Wind and the Grid: A Precautionary Tale from the U.K.

So, you think the rolling blackouts experienced in California were a fluke and of no relevance to Virginia? Well, then, consider what’s happening right now in the United Kingdom, where “unusually low wind output” and a series of planned power plant outages puts the nation at risk of blackouts. You see, the U.K. relies upon wind power for literally half of its electricity, which is just dandy when the wind is blowing, but not so great when the airs are calm.

As it happens, here in Virginia, Dominion Virginia Power has finished installation of its first two offshore wind turbines. Those two units are paving the way for a much wider deployment of wind power in the Atlantic Ocean. The utility forecasts that wind will account for 5.1 megawatts of its electric-generating capacity (about 20%) within 15 years.

In the U.K. the becalming of the wind — windpower is expected to drop from 51% of output to as low as 10% over the weekend — coincides with planned outages at two of the country’s nuclear reactors, reports the Daily Mail. The National Grid Electricity System Operator reassured the Brits that it would “make sure there is enough generation” to prevent blackouts…. In other words, the U.K. will be cutting it really close.

One big difference between the UK and Virginia is that the UK continues to invest in nuclear energy to supply a reliable base-load of electricity. Here in Virginia, the 15-year forecast in Dominion’s Integrated Resource Plan (IRP) assumes that its two aging power stations will be re-licensed. But powerful environmental groups oppose the projects, which are still several years out, in the expectation that energy conservation and battery storage will be able to make up the difference.

Another difference is that Virginia’s portfolio of renewable power sources will rely heavily upon solar. Indeed, the IRP forecast projects three times as much solar as wind. That makes Virginia less vulnerable to a falloff in wind but more vulnerable to extended cloudiness.

The UK experience points out other problems associated with excessive dependence upon renewables:

During the national lockdown earlier this year, the network was inundated with extra power.

National Grid had to spend £50million on the second May Bank Holiday weekend alone to pay power producers – including surplus wind and solar farms – to switch off.

It spent almost £1billion on extra interventions to prevent blackouts during the first half of the year and also handed out money to EDF Energy to halve the amount of power generated at its Sizewell B nuclear plant.

Bacon’s bottom line: Virginia will get to a 100% renewable grid eventually. But it is reckless and dangerous to set arbitrary deadlines in the hope that somehow, maybe we will have developed batteries or other energy-storage mechanisms that will allow us to maintain reliability without driving electricity rates into the stratosphere. Until such technologies are proven, we need to maintain a base supply of nuclear and, dare I say it, natural gas. Further, we’ll need quick-surge natural gas capability to fill in when the sun don’t shine and the wind don’t blow.

The most discouraging thing about the discourse about maintaining the reliability of Virginia’s electric grid is that the environmental lobby has yet to say anything more reassuring than, “We’ll figure it out.”

A version of this commentary was originally posted on October 16, 2020 in the online Bacon’s Rebellion.

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Holiday Spending Could Be a Bumpy Economic Sleigh Ride

The official kickoff to the holiday selling season starts next month, but Christmas trees have already started showing up at retail stores.
It is an important time of year for retailers as holiday sales represent about 20% of the retail industry’s total sales.

The typical signals forecasters use to predict holiday sales are not very helpful during this COVID-19 environment.

Increasing consumer spending is typically associated with growing employment and low unemployment rates.

The coronavirus pandemic put the economy into a tailspin with employment still 10.7 million below pre-COVID-19 levels in September and the unemployment rate at 7.9% after peaking at 14.7% in March.

Not surprisingly, consumer spending on goods and services plunged 16.5% in April, compared with a year earlier. The latest data for August shows improvement, but sales remain 3.2% lower than a year ago.

These trends, along with the social distancing and concerns over coming down with the virus, seem to point toward a dismal holiday selling season.

Is it possible to see more sales over the holidays than last year? The National Retail Federation, the nation’s largest retail trade group, predicts holiday sales will increase between 3.5% and 4.1% to more than $3.9 trillion during the upcoming holiday season.

The forecast, which excludes sales at automobile dealers, gas stations and restaurants, represents sales to be generated in November and December. Holiday sales grew between 3.2% and 4.2% annually over the past five years.

“Consumer spending has seen a clear V-shaped recovery thanks in part to $1,200 stimulus checks issued in the spring and enhanced benefits for the unemployed,” said Jack Kleinhenz, the NRF’s chief economist. “I am cautiously optimistic about the fourth quarter in terms of the economy and consumer spending, but the outlook is clouded with uncertainty pivoting on COVID-19 infection rates.”

Global financial services firm Deloitte is not as optimistic. It is looking for holiday retail sales to increase between 1% and 1.5% when compared with last year.

This forecast comes by melding together two scenarios.

The first is that sales increase only 0% to 1% as consumers remain concerned about their finances and health. A more optimistic scenario of 2.5% to 3.5% year-over-year sales growth would occur if consumer confidence rises due to additional federal pandemic relief and the creation of a vaccine.

Since people have not traveled or eaten in restaurants as much in the COVID-19 environment, some of that spending might shift to holiday spending under the more optimistic Deloitte forecast.

My view about holiday spending is in line with the NRF forecast for a couple of reasons.

Consumer confidence about the strength of the economy has risen. The Conference Board’s monthly survey index value stood at 101.8 in September, up from a low of 85.7 in April during the COVID-19-induced recession.

Fiscal stimulus and high savings rates also put consumers in good shape to spend this year.

Sales might be a bit higher in Virginia because our economy has rebounded slightly faster than the nation.

But the one thing all forecasters seem to agree on is that the shift toward e-commerce sales will accelerate this holiday season because of virus concerns.

A version of this commentary was originally published on December 11, 2020 in the Richmond Times-Dispatch.

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TCI Returns

Having imposed a carbon tax on Virginia electricity generation in 2020, the General Assembly starting in January 2021 will consider adding a similar tax on every gallon of gasoline and diesel sold for vehicle use. The Transportation and Climate Initiative, an environmentalist dream for a decade, is finally ready for its close up.

Advocates in the 12-state region that would make up the proposed interstate compact held two webinars in September, one focused on additional modeling on the project and the other discussing all the racially- and environmentally-just ways they believe states can spend the billions in new taxes.

The new modeling results did not change the basics of the program. TCI is a cap, tax and trade system that imposes a dollars-per-ton cost on the carbon dioxide emissions released by burning the fuels. The tax rate is set by an interstate auction, and the tax itself is imposed on the fuel wholesalers. The amount of fossil fuel emission credits that wholesalers may bid for will be capped and then will shrink a certain percentage every year.

The advocates have still not released a new memorandum of understanding, which Virginia would need to agree to. During the 2020 General Assembly, members of Governor Ralph Northam’s administration stated the issue would be brought before the full General Assembly and he would not simply sign the deal.

Once approved, the details of implementation would need to be worked out in a regulatory process imposing the supply cap and tax mechanism on all wholesalers serving the Virginia markets. Maryland will be the only adjoining state in the compact, creating additional pressure on the fuel industry along most of Virginia’s borders.

That still-hidden-in-the-weeds MOU will be crucial because it will set the reduction targets. The higher the targets, the higher will be the carbon tax and the steeper will be the slope on the reduced amounts of fuel for sale. The new models still project that a 20% reduction over a decade will start with a tax of 5 cents per gallon, while a 25% reduction will start with 17 cents per gallon and climb from there.

The final MOU is expected to include mechanisms to decrease the amount of emissions available slightly if auction prices drop too or increase them if they spike quickly. But there will still be a steady decrease in the number of gallons available for sale throughout the region, a form of rationing.

Governor Ralph Northam was just branded with a grade of “F” by the Cato Institute in part for raising gasoline taxes ten cents per gallon in some parts of Virginia and almost 18 cents per gallon in other parts of the state. That will put the state gas tax around 34 cents per gallon by July 2021.

With TCI carbon taxes added on, Virginia’s fuel taxes may be exceed 50 cents per gallon by next summer. Legislators seeking their own re-election, or seeking a statewide office, may need to explain why some parts of Virginia saw fuel taxes triple in two years.

The increases imposed this summer and fall have been all but invisible, with fuel prices down in the recession. A year from now could be different, the economy and fuel prices up, and another fuel tax hike then might be quite apparent to voters and business owners.

And to accomplish what? The new TCI modeling shows what the old version did: With no action whatsoever, market forces are already driving down emissions in the transportation sector. Old vehicles are being replaced by new, more efficient models, and electric vehicles are growing in popularity. By 2030 vehicle-related emissions could drop 19% or even more, without any caps or carbon tax.

Against that backdrop, the TCI goal is really to add only one to 6 additional percentage points of reduction in CO2 emissions. To claim substantial environmental or even health-related benefits from that is a stretch. The Thomas Jefferson Institute’s David Schnare, Ph.D., dismantled the earlier environmental and health benefit claims in a 2019 review, still valid apparently.

One of Schnare’s criticisms is the money being raised by the TCI carbon tax is not going to transportation infrastructure, while the declining cap on fuel sales will reduce the traditional sources of revenue for road construction and maintenance funds. The TCI organizers want to use the new tax revenues to subsidize electric cars and trucks, mass transit and non-vehicle travel (bike and pedestrian options.) Their models depend on assumptions that doing that will reduce fuel sales.

One of the TCI sales pitches will be promising to focus the financial aid on lower income communities. A major topic of that webinar’s discussion was the premise that urban and low-income citizens have been overburdened by traditional energy development and related pollution. At the webinar, Chris Bast of the Virginia Department of Environmental Quality touted the 2020 Virginia Environmental Justice Act and Northam’s creation of a cabinet-level Chief Diversity Officer.

Programs outlined in other states included subsidies for electric cars and buses, building out EV charging stations, residential development on transit lines and for home energy efficiency projects. The General Assembly debate could quickly devolve into a sticky contest between drivers who would pay the higher taxes or feel the pinch from a supply cap — heavily business, suburban and rural — and those who believe they will benefit from the new taxes, mostly urban.

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Free Speech Guaranteed — Except When You Disagree with Us

The Loudoun County School Board expects public school employees to conduct themselves in a professional manner. A draft policy for professional conduct contains all the usual things one would expect. Teachers and other employees should treat students and peers with dignity, respect and civility. They should not bully people, consume alcohol or drugs in the workplace, use racial slurs or insults, or engage in inappropriate or sexual relations with students.

But the proposed policy, which the board is scheduled to vote on Oct. 12, contains something extra. It would curtail what school employees can say outside of school. Specifically, it would prohibit anyone from making speeches, social media posts or any other “telephonic or electronic communication” that is “not in alignment with the school division’s commitment to action-oriented equity practices.”

In other words, if you are a public school employee who disagrees with the leftist social-justice agenda of the Loudoun County Public School system, shut up or face the consequences.

The draft professional-conduct policy is explicit about what it is trying to accomplish. States the draft (my highlight):

The Loudoun County School Board is committed to an equitable and inclusive work and educational environment for employees and students. As outlined in the Superintendent’s Statement on Equity, Loudoun County Public Schools reject racist and other racially motivated behavior and language, recognizing that it encourages discrimination, hatred, oppression, and violence. Employees are expected to support the school division’s commitment to action-oriented practices through the performance of their job duties, as the Division engages in the disruption and dismantling of white supremacy, systemic racism, and language and actions motivated by race, religion, country of origin, gender identify, sexual orientation, and/or ability.

Behavior that will not be tolerated includes but is not limited to discriminatory statements, the use of racial insults or slurs, or:

Any comments or actions that are not in alignment with the school division’s commitment to action-oriented equity practices, and which impact an individual’s ability to perform their job responsibilities or create a breach in the trust bestowed upon them as an employee of the school division. This included on-campus and off-campus speech, social media posts, and any other telephonic or electronic communication.

Moreover, states the draft policy, employees are … encouraged to to report violations of LCPS’s commitment to “equitable treatment” of students and staff to their immediate supervisor or principal.

Apparently, it did occur to the drafters of this proposed policy that some provisions might infringe upon employees’ right to free speech. “Nothing in this policy or any other policy shall be interpreted as abridging an employee’s First Amendment right to engage in protected speech,” the draft says. But then it creates a massive loophole. The right to free speech does not apply “on matters of public concern [that] may be outweighed by the school division’s interest in … achieving consistent application of the Board’s and Superintendent’s stated mission, goal, policies and directives, including protected class equity, racial equity, and the goal to root out systemic racism.”

In other words, nothing shall abridge your right to free speech — unless you express disagreement with the School Board’s leftist social-policy agenda.

This document is so grievously flawed that I cannot imagine the Loudoun County School Board will approve it. If the board, in a fit of madness does adopt this policy, surely the free-speech provisions would never survive a legal challenge. But the fact that such a document could be drafted tells us a lot about the people running the Loudoun County school system. In their zeal to “root out systemic racism,” they’re perfectly willing to root out traditional American liberties as well.

These people are dangerous, and they are taking over.

This commentary originally appeared on Oct. 4, 2020 in the online Bacon’s Rebellion.

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Dominion Green Energy Costs Grow Again

Dominion Energy Virginia’s major capital projects listed in its pending integrated resource plan. The SCC staff added the lifetime revenue requirement, the total dollars extracted from ratepayers over time which includes financing costs and the company’s current profit margin. Source: SCC

As sobering as they were, the initial estimates of how a green energy conversion will explode Dominion Energy Virginia rates have now been revised up. The State Corporation Commission staff now sees it costing an additional $800 per year for a residential customer to purchase 1,000 kWh per month by 2030, an increase of just under 60%. 

The main drivers of the higher costs will be all the offshore wind and solar generation Dominion proposes to build, as outlined in its most recent integrated resource plan. That plan is now being reviewed by the SCC, and the staff filed its analysis late last week, summarized here on pages 4-5. 

The separate cost analysis by Carol Myers of the SCC’s Division of Utility Accounting pushed up the utility-issued estimate by disputing assumptions the utility made. Staff disagrees with the utility projection that by 2030 less than half of its electricity will be used by residential customers. It is now about 55%. Should the portion shrink as Dominion projects, more of the project costs would be imposed on commercial users.

Myers reported it is also unrealistic to assume most residential households use 1,000 kWh per month, when the history show usage at or above 1,100 kWh.  Plugging that into the data would increase the projected cost to families even beyond $800. Myers’ testimony also shows huge increase in commercial (60%) and industrial (65%) power costs by 2030, even larger on a percentage basis than residential. For the state’s economy, they also matter.

Reading her testimony demonstrates how many variables are involved in these projections. Behind the “gotcha” headlines, it is clear these estimates could easily be too high or too low. Much but not all of the coming price increases can be blamed on the 2020 Virginia Clean Economy Act, which is dictating the massive wind, solar and storage investments. The General Assembly is also responsible for the vast majority of the other recent decisions driving up your future bills. 

There is also no reason to assume that a General Assembly which has rewritten utility law several times in the past decade will not continue to do so going forward. Each integrated resource plan seems to survive as a useful document only until the next General Assembly session, if that long.

One of the major unanswered questions is whether the North Carolina regulatory authority will impose these capital costs on its citizens served by Dominion. If not, that will further increase the bill on Virginians.

The new analysis by the State Corporation Commission staff confirms that the green energy law passed by the General Assembly is indeed the “Clean Energy We Don’t Actually Need Act.” Dominion Energy Virginia will be collecting $100 billion from its customers to build far more electricity generation than we need, either to meet renewable energy goals or to simply meet demand.

Environmental opponents of the plan will seek to stop continued operation of the coal-fired Virginia Hybrid Energy Center in Southwest Virginia, which on an accounting basis is actually a money-losing operation with a net present value of negative $472 million by 2030.

Along with fossil fuel plants not being closed, Dominion proposes to add 970 megawatts of new natural gas generation by 2024, “to address what (Dominion) characterizes as probable system reliability issues resulting from the addition of significant renewable energy resources and the retirement of coal-fired facilities,” the staff wrote.

SCC Staff versus Dominion estimates of residential cost increases by 2030. Plan B assumes a 25% solar capacity factor, and B19 assumes a 19% capacity factor.

Like Gaul, your future Dominion bill increases are divided into three parts in Myers’ testimony, as her table above illustrates.

First, identified in the document as Plan A, are increased costs not directly tied to the 2018 or 2020 legislation. Those include the Assembly-approved plans to remove coal ash, to place hundreds of miles of residential tap lines underground, and various demand management programs where customer A pays customer B to use less power. Also included are the cost of gaining new 20-year operating licenses for Dominion’s four nuclear reactors.

The second tranche of higher costs are projects which were mandated in the 2018 Ratepayer Bill Transformation Act (also called the Grid Transformation Act). That includes a portion of the planned solar, a broadband program subsidized by ratepayers, even more demand management, and a planned pumped storage facility to provide 300 megawatts of backup to renewables. 

The third tranche comes from 2020’s VCEA: Four or more waves of wind turbines built off Virginia Beach, thousands of megawatts of new solar, battery storage, the cost retiring coal plants early, and the new carbon tax Virginians will pay as part of the Regional Greenhouse Gas Initiative.

Myers includes a table comparing the new generation sources, the amount of energy generated when they operate and their initial cost and all-in cost, including financing and profits over time. That’s how $45 million in capital costs translates into $100.6 million in customer payments.

Do the division and it turns out the offshore wind will cost $7 million per constructed megawatt, solar will cost about half that at $3.7 million per megawatt, and the natural gas generation less than $2 million per megawatt.  The disparity is even worse, in reality, because solar and wind are unreliable, intermittent producers.

The staff testimony and all the other documents in the IRP case may be found here. Below is the revised version of a chart used earlier. 

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