Category Archives: Infrastructure

Dominion Doubles Down on Natural Gas

Questar pipeline operations

Questar pipeline operations

by James A. Bacon

With the acquisition of Questar Corporation, a Salt Lake City-based natural gas distribution and pipeline company, Dominion Resources is making a $4.4 billion bet that natural gas represents the energy future.

“Dominion expects the value of the Questar pipeline system to rise over time as Utah and other Western states seek to comply with the requirements of the U.S. Environmental Protection Agency’s Clean Power Plan and meet state-mandated renewable standards, with increasing reliance on low-carbon, gas-fired electric generation,” stated Dominion, parent company of Dominion Virginia Power (DVP), in a press release announcing the deal.

In the same statement, the company noted that it has committed $1 billion for three solar-generating facilities located in Beaver, Iron and Millard counties in Utah. “These solar facilities are backed by long-term power purchase agreements with local electric utilities,” the company said.

The announcements come at a time when the McAuliffe administration is wrestling with which strategy Virginia should pursue in meeting the requirements of the Clean Power Plan. The EPA gives states some flexibility in meeting its tough goals for reducing CO2 emissions from electric-generating plants. DVP has been leaning toward natural gas as the dominant fuel to replace coal, while keeping open the expensive nuclear option. The Sierra Club and other environmental groups are pushing for much more aggressive use of wind and solar, which emit zero CO2 but create grid-reliability issues when operated on a large scale.

Dominion and DVP contend that the giant Marcellus and Utica shale basins in West Virginia, Ohio and neighboring states will provide years, perhaps decades, of inexpensive natural gas. Although gas combustion does emit CO2, it creates far less than coal. The cost is lower than that of wind and solar, and the fuel source provides more flexibility. Critics counter that the price of gas is volatile and not necessarily the optimum long-term choice. Dominion prefers its DVP subsidiary to burn gas, however, in the expectation that DVP will purchase gas transported on the proposed Atlantic Coast Pipeline, of which Dominion is the managing partner, and utilize its gas storage assets in the Marcellus basin. Keeping the business all in the family, so to speak, will create more profit for the parent company.

The Questar acquisition suggests that Dominion’s top brass really does see natural gas as the energy future. Serving markets in Western states, Questar gains no benefit from its association with Dominion Virginia Power. Rather, as the company explained in its press release, “Questar would provide enhanced geographic diversity to Dominion’s natural gas operations. Dominion’s existing operations lie in the heart of the mid-Atlantic, whereas Questar’s system is the ‘hub of the Rockies’ and a principal source of gas supply to Western states.”

At the same time, Questar fits Dominion’s broad corporate strategy. “This addition is well-aligned with Dominion’s existing strategic focus on core regulated energy infrastructure operations,” said Thomas F. Farrell II. “Questar boasts best-in-sector customer growth in states with strong pro-business credentials and constructive regulatory environments. These high-performing regulated assets will improve Dominion’s balance between electric and gas operations.”

Market commentators had little light to shed upon the merger, noting mainly that stagnant demand for electric power due to energy efficiency has spurred a number of deals between utilities and natural gas distributors, which enjoy stable prices thanks to the supply glut from shale fields.

“Top-line growth in electricity is basically nil,” Kit Konolige, an analyst for Bloomberg Intelligence, said Monday. “They’re looking for a business on the gas side that’s similar to what they’re doing but, as they see it, would have better growth prospects.”

Chesterfield Confronts Cost of Addressing Storm Water Runoff

Virginia Tech bioretention project

Virginia Tech bioretention project

by James A. Bacon

Chesterfield County businesses could wind up paying $308 per year on average to fund the county’s $35 million stormwater utility program, while single-family households could be tagged with $24 per year, reports the Richmond Times-Dispatch.

Needless to say, a lot of people are unhappy with the prospect of a new fee. “It is very unfair that we have to deal with it,” said Steve A. Elswick, board chairman. But noncompliance is not an option. “There have been questions about what if we just don’t do it. Unfortunately we’ll be faced with civil liabilities and criminal charges against the county administrator.” Public hearings on the plan are scheduled in March.

As Bacon’s Rebellion readers know, I’m not a fan of new taxes and government-mandated fees that look and feel like taxes. I believe in smaller, less intrusive government. But if a new tax or fee is justified, the stormwater utility program probably is it.

First off, the burden of establishing a serious stormwater management plan has been working its way through the legislative and regulatory system for a decade or longer. Every local government has known it was coming and has had years to prepare. The fact is, stormwater runoff  imposes significant economic costs. It causes erosion and puts sediment into rivers and streams, it picks up nitrogen and phosphates which contribute to destructive algae blooms, and it carries toxic chemicals from roads and parking lots into the watershed. The end result is significant environmental degradation to Virginia’s streams, rivers and Chesapeake Bay, which causes economic harm to the recreation and fishing industries (to say nothing of the harm done to the wildlife).

Second, the most appropriate way to pay for mitigating stormwater runoff is with a user fee. People should pay in direct proportion to the harm they cause, as measured by the square footage of impermeable surface on their property such as roof tops, driveways, patios and parking areas. That means large retailers with sprawling parking lots would pay the most, as appears to be the case in the Chesterfield plan. Insofar as county roads contribute to runoff, it may be justifiable for a proportionate share of program costs to come from general county funds.

How much will the program cost businesses? Many will pay less than the $308 average, Scott Smedley, director of Environmental Engineering, told the board of directors. And some will pay a lot more. “There is a small percentage on top, large facilities, that have really high bill, so that kind of skews that average.”

I haven’t seen the Chesterfield plan, so I don’t know the details of how the fees are structured. But in an ideal world (ideal from my perspective, at least), businesses should be rewarded through a reduction in fees if they reduce the square footage of impervious surface. One thing the county could do is to relax minimum parking mandates that compel businesses to maintain more parking spaces than they need or want. Indeed, every jurisdiction in Virginia should repeal their parking minimums.

Meanwhile, in General Assembly action, funding for stormwater runoff has become a budgetary issue. The McAuliffe administration’s proposed budget would cut the Stormwater Local Assistance Fund, which provides matching funds to local stormwater-cleanup initiatives, to zero. The Chesapeake Bay Foundation is backing budget amendments that would provide $50 million over each of the next two years. A separate measure would streamline statutory programs to help localities better manage their runoff programs.

Cleaning up the Chesapeake Bay is an environmental and economic imperative. While some may be impatient at the slow pace of progress, the Bay ecology is improving. It took decades to ruin the Bay and it will decades to restore its full potential. Virginia is pursuing a reasonable, slow-but-steady approach that is fiscally and politically sustainable.

Marc Edwards, Virginia Hero

Marc Edwards. Photo credit: Washington Post

Marc Edwards. Photo credit: Washington Post

Just when you begin to lose faith in the system, when you think that spendthrift politicians, corporate cronyism and bureaucratic inertia can never be defeated, along comes someone like Marc Edwards, the Virginia Tech environmental engineering professor who exposed the lead-poisoning scandal in Flint, Mich. Today’s Washington Post describes how he brought the story to light, collecting and testing water samples, assembling a team, battering public officials with Freedom of Information Act requests, and holding government accountable. He spent thousands of dollars of his own money in the process.

A decade previously, Edwards had worked with the Washington Post to demonstrate that corrosion in Washington, D.C.’s pipes had allowed lead to seep into the water supply. He then spent years dogging the Centers for Disease Control and Prevention until the federal agency conceded the flaws in a 2004 report in which it had concluded that no children had been harmed. “There’s a lot of lessons here for how science can go awry, how bureaucracies can use science to hide the truth,” Edwards told the Post at the time.

Edwards is a hero in Flint. He should be a hero here in Virginia, too, and a model of how citizens can make a difference.

— JAB

A Humble Proposal for Addressing Recurrent Flooding

Flooding in Portsmouth. Image credit: Virginia Newsletter

Flooding in Portsmouth. Image credit: Virginia Newsletter

By James A. Bacon

The recurrence of tidal/surge flooding in Hampton Roads has increased from 1.7 days of “nuisance” flooding yearly in 1960 to 7.3 days in 2o14, and with continued land subsidence and sea-level rise, the flooding will become even more common. So say the authors of “Building Resiliency in Response to Sea Level Rise and Recurrent Flooding: Comprehensive Planning in Hampton Roads,” published in the January 2016 issue of the Virginia News Letter.

Of all the region’s localities, according to the paper, the City of Portsmouth has moved the fastest to incorporate adaptive strategies into its comprehensive planning. The low-lying city of about 100,000 citizens is extremely vulnerable, with 38% of households lying within AE Flood Zones and approximately 50 miles of roadway located less than 4.5 feet above mean high water.

Last year the city interviewed nearly 2,000 households to ask about the frequency of flooding, flood-related loss, risk perception and mitigation behavior. Nearly half the residents surveyed reported being unable to get in or our of their neighborhoods in the past year due to flooding; more than a quarter reported being unable to get to work. More than 18% report suffering some form of damage to vehicles.

“There is strong perception among residents that future economic opportunities will be curtailed by changing sea levels; this view is even more strongly held by residents who experience difficulty getting in or out of their neighborhoods due to flood in or out of their neighborhoods due to flood,” the authors write. “About 30 percent of residents agree that flooding specifically has negatively impacted the value of their homes.”

The authors are less clear about what can be done. They allude to three broad strategies for dealing with flooding: retreat, protection and accommodation. Retreat might entail restricting development in low-lying areas. Protection might include sea walls, living shorelines, improvement storm water drains, better street drainage or ditch maintenance. Accommodation might mean accepting inconvenience, disruption and property loss as the “new normal.” But the paper provides little guidance as to when and where these strategies might be appropriate or how they might be paid for.

Bacon’s bottom line: The authors note that households can adapt by installing pumps and drains, relocating HVA systems or buying higher-riding automobiles. But, other than relocating their residences to higher land, there doesn’t seem much else that individual households can do to protect themselves. Some kind of collective action is necessary.

Here’s the problem: In some areas, improvements will be too costly. In others, the real estate is of such low value, it’s not worth saving even at modest cost. But if local governments spend money on one neighborhood, every other neighborhood in the political jurisdiction will want their piece of the pie. And why not? Their residents pay taxes, too.

hot_spots

Flooding hot spots in Portsmouth. Image credit: Virginia Newsletter.

Here’s an idea I throw out for discussion: Create community development authorities that encompass those areas (such as the yellow-red islands shown in map of Portsmouth to the right) that are most prone to flooding. A flood-mitigation plan is developed for each district, with improvements to be paid for with taxes raised from property owners in that district. Then put it to a vote of the residents of the district. Let those closest to the situation weigh the costs (a higher tax) versus the benefits (less property damage, flood-free streets, etc.) and decide for themselves.

The result would be a public-improvement plan more tightly aligned with the local circumstances and less vulnerable to political log-rolling than anything a city-wide effort could pull off and far easier to sell politically.

Five-Year Dominion Spending to Upgrade Grid

Dominion's five-year spending priority: upgrading the grid.

Dominion’s five-year spending priority: upgrading the grid.

by James A. Bacon

Dominion Virginia Power plans $9.5 billion in capital expenditures through 2020, almost two-thirds of which will go to upgrading the company’s transmission lines, substations and distribution system. Other priorities include $700 million for new solar generation and, if approved by the State Corporation Commission, additional funds for undergrounding vulnerable distribution lines.

“We know our customers expect high reliability, clean energy and reasonable rates,” said Robert M. Blue, DVP president in a statement. “We focus on that in everything we do, from building new infrastructure to day-to-day maintenance and fast storm response.”

The capital spending, which will average nearly $2 billion a year, represents a major step-up from the past seven years in which Dominion spent $8 billion, much of it for environmental control equipment to reduce coal-fired power plant emissions of toxic chemicals.

Dominion has the fastest-growing demand for electricity of any utility in PJM Interconnection, which manages wholesale markets and the reliability of the regional electric grid for a 13-state region plus the District of Columbia. The company added 430,000 customers in the past decade, the press release states. Dominion also serves an increasing number of energy-intensive date centers in Northern Virginia.

“Our modern way of life requires lots of energy – and that means infrastructure,” Blue said. “To keep up with energy demand and meet new clean air requirements, Dominion Virginia Power and its parent company are constantly building everything from power stations to power lines, substations to natural gas pipelines.”

Of the $9.5 billion in planned expenditures, Dominion proposes to allocate $3.6 billion for transmission lines and substations, $2.4 billion for its distribution system, and $3.5 billion for new generation and environmental improvements.

While policy makers tend to focus mostly on electric rates and environmental impact, Dominion also emphasizes the reliability of the electric grid. Blue said that reliability, measured by minutes lost due to routine service disruptions, has improved 25% since 2008. “Our reliability in 2015 was 98.8%, which translates into approximately 2 hours of outage time per customer over the whole year.” (Reliability metrics do not take into account outages from major storms.)

Dominion’s proposal to run power lines underground would focus on the most outage-prone tap lines. The idea is to enable electric power to be restored more quickly to customers in the event of a hurricane, ice storm or other major weather-related disruption, which historically has hit the state on average every couple of years.

Speaking of Land-Intensive Solar Plants…

solar_aerialsIn remarks made at a business conference Friday, CEO Thomas F. Farrell II noted how much land solar panels consume. As paraphrased by the Richmond Times-Dispatch, he said:

A solar project that Dominion hopes to build near Culpeper would occupy 125 acres of land and power about 5,000 houses — about 30 percent of the time. By contrast, a natural gas plant in Warren County sits on 39 acres and can power 335,000 houses — about 80 percent of the time.

Writing in a Sunday op-ed pieceT-D columnist Bart Hinkle extrapolated from Farrell’s numbers: “Dominion can generate more than 24,000 megawatts of power all together. To get that from solar power alone would require more than 1,000 square miles of solar panels.”

Assuming Hinkle’s got his numbers right,  that’s roughly equivalent to putting Chesterfield County, Henrico County, the City of Richmond and half of Hanover County under solar panels in order to supply the state’s electricity needs. That’s a serious amount of real estate.

In all fairness, Hinkle’s example is somewhat extreme: No one is calling to convert 100% of Virginia’s electric power to solar. Indeed, Virginia’s Renewable Portfolio Standard sets a voluntary goal of only 15% for the state’s electric power to come from renewable sources, which also includes wind and biomass. And the state energy plan also calls for energy conservation as an alternative to building new generating capacity. But the example dramatizes how much land Virginia will have to dedicate to solar in order to make meaningful progress toward renewable energy goals.

It might be worth debating the pros and cons of converting thousands of acres of land to solar. We should discuss the environmental impact — what kind of wildlife would prosper in fields of solar panels? What would the visual impact be on habitat does fields of solar panels make? How do we minimize the adverse visual and environmental impacts?

I’m serious, solar panels could become one of Virginia’s most extensive land uses. This is something we need to start thinking about.

Update: Commenters have made the valid point that comparing the footprint of solar facilities to that of, say, a natural gas -fired generator is not fair unless it takes into account the right-of-way gas required for the pipeline that serves the gas plant, not to mention the gas storage and drilling facilities associated with the generator. Also, considerable solar capacity could be installed on rooftops.

— JAB

Speaking of Storing Electricity…

battery_storageIn the previous post, I quoted Dominion Resources CEO Thomas F. Farrell II as alluding to the impracticality of storing electricity on a large scale. He is indubitably right about the high cost of storage today, but scientists and entrepreneurs are looking for ways to drive the costs down.

Battery storage of electricity is no more than a niche business at present. In our part of the country, it is used mainly to help PJM Interconnection, which maintains wholesale electricity markets, make tiny, fine-tuned adjustments to equalize the supply and demand of electricity on the grid. But some say that advances in battery technology will make it economical one day to store large amounts of surplus electricity generated by wind and solar power during periods of peak production for use during other times of the day.

Given the strategic importance of power storage, it is interesting to note the submission of HB 452 by Del. Patrick Hope, D-Arlington, to create a Virginia Energy Storage Consortium. Here is a summary of the bill:

Establishes the Virginia Energy Storage Consortium as a political subdivision of the Commonwealth for the purpose of positioning the Commonwealth as a leader in research, development, commercialization, manufacturing, and deployment of energy storage technology. The powers of the Consortium include (i) promoting collaborative efforts among Virginia’s public and private institutions of higher education in research, development, and commercialization efforts related to energy storage; (ii) monitoring relevant developments nationally and globally; and (iii) identifying and working with the Commonwealth’s industries and nonprofit partners. Staff support shall be provided by the Department of Mines, Minerals and Energy. The measure expires on July 1, 2021.

— JAB