Category Archives: Environment

Appalachian Power Proposes Green Power Tariff

west_virginia_turbinesby James A. Bacon

Appalachian Power has proposed an alternative rate for customers who want to purchase 100 percent of their electricity from renewable sources. A rider attached to the company’s Virginia tariff bundles the energy output of renewable generators to provide around-the-clock, carbon-free generation.

The company, whose service territory encompasses the southwestern third of the state, designed the green tariff so that subscribing customers would not be subject to charges relating to fossil-fuel energy generation, and standard retail customers would not subsidize renewable energy.

“We are increasing the amount of renewable energy in our generation portfolio and developing programs to help our customers meet their energy needs with renewables,” said James Fawcett, Appalachian’s manager for energy efficiency and alternative energy initiatives in a press release yesterday.  “The proposed Rider REO is the latest addition to our renewables strategy.”

Initially, the portfolio will consist of 423 megawatts of Appalachian’s current wind and hydroelectric resources. As new renewable resources—including wind and solar—are added, the subscribed portion of those resources will be assigned to Rider REO.

Who will buy this product? Appalachian suggested that the main appeal may be to industry. Said Fawcett: “We expect that the ability to deliver 100 percent renewable energy will also provide economic development benefits to potential commercial and industrial customers seeking that requirement.”

Bacon’s bottom line: If one overlaid Appalachian Power’s territory with an electoral map, it would skew heavily Republican red, with a Trumpian tint. Buchanan County, once a major coal producing county, was recently profiled in the Wall Street Journal for the highest percentage of votes cast for Donald Trump anywhere in the country. I can’t imagine that the company anticipates a surge in retail demand for higher-priced green energy.

The real play is for industry. Just as Amazon Web Services and other data center providers in Northern Virginia are being pressured to use more solar electricity, so are many of the industrial and warehousing companies (think Walmart) that might consider investing in western Virginia. Thus, Appalachian is converting the liability of higher cost electricity into an economic development asset. Very clever. It will be interesting to see what kind of issues arise in the SCC deliberations.

One issue, I expect, would focus on how Appalachian allocates the cost (if any) of (a) upgrading the transmission and distribution grid and (b) maintaining fossil fuel backup capacity for when the wind isn’t blowing and the sun isn’t shining. The accounting discussions, I expect, could get very arcane. Another question is what happens if Appalachian can’t find subscribers for 423 MW of pure-play renewable energy. Do regular ratepayers shoulder the costs, as they undoubtedly would if the green tariff didn’t exist?

Why Dominion Sees Growing Electricity Demand in the 15-Year Future

electricity_demandby James A. Bacon

One of the more controversial forecasts contained in Dominion Virginia Power’s 2016 Integrated Resource Plan (IRP) is a projection that average electricity demand and peak demand in its service territory will increase at an annual rate of 1.5% annually over the next 15 years. If that forecast pans out, demand will outstrip the company’s 12.5% reserve margin when the current round of building projects is complete around 2021, and would create a supply shortage of 4.6 million megawatts by 2031 if no new capacity were added.

Setting aside questions of whether or not Dominion should include more renewable energy in its generation mix, environmentalists find the growth forecast problematic, arguing that electricity consumption is decoupling from economic growth nationally as new technologies become available, industries invest more capital in energy-efficiency, and some states adopt policies that promote efficiency.

I am agnostic on the issue but I believe this is one of the most important debates taking place in the electricity policy arena today. A higher demand forecast would justify a bigger investment by Dominion and Virginia’s other electric utilities, Appalachian Power and the Old Dominion Electric Cooperative, in new generating capacity. A lower demand forecast would support a more constrained approach to capital spending. The debate also raises the question of whether Virginia’s power companies should be moving more aggressively to implement energy-efficiency measures.

With this blog post I present the findings from Dominion’s 2016 IRP. I think it’s fair to say that Dominion has spent more man-hours and more dollars analyzing electricity demand in Virginia than anyone else. That’s not to say its forecasts are more reliable. Dominion concedes the enormous uncertainty regarding Clean Power Plant regulation, and the company may have institutional biases favoring faster demand growth. But it’s the best analysis we’ve got at the moment. I summarize Dominion’s discussion with the aim of stimulating discussion.

Dominion’s econometric model utilizes hourly DOM Zone data — the DOM Zone is the PJM Interconnection-designated zone inside which there are relatively few transmission constraints) and simulates both time-trend variables (electricity demand over time) and weather variables such as wind speed, cloud cover and precipitation. The model factors in time of day, day of week, holidays and seasonal effects, as well as unusual events such as hurricanes.

dom_zone_peak

Graphic credit: Dominion. Click for larger image.

Overall, Dominion’s service territory is a summer-peaking zone, meaning that the highest demand is normally experienced during the summer. However, Dominion also has a weaker, winter peak, which on rare occasions such as the polar vortex a couple of years ago, is stronger than the summer.

While electricity demand has slowed in some sectors as energy-efficiency makes inroads, Dominion expects growing consumption in other areas — PCs, laptops, tablets and other digital devices; electric vehicles (primarily during evening hours); and data centers.  Consolidating data storage in hyper-efficient cloud facilities work to reduce overall overall demand, but the trend displaces consumption from scattered locations in the East Coast to Northern Virginia, which may be the most competitive location in the world for data storage due to its access to high-capacity fiber cable. While data centers do not create many jobs, economic developers like them because their enormous capital investment in servers contributes millions of dollars in local government tax revenue.

Moreoever, the Virginia economy is more dynamic than the national average. Going forward,” states the IRP, “the Virginia economy is expected to rebound considerably within the Planning Period. The 2015 Budget Bill approved by the President and the U.S. Congress has significantly increased the level of federal defense spending for fiscal years 2016 and 2017, which should benefit the Virginia economy.” All other things being equal, a more vibrant economy means higher electricity consumption.

Dominion makes its 1.5%-per-year forecast despite committing to a 2007 Electric Utility Reregulation Act goal of reducing retail electricity consumption by 10% (based on 2006 consumption levels).

To advance that goal, the company has put into place energy-efficiency measures ranging from air conditioner recycling and residential low-income energy assistance to demand-response tariffs for households using smart meters. Also, to curb increases in peak demand, Dominion has instituted a Standby Generation rate schedule providing incentives for businesses to switch to backup generators if demand is overwhelming supply. The size of the standby program is relatively small, however. According to an IRP table, there were 16 events in the summer of 2015 and 12 in the winter, reducing demand by on average by two megawatts. (That compares to about 24,400 megawatts of generating capacity across the utility’s fleet.)

comparative_costs

In the chart above, Dominion displays its calculations of how much various energy-efficiency and alternative-energy programs will cost on a per-megawatt of power conserved or generated. In many cases, the energy-efficiency programs provide the most bang for the buck. But they are limited in scale.

Moreover, it is difficult to calculate the benefits of investments in energy efficiency, states the IRP, because the pilot programs are under-enrolled and small numbers make it difficult to extrapolate to a larger scale. The analysis for one program showed a negative impact on consumption from an energy-efficiency program, while another suggested that for every 1% increase in the price of electricity, household cut consumption by 0.75%. The company considered both to be outliers. More typical is a finding that  1% increase in price leads to a 0.1% cut in consumption  — a ten-to-one ratio.

Despite the uncertainties, Dominion stated in its “short term action plan” that it will “continue to implement cost-effective DSM programs in Virginia and North Carolina.”

Strictest Clean Power Option Would Cost Customers $12.8 Billion, Dominion Says

transmission_lineby James A. Bacon

Meeting the strictest compliance option of the Clean Power Plan would cost customers of Dominion Virginia Power an estimated $12.8 billion in higher electric rates over the next 30 years, the power company revealed in its 2016 Integrated Resource Plan, which it submitted to the State Corporation Commission (SCC) today.

Three lower-cost options would pack a punch as well, costing an additional $5.1 billion to $6.0 billion more than the least-cost plan, which the SCC requires Dominion to examine.

Implementing the strictest plan would increase residential electric bills (with 1,000 kilowatt hours per month usage) by 26.5% in 2022, with a declining impact through 2030.

“Our assumption is that some kind of carbon regulation is coming,” Katherine Bond, Dominion’s Dominion director of public policy said in a press briefing. However, she added that there is enormous uncertainty over what direction that regulation will take. The company examined options based on four broad approaches the Environmental Protection Agency allows states to pursue.

A legal challenge to the Clean Power Plan appears to be headed to the U.S. Supreme Court, which could derail the whole regulatory initiative. However, the McAuliffe administration, which backs the plan, has ordered the Department of Environmental Quality (DEQ) to determine which regulatory option would be best for Virginia if the Clean Power Plan clears the high court. No consensus has developed among the stakeholders who have been meeting for several months to advise the administration.

The Virginia Chapter of the Sierra Club and other environmental groups are backing a “mass-based emissions” approach, which would cap carbon-dioxide emissions on utilities’ existing and new generating facilities. A second mass-based approach would cap emissions from existing power plants only, while two other strategies would limit CO2 emissions using intensity-based goals that limit CO2 emissions per kilowatt hour of power produced. The intensity-based approach would provide more flexibility and give Virginia room to grow its economy, but it would allow greater CO2 emissions.

“We are pleased to see that Dominion is now considering one alternative plan in compliance with the Clean Power Plan, Plan E, that includes capping new and existing fossil fuel sources,” said Glen Besa, director of the Virginia Sierra Club in a statement responding to the IRP. “While Dominion claims that Plan E is the most expensive alternative, it is important to note that most of this cost is attributable to Dominion’s inclusion of a new $19 billion nuclear reactor at North Anna.” That reactor alone could raise customer rates by as much as 25%, found an analyst for the Attorney General’s office.

Also, Besa told Bacon’s Rebellion this afternoon, the IRP Dominion submitted last year recommended a plan that would increase CO2 emissions by 60%. He had not had a chance to examine the 2016 IRP, but he doubted the low-cost plan differed enough to change the percentage by much.

The low cost plan includes the following:

  • Three combined cycle gas units one one location: 3,183 megawatts
  • Two combined cycle gas units at a second location: 1,062 megawatts
  • Combustion turbine: 2,288 megawatts
  • Solar: 1,000 megawatts
  • Offshore wind: 12 megawatts

By contrast Dominion’s Plan E (the lowest carbon-emitting scenario) envisions the addition of the following capacity:

  • Two combined-cycle natural gas units: 3,186 megawatts
  • Combustion turbine: 1,373 megawatts
  • Solar: 8,000 megawatts
  • Nuclear: 1,452 megawatts
  • Offshore wind: 12 megawatts

Dominion cites two reasons for the high expense of the lowest carbon scenario. First, it relies heavily upon solar energy. Although the “fuel” — the sun — is free, its capacity rating, or the percentage of time a solar facility actually generates electricity is lower than for other fuel sources. Moreover, it is intermittent, which means Dominion cannot necessarily call upon it when needed, which means it must maintain backup capacity. Second, the low-carbon approach rules out coal and most new natural gas, leaving only one low-carbon alternative to provide base generation — nuclear. The lowest-carbon scenario is the only one in which Dominion envisions building the North Anna 3 unit.

Dominion did not recommend any of the alternatives it examined, but it did recommend against the mass-based programs because they offer the least flexibility in achieving compliance.

While electricity consumption has leveled off nationally, Dominion sees it continuing to grow in Virginia at an average 1.5% growth rate over the next 30 years, creating a large and growing capacity gap. Environmentalists contend that the growth rate could be reduced significantly if Dominion pursued energy efficiency strategies more aggressively. Dominion counters that Virginia’s population and economy are growing, driven by a significant degree by the growth of the energy-intensive data center industry in Northern Virginia.

Less Hysteria in the Coal Ash Debate, Please

A Dominion employee holds a container of treated coal-ash wastewater at the company's Bremo facility. The water was treated to be safe for aquatic life, not for people to drink. It would make no sense to do so.

A Dominion employee holds a container of treated coal-ash wastewater at the company’s Bremo facility. The water was treated to be safe for aquatic life, not for people to drink. It would make no sense to do so.

by James A. Bacon

Yeah, I have a problem — a big problem — when people like Marion Kanour, an Episcopal priest from Nelson County and a member of the Knitting Nannas of Virginia, are quoted uncritically in newspaper articles like today’s Richmond Times-Dispatch coverage of an environmental protest.

Referring to treated coal-ash wastewater released into the James River from Dominion Virginia Power’s Bremo Power Station yesterday, Kanour said:

I’m not sure how many parts per million you’re willing to ingest, but I’m not willing to ingest any. I guess it was much less expensive to poison the rest of us.

There are environmentalist professionals who know what they’re talking about, and then there are local activists who don’t. The professionals are careful what they say. The activists spew crazy stuff that clouds the debate. Kanour’s quote is a classic example of crazy stuff.

No one will be “ingesting” wastewater in parts per million or any other detectable level. The discharge will flow into the James River at a maximum rate of 1,500 gallons per minute and mix with a river flow of 5.5 million gallons per minute under normal conditions. The nearest water intake for a municipal treatment facility is 50 miles downstream. Any water taken into the Richmond water treatment plant undergoes an extensive treatment to make it suitable for drinking. A critical step is adding chlorine to kill bacteria. The Bremo wastewater is not treated with chlorine because adding that chemical to the river…. (drum roll)… would be harmful to aquatic organisms.

The kinds of statements Kanour makes have nothing to do with the real debate. The battle line is not over whether to put toxic swill or clean, drinkable water into the river, but over how frequently to test wastewater quality and what protocols to follow to ensure the water meets DEQ standards. The parameters of the dialogue between DEQ, Dominion and environmental groups are extremely narrow. If the Bremo controversy were a football field, the question is whether the football belongs on the 49 yard line or the 47 yard line, not the 10 yard line.

Talk about “poisoning” people with undrinkable water is hysterical nonsense that alarms people unnecessarily and makes it more difficult for the professionals — and by that I include the environmental groups who do know what they’re talking about — to do their jobs.

Update: Bacon eats crow. In the original post, I chastised Marion Kanour for spouting “crazy stuff,” such as saying that heavy metals discharged into the James River would be measured in “parts per million” instead of “parts per billion.” Well, in that instance, I’m the one who spouted crazy stuff, for, in fact, effluent levels are measured in micrograms, which are units equivalent to one-millionth of a liter. So I formally apologize for my rash statement, and I have removed the offending paragraph.

The rest of my criticism stands.

–JAB

Where the Grass Is Always Greener…

underwater_grassThe abundance of underwater grass in the Chesapeake Bay rebounded 21% between 2014 and 2015, reaching the largest extent in more than 30 years of aerial mapping by the Virginia Institute of Marine Science (VIMS) and surpassing the Chesapeake Bay program’s 2017 restoration goals two years ahead of schedule.

Aerial imagery revealed a total of 91,600 acres of underwater grasses, a number that fluctuates considerably year to year, depending upon weather conditions, and had not shown any marked improvement since 1990 or so, the Chesapeake Bay program announced earlier this week.

Underwater grasses are critical to the Chesapeake Bay ecology, providing a habitat for aquatic species, keeping waters clear by trapping suspended solids, and buffering shoreline erosion. The Chesapeake Bay program has set a goal of achieving 130,00 acres of underwater grasses by 2025 and an ultimate goal of 185,000 acres.

— JAB

Report Outlines Gas Pipeline Risks to Rate Payers

Pipeline construction between West Virginia and Pennsylvania

Pipeline construction between West Virginia and Pennsylvania

by James A. Bacon

The proposed Atlantic Coast Pipeline (ACP) and Mountain Valley Pipeline (MVP), designed to bring low-price natural gas in the Marcellus and Utica shale fields to Virginia and North Carolina, pose significant risks to electric utility rate payers and landowners along their routes, argues a new study, “Risks Associated with Natural Gas Pipeline Expansion in Appalachia.

“Pipelines out of the Marcellus and Utica region are being overbuilt,” states the report, written by the Institute for Energy Economics and Financial Analysis, whose stated mission is to accelerate the transition from fossil fuels to renewable energy sources. “Overbuilding puts ratepayers at risk of paying for excess capacity, landowners at risk of sacrificing property to unnecessary projects, and investors at risk of loss if shipping contracts are not renewed and pipelines are underused.”

A major justification for both pipelines is to provide Dominion Virginia Power and other electric utilities access to natural gas from West Virginia and Ohio, which for several years has been selling at a discount to Gulf of Mexico gas. But once a slew of proposed pipelines is built, the report contends, that price advantage likely will disappear, raising the possibility that the $9 billion cost of building the two pipelines will exceed the savings from lower gas prices.

“Shale drillers cannot continue to produce below cost indefinitely,” states the report. “In the longer term (10-15 years), it is likely that Marcellus and Utica gas prices will stabilize at a somewhat higher level. These longer-term prices will have a significant impact on the long-term economics of the Atlantic Coast Pipeline, which is designed as a 40-year project.”

Aaron Ruby, a spokesman for Dominion Transmission, managing partner of the ACP, disputed the conclusions of the report, saying, “There is no question about the urgent public need for the Atlantic Coast Pipeline. This project was developed in response to the real and demonstrated need of public utilities in Virginia and North Carolina. … Demand for natural gas in the region will increase nearly 165 percent from 2010 to 2013. Yet there is not enough infrastructure or supply … to meet this growing demand.”

Increased demand will come from electric utilities switching from coal to natural gas and from population growth, Ruby said. In Hampton Roads natural gas is in such short supply that service has been curtailed during extreme weather events for industrial customers, and attracting new customers burning natural gas is all but impossible.

Last month 33 area legislators signed a letter saying, “The need for this project is urgent; to put it bluntly, our region’s natural gas transportation system has reached a tipping point. The pipelines serving Hampton Roads are fully subscribed. Without new infrastructure, there is no way to meet our region’s rising demand for natural gas … crippling out prospects for economic growth.”

Mountain Valley Pipeline said that it had retained Wood Mackenzie Inc. to provide an independent analysis of long-term natural gas supply and demand in the Southeast. The resulting report, says MVP spokesperson Natalie Cox, “makes clear that the Southeast market alone has more than enough natural gas demand to support the MVP’s current capacity of 2.00 [decatherms] per day, and it’s important to remember that [the] Southeast is only one of MVP’s target markets.”

Graphic credit: Institute for Energy Economics and Financial Analysis

Graphic credit: Institute for Energy Economics and Financial Analysis

The Marcellus gas boom

The pipeline-building boom has been driven by soaring natural gas production in the Marcellus and Utica shale fields, in which production has outpaced the ability of pipeline companies serving the region to transport the gas to customers. A persistent price disparity has opened up between the “Henry Hub” price for Gulf gas and the “Dominion South” hub for shale gas, as seen in the graph above. Backers of both the ACP and MVP projects have argued that their pipelines will allow electric utilities to access the lower-priced Marcellus gas, saving $377 million a year for ACP’s Virginia and North Carolina customers alone.

The low gas prices are driving a race among natural gas companies to build new pipeline capacity to reach higher-priced markets, states the IEEFA report. “Pipeline companies [are] competing to see who can build out the best networks the quickest.” Continue reading

Treated Coal Ash Water Flows Today

Jason Williams, environmental manager, addresses members of the Richmond media.

Jason Williams (right), environmental manager, addresses Richmond media.

by James A. Bacon

After months of controversy, Dominion Virginia Power will start draining today more than 200 million gallons of water from its coal ash ponds at the Bremo Power Station. “We’re treating to levels that will be fully protective of the river,” Jason Williams, the environmental manager in charge of the project, told a media gaggle invited yesterday to view the water treatment facilities.

Treating the water to meet quality standards protective of aquatic life will cost about $35 million at Bremo and take a year or more, depending on how smoothly the process goes and how much rainwater is added to the coal ash ponds during the period. If Dominion consistently meets those standards, Department of Environmental Quality (DEQ) officials say that the odds of event negatively impacting human health or aquatic life in any given year are less than three in one thousand.

While the eight-step water-treatment system is basically the same design that the company submitted with its permit application to the Department of Environmental Quality, Dominion agreed to stricter protocols for treating, monitoring and testing the water quality in a settlement with the James River Association.

Coal ash is the residue from coal combustion, and it contains heavy metals that are toxic in high enough concentrations. Historically, electric utilities have stored the ash in ponds where it mixed with water to create a sludge. To prevent leaks and spillage from the ponds, the Environmental Protection Agency (EPA) is requiring power companies to remove the water and then find a safe place to store the ash. The James River Association has signed off on Dominion’s plan to de-water the coal ash at Bremo. Meanwhile, Dominion is applying for a separate permit to cover the disposal of the de-watered ash, which will create its own set of issues and potentially generate a fresh controversy.

For now, though, everyone is on board with the de-watering plan. Williams outlined the eight-step process, which he calls “state of the art.”

treatment_system2

Graphic credit: Dominion (Click for larger image)

  • Aeration. Water from the coal ash pond is piped into a tank where the addition of air facilitates the water-cleaning process.
  • pH adjustment. Acidity is reduced, which encourages particles in the water to separate and settle.
  • Clarification. Chemicals are added to the water to help the particles clump together so they will settle out of the water.
  • Settling tanks. Solids from the clarification process are separated from the water, collected, and disposed of in a landfill.
  • Filtering. The water is passed through filters to remove even more particles.
  • Enhanced treatment. The water is tested. If certain constituents such as heavy metals remain close to trigger levels agreed to by the James River Association, the water is run through an extra piece of equipment to remove them.
  • pH adjustment. If needed, the pH level of the water is adjusted back to levels that are safe for the river.
  • Holding tanks. The water is pumped to one of four 950,000-gallon holding tanks where it is tested again before being released into the water. Dominion expects the water in these tanks to meet standards, but if it doesn’t, it will be routed through the treatment process again.

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