Why Would Dominion Want a $19 Billion Nuclear Plant?

North Anna Power Station

The Nuclear Regulatory Commission has indicated it will issue a license within the next few days to build a third nuclear reactor at Dominion Energy’s North Anna power station, the Richmond Times-Dispatch reported earlier this week.

Dominion has spent $600 million so far on planning, engineering and developing the 1,450-megawatt facility, which has been widely reported to cost an estimated $19 billion. While acknowledging the huge up-front expense, Dominion has argued that it needs to keep open the option of a third nuclear unit in case federal and state regulators impose strict carbon controls on Virginia’s electric utilities.

Robert Zullo has done a fine job of covering Dominion for the Richmond Times-Dispatch, and I rely upon his reporting to keep up with the energy and environmental issues the company is embroiled in. But I would not frame the North Anna 3 issue as he did:

Given the massive cost of the controversial project, which has been opposed by both consumer and environmental groups and has yet to be approved by the State Corporation Commission, it remains unclear whether the utility will actually build the reactor.

True, consumer and environmental groups do oppose the project, and, true, it is unclear whether the utility will build the reactor. But the driver isn’t the cost, which is horrendous. The driver is what kind of regulatory regime federal and state governments enact to reduce carbon dioxide emissions from Virginia power plants. If regulators choose a “mass-based” approach that caps CO2 emissions on existing power plants and all new generation units built in the future, Dominion argues, the only way to meet electricity demand, maintain federally mandated reliability standards and stay within the CO2 limits is to construct a new nuclear unit, which emits zero carbon.

Dominion is not advocating construction of North Anna 3. It is not recommending construction of North Anna 3. There is no indication that it even wants to build North Anna 3. Rather it is preserving the option should political and regulatory developments leave it no alternative.

The company lays out its logic in its 2017 Integrated Resource Report, a planning document that provides a 15-year look into the future. There is so much political and regulatory uncertainty that Dominion examines eight different scenarios predicated on different schemes for restricting CO2 emissions. Building North Anna 3 appears in only one of the eight options, which the IRP refers to as “Plan H.” Here’s how Dominion describes that plan:

Plan H is a Mass-Based program that limits the total CO2 emissions from both the existing fleet of fossil fuel-fired generating units and all new generation units in the future, but also includes the construction and operation of North Anna 3 in 2030. This Alternative Plan was developed assuming that the Company achieves [Clean Power Plan] compliance through portfolio modifications with no market purchase of CO2 allowances. This Alternative Plan limits the generation of [the Mt. Storm coal-fired power station] to a 40% capacity factor.

Key assumptions include:

  • Retirement of up to four coal-fired units at the Mecklenburg and Clover power stations, totaling 577 megawatts, by 2025.
  • 3,360 megawatts of additional solar capacity;
  • 2,290 MW of additional natural-gas, Combustion Turbine capacity;
  • A 20-year extension of the four existing nuclear units at the North Anna and Surry power stations.
  • Addition of 1,452 of nuclear capacity at North Anna 3.

Dominion acknowledges that the compliance costs of Plan H would be extremely expensive — $14.79 billion over the IRP study period compared to $5.71 billion for the next most expensive alternative and $2.3 billion compared to the least expensive alternative.

The impact of Plan H on residential consumers would be considerable. Dominion estimates that average monthly electric rates for a typical residential customer using 1,000 kilowatt hours per month would increase 29.44% by 2030 and subside to 19.01% higher by 2042. That would be more than five times the increase of the next most costly plan in 2030.

Source: Dominion Energy

A key assumption embedded in Dominion’s projections is that electricity demand will increase by an average of 1.5% annually over the next 15 years. The IRP forecasts a compound annual growth rate of 2.04% for the Virginia economy, based upon data supplied by Moody’s Analytics. Thus, a 1.5% load increase implies continued energy-efficiency gains that reduce the energy intensity of each unit of economic growth.

Virginia’s success in attracting energy-intensive data centers plays into the utility’s Virginia forecast. “The Company has seen significant interest in data centers locating in Virginia because of its proximity to fiber optic networks as well as low-cost, reliable power sources,” the IRP says. (See yesterday’s post, “Building on Virginia’s Data Center Boom.”)

Some observers argue that Dominion’s forecast overstates demand growth. Most notably, PJM Interconnection, the regional transmission organization of which Dominion is a part, provides a significantly lower growth forecast for the Dominion transmission zone, as seen here:

Source: Dominion Energy

The IRP addresses this forecast discrepancy at length. Dominion says four factors account for the gap in projected demand growth. First, PJM eliminated new data center growth from its forecast. Second, PJM makes assumptions about Distributed Energy Resources (primarily solar) that overestimate how they would perform during critical system conditions. Third, PJM bases its forecast of appliance saturation and efficiencies on Southeast regional data, while Dominion uses historical data from its own service territory. And fourth, Dominion uses a different methodology to account for public sector energy growth, which accounts for 13% of company sales.

Another unknown is the likelihood that a Plan H scenario will materialize.

The Trump administration has expressed a desire to scrap the Clean Power Plan. Even if it succeeds in neutering the CO2 regulations, though, a future administration could reinstate them. Meanwhile, the Virginia environmental lobby is pushing hard for the CO2 caps contemplated in Plan H, and the McAuliffe administration will announce its own plan later this month to combat CO2. Furthermore, several environmental groups have gone on the record in opposition to extending the life of the existing Surry and North Anna nuclear plants. Should Dominion fail to renew those licenses, it would have to make up nearly 3,400 megawatts of capacity elsewhere. Unable to add fossil fuel capacity under a Plan H scenario, it would be limited to renewables or nuclear. An all-renewables approach could create an unstable grid with major reliability issues. That would leave North Anna 3 as the only alternative.

Many possibilities might obviate the necessity of building North Anna 3 under a Plan H scenario. The electricity load might increase at a slower pace than Dominion forecasts. The utility might succeed in extending the life of its existing nuclear units. Battery storage technology might advance to the point where it is feasible store massive amounts of sunlight-generated energy. There is no way to know at this time what will happen. But as the entity responsible for keeping the lights on, now and far into the future, Dominion is taking no chances. Despite the jaw-breaking cost, it is not taking the North Anna 3 option off the table.

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54 responses to “Why Would Dominion Want a $19 Billion Nuclear Plant?”

  1. Steve Haner Avatar
    Steve Haner

    As many of you know, state law provides for an enhanced rate of return on equity on nuclear plants, an extra 100 basis points over the standard ROE (right now about 9.4 percent.) That 100 extra basis points when applied to $19 billion over 20 years is not exactly a small chunk of change….

    Less well known is a provision in the statute (I’m not going to dig it out) which puts that enhanced ROE in jeopardy if the utility is not moving forward on building such a plant. The law says that the utility must demonstrate it is moving forward at the 2018 rate review, and if the SCC determines it is not, it can remove the extra profit. Getting the license in 2017 shows good faith in moving forward.

    Now, of course, right now there is no 2018 rate review so it is not quite clear what happens next. But the VA Supreme Court could overrule the General Assembly and restart that process, or the SCC at it next opportunity could look back to 2018, so it is understandable that the utility would want to preserve its right to extra profits on the plant, should it be built. Just to repeat the math, 100 basis points on $19 billion = $190 million. Annually. On top of the standard ROE. Paid annually.

    The company has also been allowed by the Assembly (the 2014 law) to recover a huge chunk of its planning costs to date directly from ratepayers already – a bill that normally wouldn’t come due until the plant is operating. So its risk in continuing to plan for the plant is very, very low IMHO.

    Watch the projects in Georgia and South Carolina to gauge the future of North Anna 3. The Westinghouse bankruptcy. But the company has strong incentive to keep moving and not stand still while that sorts out.

  2. Acbar Avatar

    This post does a superb job of explaining why growth forecasts are THE driving force behind the regulation of capital-intensive, long-lead-time electric utilities. And also, this highlights why the fundamental response of an electric utility faced with regulatory uncertainty is, “Just decide on something — anything — and then let us plan to cope with it in the best way possible!” Utilities HATE regulatory uncertainty.

    But currently, in addition to the back-and-forth over the CPP and whether or not “massed based” limits, there’s the nationwide debate over distributed renewable generation, over energy efficiency, changing battery and transportation technology, and the potential for a natural gas “bubble” that collapses in a few years. And along the way, Dominion has to keep its stock price up and its financials sound.

    This is not a good time to be a utility planner. There are many pressures to be overly conservative with your inputs and overly optimistic with your cost estimates. It is not fair to choose between the Dominion and PJM forecasts based solely on outcome; but it is fair to examine in detail why those forecasts differ. One reason PJM got into the forecasting business is the need to look at the drivers of growth across all of PJM’s 13-state region on exactly the same basis; there were too many apples to oranges comparisons. Another was to answer the objection of some watchdog groups that utilities have too many biases to do their forecasts correctly. Another was to give PJM an early warning on transmission grid stresses and on the adequacy of long-term independent versus traditional utility generation construction.

    But the bottom line is, as you say, “There is no way to know at this time what will happen.” We ought to be debating the risk, the wisdom, of each difference between the forecasts that the IRP puts out there, and other variables too. For example, why does PJM not share DOM’s belief that there will be more data centers built in NoVa? Why is there such a difference in their assessment of distributed generation’s reaction to a system emergency? There are other ways to validate these conclusions that the IRP highlights. That is a large part part of what the SCC’s review of the IRP is supposed to get into; and for the last few years, instead, the SCC has issued perfunctory, dismissive findings that simply conclude, “We can’t decide.”

    That is no way for regulators to regulate. Dominion has done its job, here (pointing out the areas of its concern and how it proposes to deal with them or at least to mitigate the risks); now, SCC, do yours.

  3. LarrytheG Avatar

    I’d not be surprised to see the environmental community split over the idea that burning gas for baseload if it could generate twice as much greenhouse gas than coal… or more… I’m dismayed that that we’re trading coal baseload for gas baseload if it’s true that gas is a worse contributor…

    some will question the demand forecast which seems pretty ambitious given the advance of solar and other demand-side reduction technology that seems to promise much more efficient use of electricity. Our own “smart” thermostat which we can turn up or down from a phone hours away can and does also determine if “anyone” is in the house and adjust the temperature accordingly – then finally REC can “touch” it when demand is high to dial it down a little. we’re now using less electricity… multiply that by tends of thousands of households in Virginia.

    others will claim – and perhaps true at some point that solar combined with a Tesla powerwall will make a joke out of any claimed increase in forecast.

    Did I say that others might say ” use the nukes if gas is going to generate worse greenhouse gas than now…

    they’re selling solar roofs and Tesla powerwalls right now.. they take 20-30 years to pay back but that does make them legitimate ROI for 30-year mortgages but those who install are claiming 1/2 less electricity use.

    More expensive electricity for Nukes would seemingly doom them in the end… as more and more folks would likely find solar/powerwall electricity cheaper AND just as clean without the spectre of what to do with the radioactive waste.

    So Dominion must know (or believe) something a lot of other observers are ignorant of…

    or they are just the latest version of Kodak – and other disrupted industries betting the farm as a last gasp effort against advancing obsolescence and their own intransigence and refusal to adapt to change.

    1. Acbar Avatar

      There are numerous reasons why DOM has an incentive to skew the results. There’s the VA law about the special return-on-equity for nuclear that Steve Haner points to. There’s the natural utility instinct to build its own generation resources rather than rest on independent generators and the wholesale marketplace: at least this yields a degree of control, if not an adequate financial return. There’s a conservative organization’s inherent distrust of new technology, in a conservative industry where risk-taking is frequently punished. There’s a strong disinclination to attempt to look “beyond the meter” and invest in changing what the customer does with the retail product: even if energy efficiency would save the customer money; even if it would save the utility money. Every one of the IRP’s assumptions potentially reflecting these biases should be questioned; there should be push-back from the Commission’s own staff as well as the public. But IMO the IRP is a remarkably-thorough document that lays out the primary planning options for regulatory consideration and will serve as a decent framework for debate over any of them. It “tees up” the debate. It even points out many of its own weaknesses and uncertainties. If “Dominion must know (or believe) something a lot of other observers are ignorant of…” let’s insist the regulator ask the hard questions to find out what that “something” is, or take the NA3 option off the table once and for all. The IRP merits a lot more attention than it probably will get. And it deserves a meaningful regulatory response, not perfunctory public notice and a dark place at the back of the file cabinet.

      1. Good advice Acbar. One option that completely replaces NA3 is energy efficiency. It provides all of the same benefits, zero emissions, 24/7 availability (even better than nuclear) at a fraction of the cost without any of the downside – the likely cost and schedule overruns, exorbitant capital costs, huge public subsidies, safety and nuclear waste disposal issues, etc.

        Virginia utilities cannot promote that as an option. Currently, it works too much against their interest. However, it is only in the Virginia utility world that nuclear is the only zero carbon, 24-hour source of energy. The state can certainly alter the game so that efficiency can compete on equal footing without hurting the utilities (in fact aiding them). But this is heavy lifting and requires political courage. In the meantime, Dominion gains an income advantage by keeping the NA3 option open. But ratepayers are paying extra for something they will never benefit from.

        It is only in the artificially constrained world of the IRP that continued discussion of the nuclear option makes sense. Nuclear is just too darned expensive and inflexible in its operation. It runs completely against the trends in the modern energy system where all of the new technologies are offering lower costs and increased flexibility.

        I agree that the SCC should decide the issue once and for all. I believe that they are too afraid that the GA will take matters into their own hands again if the SCC exhibits too much backbone.

        It would be better for Dominion if we gave them a way to make money without all of these financial shenanigans. Their job is to please the shareholders. That’s fine, but do it in a way that is good for the rest of us too.

    2. TooManyTaxes Avatar

      Larry – how many years before we have smart thermostats in 80% of the homes and businesses (think small businesses)? And I don’t think that, absent a major change in the relationship between personal incomes and electricity prices, we will see a majority of homes/small businesses buy a Tesla power wall. A 30-year crossover point just will not make it.

      I don’t know about other states, but if this is Virginia’s demand reduction plan, it’s a joke.

  4. LarrytheG Avatar

    here’s an interesting article that has information in it that I’ve not seen before:

    More Fredericksburg-area homeowners are switching to solar energy


    People often pepper Sherry Roberts with questions about the solar panels on the front of her Stafford County home.

    Nationally, homeowners are paying between $2.87 and $3.85 per watt to install solar panel systems, and the average gross cost of solar panels before tax credits is $16,800, according to EnergySage, an online market. That’s 9 percent lower than what solar panel systems cost a year ago—and prices are continuing to fall.

    The total cost is even lower once tax credits are factored in. The federal solar tax credit, also known as the investment tax credit, allows residential and commercial users to deduct 30 percent of the cost of installing a solar energy system from their federal taxes.

    She and her husband hired Teakwood Enterprises Inc., a Spotsylvania building contractor, in December to install their solar panel system and flipped the switch connecting them to Dominion’s power grid on Feb. 1. It began producing that day.

    Since then, the couple’s electric bill has dropped from $144 per month under Dominion’s budget plan, to around $20 a month.

    The Roberts are among a growing number of homeowners who are having solar panels installed on their residences, detached garages or in their yards. Dominion saw a 30 percent increase in 2014, a 39 percent increase in 2015 and a 27 percent increase in 2016. So far this year, there’s been a 9 percent increase from January to April.

    “If the trend continues throughout the year, we should see a 30 percent increase by the end of 2017,” said spokeswoman Le-Ha Anderson.

    According to a 2016 Pew Research Center survey, 4 percent of homeowners currently have solar panels and 40 percent said that they’ve given serious thought in the previous year to adding them.

    In Virginia, the number of private residences using solar power numbers is about 24,000, according to the latest figures from the Solar Energy Industries Association. The state ranks 20th in the nation.”


    1. TooManyTaxes Avatar

      Larry – good information. I found some data that indicates Virginia had 3,056,058 homes in 2016. Assuming this to be correct, 24,000 solar homes is 7/10ths of one percent. Further assume a trend of lower prices for solar installations, when does 7/10ths of one percent become 10%, 25%, 33% and 50%? I suspect the Pew data is affected by homes in the desert west.

      If we are going to get significant growth, Virginia needs a different policy.

      1. LarrytheG Avatar

        It still costs about 40K to get a full-sun house to 90% power from solar and it still has to rely on grid power for night and cloudy…

        if someone pays $150 a month for electricity – that 1800 a year x 30 = $48K

        in theory – if you buy a solar-ready house – you can pay for you electricity over the 30 years … and use grid for a lot less power and cost. The rich , even upper middle class , can afford it right now…

        the thing is – few people live in well-suited single-family homes for solar. A lot of the population lives in urbanized areas in multi-family structures – not in single-family homes that are “ideal” for solar.

        so perhaps not a whole lot of the 3,056,058 existing households are really ever going to be retrofitted for solar.

        1. LarrytheG Avatar

          looks like 1,810,353 detached… more than I thought…


        2. TooManyTaxes Avatar

          Another factor would seem to be how long does a household plan to live in their current home. If 30 years is the breakeven point, I’ve never lived 30 years in one place. Of course, if solar prices continue to decline, a shorter payback period may occur.

          I would also think that HOAs for townhouse and condo communities might consider common ownership for solar. But all in all, I think a number of factors play against a majority of homes and small businesses installing solar. If another result is desired, new policies and, likely, statutes are needed.

  5. Thirty-some years ago when I lived in Charlottesville, I installed a solar hot water heater. It worked out just fine. I’ve often entertained the idea of installing solar on my own house. One big advantage, over and above the cost savings, is the ability to generate my own electric power even if my Dominion-supplied electricity has been cut off. After a hurricane a dozen years ago (Hugo?), we lost power for 11 days. Electric power half the day would be better than no electric power at all.

    My big reservation is that we have two tall trees shading the house, and we don’t want to cut them down. We like trees. Solar works best in neighborhoods with no trees. A lot of people like their trees and would not be willing to cut them down for solar.

    Another factor is that the reliability of our electric service has improved immeasurably. We used to lose power routinely. Now (knock on wood) we rarely lose it. Whatever Dominion is doing, it’s working. The incentive to have a personal back-up power source is no longer as pressing as it once was.

  6. Solar installers in the Shenandoah Valley usually estimate a payback of 10-15 years for residential solar. This depends on site-specific factors such as orientation of the roof and the amount of time the unit is exposed to full sun. Payback periods are likely to decrease as solar units continue to decline in price and utility rates are on the rise.

    New smart inverters automatically switch to isolate themselves from the grid when an outage occurs so the household has solar power during daylight hours.

  7. LarrytheG Avatar

    Here’s an interesting solar calculator:


    then you can follow it up with ” How much do solar panels cost in the U.S.?”

    ” In 2017, most homeowners are paying between $2.87 and $3.85 per watt to install solar, and the average gross cost of solar panels before tax credits is $16,800. Using the U.S, average for system size at 5 kW (5000 watts), solar panel cost will range from $10,045 to $13,475 (after tax credits).”

    But what would motivate someone to install solar in an existing house?

    Probably only those that have 14K up front and are convinced that over the longer run – they get their 14K back ..and then some. Then again, people pay 30-40-50K for an upscale SUV when all they really need is basic transportation… easily available for 20K or so.

    1. “But what would motivate someone to install solar in an existing house?”

      Because with adequate roof space with the proper orientation, they start saving on their electric bills from the start. This concept of payback is somewhat distorted whether 10, 15 years or whatever.

      The important issue is that if you have the right conditions you will save money from the beginning. The cost of your new electric usage plus the cost of paying back the loan on the solar unit (minus the tax credit) is less than what you would have paid for electricity if you had not installed the solar unit. You save from day one. It might take 10-15 years to save enough to fully repay your investment, then you save even more. If you kept your savings the same each month by paying down the loan faster as the cost of electricity increased you would pay it back even faster.

      1. TooManyTaxes Avatar

        How many people plan to live in the same house for the next 10-15-20 years? How much more would a person pay for a house that has solar? And what about people whose roofs face east and west? The front of my house faces south with the roof largely on the east and west sides. Very good for snow melt, but not so good for solar. And we have lots of trees in the neighborhoods. The shade helps keep the house a bit cooler than if they weren’t there. But for solar – not so good.

        I agree with everyone who says home solar will grow. But when one considers all the factors, including how long most people live in a home, the facings of roofs and the long payback time, it’s going to be a long time before home solar truly affects Dominion demand, IMO.

        1. West or southwest facing roofs might have the greatest benefits in the future. As advanced metering gets more widely distributed, we might evolve to time-of-day billing to send accurate price signals for changing usage. The most valuable solar input would be in the late afternoon and early evening, exactly when a southwest or west facing roof would provide the greatest output.

          You could stay in a house for 5-8 years, then sell it. The conditions of the sale could require the seller to pay off the balance of the solar loan and the new owner would essentially have the remaining 5 years or so of the solar loan covered by his mortgage. The seller could document the energy savings provided by the solar which would enhance the value of the home. Better for everyone.

  8. CleanAir&Water Avatar

    That is exactly why I consider the messed up writing of the PACE – Property Assessed Clean Energy – loan enabling law a primary way Dominion has blocked on-site solar and preventing central grid demand from declining.

    PACE loans are written for the amount due from the customer. The customer pays back the loan with their annual tax bill because the loan is registered against the house at town hall. That means that each town must pass a PACE law describing the loan parameters and approving and operating the process.

    It should be noted that the loan, which sits above the mortgage on the deed, does NOT have to be paid back when the house is sold. Like a conservation easement … it runs with the property, not the owner.

    Why do this? As a lien above the mortgage it is a very secure loan and the lender can charge a lesser rate and can run the loan for a longer time than an improvement loan. The customer will usually be able to pay the loan with their utility bill savings and with prices dropping may come out ahead.

    Arlington is doing the work Virginia could have done and hopes to have a program up and running soon. In TX and CT the parameters are defined at the state level and monies rounded up from private funds. The local district can just adopt the program. In TX they call it PACE in a box.

    Some areas call on national PACE companies to come in and set up and operate their process. The national companies bring the necessary standardization to the loans that let’s them be securitized.

    Virginia could have done better and, even without tax monies, would now have lots more on-site solar.

  9. LarrytheG Avatar

    PACE looks like a Govt loan … with repayment incorporated into tax bill….

    I think water/sewer hookups (that usually run 10-20K or more) might be
    done like this… also but still suspect that the “no-tax” elected would likely
    not do PACE…. for solar…

    although Fredericksburg and Spotsylvania DO give tax credits for SOLAR… though as I recall the BOS in Spotsy was reluctant in approving it.. Conservative types who don’t think solar should be subsidized to start with and not with cross-subsidies from other taxpayers..

    Bacon is on same wavelength although Nukes are certainly subsidized as well as fossil fuels…

    from Wiki:

    Allocation of subsidies in the United States

    On March 13, 2013, Terry M. Dinan, senior advisor at the Congressional Budget Office, testified before the Subcommittee on Energy of the Committee on Science, Space, and Technology in the U.S. House of Representatives that federal energy tax subsidies would cost $16.4 billion that fiscal year, broken down as follows:

    Renewable energy: $7.3 billion (45 percent)
    Energy efficiency: $4.8 billion (29 percent)
    Fossil fuels: $3.2 billion (20 percent)
    Nuclear energy: $1.1 billion (7 percent)

    1. I don’t know where this guy got his numbers. Tax breaks alone for fossil fuels amount to hundreds of million per year in subsidies. The Yale study recently published, shows that the social costs that are not attached to coal use amounts to 10-27 cents per kilowatt hour of coal generated electricity. Again, a number in the hundreds of millions per year (about 200-500 million I believe).

      The insurance subsidy alone for nuclear plants amounts to 20 cents to over a dollar per kWh. Again, multiplied by the kWhs generated per year by nuclear plants would be a huge number. The costs related to Fukushima is $180 billion and counting.

      It is not clear if the taxpayers will bear a burden for the federal loan guarantees that make construction of nuclear plants possible. This would require payments in the hundreds of million if not billions for the failing new nuclear plants in SC and Georgia.

      Recently, the DOE stopped requiring utilities to pay for future spent fuel disposal. This is several millions of dollars per year for each of the 100 or so nuclear reactors in the US. Again, a subsidy of hundreds of millions per year.

      The subsidies for solar and wind will be gone in three years. I wish we could say the same for coal and nuclear. It won’t happen because it would be the end of the game for those technologies. They can’t afford to pay their own way now. They could not compete if required to be priced at their true costs.

      We have seen how quickly the advocates of market pricing retreat when their favorite option is threatened. So much for an intelligent discussion of long-term energy development.

      I suspect this guy’s numbers included a very narrow definition of subsidies to make his point. It makes it hard to have a dialogue when we can’t even agree on the facts.

      1. LarrytheG Avatar

        there’s more:
        A 2011 study by the consulting firm Management Information Services, Inc. (MISI)[28] estimated the total historical federal subsidies for various energy sources over the years 1950–2010. The study found that oil, natural gas, and coal received $369 billion, $121 billion, and $104 billion (2010 dollars), respectively, or 70% of total energy subsidies over that period. Oil, natural gas, and coal benefited most from percentage depletion allowances and other tax-based subsidies, but oil also benefited heavily from regulatory subsidies such as exemptions from price controls and higher-than-average rates of return allowed on oil pipelines. The MISI report found that non-hydro renewable energy (primarily wind and solar) benefited from $74 billion in federal subsidies, or 9% of the total, largely in the form of tax policy and direct federal expenditures on research and development (R&D). Nuclear power benefited from $73 billion in federal subsidies, 9% of the total, largely in the form of R&D, while hydro power received $90 billion in federal subsidies, 12% of the total.

        A 2009 study by the Environmental Law Institute[29] assessed the size and structure of U.S. energy subsidies in 2002–08. The study estimated that subsidies to fossil fuel-based sources totaled about $72 billion over this period and subsidies to renewable fuel sources totaled $29 billion. The study did not assess subsidies supporting nuclear energy.

        The three largest fossil fuel subsidies were:

        Foreign tax credit ($15.3 billion)
        Credit for production of non-conventional fuels ($14.1 billion)
        Oil and Gas exploration and development expense ($7.1 billion)
        The three largest renewable fuel subsidies were:

        Alcohol Credit for Fuel Excise Tax ($11.6 billion)
        Renewable Electricity Production Credit ($5.2 billion)
        Corn-Based Ethanol ($5.0 billion)

  10. CleanAir&Water Avatar

    PACE might look like a government loan but it is NOT!
    The first PACE program in CA 10 years ago use a government bond to come up with the lending monies, but recent PACE programs have been privately funded although the repayment runs through the tax district.

    Certainly the national programs are totally privately funded and in CT the state seeded a Green Bank but signed on banks that operate in Ct to provide loan funding. Government seed monies will be paid back.

    Also, this loan has NOTHING to do with subsidies although the customer is able to take advantage of whatever subsidies are available..

    Finally, because the loan runs with the property … how long a homeowner says in the house is not an issue. What is not to like? Enabling customers to buy solar panels without added subsidies?

    AND … real community solar is also blocked in Virginia. In Colorado they call it “community solar gardens”. The idea being that Jim, with his shaded roof, could buy panels on a solar installation located somewhere sunny in the neighborhood. This works particularly well where their are housing developments as we have here. Software take care of the usages and is available to the utility.

  11. LarrytheG Avatar

    @CleanAir&Water – my bad… I’m obviously not well informed…

    how is it better/different than say a private home equity loan?

    and yes.. I hear you about Community Solar… and agree… most new developments need “community” storm water infrastructure which may be dual use venue.. for solar..

    just FYI – we’ve had approved proposals up our way for Community drainfields… one single large drainfield for the development and that is probably a good venue also.

    the thing about a lot of people though is that they want their electricity – hidden.. they don’t want powerlines… wind turbines.. or solar stuff messing up their “view”.. We have folks down my way that want cell phone coverage but don’t want the tower – where it can be seen!!!

    that, in turn has let to this:


    and yes.. it’s 50 feet higher than all the trees around it !!!

    You can bet that the folks who complained about the cell towers would also complain about solar panels!

    they just want their plain old hidden electricity!

  12. Peter Galuszka Avatar
    Peter Galuszka

    One of the problems with posting material on this blog that is sponsored by Dominion Energy is constant myopia.

    The argument here is why Dominion is correct to move forward with the North Anna 3 nuclear unit since it fits with Dominion’s long term assessments of where generating capacity may be and what demand may be.

    What the blog posting does not as (and almost never asks) is what is the experience of other utilities and what are they planning. If Dominion is so correct in planning on this $19.3 billion or more nuke, then why aren’t all sorts of other utilities doing the same?

    Good question.

    So, I looked at the website of the U.S. Nuclear Regulatory Commission. I counted 17 new nuclear projects (some one unit, some two) for which a license had been applied. The applications were mainly in the 2007 to 2009 era and my guess is that is when nuclear was considered a green alternative to coal.

    But then it changed. Of the 17 applications, 11 have been withdrawn or suspended. This started around 2010 and some were after the 2011 Fukujima disaster in Japan. The only new power stations under construction are Vogtle and Virgil C. Summer in the U.S. Southeast.construction and they are messes.

    According to Ivy Main, an environmental lawyer associated with the Sierra Club, the two projects are woefully over budget and local regulators are considering shutting them down. Another victim has been Westinghouse, a pioneer in nuclear reactor design that was taken over by Japan’s conglomerate giant Toshiba, which went bankrupt in the mess.

    See Main:

    ANother factor involving North Anna is its unresolved problem of being located near a fault line. Virginia Electric & Power Co., Dominion’s predecessor, lied about the fault line in its applications for Units 1 and 2 and was fined back in the 1970s.

    In 2011, an earthquake struck near North Anna that was so powerful that the station had to immediately shut down. Extremely heavy casks of spent nuclear fuel were moved. The NRC launched a massive safety reset for all reactors in the U.S. Not much of this got covered at the time. but it was a big deal.

    So, it might be wise to keep these things in mind when considering Dominion’s “Plan H.” One wonders how many other utilities are sweating over their own “Plan H?”

    1. “The argument here is why Dominion is correct to move forward with the North Anna 3 nuclear unit.”

      Wrong. Totally wrong. Nowhere do I argue that Dominion is “correct.” I explain Dominion’s point of view because no one else has explained it adequately. Without such an action, its actions seem incomprehensible.

      Indeed, in my post, I expose the assumptions underlying Dominion’s logic for all to see — and to either agree with or criticize. The high cost of new nuclear reactors and their propensity for incurring massive cost overruns is very much worth examining. I’m glad you raised the issue.

      However, I would suggest that you are guilty of the very thing you accuse me of. Your reporting on Dominion is colored by your anti-Dominion animus. Think about it.

    2. TooManyTaxes Avatar

      Peter, why is the Sierra Club more credible than Dominion? They are both entities that have their own interests. I don’t think either of them represent the views of the average Virginian. Moreover, Ms. Main posted her blog on a partisan blog – BlueVirginia. If someone quoted a post on a GOP blog, you and others would be up in arms. Why the difference?

  13. Peter Galuszka Avatar
    Peter Galuszka

    Oh, I forgot a big point in my timeline. All of the nuke applications were made from 2007 to 2009. Hydraulic fracking for shale gas didn’t really get underway in earnest until about 2008 and by 2011 or so, the impacts were very clear. That could explain why so many nuke projects were cancelled.

  14. LarrytheG Avatar

    Hey Peter – you also forgot there are two aspects to Dominion these days:

    1. – what Dominion wants to do

    2. – all the housekeeping “paperwork” they gotta do – to tell the public…and
    make it sound like a planning process…


  15. CleanAir&Water Avatar

    AND … here is an alternative choice to Anna 3 that Dominion appears to have thrown away …. “Several companies are in the news as they gear up to work on U.S. offshore wind farms. DONG Energy awarded Lloyd’s Register a second contract to support offshore survey work on the Bay State Wind and Ocean Wind projects in Massachusetts and New Jersey. Scottish Power will build two wind farms off the coast of Massachusetts and North Carolina, expected to start generating power by 2022 and 2025, respectively. Thousands of jobs are expected to result from the wind development.”

    “The Maryland Public Service Commission approved two proposals for offshore wind farms off the coast of Ocean City because of economic benefit to the state: approximately 9,700 jobs and $1.8 billion of in-state spending over 20 years. The Public Service Commission required project developers U.S. Wind and Deepwater Wind to build part of their supply chains in Maryland, to spend at least $76 million on steel manufacturing in Maryland, and to use ports in the state. The developers are also required to invest $40 million into Tradepoint Atlantic, a shipyard near Baltimore that was once home to Bethlehem Steel. “We’re extremely excited about it,” said David Roncinske, a representative with Wharf, Dock Builders, Pile Drivers, and Divers Local Union 179.”

    Dominion says offshore wind is too expensive and are sitting on Virginia’s offshore area leases, blocking wind development in this state. Hmmmm!

  16. Peter Galuszka Avatar
    Peter Galuszka

    You may dot your posts with caveats, but what I find so lacking is analysis that goes beyond Dominion’s worldview. A year ago, when coal ash was of great concern, this blog and others simply dismissed that the muck could be removed to safer inland, professional landfills with liners on top AND bottom.

    Then we find out that other utilities are doing just this. Or, they are using coal ash as a raw material for other things.

    All I am saying is that for your analysis to be credible, you need to go beyond Dominion’s take on everything. Fine, give us their take. But too many times, the world ends at the Virginia border. There are other ideas out there.

  17. Peter Galuszka Avatar
    Peter Galuszka

    And Jim, BTW, you are NOT partisan?

  18. LarrytheG Avatar

    re: ” All I am saying is that for your analysis to be credible, you need to go beyond Dominion’s take on everything. Fine, give us their take. But too many times, the world ends at the Virginia border. There are other ideas out there.”

    In fact, I think it is incumbent on Jim to provide someone from the opposing view to present alternate views – to assure readers that Dominion’s support is to encourage dialogue and debate not just their view.

  19. djrippert Avatar

    This whole debate is ridiculous. Dominion wants the new reactor because Dominion is concerned with the aesthetics of Virginia. A large and unsightly earthquake fault runs through the state and Dominion uses nuclear reactors along to fault line to conceal the ugliness of the fault. I hope all of you feel bad for belly aching and you send Dominion a thank you note for keeping those earthquake fault lines out of sight under nuclear power plants.

    Who, in their right mind would let Dominion build another reactor on a fault line?

    Natural disasters and nuclear reactors don’t play well together …

  20. TBill Avatar

    I’m late but you know what I feel.
    The reason coal predominated in the USA, despite being more expensive than nat gas, was the money trail which was so lucrative to utilities and politicians and host communities. NA3 would be a jobs and money bonanza for a lot of folks, and that’s the driving force. It’s almost unstoppable if the politicians want to go that way….just as coal was unstoppable for the longest time. I know New Jersey strongly viewed power plant construction as a business run by the state, that the state could take the initiative to make happen to improve the lagging economy. The money for this development initiative comes from the rate payers. Our own money then gets used for PR campaigns and monetary rewards to win over the officials and the public to the proposals. Hard to fight it…God knows I tried. Money talks.

  21. Peter Galuszka Avatar
    Peter Galuszka

    “The reason coal predominated in the USA, despite being more expensive than nat gas, was the money trail which was so lucrative to utilities and politicians and host communities.”

    Host communities? They have enjoyed King Coal’s largesse? ARe you out of your mind?

    1. TBill Avatar

      I suppose that has to do with state charters, but in NJ yes towns would get the money, and therefore they would be the ones fighting for the plants, landfills, etc. NJ law even allowed a lump sum up front tax payment to the town, so quite a large host community benefit indeed. So in NJ basically I’d be fighting towns that wanted to approve coal plants, or nuke waste sites or whatever they thought they could do to get the money. I am certainly thinking host community benefit plays into Virginia’s past trash importation policies.

      NJ had studied risk communication, and they knew monetary reward made the public accept the risk. In the case of NJ, that boiled down to giving a town money to get the project, because as a Home Rule state, the town approval was all that mattered. We as Virginia might have different Dillon state dynamics, but I’d be worried.

  22. Acbar Avatar

    Completely agree with you, TBill. It doesn’t make economic sense for DOM’s ratepayers to do it, but at least, if the State did tilt the scales toward NA3 construction, it would accomplish the short term objective of employing lots of folks in Virginia, and we’d have something to show for it and to use and extract payback value from for the next 50 years — unlike so many of the proposed “infrastructure” boondoggles being talked about these days. AND, it would help to hide more of that ugly fault line onthrough Louisa County.

    CA&W and others talk about offshore wind proposals and such, and they are a fine idea when assessed against the alternatives with all costs disclosed, including the environmental cost of fuel and fuel transportation, and all subsidies removed for cost comparison purposes. But — it’s extremely difficult to obtain and make cost comparisons on that basis because the “clean” data is extremely hard to get. What, for example, does a commitment by an offshore wind developer have to do with redeveloping Sparrows Point hundreds of miles away? Could it be done cheaper on the DE or MD coast? Of course, yet the MD PSC would require the developers’ support facilities to be in Baltimore; the extra cost of building there and hauling everything from there to Ocean City ever after is no more than a tax to support Baltimore, and has nothing to do with the real cost of offshore wind (versus other generation types) that should be made. And this goes to the point that Virginia should learn from what other jurisdictions are doing. Get ideas, certainly, but make decisions on that basis? Only with caution, after stripping out the cost subsidies and restrictions that skew so many other States’ PSC decisions!

  23. LarrytheG Avatar

    re: coal and gas. Gas used to be very expensive before fracking.

    In fact, it was only used for peak generation and at a cost that was said to be 7 times what coal cost.

    But as bad as coal was/is – there is some science that says gas is 10-20 times more potent as a greenhouse gas… and that’s pretty troubling if true – especially if we’re going to burn it 24/7 for baseload.

    If it turns out that gas IS 10-20 times more potent … we’re in trouble and it could well be that Nukes are the choice and now we have that option.

    and it might be interesting what the GW “skeptics” say since Nukes are a heck of a lot more expensive and the skeptics say that we should not spend gobs of money on something that they’re not convinced is a problem to start with.

    just go back to burning coal and REDUCE your gas greenhouse emissions emissions by 90% !!!

  24. CleanAir&Water Avatar

    Larry is right about gas being at least equally as bad as coal. While it creates 1/2 of CO2 while making electricity the methane escaping from pipeliones and well heads is 85 times more potent while it is in the atmosphere. 85!.. It just disapates sooner than CO2.

    The new study at DOE is based on old ideas about ‘baseload’, so we won’t have to run gas as baseload for long.

    Advanced Energy Economy (AEE), the American Wind Energy Association and the Solar Energy Industries Association also wrote a letter to Secretary Perry this week, in which they welcomed the DOE’s examination of the U.S. electric power system, but stressed that the growth in wind and solar power are neither causing grid reliability issues, nor putting coal and nuclear out of business. “Numerous studies have conclusively demonstrated that low natural gas prices and stagnant load growth are the principal factors behind the retirements in coal and nuclear plants,” the letter states.

    Renewable energy is “reshaping state regulatory strategies and electric markets in the West,” and that’s largely because utilities are making the decision to take advantage of these new, competitive resources, he said. As a result, California doesn’t need the kind of baseload power plants that were built in the early 2000s; it really needs peaker plants.

    “We’re closing about 8,500 megawatts of gas baseload, building maybe 5 gigawatts of peakers,” he said. “This is a reshaping, and it’s all happening because renewables are killing, they are just killing.”

    The upcoming solar eclipse will be a prime opportunity for California to show that a grid with a strong renewable energy mix can withstand extreme variability, he added. On August 21, the Golden State is expected to suddenly lose around 6,000 megawatts of power as solar generation goes offline. “We can deal with that…without dragging baseload power plants out of retirement,” said Picker.”

  25. LarrytheG Avatar

    good article.. and good continuing conversations on this subject without rancor.

    I guess I still see solar as not compatible with baseload because even though solar can pump it out during a sunny day – it can’t on a cloudy day and if your strategy is to use “peaker” plants to cover that gap – that’s concerning… especially since peakers are less efficient than combined cycle plants.

    be that as it may – it’s also clear that no matter what happens to coal and nukes that gas is a critical fuel if it’s going to be what you use when solar is “down”.

    but even worse is Rick Perry and the Trump folks getting involved in Grid reliability under the guise of national security. I cannot imagine a more ignorant and incompetent group of folks to get involved in anything that requires careful and reasoned actions or bad stuff happens.

    Perry acts like he’s never heard of PJM… which is…. quasi-Govt… and apparently has managed to maintain critical infrastructure logistics.. in spite of politics which if you think about it – is amazing… or perhaps we just don’t see it…

  26. LarrytheG Avatar

    re: ” Numerous studies have conclusively demonstrated that low natural gas prices and stagnant load growth are the principal factors behind the retirements in coal and nuclear plants,” ”

    well.. the way I read this is that gas is replacing baseload coal/nuke… which leads one to wonder… the following:

    I wonder if those “numerous” studies have indicated how long gas supplies will last – and what happens after we run out of cheap gas? Do we then do a “180” and frantically start bringing coal and nukes back online?

    The issues .. are all over the map… I have yet to see a cogent analysis of how we operate 20 years from now if gas gets scarce and we’ve closed a bunch of coal and nuke plants.. it points to not a good thing..

  27. To be successful 20 years from now, we must replace our current thinking about more “supply” being the answer. That is what you are discussing. It assumes that mainframes are the only to solution after the world has shifted to networks.

    Remember “baseload” is not a description of a method of generation (although it is often used that way) it is a description of the minimum 24-hour demand. With energy efficiency, demand response and storage, we will have far better tools to manage demand than we have today. In that scenario, the dispatchable units that have the greatest value will be flexible ones. Coal and nuclear do not meet those conditions.

    We will have nearly all of the units we have today for at least the next 15 years. Adequacy of supply is not the issue. We have to chart a course for those units to be economic while our energy systems evolve.

  28. LarrytheG Avatar

    ” a description of the minimum 24-hour demand”

    yes… and no matter what that demand is … it will be static 24/7 demand … the default demand that is always there .. and then layered on top of that is dynamic demand – mostly influenced by temperature…i.e. “degree days’.

    So what “fuel” will be the “base load” fuel – 20-30-40 years from now?

    Even if we massively reduce that 24/7 demand with demand-side technological efficiencies.. we will still have to generate some amount electricity to power the minimum 24/7 static load.

    then… we’ll have the dynamic load – the load that is in addition to the base load… and varies dynamically according to temperature and , for want of a better word – “societal tempo”… i.e. the times when people are awake and doing “stuff” … that results in increased/dynamic demand… water heating for bathing, cooking, entertainment, etc…

    I don’t have a clue if there is a ratio between base and peak… nor how demand-side technology might change it and even if so.. does it really mean anything of consequence…

    starting to wander now…so will finish again with the idea that the ONLY fuel that can dynamically adjust to dynamic load is – gas… until and unless we have cost-effective storage… which may not be a near term thing…

    If we HAVE to burn gas for peak loads and it is the absolute worst in terms of impact to the climate – we will have to use it sparingly only when there is no other option… and certainly not for 24/7 base load and that drives me back to what do we “burn” for baseload even in a highly optimized demand-side world.. we still end up having to have baseload… of some amount.

    my thinking so far… but am listening to you guys.. to see where I might need to rethink..

    1. First, an update on gas-fired plants. They are equivalent in GHG effects to coal plants because of the methane leaks. Leaks can be dealt with relatively inexpensively. Let say we could reduce them them by 50-75%. That would mean if we replaced all of the coal plants with gas we would have slightly lower GHG emissions from the electricity sector. However, the direction we are going is to keep many of the coal plants and maybe add some more ( I think the administration is overly optimistic about this – not too many generators interested in building new coal plants). We are also planning to add many new gas-fired plants.

      On our current trajectory, by 2040, the US would exceed our climate targets with just natural gas use – assuming no use of coal or oil (for transportation and generation). This is the scenario Dominion has kept the nuclear option for (as well as the revenue advantages to them).

      The alternative is to keep the load stable or declining, so no new baseload capacity is required. As coal and nuclear units retire they would be replaced by energy efficiency, storage from pumped storage, long-term batteries, compressed air storage, etc. Peakers are being replaced by batteries now. These technologies are evolving and rapidly declining in price. If we hold demand steady, we have 15+ years to develop solutions, while maintaining high reliability.

      Overbuilding new capacity whether gas-fired or other types of conventional generation locks us into a 35-40 year payout where the new or functional older units are forced into a stranded cost situation.
      The grid will also be improved during this period to accept many new possibilities.

      We don’t need all of the frenzy and confusion that is going on right now. We have a surplus of capacity all over the US. We just need to calm down, invest in energy efficiency at 2-3 cents /kWh, invest in grid improvements and technology innovation that will drive down prices, and update our regulatory schemes to bring our utilities into the 21st century.

      We have a wonderful opportunity. For the first time, the cheapest ways to generate energy are also the cleanest. It is time for the environmentalists and the energy producers to collaborate and innovate rather than oppose one another. Changes in regulations will allow utilities to prosper by moving in that direction too.

  29. CleanAir&Water Avatar

    Here is my best take on a confusing subject …
    I think the interesting thing about the curve growing while base requirements diminish is that large scale solar is making the problem worse and more distributed solar – not so much.



  30. CleanAir&Water Avatar

    This environmentalist would like to second Tom’s view of the way forward … TKS

  31. TBill Avatar

    As far as I know, natural gas is far better than coal for mitigating climate change. It is not helpful to condemn natural gas because it may be the best thing we have.

    1. TBill,

      Most of what you hear from the energy industry is confusing because they compare only CO2 output of the gas-fired plants, which is about half of the CO2 emitted from an similar size coal plant, so they say that natural gas helps with climate change. However, when you take into account the methane leaks along the supply chain to the power plant, the total greenhouse gas emissions (CO2 + methane) from operating that gas-fired plant is about the same as a coal plant. Methane is a far more potent greenhouse gas than CO2, but it disperses more rapidly.

      If you discuss climate change and compare options, it should be done on an equal basis. Limiting the comparison to just CO2 does not do that. But it is much easier to measure the the CO2 from burning coal or gas, so that is what the discussion has been limited to and it is only CO2 pricing that is likely to show up in wholesale energy markets. So gas will get a “subsidy” by ignoring the methane component.

      Thinking that burning gas provides a climate benefit will actually accelerate the climate effects, because we are building more plants with the same GHG contribution as coal, thinking that it is actually helping things. Most policymakers, regulators, and energy executives are either ignorant of this or choose to ignore it. So if discussions about climate do take place, the decisions are distorted by not fully considering the facts.

  32. LarrytheG Avatar

    I’m on board with most of it but still a heavy skeptic on this:

    ” baseload capacity is required. As coal and nuclear units retire they would be replaced by energy efficiency, storage from pumped storage, long-term batteries, compressed air storage, etc.”

    pump – storage is not going to go anywhere.. it requires an ideal.. almost unique situation of a huge upper and lower reservoir like you see in Bath County… there are few places like that…

    “storage” .. for baseload.. is a pretty tall order… it’s hard enough to do storage for peak…. so I also put that in the not-likely column although perhaps a breakthrough will happen..

    compressed air…etc… it could well be that at some point some kind of novel..as yet unthought of technology will emerge… and I’m certainly not say it’s inconceivable… in fact.. it probably will happen – but it’s not on the horizon right now … so the most promising option .. I agree … is demand-side technology that will reduce baseload…

    but we still have to have SOMETHING to generate baseload.. whatever lower level it might be… that’s the reality.. in other words what are you going to “store” ? it has to come from some kind of generation to start with. I guess you mean solar harvested during the day and stored for nightime use?

    so are we going to have nukes, burn coal or burn gas – for whatever level of (hopefully reduced) baseload?

    we ought to be clear-eyed about what the reality is.. here.. in my view.. no pie in the sky hand waving… it just gives ammunition to the pro burn-baby-burn folks..AND Dominion when they dismiss the green-weenies as well-intentioned but out of touch.

  33. Larry, I agree with you.

    I was speaking mostly about Virginia when I mentioned pumped storage. You would pump it up during the day with solar instead of at night with nukes. The economics shift between day and night but we might see a shift in that too. Daytime peaks with lots of solar might become the cheap time of day and night time with more expensive conventional generation might become more expensive, plus adders for dispatchability, etc. New York and Michigan have pumped storage, maybe the Northwest, but it is not everywhere (where are you going to find a hill in Kansas or Florida?).

    We will be using gas, some nukes, maybe even some coal plants for the nighttime load for quite some time. They will just become more expensive. My point is they last a long time and if we keep the demand steady or declining we don’t have to build many new ones.

    They are using compressed air storage economically today on the Great Plains for storing excess wind energy. Wind energy is very cheap and compressed air has a large storage capability and a long discharge time. Increasing wind output lends to baseload capacity.

    I think we will see a great deal more innovation, but even if we only have the technologies we have today we can create a modern energy system as the prices continue to decline. The key will be to keep demand stable while economic activity and population continue to increase. This will lead to the lowest cost and most reliable system. Cost and reliability are threatened if we overbuild conventional generation. That will increase the cost and reduce the reliability because we will have too much inflexible generation. Many units will not be economically dispatched which will threaten generator profits or require taxpayers or ratepayers to pay extra for foolish choices designed to prop up specific industries.

  34. LarrytheG Avatar

    re: ” My point is they last a long time and if we keep the demand steady or declining we don’t have to build many new ones.”

    yep… we might learn from states like California and Hawaii where per capita electricity use is about half what we use in virginia.

  35. TooManyTaxes Avatar

    A new coal mine is opening in Pennsylvania. Posting as news, rather than arguing its meaning. http://insider.foxnews.com/2017/06/10/new-coal-mine-donald-trump-pennsylvania-fossil-fuels-regulations

  36. Peter Galuszka Avatar
    Peter Galuszka

    This little item on Fox shows why there is so little understanding of the U.S. coal industry Consider:

    (1) The mine has been planned for years and has nothing to do with Donald Trump’s presidency. Typically, Trump is taking credit for it.
    (2) The coal that will be mined is metallurgical coal, needed to make iron and steel. It has absolutely nothing to do with keeping our lights on. Only 10 percent of U.S. coal is coking coal.
    (3) Much of the coking coal mined in this country is exported to places like China and South Korea. America has very few vertically integrated steel making processes left – that is — ones that take raw materials and end up making steel. There are very few blast furnaces left and much U.S> steel production is done in rolling mills using scrap.
    (4) The met coal market is enormously volatile. A bad storm in Australia can skew the market which has just happened again. Met coal mine problems in Australia and other foreign spots created a huge but temporary spike for demand around 2010-2011 for U.S. coal. It got so intense that Norfolk Southern railroad had to scramble to find enough hopper cars and locomotives to get product to wharves in Tidewater for export.
    (5) The coal industry and its backers love to pretend that met coal is really steam coal (used for electricity) and is patriotically “keeping our lights on.” What’s hurting steam coal is fracked gas which, of course, has absolutely no effect on the met coal market.
    (6) The EPA and Hillary Clinton and all their supposed regulations have a considerably less influence on regulation. The EPA cannot regulate U.S> met coal being burned to make coke in a Chinese steel mill. Some federal regs, such as MSHA for miner safety and for Mountaintop removal do apply.
    (7) Met coal can be dangerous to a company’s ledger books. When Richmond-based Massey Energy was going belly up after the worst coal mine accident in 40 years in 2010 and 2011, Bristol-based Alpha Natural Resources paid $7 billion to buy it. Why? Massey had great met coal reserves. But, the met coal market crashed and Alpha went bankrupt.

    Wonder why Fox News didn’t get into any of this?

    1. FWIW, What Peter says here is an accurate summary of the situation.

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