Tag Archives: James A. Bacon

APCo Forecast: One Quarter Renewables by 2030

Image credit: Roanoke Times

Image credit: Roanoke Times

by James A. Bacon

While acknowledging regulatory and market uncertainties that could change its thinking, the Appalachian Power Company (APCo) plans to meet its projected demand growth over the next 15 years through solar power, wind power, battery storage, energy efficiency initiatives and demand-side management strategies, according to the company’s 2016 Integrated Resources Plan filed earlier this month. Renewable solar and wind energy sources would provide roughly one-quarter of APCo’s generating capacity by 2030, but the company would continue operating most of its existing fleet of coal- and natural gas-fired generators.

Roanoke-based APCo serves 526,000 customers in Virginia and another 431,000 in West Virginia and Tennessee, making it the second largest electric power producer serving Virginia.

Meeting the requirements of the Clean Power Plan, a sweeping overhaul of the electric power industry designed to reduce carbon-dioxide emissions, will result in incremental costs to APCo of $300 million to $600 million, the company estimated. Several states have challenged the constitutionality of the plan, however, and U.S. Supreme Court action may not resolve the legal issues until next year.

APCo forecasts that electricity demand will increase at an average annual rate of 0.3% annually. For purposes of comparison, that is considerably lower than the 1.5% annual growth rate projected by Dominion Virginia Power, whose service territory is expected to experience faster population and economic growth, goosed by growth in power-hungry data centers in Northern Virginia. APCo also assumes that the installation of 60 MW (megawatts) of rooftop solar generation by homeowners and businesses will cut into electricity demand.

The APCo IRP describes what it calls its “Hybrid Plan” that “attempts to balance cost and other factors while meeting APCo’s peak load obligations.” Major elements of the plan include:

  • Adding 20 MW of large-scale solar energy by 2018, with subsequent additions reaching 590 MW by 2030.
  • Adding 300 MW wind energy by 2018, followed by future additions totaling 1,800 MW by 2030.
  • Implementing energy-efficiency programs reducing energy requirements by 203 MW by 2030.
  • Adding 20 MW of battery storage in 2025.
  • Retiring two natural gas-converted Clinch River generating units by 2026.

Over the 15-year planning horizon, the Hybrid Plan would reduce coal-fired assets from 61.2% of nameplate capacity to 47.8%, while wind and solar assets would climb from 5% to 24.8%. Because wind and solar generate power only when the wind is blowing and the sun is shining, actual energy output from renewables would be lower than the nameplate capacity, increasing from 2.7% to 18.5%.

Making the job trickier is the fact that APCo’s peak load demand occurs on winter mornings rather than on summer afternoons when Dominion and most other mid-Atlantic utilities experience their peaks. The early-morning winter peak demand makes solar energy a poor match. While rooftop solar will help reduce APCo’s total energy consumption, solar’s peak production mid-day in summer months “does not alleviate APCo’s overall distribution and transmission requirements as they relate to peak demand,” states the IRP.

Likewise, APCo finds itself an odd man out in the PJM regional transmission organization (RTO), which creates wholesale markets for the buying and selling of electricity. “The Company’s load profile does not align with that of PJM. APCo experiences its greatest demand during the winter, and hence is a winter-peaking entity. PJM as a whole operates as a summer-peaking RTO.” The result: APCo is short on energy in winter months.

Another challenge will be accommodating the expected surge in distributed generation (DG) in the form of rooftop solar. “Higher penetration of DG can potentially mask the true load on distribution circuits and stations if the instantaneous input of connected DG is not known, which can lead to underplanning for the load that must be served.” APCo foresees the need to install smart inverters in its distribution grid to control “voltage and other circuit parameters.”

Meanwhile, the company projects a need to upgrade its electric transmission grid (which handles larger, longer-distance electricity flows than local distribution lines) to interconnect with merchant generators providing up to 1,000 MW of additional capacity over the next several years.

To provide more flexibility, APCo will add 20 MW of battery storage. While batteries will not store enough electricity to meet wide swings in electricity demand for long periods of time, they can help smooth electricity output resulting from fluctuating solar and wind generation.

“This plan is essentially a snapshot of a process that is constantly under review based on changing market conditions, the economy, and the adoption of new products by consumers among many other variables,” said Charles Patton, Appalachian’s president and chief operating officer, in a press release. “We, as a company and an industry, continue to plan and adapt to the constant change of our markets so that we can remain healthy and deliver reliable power to our customers—now and in the future—at a reasonable price.”

Are Smaller Metros Becoming Competitive with Big Metros?

Governor Terry McAuliffe (left) and Steve Case

Governor Terry McAuliffe (left) and Steve Case. Photo credit: Richmond Times-Dispatch

by James A. Bacon

The flight of promising startup companies from smaller cities to big ones “is beginning to change,” AOL co-founder Steve Case said yesterday during an entrepreneurship event in downtown Richmond yesterday. Regions such as Richmond can avoid losing startups to bigger metros, he told the Richmond Times-Dispatch, “if you build up the right infrastructure in terms of capital and talent.”

You can take Case’s words with a heavy helping of salt — he was on a cross-country bus tour to promote entrepreneurship and his new book, “The Third Wave,” in which he argues that the third phase of the digital revolution is integrating the internet “in seamless, pervasive and sometimes even invisible ways” throughout our lives. This third wave, he contends, will revolutionize traditional sectors such as energy, health care, education, transportation, and food.

Currently, about 75% of all venture capital deals are consummated in just three states — California, New York and Massachusetts. “That does not reflect the distribution of great entrepreneurs with great ideas,” Case said. “There are a lot of great entrepreneurs in Virginia.”

The T-D article provided little explanation of why Case thinks why smaller cities will fare better than the past, other than citing the rise of crowd-funding, which allows average investors to find and invest in small startups.

Indeed, Case’s prognostication makes quite a contrast to a post I published earlier this week, “A New Map of Economic Growth,” which suggested new business formation is becoming more concentrated in a few large cities, not less. There is a large body of economic theory to suggest that, all other things being equal, larger metropolitan regions enjoy a big competitive advantage in the Knowledge Economy over smaller ones. Both job seekers and the companies that hire them prefer doing business in larger labor markets where they have more choices.

There wasn’t enough in the T-D article to make Case sound terribly persuasive. However, Case is one shrewd guy. He built AOL into an internet powerhouse and then, seeing that his subscription-driven business model was living on borrowed time, sold out to Time Warner at an extraordinary premium.

I’d like to think that there’s a strong case to be made for a smaller-metro revival in fortune. It just can’t be divined from Case’s remarks yesterday.

However, Governor Terry McAuliffe left no doubt in his remarks what he thought the secret is — a business-friendly environment and workforce training. He said his goal is to revamp high school education to produce graduates better prepared for the 21st century economy. “My goal is when every child gets out of high school that they have a skill to match the jobs that are out there today.”

A Major Setback for Virginia OffShore Wind

We won't be seeing any of these off the Virginia coast any time soon.

We won’t be seeing any of these off the Virginia coast any time soon.

The U.S. Department of Energy (DOE) has withdrawn $40 million in funding from the Virginia Offshore Wind Technology Advancement Project (VOWTAP), dealing a major blow to plans to build two experiment wind turbines off the Virginia coast and jeopardizing the prospect of major offshore wind development in the foreseeable future.

Dominion Virginia Power had hoped to build turbines incorporating features capable of withstanding Category 3 hurricane winds, considerably stronger than those faced by wind farms in Europe. Demonstrating the viability of the technology would reduce a major element of risk and, hence, the cost of financing construction of a large-scale wind farm capable of supplying hundreds of thousands of homes.

Dominion’s early estimate to build the two turbines was $230 million, which would generate enough power to supply 3,000 homes. The first solicitation yielded a bid of $375 million. Subsequent efforts to squeeze costs out of the project resulted in bids ranging from about $300 million to $380 million. Dominion has said that even a cost as low as $230 million would be a challenge to win approval from the State Corporation Commission. The cost per kilowatt hour for electricity would be astronomically high compared to other energy sources, and the project was justifiable only as a proof-of-concept opening the way for cheaper, large-scale wind development.

The loss of DOE’s $40 million project puts the VOWTAP project that much further out of reach.

“Naturally, we are disappointed in the DOE’s decision because we still believe that offshore wind has a great potential to deliver clean, renewable energy to Virginia,” said Mary C. Doswell, senior vice president‒Dominion Energy Solutions in a press release. “However, we also recognize the unique regulatory and cost challenges involved in our project and appreciate the DOE’s desire to support other projects that may have an earlier opportunity for fruition.”

DOE made its decision after Dominion could not guarantee an in-service date for the project earlier than 2020, according to Doswell. The inability to get firm construction contracts and the increasing complexities of gaining regulatory approval for energy infrastructure projects have made it impossible for Dominion to guarantee an earlier date.

“This project is a first in many ways,” Doswell said. “As such, you need to account for many variables when attempting to lock in on a date with any degree of certainty.”

Dominion said it would consult with other VOWTAP stakeholders on how to proceed.

Swapping Easements

This Dominion map submitted to the VOF shows the location of conservation easements in the Augusta-Bath-Highland area (parcels outlined in red), and the location of the Hayfield Farm where Dominion would create an easement and turn over to the VOF. (Click for larger image.)

This Dominion map submitted to the VOF shows the location of conservation easements in the Augusta-Bath-Highland area (parcels outlined in red), and the location of the Hayfield Farm where Dominion would create an easement and turn over to the VOF. (Click for larger image.)

by James A. Bacon

Dominion Transmission, managing partner of the proposed Atlantic Coast Pipeline, has proposed to donate two parcels totaling nearly 1,200 acres to offset the intrusion of its proposed 600-mile pipeline onto lands protected by conservation easements.

In a proposal made to the Virginia Outdoor Foundation (VOF), which holds the conservation easements, Dominion would donate the land and easements for a 1,100-acre parcel and and 85-acre parcel to offset the conversion of 68 acres of protected open space on ten different easement-protected parcels in Bath, Highland and Nelson Counties. The donations would create a “mitigation ratio” of 16 to 1 in one case and 20 to in the other, according to Robert Hare, senior business development manager with Dominion.

Dominion presented its proposals Thursday to VOF’s Energy & Infrastructure Committee. The Mountain Valley Pipeline, which proposes to build an interstate transmission line through Virginia, also described a plan to offset an easement in Montgomery County that it wants to route its pipeline through. The ACP proposals are expected to be reviewed by the full VOF board next month.

The stakes are potentially momentous for the governance of conservation easements in Virginia. In its entire 50-year history, VOF has received only 14 “conversion-diversion” requests to alter easements, which landowners grant in order to protect scenic, environmental, cultural or historical resources on their property in perpetuity. Most conversions involved slivers of land needed for public purposes such as widening a road, adding a turning lane for a school or extending water-sewer lines. In every case, the requests were supported by the local governments involved. The pipeline cases are very different. They are proposed by for-profit utilities, they would be far more intrusive, and they are all opposed by the respective local governments.

Conservation easements are protected by state law, and they are hard to bust using eminent domain under state law. But Dominion’s interstate pipeline is regulated by the Federal Energy Regulatory Commission (FERC). In the event of a conflict, it is unknown whether federal or state law would prevail because no case has been tested in the courts.

VOF board members find themselves between a rock and a hard place, said Tom Slater, chairman of the energy and infrastructure committee. A Richmond attorney, he spends weekends tending to 110 Angus cows on a Loudoun County farm that his family has owned since the 1840s. Board members are passionate about conservation and sympathetic to landowners who entrusted their easements to the VOF, he said. “We want to enforce state law.” At the same time, he added, they are cognizant that state law could be “pre-empted” by federal law.

Under FERC guidelines, pipeline companies must go through an exhaustive process of working with state agencies to avoid or mitigate intrusions upon historical, cultural and environmental resources. Virginia is unique in having an entity like the Virginia Outdoors Foundation, which holds 3,835 easements totaling more than 750,000 acres. While VOF’s mission is to conserve viewsheds, wildlife habitat and other resources, it is also enjoined by state law to work with railroads, utilities, the Virginia Department of Transportation and other entities citing a public-need justification for infringing on the easements.

Dominion has made literally hundreds of adjustments to its proposed route. The resulting zigs and zags around residential areas and land with historical, cultural or environmental value have increased the pipeline length from an estimated 550 miles to 600 miles.

An early version of the route had managed to avoid 23 VOF easements, Hare told the VOF committee. However, when the U.S. Forest Service wrote a letter to FERC in January stating that the pipeline would be “incompatible” with the protection of rare salamanders and other species in Virginia and West Virginia national forests, Dominion had to re-route 95 miles of the line. With severely constrained options, the new route ran through 10 VOF-protected parcels.

The Mountain Valley Pipeline (MVP) hasn’t faced the same routing challenges as ACP, but it still found itself unable to avoid one easement. The company has asked the VOF if it could mitigate the impact of crossing that parcel, as well as allowing a temporary construction-access road, by purchasing land elsewhere and turning over the easement to VOF. In the meantime, MVP is working on a work-around that may allow it to withdraw its request, said Lindsey Hesch, senior environmental specialist.

Dominion and MVP have shown “good faith” in trying to route their pipelines around conservation easements, said Slater, the committee chair. “But these land swaps are a first — on a scale way beyond anything we’ve experienced before.” Continue reading

Justifiable Jitters or Unwarranted Worry?

Leslie Hartz, the Dominion executive in charge of pipeline construction shows the width of steel to be used in smaller-diameter sections of pipe.

Leslie Hartz, the Dominion executive in charge of pipeline construction, shows the width of steel to be used in smaller-diameter sections of pipe.

Virginians living in the path of the proposed Atlantic Coast Pipeline fret about the threat of explosions. Dominion Transmission says their fears are overblown.

by James A. Bacon

Irene Leech, a consumer studies professor at Virginia Tech, grew up on a farm in Buckingham County where her family has raised beef for more than a hundred years. The family has preserved many of the original structures, including the old ice house, granary and smokehouse. Her husband, she says, devotes half his time to help keep the farm going. “Our plan is to retire to the farmhouse. Our goal is to pass on a sustainable business to the next generation.”

But Dominion Transmission, managing partner of the proposed Atlantic Coast Pipeline, has thrown her for a loop. The company wants to route a high-pressure transmission pipeline through the farm. While Leech acknowledges that the odds of gas leaking and igniting anywhere near her are remote, if the gas does explode, the farmhouse and outbuildings are within the danger zone.

“From my perspective, they put my life at risk, all our property, all our heritage,” says Leech. “I know the odds of something happening are very, very small. But I had a brother killed in a farm accident. My grandmother died in an accident. My husband was working for the Pentagon on 9/11. I was at Virginia Tech during the mass shooting. Things happen. We’ll have to live with the risk for the rest of time.”

Leech is just one of thousands of residents along the route of the proposed Atlantic Coast Pipeline (ACP) who worry about the safety risks. Like many others, she remains unpersuaded by Dominion assurances that the ACP will incorporate the latest, greatest technology, best practices, and specifications that exceed federal safety standards. Running pipe on the steep slopes and through sinkhole-ridden karst geology of the mountainous Nelson and Augusta counties poses issues that pipelines don’t encounter in less rugged terrain.

“The possibility of an explosion is the really frightening thing,” she says. “You can come up with statistics that make it seem very remote. The problem is, if it occurs, it’s really deadly.”

Dominion responds that it is pushing the envelope of industry best practices to ensure the safe operation of the pipeline, which, if approved by the Federal Energy Regulatory Commission (FERC), would run from West Virginia through Virginia to North Carolina. “We’re a safety first company,” says Dominion Transmission spokesman Aaron Ruby. That’s not a P.R. slogan, he insists. An emphasis on safety permeates the organizational culture and informs everything the company does.

Dominion makes every reasonable effort to accommodate landowners like Leech, says Ruby. The company has offered to re-route the pipeline from an 800-foot distance from her farmhouse to 1,900 feet, he says, “but she has refused to let us survey her property to see if the alternative is suitable.”

In the meantime, the company is designing safety into pipeline construction and operations at every step, says Leslie Hartz, vice president of pipeline construction. The quality-control process entails a rigorous inspection protocol for fabricating the pipe in the mill, and then X-ray and hydrostatic testing of pipes and welding in the field. When up and running, ACP will use robots to inspect the pipe interior and will deploy aerial patrols and sensors to monitor the exterior. If conditions deviate from narrowly defined parameters, operators will not hesitate to shut down the pipeline.

Pipelines co-exist with people all around the country, and hardly anyone thinks about it, says Ruby. As an example in Virginia, he cites Lake Monticello, a bedroom community in the Charlottesville metropolitan region with a 2010 population of almost 10,000. “Lake Monticello …. developed over many decades alongside four large-diameter natural gas pipelines!”

The Big Picture

Interstate gas pipelines are the safest mode of energy transportation, says Catherine Landry, a spokesperson for the Interstate Natural Gas Alliance of America (INGAA). “Last year 99.999997% of gas moved without incident.” That compares very favorably to moving propane or petroleum by truck or rail. Continue reading

Another Blow to Free Market Health Care

dpcby James A. Bacon

Citing fiscal reasons, General Assembly Republicans have blocked Medicaid expansion that would have extended medical coverage to 400,000 uninsured Virginians. But they have tried to enact other measures to make medical care more accessible and affordable. Among other ideas, they have fought for expanding medical clinics, rolling back Certificate of Need restrictions on competition, and pooling insurance company data to create databases that allow analysts to spot inefficiency and poor outcomes in the health care system.

This year, a bill sponsored by Del. R. Stephen Landes, R-Verona, would have eliminated legal ambiguities discouraging physicians from contracting directly with their patients to provide primary care services for a fixed monthly fee. The bill declared that the contracting arrangement, commonly known as Direct Primary Care (DPC), did not constitute insurance and, thus, was exempt from insurance regulation. DPC proponents say it provides a cheaper alternative to accessing primary care through health insurance, which adds layers of bureaucracy and cost.

But Governor Terry McAuliffe vetoed the bill last week, saying, “While I applaud the patron’s desire to increase access to care, I feel this concept needs further scrutiny and study. … Not only would a product like this deter an individual from purchasing health insurance, it would still not cover any catastrophic care or chronic conditions requiring a specialist.”

Landes’ bill passed the House 97 to 0 with broad backing from patients, family practice doctors, small business lobbies and chambers of commerce. But it ran into trouble in the Senate when the insurance industry began lobbying heavily against it. As reported by the Associated Press:

Insurance companies don’t oppose the idea of direct primary care in principle, but don’t want imperfect legislation rushed through, said Doug Gray, executive director of the Virginia Association of Health Plans. This legislation, he said, is unnecessary and provides no consumer protections.

McLaughlin has joined a tiny but growing movement of doctors nationally — there are only a handful in Virginia — who have begun to provide subscription-like service to patients, a model known as direct primary care.

Similar to concierge medicine for the rich, direct primary care can appeal to middle and low-income patients who struggle with high deductibles or can’t afford insurance at all. McLaughlin charges $60 a month for people over 31, $30 for 30 and under and $15 for kids whose parents are enrolled.

The change from typical primary care has been “wonderful,” McLaughlin said: She can focus on fewer patients, spend more time with each one, and worry less about dealing with insurance companies. Other doctors are taking notice, she says, including young ones, who might otherwise avoid going into primary care because of its relatively low profit margins and high-volume demands.

“This can change the trajectory of our whole system,” McLaughlin said.

That may be the real problem with Direct Patient Care — it would change the trajectory of the system. Many players in the health care industry are vested in the status quo and don’t want to see the system change, except on their own terms. And many politicians are so ideologically committed to an expanded role for government in health care that they want to grind out market-based alternatives before they can prove their efficacy. Meanwhile, legal uncertainties may discourage other physicians from following McLaughlin’s example, and Virginia consumers will be denied a choice that might benefit them.

The New Map of Economic Growth

Jobs growth during the recovery from EIG

by James A. Bacon

Not only has job creation and new business formation been weak in the current business cycle, it has been more concentrated geographically than in the past. Unfortunately for the Old Dominion, between 2010 and 2014 that concentration did not occur here.

This analysis points to very different futures for American communities, suggesting that the gains from growth have and will continue to consolidate in the largest and most dynamic counties and leave other areas searching for their place in the new economy,” writes the Economic Innovation Group in a new publication, “The New Map of Economic Growth and Recovery.”

The report buttresses an argument familiar to Bacon’s Rebellion readers: that larger metropolitan areas enjoy a significant competitive advantage in the Knowledge Economy. Skilled and educated employees seek large labor markets that provide a diversity of employment opportunities, while corporations seek larger, deeper labor markets that provide access to a diversity of skilled and educated employees. The dynamics of labor markets outweigh factors that confer competitive advantage in the old industrial economy such as access to transportation and natural resources, lower labor costs, low taxes and a low cost of doing business.

In summary: Large metros enjoy a major competitive advantage, smaller metros are teetering on a knife’s edge, and rural areas and small towns are hosed.

“The U.S. economy is becoming far more reliant on a small number of super-performing counties to generate new businesses,” EIG says. “A mere 20 counties accounting for only 17 percent of the U.S. population were responsible for half of the net national increase in business establishments from 2010 to 2014.”

The report does not speculate whether the trend is the result of temporary economic or political factors or is an irreversible long-term trend.

Graphic credit: EGI

Graphic credit: EGI

Two trends contribute to the sharp decline in the number of businesses: a higher rate of firm deaths (more companies getting acquired or going out of business) and a collapse in new business formation, as can be seen below.

births_deaths

What could account for these trends? One logical possibility: In a blast of creative destruction associated with the digital economy, a relatively small number of new companies are displacing many established businesses. Another possibility: A wave of economic regulation in recent years has hobbled large swaths of the economy — the banking industry, the Internet, health care, energy, and so on — and has created new economies of scale that favor large, established corporations, encourages mergers and consolidations, and throws up barriers to entry to new firms. Most likely, both are at work.

Weakness in the national economy means that everyone is swimming upstream. Only a small number of metropolitan areas are strong enough to make any progress swimming against the current. Mega-trends favor the mega-metros.

But mega-trends won’t tell the whole story. Some large metros bungle their opportunities though corruption, business-hostile policies and mal-investment of public resources. Some smaller communities buck the broader trends by building defensible economic niches. The news from the EIG report is discouraging, but short-term trends need not dictate our long-term destiny.