “In an economic jobs and benefits analysis,” Symapse says, “a complete set of modeling assumptions, inputs, and outputs” typically would be included.

ICF stated that it based its analysis upon years of experience in North American natural gas and “proprietary software tools and databases,” including its Gas Market Model and Integrated Planning Model to model the North American gas and electric markets with and without ACP.

Dominion stands by the ICF and Chmura numbers. Unlike Synapse or SELC,the company has skin in the game. It seeks the best forecasts it can find because it bases business decisions on the data. The utility uses ICF’s commodity price forecast for the Dominion Virginia Power Integrated Resource Plan and other regulatory filings. The company also uses ICF for its own internal business deliberations, says Jim Norvelle, director-media relations for Dominion. “It is safe to say there are significant business decisions made using the ICF International forecast.”

“ICF International and Chmura are internationally known and respected firms,” says Norvelle. “Their findings quantify what is obvious and undeniable: the Atlantic Coast Pipeline will bring significant financial and other benefits to the residents and businesses of Virginia, West Virginia and North Carolina. It is Economics 101. More natural gas supplies mean lower prices, more money available for investment, better reliability and cleaner air. Just plain common sense.”

Bacon’s bottom line: Synapse makes a good point: Consultant studies should be fully transparent, providing sufficient data and articulating their assumptions for third parties to critique them. But what’s sauce for the goose is sauce for the gander. When SELC and pipeline opponents make assertions about the pipeline’s economic and environmental effects, they need to abide by the same standards they demand of Dominion. They, too, need to lay out their facts and assumptions for public scrutiny.

Virginia’s Tax on Money

gold_coinBy Steve Haner

You can now walk into a retailer in Virginia (or buy from a Virginia retailer online) and get your gold or silver without having to pay sales tax — but only if you have $1,000 to spend.

House Bill 1648 and Senate Bill 1336, signed into law this year, were companion bills that created a new sales and use tax exemption for gold, silver and platinum bullion. Similar bills had been offered for years without success. Are we looking at another example of a government policy promoting income inequality? To get the exemption, you have to spend at least $1,000. The buyer picking up $250 or $500 of bullion is still being taxed.

Effective July 1 the sales and use tax (5.3 percent in most of Virginia, 6 percent in Northern Virginia and Hampton Roads) was not applied to items which met the following tests:

  • It must be refined to a purity of at least 90 percent precious metal. It can be a bar, ingot or coin – but cannot be artwork or jewelry.
  • The sale price must not exceed 120 percent of the value of the precious metal content.
  • The total transaction, which can include more than one exempt item, must exceed $1,000. That is only one ounce of gold, but it is more than four pounds of silver.

You can read the Tax Department guidelines here. Disclaimer: Yes, I worked in support of this bill on behalf of a Virginia Beach company. The $1,000 minimum purchase matches Maryland’s law and in theory limited the fiscal impact. Actually, I’m convinced Virginia has been collecting very little tax on bullion. It was too easy not to pay it.

More than 30 other states – including the largest – already exempt these popular investment items or have no sales tax at all. Virginia dealers have been required to impose the sales tax on any Virginia buyer, which meant most Virginia buyers purchased their bullion somewhere else to save 5-6 percent. They went to the U.S. Mint, which charges no sales tax, or used out-of-state on-line providers and ignored the requirement to pay the use tax.

The smaller investor, spending less than $1,000, will still be doing that. They will still turn around and walk out of the store or cancel the e-transaction before paying the tax. This market is a perfect example of the impact e-commerce makes when there is any marginal price advantage.

Virginia remains behind the times when it comes to the other (and larger) side of this business – collector coins. The introduced bills also would have exempted legal tender, but that far the Assembly would not go. Yes, Virginia, you tax hard money — another investment item not taxed by 30 or more other states.

Investors in coins do much of their business at large national and regional shows, which fill hotel rooms and restaurants in their host cities for a week – generating plenty of other taxes to compensate for the lost sales tax on the coins. None of those lucrative shows will ever come to Virginia unless the General Assembly takes that additional step and stops taxing money. Virginia collectors and investors in these products (big and small) will continue to bypass Virginia dealers and shop on-line.

Stephen D. Haner is the principal of Black Walnut Strategies.

The Boston Globe Visits Richmond

Slavery? What slavery>

Slavery? What slavery?

 By Peter Galuszka

An outside view is always welcome, especially in these incredible days when a lot of Southern mythology is being turned on its head.

Richmond is a great locus for the examination given its tortured history. The former Capital of the Confederacy (more by accident than anything else) is a true crucible.

The Boston Globe is running a series of articles from cities across the country examining how Americans citizens view their identities and how they are reacting to the fast-moving examination of slavery, the Civil War and the debates over its twisted symbols, especially the Confederate flag.

Globe reporter Michael Karnish starts with Ana Edwards, an African-American Richmonder, as she stands near the Jefferson Davis Monument on the city’s famed Monument Avenue packed with Confederate generals, Arthur Ashe and an aviator.

Confederate President Jefferson Davis, who led the insurrection against the United States, is praised as backing “Constitutional Principles” and “Defender of States Rights” (strangely similar to the conservative reaction to the recent U.S. Supreme Court decision on gay marriage).

Nowhere is it inscribed about what the war was all about – slavery.

You might go down to Shockoe Bottom for that. It was once the second busiest slave trading market in the country. There’s a site for an old gallows, a “Burial Ground for Negroes.” Lumpkin’s Jail. Ghosts of about 350,000 slaves “sent downriver from Richmond over a 35-year period before the Civil War.

One of them was Anthony Burns, 19, who escaped to Boston in 1853 but was arrested under a fugitive law and after lots of public demonstrations, was returned to Richmond with federal troops at the ready. He ended up in Lumpkin’s Jail.

There’s not a lot in Richmond to remind about slavery. In fact, when one drives north across the James River on Interstate 95, the Virginia Holocaust Museum makes a bigger impression even though Virginia had nothing to do with the Nazi Final Solution.

The Globe reporter does a fair job of contrasting Carytown, the chic and artsy shopping district (that goes hand to mouth with the city’s annoying fetish for fancy food and craft beer) with other parts of the city that are chock full of impoverished people. One out of every four Richmonders is officially poor.

Mayor Dwight Jones, an African-American, discusses his plans to eliminate public housing and fill it with mixed-use and mixed-income developments.

The next page to turn will be the UCL World Cycling Championship where 1,000 international cyclists will converge on Richmond for nine days in September. It is expected to draw 450,000 spectators (as the promoters insist they be called). Jones is a big promoter.

But plans are to have the cyclists zip past the 1907-era Confederate generals and Jefferson Davis on the city’s most famous avenue about 16 times before video cameras that will be broadcast globally. What kind of impression will that make? Given Richmond’s enormous and unresolved image problems and insecurity, can it simply and politely avoid facing the past as it has for 150 years and expect everyone else to go along with it?

I wouldn’t expect Mayor Jones to come up with an answer since he has failed to do much to put a slavery museum in Shockoe Bottom, the most appropriate spot for it. Instead, he was pushing some kind of museum along with an expensive project including a minor league baseball stadium and bars and restaurants.

To be sure, I am not completely sure people or newspapers from Boston have a lock on any moral compass. I went to college there for four years in the early 1970s and heard so much self-righteous nonsense that I began to think of myself as a Southerner.

After all, in the fall of 1974, just after I graduated and went back to North Carolina, Boston erupted into racial violence over court-ordered busing to integrate its de facto segregated schools.

In this case, however, the Globe has a good perspective on Richmond. It is a valuable addition to the debate.

More Gas in Dominion’s Electric Power Future

The combined cycle process

The combined cycle process. Image credit: Mitsubishi Hitachi Power Systems

by James A. Bacon

Dominion Virginia Power asked the State Corporate Commission yesterday for regulatory approval to build a $1.3 billion natural gas-fired power station in Greensville County. The station will generate about 1,600 megawatts, a substantial addition to the power company’s existing 17,600 megawatt fleet.

Combined-cycle technology represents an advance over older gas-fired facilities by running waste heat through a second generator to create additional electricity. The process extracts more heat from a cubic foot of gas and emits less carbon dioxide per unit of energy generated. The station also will have lower water usage and wastewater discharge, Dominion says.

“Our analysis shows that over the life of this station our customers should save more than $2 billion versus the projected cost for purchasing the same amount of power for customers off the regional power grid,” said David Christian, CEO of Dominion Generation in a press statement. “It will be highly efficient, low cost and very reliable. It will also have excellent environmental attributes and an extremely favorable location for fuel and transmission service.”

In a statement released yesterday, a coalition of four environmental groups addressed Dominion’s 2015 Integrated Resource Plan (IRP), a 15-year outlook of the company’s fuel and facility mix. The statement did not mention the Brunswick facility directly but listed three principles for achieving the objectives of the Environmental Protection Agency’s draft Clean Power Plan, which sets a preliminary target of 38% reduction in CO2 emissions by 2030. The statement called for full disclosure of the company’s carbon emissions, greater attention to Governor Terry McAuliffe’s goal of reducing energy consumption 10% by 2020, and greater emphasis on renewable energy.

At least one of the environmental groups, the Virginia Chapter of the Sierra Club, is on record opposing an earlier gas-fired plant proposed by Dominion in Brunswick County. “Relying more heavily on natural gas is not how we want to power our state. Energy efficiency is cheaper, cleaner, and more reliable than gas-fired power plants and provides 21st century jobs.”

Both the Brunswick and Greensville plants are included in all scenarios of Dominion’s 2015 IRP. That plan laid out a low-cost scenario, which would not meet EPA goals, as the basis for cost comparison, and proposed four alternate scenarios emphasizing different fuels, including solar, wind, nuclear and natural gas co-fire to supplement existing coal-fired plants. The following elements are common to all four scenarios:

  • The natural gas-fired, combined-cycle Brunswick Power Station, with a generating capacity of nearly 1.7 MW, to be completed in 2016.
  • A second combined-cycle plant in Greensville County, with a generating capacity of nearly 1.6 MW, to be completed in 2019.
  • Retrofit of the 790 MW oil-fired unit 5 at Possum Point Power Station with pollution controls to reduce nitrogen oxide emissions.
  • Retirement of Yorktown Power Station’s two coal-fired units with a combined generating capacity of 320 MW by 2016.

Dominion also envisions integrating more solar, wind and energy efficiency into its long-range plans. These initiatives include:

  • 400 MW (nominal capacity) of company-owned solar capacity, including the announced 20 MW Remington Solar facility by 2020.
  • 400 MW (nominal capacity) of solar capacity owned by non-utility generators (NUGs) by 2017.
  • 16 MW (nominal capacity) installed on customers’ property through the Solar Partnership Program.
  • 12 MW (nominal capacity) Virginia Offshore Wind Technology Advancement Project by 2019.
  • 611 MW reduction in peak demand through implementation of demand-side management programs by 2030.

The most cost-effective green energy alternative on a risk-adjusted basis is solar power, Dominion concluded in its IRP. (See “Here Comes the Sun.”) However, the report emphasized that assessment does not take into account the expense associated with upgrading the power grid to handle rapid fluctuations in supply caused by clouds. The IRP also concluded that wind power was the most expensive of the four alternatives.

Taking The Statues Down

stalin By Peter Galuszka

In 1993, I was stumbling along the rough concrete sidewalks of Alma Ata, then the  capital of the former Soviet Republic of Kazakhstan. I was late for an interview with an official of what was now an independent nation rich in oil, natural gas and uranium.

The street map I had was old. I stopped a Kazakh woman in a kerchief and asked, “Is this Lenin Street?”

“Not anymore,” she replied. “It is Apple Street.”

Therein lies a small history lesson. Every human society, it doesn’t matter, where undergoes a major reassessment of how its humanity squares with its history.

The former Soviet Union is an excellent example. Its architect, V.I. Lenin, was a brilliant organizer but a killer. Josef Stalin murdered at least 20 million (who’s counting?) during the Great Purge and later in the war against Hitler.

Time and again, the old USSR and now the Russian Federation would undergo a change in leadership and the statutes would come down. They did when Stalin died in 1953 in Eastern Europe. Russians were shocked when new chieftain Nikita Khrushchev gave his liberal-minded “Secret Speech” in 1956 denounced Stalin. When another liberal, Mikhail S. Gorbachev, came to power in 1985, he pushed the national conversation even further.

By that time, I was reporting there for an international magazine. I visited a tractor factory in the town of Vladimir in 1987. Its very bright deputy director who would go on the Harvard Graduate School of Business, smirked uneasily when he said the factory was still named after Andrei Zhdanov.

He didn’t need to mention that Zhdanov was a Stalin thug who oppressed artists like Anna Akhmatova and Dmitri Shostakovich. He also was instrumental in starting the great purge of the 1930s during which 1.5 million people were imprisoned and more than 680,000 were shot.

The old statues really started to come down after the Soviet Union fell apart in 1991. The Zhdanov plant got a new name (although the way things are going under Vladimir Putin, the statues are starting to go back up).

So, what’s may point? That all societies need to air their history and their myths – including the ones that white Southerners have clung to for yours. Are some so arrogant as to claim they are above what other nations undergo?

Mother Jones, one of my favorite magazines, has story listing just how many streets, schools and public buildings are named after dubious characters. In Jacksonville, Fla., they renamed a high school named after Nathan. Bedford Forrest, a lieutenant general in the Confederate Army and founder of the Ku Klux Klan. North Carolina has renamed school facilities named after former Gov. Charles Aycock, a white supremacist.

And for the truly strange, look no farther than Richmond. The Martin Luther King Jr. Middle School is on a street named after John Singleton Mosby, a famous Confederate cavalry raider.

Disgraceful

Richmond City Hall

Richmond City Hall

by James A. Bacon

Fiscal Year 2015 in Virginia came to a close yesterday but the City of Richmond still had not filed its Comprehensive Annual Financial Report (CAFR) for FY 2014, reports the Richmond Times-Dispatch. The report provides an audited overview of revenues, spending, assets and debts critical to appraising a locality’s financial condition.

The City of Richmond is one of only three localities still to have failed to issue the report, the filing deadline for which was seven months ago. With a population of 218,000, Richmond is by far the most populous of the three, which includes poverty-stricken Wise County (pop. 40,000) and the town of Dumfries (pop. 5,100).

“A ten-month delay for something that should be a basic function of government is unconscionable,” said City Councilman Jonathan T. Baliles. “This is what happens when you ignore the fundamentals of government.”

City officials, reports the TD, have cited employee turnover, a lack of training and challenges in implementing a new financial system as reasons for this year’s delay. In other words, city officials blame dysfunctional management.

The problems did not materialize overnight, however. The city issued emergency procurement documents for outside help from an independent consultant to ensure timely completion of the 2013 CAFR. Payments to that consultant have risen from an anticipated $95,000 to $295,000 under  March contract extension.

Shortly thereafter, the city’s auditing firm, Cherry Bekaert, fired the city as a client. According to the TD, partner Eddie Burke cited “a high-risk, dysfunctional working environment that ‘has continually gotten worse every year.'” Ask yourself: How bad did the situation have to be for a midsize CPA firm to turn down a $320,000 annual contract?

Bacon’s bottom line: As Baliles says, balancing the books is fundamental. Add this failure to a string of other spending and administrative scandals over the past few years, and it seems pretty clear that government in Virginia’s capital city is a mess. It wasn’t always this way. Long-time residents remember when Robert C. Bobb ran the city in the 1980s as one of the most effective city managers in the country.

Ultimately, it is the responsibility of one person — the mayor — to ensure that the city functions properly. While Mayor Dwight C. Jones is good at striking the right rhetorical chords on a variety of issues, he has proven ineffectual as an executive.

I admire Jones’ response to the controversy over the Confederate flag and other symbols of the Confederacy, including the statues along Monument Avenue. “Rather than tearing down,” he said recently, “we should be building up in ways that establish a proper sense of balance and fairness by recognizing heroes from all eras to tell a richer and more accurate story of Virginia’s history.” Those are the words of a uniter and a healer, not a divider.

But I’m concerned that Jones doesn’t have much interest in the nuts and bolts of government. Perhaps that is understandable considering that he has divided his time between his responsibilities as mayor, Senior Pastor of First Baptist Church and for a year, chairman of the Democratic Party of Virginia. But when he does focus on his mayoral duties, instead of making sure the trains run on time, Jones has promoted high-profile projects like the Shockoe Bottom baseball stadium, the Washington Redskins training park and the World Road Cycling Championship.

Private investors are pouring money into the city. What most of them want to see, however, isn’t wheeling and dealing that rewards a privileged few. They want to see a city that does the things that cities are supposed to do. Like close out the books on time.

What It Takes to Power the Cloud

power_lineby James A. Bacon

If it’s not one thing, it’s another. The “rural crescent” in the western reaches of Prince William County has fended off development threats from Disney’s America to four-lane highways. The latest hazard to rural tranquility: a proposed Amazon Web Services (AWS) data center and an electric transmission line to deliver electric power to it.

Emulating the success of its neighbor Loudoun County in encouraging data-center development, Prince William economic development officials have sought to recruit lucrative data centers in the county. Data centers generate tremendous local taxes — roughly $1 million annually per data center in Loudoun — while making minimal demands on local government services.

However, data centers do require electricity — lots of it. Someone has to generate that electricity, which can be an issue because no one wants power plants nearby, and someone has to deliver the electricity, which also is an issue because no one likes looking at power lines. In the case of western Prince William, serving a new AWS facility with electricity would require Dominion to build a six-mile, 230,000-volt transmission line from Gainesville to Haymarket, according to the Washington Post. And many locals don’t want a power line any more than they wanted a Disney theme park or an outer beltway.

Prince William Supervisor Peter K. Candland  is skeptical that a new power line is needed to serve the community, where growth is largely discouraged. “In the last four years, we’ve only approved about 400 new homes and one senior living community,” he told the Post. “I don’t see any other developments on the horizon,” he added. “We’re in a holding pattern.”

Haymarket Mayor David Leake says the power line is “really for one customer, for one need” — Amazon.

Dominion, for its part, says, “The determination has been made that the need is there.”

AWS operates one data center on John Marshall Highway, and county economic developers have held discussions with a local property owner to accommodate another one, including a Dominion sub-station to serve it. Given local resistance, however, the property owner told the Post that it would not seek the zoning necessary to build one.

Bacon’s bottom line: This controversy is instructive in so many ways. First, it shows that localities seeking to bolster their tax base with data centers need to plan for them. Loudoun County is ahead of the game, having developed a special zoning category for data centers and planned for them in other ways. Judging from the Post article, Prince William seems to be winging it.

Second, the hoo-ha in Prince William highlights a potential obstacle to achieving the kind of energy conservation called for by environmentalists to meet the goals of the Environmental Protection Agency’s Clean Power Plan. One of the biggest potential sources of energy efficiency is migrating business data and computing from energy-inefficient in-house servers to state-of-the-art data centers maintained by cloud providers like AWS, Google, IBM, Microsoft and others. Data centers can reduce the energy cost of storing and processing data by 80%. They reside in inoffensive buildings that generate little traffic and impose few costs on local government, but they require electric power. Supplying that power sometimes requires building new sub-stations and transmission lines. If the United States, as a society, is serious about achieving gains in energy efficiency, it needs to figure out how to build the sub-stations and power lines needed to power the cloud.

What’s the Deal with Dominion and Coal Ash?

The coal ash ponds at Possum Point

The coal ash ponds at Possum Point

By Peter Galuszka

So what’s the deal with dumping coal ash and Dominion Virginia Power?

A story in the Associated Press that is getting wide attention suggests that the utility may be consolidating five coal ash dumping ponds at its Possum Point generating plant into one that may or may not be properly lined.

If the lining is inadequate, then the coal ash which contains such dangerous chemicals as arsenic and selenium could leach into Quantico Creek and the Potomac River, according to the Southern Environmental Law Center.

Dominion claims it is in compliance with all current state and federal rules although stricter ones are due soon. So why not wait for final rules and bury the coal ash in a proper way? Dominion thinks that would be too expensive, critics say, and it is making its move now.

Dominion announced recently that it was closing nine coal ash ponds at Bremo Bluffs, Chesapeake, Chesterfield and Possum Point. Some of the ponds were opened in the 1940s. Bremo has converted from coal to gas, as has Possum Point. Chesapeake is closing completely.

Just to quash the potential argument, these closings were announced long before the fossil fuel industry started their “War on Coal” propaganda campaign and is doing so for cost reasons. Possum Point switched from coal in 2003.

Coal ash is messy and can be deadly. Its problems were underscored when 50,000 tons of coal ash stored by Duke in North Carolina broke free and splashed into the Dan River. That polluted rivershore into Virginia. Duke ended up with $102 million or so in fines. Virginia fined Duke a puny $2.5 million.

The Energy Paradox of Virginia-based Data Centers

Loudoun County promotion for its data centers.

Loudoun County promotion for its data centers.

by James A. Bacon

There’s a fascinating paradox in the energy economics of data centers. Outsourcing data storage and computing to hyper-scale, hyper-efficient data centers allows businesses to conserve energy and consume less electricity than they would otherwise. But the outsourcing phenomenon increases demand for electricity where the data centers are clustered.

Because so many state-of-the-art data centers have located in Northern Virginia, Loudoun County in particular, and because those data centers are serving customers as far afield as Philadelphia and Charlotte, outsourcing reduces overall electricity demand compared to what it would be otherwise but also concentrates that demand in a localized geographical area.

That paradox might — and I emphasize might because there may be mitigating factors of which I am unaware — undermine the case that Virginia can meet its proposed goals for the Clean Power Plan through energy conservation. Data centers are a major force in driving electricity demand higher for Northern Virginia utilities, primarily Dominion Virginia Power and the Northern Virginia Electric Cooperative.

Here’s how outsourcing promotes energy conservation: Thanks to economies of scale and the pooling of customers with diverse peak demand, data centers can store and process the same amount of data with a single server that most businesses handle with four. Fewer servers translates into less electricity consumed. Moreover, because state-of-the-art servers invest in more efficient cooling systems, their servers sip less energy. Combine the two and the synergy is powerful. “This represents an 88% reduction in carbon emissions for customers when they use AWS vs. the typical on-premises data center,” writes Jeff Barr for the official Amazon blog.

For good reason, environmental groups have targeted data centers as one of the most promising strategies for improving energy efficiency and reducing carbon dioxide emissions in the United States. If all data centers could achieve just half the savings available by attaining industry-leading performance standards, writes Pierre Delforge with the National Resources Defense Council, the country could save  39 billion kilowatt-hours annually — “equivalent to the annual electricity consumption of nearly all the households in the state of Michigan.”

What applies to the nation, however, does not apply to locations where data centers are clustered. Playing on its location on the Northern Virginia fiber network, a tech-savvy workforce and an expedited permitting process, among other advantages, Loudoun County has targeted data centers for economic development. The 60 or so data centers in the county don’t support many jobs — although the jobs are high paying — but they give a massive boost to the tax base. Buddy Rizer, Loudoun’s economic development director, says data centers contribute $70 million a year in local taxes. Better yet, they create very little demand for local services. Every locality in Virginia would love to recruit data centers if it could.

This enters the debate over implementation of the Clean Power Plan because energy efficiency is one of the strategies which the Environmental Protection Agency says states can use to reach their goals for reducing carbon dioxide emissions from its electric utilities. The goals effectively force Virginia power companies to shut down their least efficient coal-fired plants, with lost capacity to be made up through increased use of natural gas, renewables and energy efficiency.

The operative question is how much can Virginia reasonably expect to reduce electricity demand through energy conservation? Environmentalists say that energy efficiency can help reach the Clean Power Plan goals but power companies say the savings will be offset by increased demand from other sources — such as more electric gadgets and appliances, greater use of computer power and data and, eventually, more electric vehicles. State Corporation Commission staff have expressed skepticism that energy conservation can compensate for shutting down coal-fired power plants, especially if Virginia does not build a new nuclear reactor at North Anna, as some environmental groups propose.

A new study shows that investments in household energy conservation may be far less cost-effective than thought. “The findings suggest that the upfront investment costs are about twice the actual energy savings,” states a University of Chicago Study, “Do Energy Efficient Investments Deliver? Evidence from the Weatherization Assistance Program.” “Even when accounting for the broader societal benefits of energy efficiency investments, the costs still substantially outweigh the benefits; the average rate of return is approximately -9.5% annually.”

Can conservation investments in a business setting like building automation or data outsourcing, where the ROI can be much higher, take up the slack? Perhaps it can on a national level, but it’s harder to make the case in Northern Virginia, where data centers are, in effect, sucking up electricity demand from other parts of the country, even the world.

Business-Labor Coalition Enters Pipeline Debate

Proposed route of Atlantic Coast Pipeline.

Proposed route of Atlantic Coast Pipeline.

by James A. Bacon

More than 100 business, labor and economic development organizations have announced the formation of an advocacy group, EnergySure, to promote the Atlantic Coast Pipeline. The founding members “represent millions of employees and associates across Virginia, West Virginia and North Carolina,” says the organization’s press release.

EnergySure is being funded by the four Atlantic Coast Pipeline partners: Dominion, Duke Energy, Piedmont Natural Gas and AGL Resources. “The ACP partners serve millions of homes and businesses that depend on the companies to meet their energy needs,” states the group’s website. “The EnergySure Coalition was created as a platform for these consumer voices to be heard.”

The proposed 550-mile pipeline would transport natural gas originating from fracked natural gas fields in West Virginia to markets in Virginia and North Carolina.

The advocacy group comes together in response to spirited opposition by landowners along the proposed route, especially in bucolic Augusta County and Nelson County in Virginia. Led by the All Pain No Gain group, foes say the pipeline would harm property values, contaminate water, pose a safety risk and negatively impact local craft agriculture while doing little to create jobs or lower energy prices.

EnergySure hits three main themes in support of the pipeline:

Reliable energy. Virginia and North Carolina need a reliable supply of natural gas to support economic growth. Utility demand for natural gas is expected to triple as power companies in Virginia and North Carolina retire coal-fired power plants and burn cleaner natural gas in its place. Pipeline advocates also assert that existing pipelines are approaching maximum capacity and the inability to bring more gas into the region will make it difficult to recruit manufacturers that require natural gas in their processes.

Economic development. Pipeline construction will support 17,240 jobs across Virginia, West Virginia and North Carolina, asserts EnergySure. Longer term, the pipeline also will save Virginia and North Carolina consumers $377 million yearly over the next 2o years, which in turn will stimulate local economies.

The money consumers save on energy each year could help support 2,200 jobs when reinvested back into Virginia and North Carolina’s economies. Over the next 20 years, the Atlantic Coast Pipeline is projected to generate $7.5 billion in energy savings, $2.6 billion in labor income and $4.4 billion in gross state product to Virginia and North Carolina.

Another bonus: Projected cumulative property taxes are estimated at $25 million annually.

(The website does not say where the economic impact numbers come from. The data comes from a report, “The Economic Impacts of the Atlantic Coast Pipeline,” written by ICF  International, a Northern Virginia professional services firm, for Dominion Transmission Inc. ICF utilized its Gas Market Model and Integrated Planning Model to model the North American gas and electric markets with and without the pipeline. )

Green energy. Two waves of federal regulation — one enforcing stricter standards for emissions of toxic chemicals and the other curtailing carbon dioxide — leave Virginia and North Carolina power companies with little choice but to substitute natural gas for coal in their fuel mix. In addition, gas-fired power plants serve as back-up for solar and wind power, whose power output varies with time of day and weather conditions.

As for local environmental impact, EnergySure concedes that there will be “temporary disruption” during the construction phase, but that “most of the land” the pipeline crosses will return to its original land use. Also, inspectors will be conducting tests through the construction process to ensure water quality remains the same as it was before.

Bacon’s bottom line. With the publication of the EnergySure and All Pain No Gain websites, the battle lines are drawn and the issues clear for all to see.  At the moment, the conflict is shaping up as a David and Goliath contest: rural landowners in Nelson and Augusta counties pitted against the business, labor and economic development establishments of three states.

It remains to be seen how two important constituencies align themselves. Outside property rights groups have not yet played a vocal role in the debate so far, although one would think that they would sympathize with local landowners. Another potential ally, the environmentalist movement, appears to be conflicted. Environmentalists typically side with landowners seeking to protect the local environment against disruptive construction projects, and some environmental groups oppose anything that would promote the production and consumption of fossil fuels (including natural gas) for any reason. On the other hand, pragmatists in the environmental community recognize that the energy economy cannot transition away from coal without more natural gas. To date, major environmental groups have kept a low profile in the pipeline debate.

Politically speaking, the entry of dozens of business, labor and economic development organizations on the side of the pipeline partners would seem tip the odds strongly in favor of the pipeline.