Top Northam administration officials say state should not forbid new fossil fuel plants

In a New Year’s Day letter to Gov. Ralph Northam, two top Virginia officials recommended that the General Assembly not forbid any new carbon-emitting power plants “at this time,” saying that the state can meet its ambitious decarbonization goals without a moratorium. 

“The 2045 carbon-free electricity generation goal can be met through existing natural gas infrastructure, existing nuclear energy facilities (with renewed permits) and new renewable energy investments,” wrote Secretary of Commerce and Trade Brian Ball and Secretary of Natural and Historic Resources Ann Jennings (emphasis theirs). “A moratorium on new carbon-emitting generating units is not required to meet clean energy goals.” 

Furthermore, they warned that “a moratorium may prove counterproductive if it prohibits vital reliability projects and stifles other forms of clean energy innovation.” 

A ban “is unlikely to accelerate the expansion of the clean energy industry in Virginia as carbon-free sources will continue to be highly advantaged by the provisions of the [Virginia Clean Economy Act] and by market dynamics,” they concluded. 

The Democrat-backed Virginia Clean Economy Act commits the state’s electric grid to becoming carbon-free by 2045, both by requiring the state’s two largest electric utilities to source increasing percentages of their electricity from renewables and by mandating the development of wind, solar and battery storage. 

But the law has been controversial. Some critics on the left have decried its lack of a ban on new fossil fuel development as a loophole that undermines the state’s decarbonization commitments. And lawmakers on both sides of the aisle have voiced concerns about the costs the VCEA will impose on ratepayers, with Republicans emphasizing a 2020 estimate by the State Corporation Commission that it will raise the average residential customer’s annual costs by $800 by 2030. In August, State Corporation Commission Judge Judith Jagdmann expressed concerns in an order about “potential costly duplications” between the VCEA and overlapping legislation that authorized Virginia’s participation in the Regional Greenhouse Gas Initiative, a carbon market involving 10 other Mid-Atlantic and New England states. 

The VCEA required that both issues be studied, ordering the secretaries to issue a report by Jan. 1, 2022, on the moratorium question and how decarbonization could be achieved “at least cost for ratepayers.” Until that report was released, the State Corporation Commission was prohibited from approving any new carbon-emitting power plant proposed by an investor-owned utility. 

Del. Sam Rasoul, D-Roanoke, one of the most vocal proponents of banning future fossil fuel plants, said the secretariats’ recommendation was “unfortunate” and that Virginia already has pathways to ensure reliability through its participation in the regional PJM electric grid. 

“We have the ability to be purchasing power through PJM or other markets should we have disruptions in supply,” he said. 

How to get to zero at the least cost

When it comes to achieving decarbonization at the least cost to ratepayers, “flexibility is king,” said William Shobe, an economist and director of the Center for Economic and Policy at the University of Virginia’s Weldon Cooper Center for Public Service, which was charged with carrying out the least-cost study mandated by the VCEA. 

The final report, entitled “Achieving Clean Electricity Generation at Least Cost to Ratepayers by 2045,” concluded that decarbonization costs could be substantially reduced by replacing mandates focused on particular technologies, such as solar and wind, or geographic areas with “a more flexible approach specifically targeting [carbon dioxide] emissions.” 

“Market-based instruments like RGGI are the best way we know to provide maximum flexibility,” said Shobe. 

Republican Gov.-elect Glenn Youngkin has pledged to withdraw Virginia from RGGI by executive action once he takes office this January, a decision that Shobe said “seems backward to me as an economist.

“If the objective is to lower cost, you want to stay in RGGI and relax some of these other specific provisions of the law that allow a certain kind of technology to be built by a certain date. That is almost certainly going to be more expensive,” he said. 

Among the provisions of the VCEA that the Weldon Cooper study found will likely increase ratepayer costs are the law’s mandates for Dominion and Appalachian Power to propose large quantities of solar, wind and storage. The researchers’ modeling concluded that those mandates could cost ratepayers more than $250 million per year by 2035 and $450 million per year by 2040 compared to a “least-cost” scenario. Wind and storage in particular were found to be more expensive than other options like solar.

Instead, the report found that relying on the VCEA’s renewable portfolio standard — a requirement that a rising percentage of each utility’s non-nuclear generation portfolio come from renewables — along with RGGI could drive down costs. 

“Eliminating the capacity targets for expanded offshore wind and for electricity storage, and allowing deployment of these resources to be guided by investor decisions about how to meet the RPS and RGGI requirements cost-effectively will likely save money for ratepayers,” the authors wrote. 

In a policy brief released along with the Weldon Cooper report, the Virginia Department of Energy acknowledged that the capacity targets “are not economically optimal,” the agency argued that “removing them could send a negative signal to industries already investing in Virginia. 

“Offshore wind is the clearest example of this dynamic — the capacity target and Virginia’s commitment has already stimulated long-term investment in the commonwealth,” the department wrote. “Without the capacity target, that investment would be delayed, which could, in turn, delay the cost reductions from early investment in the technology.” 

Other suggestions for reducing costs floated in the Weldon Cooper report included allowing renewable energy certificates — a tradable credit for renewable generation that can be bought and sold — to be acquired from other states within the regional grid; retiring all remaining coal plants including the Virginia City Hybrid Energy Center in Wise County before 2025; and building frameworks for regional transmission planning and energy efficiency monitoring. 

Transmission planning is “the biggest elephant in the room” when it comes to costs, said Shobe. Major investments will be needed as electric grids shift away from their traditional design of a smaller number of centralized power plants where electricity only flows in one direction to one with thousands of generation sites, more intermittent power production and customers who both produce and consume electricity. 

 “Trying to do this as a state-by-state regulation issue rather than a multistate planning effort would be very very costly,” said Shobe, who encouraged Virginia to work with other states on transmission. “Doing this alone means raising our own costs.”