"First they ignore you, then they ridicule you,
then they fight you, then you win."
-- Mohandas Gandhi
Ken Ward had a story in yesterday’s Charleston Gazette titled “West Virginia could meet EPA plant standards, report says.”
West Virginia could meet proposed federal standards to reduce greenhouse gas emissions with a smart mix of energy efficiency programs, ramped up solar- and wind-power generation and moderate improvements at existing coal-fired power plants, according to a new report.
The U.S. Environmental Protection Agency proposal presents “a number of challenges” for West Virginia but also provides states with the ability to design their own plans for meeting the Obama administration’s objective of curbing heat-trapping carbon dioxide pollution.
“Given this flexibility, West Virginia can develop a state plan that puts the state on track to meet its emission limits while at the same time enhancing the social, economic, and environmental benefits of further integrating its energy efficiency, renewable energy, and natural gas resources into the state’s electricity sector,” says the report.
Here is a link to the report, published by the WVU Law School’s Center for Energy and Sustainable Development and Downstream Strategies. The report is a good one. It quantifies the impacts of implementing all of the strategies we have covered on The Power Line for years: energy efficiency, combined heat and power, turning WV’s fake standards into a real renewable portfolio standard, creating an energy efficiency standard and requiring real integrated resource planning (not the fake IRP that FirstEnergy pushed through the Legislature last year). Keep in mind that none of these changes have even gotten out of committee in the WV Legislature over the last six years.
There’s another big problem. This report (or, better yet, its implementation) is about three years too late for WV.
The WV PSC and the two Ohio-based holding companies that control the WV electric power industry have closed the door to these solutions, because the WV PSC has just made it much more expensive to make the changes we need to make. In 2013, the PSC approved the dumping of FirstEnergy’s Harrison Power Station on WV rate payers. In this deal, the PSC locked FirstEnergy customers into paying for much more electric capacity than they need for the next thirty years.
In the more recent AEP case, the parties have reached a settlement involving the same kind of transfer of units of the obsolete coal-fired Amos and Mitchell plants to WV rate payers. In this case as well, the generating capacity for which AEP’s WV customers are stuck paying is also more than projected demand in our state for the next thirty years. The PSC has not approved this AEP settlement yet, but Commissioners Albert and McKinney will no doubt approve the essential features of the transfer. They have already approved the Amos transfer. If the PSC approves the Mitchell deal, WV rate payers will also be paying for much more capacity than they will need for the next thirty years.
A number of us, including the Gazette’s Ken Ward and the State Journal’s Pam Kasey, warned that the Harrison and Mitchell deals would close the door for real energy change in WV for decades. WV Citizens Action Group fought the Harrison settlement tooth and nail to block the Harrison boondoggle. The Sierra Club, however, settled for a few crumbs on energy efficiency, and seemed to overlook the real impact of these power plant deals.
This situation illustrates clearly how many environmentalists miss the real issue. Too often they isolate themselves on the fringes of the main argument and settle for small, short term victories that leave them powerless to effect real change. Both AEP and FirstEnergy are masters at publicizing window dressing about renewable power and energy efficiency while operating behind the scenes at state legislatures and PSCs to lock in their corporate control. FirstEnergy has even gone on the offensive in Ohio to roll back existing renewable power and energy efficiency standards.
Superficial company-run energy efficiency programs are valuable tools for power companies to ghettoize “environmentalists.” These programs channel activism into advocating for energy efficiency as a painless panacea for carbon emissions and all the other problems associated with coal burning power plants.
Power companies in WV see energy efficiency programs only as a way to sidetrack public discussion. The companies’ primary goal is PR. They will never agree to so much reduction in demand that threatens to significantly displace their coal-fired generating plants. AEP and FirstEnergy will have to be forced to make those kinds of efficiency investments, and, in the recent coal plant cases, the PSC has demonstrated that it is not willing to do that. Chairman Albert seems to have a serious fetish about “steel in the ground.”
Improvements in energy efficiency have an important place in transforming our electrical system. They have already proven that. But there are limits to that impact. The rebound effect plays some role in reducing efficiency improvements as people use some cost savings to use more electricity. Also, as the cheap and easy efficiency investments are made, the marginal return of each succeeding improvement becomes a little more expensive to generate. Some demand reductions attributed to energy efficiency improvements are actually the result of de-industrialization and the transfer of less efficient manufacturing to other countries, reducing the net effect on worldwide impacts. The US is woefully behind other industrial countries when it comes to building energy efficiency into all of our generation and manufacturing processes, but energy efficiency advocates need to recognize that energy efficiency alone will not get us where we need to go.
That is why we need to go to the heart of the matter – how West Virginia regulates electrical generation capacity. Unfortunately, that matter is now largely settled for a generation. The WV PSC has made, or will soon make, in the case of AEP, a legal commitment to WV’s electrical holding companies that WV rate payers will bail out the companies’ obsolete coal burners. If any alternatives to that generation are implemented, the WV PSC will likely require West Virginians to pay them for the Harrison, Amos and Mitchell plants if those plants are closed. In its current 17.2% residential rate increase request, FirstEnergy wants rate payers to pay for the stranded capital costs of the Albright, Rivesville and Willow Island plants that it closed in 2012. What happens in that case will be a good indication of what the PSC would do with stranded costs in the future.
So if, by some miracle, WV implemented a lot of new renewable generation or cut electricity demand further through CHP plants and energy efficiency investments, AEP and FirstEnergy would demand that we pay them for the idling of one or more of their existing coal plants. It’s a zero sum game now. Any new generation would have to displace those plants. WV rate payers would likely be obligated to pay for them if they close.
Any new shift in generation away from coal in WV, as suggested in the new report, could result in WV rate payers paying twice for the same generation capacity: once for the new renewable sources and efficiency investments, and twice because the PSC will probably force them to pay back the Ohio power companies for the Harrison and Mitchell/Amos plants if they are forced to close. You can bet FirstEnergy and AEP will be quick to blame “environmentalists” and the EPA for any rate increases that end up on West Virginians’ electric bills as a result.
With the recent power plant cases, FirstEnergy, AEP, Chairman Albert and Commissioner McKinney have doubled the costs of WV’s path to renewable power, and most of the state’s media and politicians didn’t even notice. And now, it’s too late.
Wind turbines have not worked well as small scale electricity generators. Complexity and too many moving parts makes their cost of maintenance high at a small scale. Generally, efficiencies rise dramatically with size. For years, innovators have been working on simpler, quieter vertical shaft turbines that are efficient in small scale applications.
Vertical shaft turbines are now being deployed at businesses in the New York area. Here is a story about some new and beautiful turbines at several businesses. The TV talking heads get a lot of stuff wrong in the story, (No, new small scale generation is not “energy efficiency.”) but the visuals are great.
Here’s one set of turbines -
Click on the link above to see the turbines in action.
If these kinds of turbines can be produced and operated at costs per kwh as low as solar panels, we will see a real revolution in decentralized power.
On October 6, WV PSC Commissioner Jon McKinney traveled to Shepherdstown to preside over the public hearing about FirstEnergy’s 17.2% rate increase for WV’s residential customers. A friend of mine, John Christensen, testified at the hearing and asked me to forward him the transcript of the hearing.
When I read John’s testimony, I was astounded to see Commissioner McKinney offering his own testimony on the record on behalf of the holding companies that control WV’s electrical system. Mr. McKinney acts in the capacity of a judge in PSC cases and should never be testifying on the record pushing the power company agenda. But push he did.
John Christensen has included in his testimony a description of his home solar power system. Here is what Mr. McKinney said following John’s testimony:
COMMISSIONER MCKINNEY:Just a quick comment about your — one of the things. Obviously one of the things we’re very interested in is how the renewable resources come into the system. A big debate obviously occurs to how the distribution system is used and what the fair charge for a distribution system is. And what we don’t want to do is leave the ratepayers paying for distribution system charges that should be paid through other people. So please put that in your comments the next time you talk, that concept. Thank you.
The American Public Power Association has published its latest biennial report on the impacts of mandatory capacity markets. This report is not a theoretical analysis. It looks at individual projects built in 2013 and how they were financed. Most of the 24 page report is appendices with tables describing the new generation plants built in 2013. As in their 2012 report, APPA concludes that, particularly in terms of stimulating new generation in areas where it is needed, capacity markets run by RTOs have almost no impact on creating new generation.
As was found in the analysis of 2011 generation, almost all new capacity was constructed under a long-term contract or ownership. Just 2.4 percent of the new capacity was built for sale into a market, a number that includes new facilities for which no information could be found about the contracts. Moreover, when broken down geographically, only 6 percent of all capacity constructed in 2013 was built within the footprint of the RTOs with mandatory capacity markets.
Are the capacity markets the least-cost means to achieve reliability?These constructs are costing consumers billions of dollars for little in return, for the following reasons:Different resources have different costs.In these markets, a 50-year old coal plant is paid the same amount per MW and for the same duration as is a brand new highly efficient combined-cycle natural gas plant as is an agreement by a factory to curtail load when needed. As a result, excess windfall revenue is paid to the older depreciated plants and the revenue stream is not stable enough to attract investors in new resources. The bulk of revenue has been paid to existing plants. In the PJM Interconnection (primarily covering Maryland, New Jersey, Pennsylvania, Virginia, West Virginia, Ohio, northern Illinois, and Delaware), $72 billion has been paid or will be paid by consumers to generators and other capacity providers. Yet over 90 percent of this revenue has gone to existing generation, although many older plants have paid off much of their fixed costs. Moreover, most of the new generation capacity that has been built was done so under utility ownership and long-term contracts, not as a result of capacity market payments.Capacity markets do not ensure an appropriate mix of resource types.Because the capacity markets do not distinguish between technology types or specific locations on the grid, critical needs are not addressed, including adequate flexible ramping capability to match the variability of renewable resources, reliability gaps created by retiring coal plants, the coordination of natural gas infrastructure and delivery with the significant expansion of natural gas generation. As a result, the RTOs often create systems of side payments to ensure reliability, such as direct payments through what are known as reliability-must-run agreements to coal plants to remain in place to ensure reliability.Price signals are not effective.If transmission congestion limits the ability of capacity in one area to deliver lower cost power to another zone, the more congested zones may have a higher price. The theory behind zonal price differentials is that higher prices will act as a “signal” for the development of new generation or transmission. But such higher prices are not effective signals because owners of generation have no financial interest in building new resources and lowering prices for their existing units; investors seek steady and predictable revenue flows, not fluctuating prices; and many other factors influence the decision to build, including land and transmission availability, local acceptance, and environmental rules. Transmission construction may alleviate these price differentials, meaning that consumer paid both for higher prices and for the cost of the transmission.
Keryn has a great account of the PSC’s public hearing on FirstEnergy’s 17.2% rate increase. Poor Commissioner McKinney had to handle the hoi polloi all by himself. He didn’t do such a great job. Despite the fact that all the people testifying against the rate increase were residential customers, and the residential rate increase they face is 17.2%, Commissioner McKinney kept interrupting people to insist that they should be using the 14.3% figure that is the average of all classes of customers, residential, industrial and commercial.
Chairman Albert appears to be hiding from the public and hasn’t been attending these public hearings. He claims that several irate AEP customers threatened him at hearings back in 2011, and he can’t stand the heat.
I have been following the written comments that the WV PSC has received about the FirstEnergy rate increases. Most people submitting comments don’t have a clear idea of what is behind this huge increase request. About half of the rate increase is stranded costs for the three obsolete and expensive coal-fired power plants that FirstEnergy has had to close in WV. These plants simply could not compete in the marketplace for electricity. FirstEnergy wants its WV rate payers to pay the costs of closing these plants as well as any other capital costs that they would otherwise have to write off from their balance sheet. This is just another rate payer subsidy to the coal industry and coal-fired power companies.
This rate increase request also converts an existing surcharge for the Harrison boondoggle into a permanent part of FirstEnergy’s rate base. The surcharge even included a guaranteed return on equity, this conversion will not actually raise rates.
The Harrison boondoggle does contribute to the increase, however, because it includes the costs of the 50 employees that FirstEnergy agreed to hire to get the PSC staff and the Utility Workers Union of America Local 304 to support the Harrison settlement.
And, of course, the rate increase includes all the costs associated with fixing FirstEnergy’s billing disaster. In its general investigation, the WV PSC decided to force the same customers who were scammed by FirstEnergy to pay for fixing a mess that FirstEnergy created. In its general investigation of FirstEnergy’s failed distribution system maintenance, the PSC also decided to force rate payers to pay for right-of-way maintenance that FirstEnergy had neglected for years, if not decades.
So about half of FirstEnergy’s 17.2% residential rate increase (except for the closed coal plant charges) is directly the result of WV PSC gifts to FirstEnergy.
No wonder FirstEnergy’s customers are angry whenever they see Commissioners at public hearings.
It may seem strange to compare a small island in the channel between Jutland and Zealand, in the middle of Denmark, with my home county here in West Virginia. If you traveled to Samsø, however, you would recognize a lot of similarities. The people are friendly. The land is the most important feature you see, not buildings or highways. Both communities share a measure of isolation caused by physical barriers. Because both communities are rural, they face the same population trends – out-migration of young people and an aging population.
In the late 1990s, Samsø lost it’s biggest businesses – a large hog operation and a commercial slaughterhouse. In the last twenty years, Calhoun County has lost the few light manufacturing businesses that appeared in the 1960s after the long decline of the local oil and gas industry. Samsø has a significant summer tourism industry that Calhoun County lacks, but tourism is significant in other parts of rural West Virginia. The largest employers in the local economies of both Calhoun County and Samsø are education and health care.
There are lots of differences between the two places, but one big difference stands out. Samsø has visionary leadership. And that leadership relied on the local people in the local community, not handouts from distant businesses and government officials. As Søren Hermansen, the director of Samsø’s ten year energy transformation puts it on the title page of the project’s final report: “Think local – act local.”
If you read through the report, you will see time and again how the people of Samsø built their new renewable power systems themselves. When they did engage outside help, it was always on their own terms. They made mistakes, they overestimated what they could do, but they always moved forward. When the new district heating systems threatened to throw a lot of local oil heat installers out of business, Samsø citizens worked out a deal so that a regional vocational school would bring courses to the island to retrain local technicians to work on new heating systems, energy efficiency improvements and skills needed for new renewable power installations. The report also details the door-to-door efforts to help everyone on the island save money by reducing their energy use. Particular care was given to the needs and abilities of older residents.
The municipal government of Samsø had started the ten year project by entering the competition, to be selected by the Danish government, to become the first area in Denmark to produce more renewable power than it consumed. Samsø won that competition in 1996. The Danish government specified that the winning municipality was required to have active involvement from the entire community, and that it use only readily available, established technology.
The solution for Samsø was relatively simple, because of the island’s location in the middle of a large body of water. The people of Samsø installed enough wind generation capacity to offset all of their remaining fossil fuel use. They also converted 65% of their heating to biomass fuel and solar power. But they did most of it themselves. About a third of their turbines is owned by power companies, another third by the municipal government, and the other third is owned by residents of the island as private investors.
Local financing was possible because local banks were innovative and serious about building the local economy. The banks were willing to finance projects because Denmark had a strong and consistent policy of feed in tariffs for new wind power projects. Both the investors and the banks could be assured that their projects would pay for themselves in less than ten years. In fact, most of the turbines were paid off in about seven years. Now, about 60% of the power produced on the island is exported, providing significant income for people on the island and their local government.
The revenue from the island’s wind power funded the construction of the Energy Academy on Samsø in 2006. Here’s how the final report describes the purpose of the Academy:
The RE[renewable energy]-island project is a socioeconomic development project constructed as an exhibit for the use of renewable energy in a local community. As a direct consequence of these actions, the general objective to establish a central home for the energy island project took hold. The Energy Academy is a community hall for energy concerns, a meeting place for energy and local development.
All of the construction work on the building was done by local contractors. The building incorporates computer controlled smart technologies and super insulation to maintain comfortable temperatures in the interior space. The roof also incorporates integrated PV panels. The advanced design provided training opportunities for local builders on these technologies. As you can see, the building is beautiful. The interior is very functional as well as being very comfortable and welcoming.
Ken Ward reported in the Charleston Gazette yesterday that parties to the Mitchell power plant case at the WV PSC have come to an agreement about dumping the power plant onto rate payers in WV. Half of Ohio-based AEP’s Mitchell plant, near Moundsville, WV, was dumped on KY rate payers last year, when the KY PSC approved the transfer of that half of the plant to Kentucky Power, the regulated AEP subsidiary in KY. As Ward reports, and I reported earlier on The Power Line, the East VA State Corporation Commission prevented AEP from dumping the Mitchell plant on APCo, which is also operates in East VA and is subject to regulation in East VA.
So AEP opted to dump the other half of the Mitchell plant on its WV rate payers by transferring that part of the plant to its WV-only subsidiary Wheeling Power. Through a special formula, APCo’s WV customers will also share the cost of Wheeling Power’s share of the Mitchell plant.
Ken points out what AEP appears to have agreed to a number of apparent concessions in the settlement.
The proposal, which needs commission approval, would leave out any transfer of ownership of Mitchell’s Conner Run Fly Ash Impoundment, protecting Wheeling Power customers from potential costs of a toxic cleanup there.
The deal also includes increased spending by AEP on energy-efficiency programs, and requires the company to issue a “request for proposals” in the future if it needs additional long-term generation capacity to meet West Virginia customer needs.
The Conner Run slurry pond exclusion is important, but it should never have been part of the deal in the first place. Although AEP had insisted that the impoundment, which represents a significant financial liability in the near future, would be dumped on WV rate payers along with the obsolete Mitchell plant, all of the waste in that pond had been created to serve only AEP’s Ohio Power customers in years past. Some of that past electricity had been purchased by Wheeling Power, but this was only a fraction of what went to AEP’s Ohio customers.
Pepper, who also represents the West Virginia-Citizen Action Group, said that citizen groups continue to have concerns about ratepayers having to essentially buy old, coal-fired power plants, but is happy with some other provisions of the settlement.
“With the approval of this sale, West Virginia will have very little room for energy diversity, as electricity will come almost exclusively from coal,” Pepper said in a press release. “It is unclear what the impact will be from increasing reliance on a single source of energy, especially in the face of new regulations to address climate change.
“While we regret the fact that the political landscape in West Virginia is such that accepting this expensive power plant seems inevitable, we are still optimistic about the settlement provisions and are hopeful that the PSC will accept it.”
Mr. Pepper’s resigned acceptance of the settlement appears to indicate that WV CAG will not challenge the AEP Mitchell settlement as they challenged the FirstEnergy Harrison settlement. This is understandable, particularly because Ryan Palmer is no longer on the Commission, but it is also disappointing. At least Mr. Pepper is not trying to claim the settlement as a victory for energy efficiency as the Sierra Club did after the Harrison settlement.
Mr. Pepper puts on a brave face, but the fact is that dumping the Mitchell plant on WV customers will prevent any significant change in how WV produces its electricity. With this expensive over-supply of electricity for the next 30 years, there is no need for power companies or the WV PSC to do anything to increase energy efficiency or substitute renewable power in our state.