Virginia's move towards a clean economy
Virginia narrowly passed the Clean Economy Act earlier in 2020, setting one of the largest energy storage targets in the country and pushing state regulators to devise a carbon dioxide cap. Yoana Cholteeva reports on the legislation’s impact on the future of the state.
The Virginia Clean Economy Act, which was passed by both chambers of the state legislature in March 2020, focuses on building one of the largest energy storage targets in the US: 2.4GW by 2035. It imposes a carbon dioxide cap, and a trade programme complying with the Regional Greenhouse Gas Initiative (RGGI), an existing initiative to improve local regulation of emissions in the Northeast.
Despite the obvious advantages that come with the Clean Economy Act, the bill passed in the Senate with a narrow vote of 21 in favour and 19 opposed.
/ Dominion has already proposed a 2.6GW wind project off the coast of Virginia by 2024. /
What does the Virginia Clean Economy Act entail?
A significant feature of the bill is its renewable portfolio standard (RPS), which will force the state’s two big investor-owned utilities, Dominion Energy and Appalachian Power Company, a subsidiary of American Electric Power, to generate a percentage of their energy from renewable sources. Virginia in fact, turned from an RPS-lenient state to one of the strictest ones in the US.
The agreed RPS policy will work to achieve gradual progress, with interim targets for the state electricity system set at 58% clean power by 2030, 73% by 2035, 88% by 2040, and 100% by 2050, drawing the state’s goal closely in-line with the Paris agreement.
The Virginia Clean Economy Act also allows regulators to stop the construction of new carbon-emitting power plants which are not currently being built and it sets a timeline for closing old fossil-fuel plants.
/ Dominion has already proposed a 2.6GW wind project off the coast of Virginia by 2024. /
When it comes to Virginia’s record-size energy storage, a fundamental part of the act, the 2.4GW deployment storage target will also include interim targets through 2035, as the State Corporation Commission is expected to approve new power storage projects in the following years.
The legislation will also require the commission to approve new offshore wind projects of up to 5.2GW in capacity through the end of 2034. In order to help balance wind and solar power, Dominion has already proposed a 2.6GW wind project off the coast of Virginia by 2024. In turn, Appalachian Power will be expected to generate at least 2.7GW of energy storage by 2035.
/ With this legislation, Virginia is poised to take a leadership role in the transition to renewable energy. /
A drop in emissions and more freedom of consumer choice
One of the benefits of the implementation of the Clean Economy Act is the development of a carbon cap-and-trade programme, associated with the RGGI, which, since 2005, has helped to reduce carbon emissions by 50% in states that have already adopted it. In addition, RGGI has generated a positive economic impact of $4bn dollars for the participating states, and has created over 44,000 new jobs while decreasing electricity demand.
In addition to the positive economic outcomes, these measures have generated finance to invest back into the state and support local communities.
/ With this legislation, Virginia is poised to take a leadership role in the transition to renewable energy. /
Elizabeth Boehmer, a state director at Environment Virginia, says the Virginia Clean Economy Act is a result of years of climate advocacy: “With this legislation, Virginia is poised to take a leadership role in the transition to renewable energy as it becomes the seventh US state to pass a law that commits to providing 100% carbon-free electricity to its citizens by mid-century. For Virginia, this means innovation, a robust clean energy industry, and a healthier climate.”
Furthermore, Virginia’s added efforts have the potential to create a rich and diversified RGGI market with increased competitiveness, leading to a faster transition to clean energy in the area. The bill would also allow more freedom of consumer choice when it comes to clean energy and the reinforcement of a growing free energy market. It could also create a more efficient electricity grid in the state, better suited to integrate renewables by creating an energy storage deployment target.
Another benefit of the legislation, according to Boehmer, is the potential for a significant rise in solar and offshore wind construction as the act requires the buildout of in-state renewables and reduction of barriers to distributed solar power.
/ Dominion Energy has been artificially inflating its demand forecasts for years in an attempt to justify building more gas plants. /
Why is there opposition to Virginia’s Clean Economy Act?
An S&P Global investigation in December 2019 found that Dominion Energy has been artificially inflating its demand forecasts for years in an attempt to justify building more gas plants. This demand inflation is seen as purposeful and targeting profit surges for electricity companies at the expense of a slower transition to renewables. As a result of higher scrutiny last year, Dominion Energy took a slightly different direction and gave up on one of its big projects – 1.5GW of additional natural gas plants in the state area.
Despite this, a significant share of Virginia’s leaders opposed the bill, motivated mostly by concerns with costs associated with the RGGI programme and claims that implementation of the bill would increase fees for the public.
/Dominion Energy has been artificially inflating its demand forecasts for years in an attempt to justify building more gas plants. /
Early estimations by Dominion energy have, to a certain extent, also raised fears that customers might be subject to additional charges. This happened after the company sparked controversy by publishing its 2018 integrated resource plan, pointing out that an earlier proposal to create a Virginia cap-and-trade programme linked to RGGI would allegedly raise costs for energy customers by $530m from 2020 to 2030, while not significantly lowering emissions.
Whether the concerns over the Virginia Clean Economy Act will come to fruition or advantages already evident in other states will overturn these concerns, one thing is for sure: Virginia has made a huge commitment to control its emissions and contribute to worldwide efforts to carbon reduction.
Playing catch-up in the US
“In Europe, offshore wind has been there for a number of years, but I think in the United States we're a little bit behind that,” said Karustis.
Should it be successful, Halo’s approach could lead to a surge in US onshore wind, which has historically lagged behind other regions in terms of wind installation and production. Since 2016, according to the International Energy Agency, the US has installed just 22.6GW of new onshore wind capacity, compared to 30.7GW in the EU, and 50.3GW in China, struggles that Karustis hopes to address.
Last December, the Chinese Government approved a number of new offshore wind projects, totalling 13GW of production and costing around $13.3bn, as the country continues to invest in utility-scale power. Karustis hopes projects like Halo’s distributed turbine can contribute to a more balanced wind sector in the US, with both large- and small-scale operations expanding renewable power.
“The large-scale wind turbines wouldn't be phased out, it's kind of an ‘all of the above’ thing,” he said. “The large wind farms play a very important role for us in reducing the carbon footprint globally, and hopefully the micro wind market is going to augment that by producing energy where energy is being used. It's a good two-pronged approach.”
This two-pronged approach also includes other renewable power sources, including solar and utility-scale wind; Halo is not trying to replace all clean energy with its turbines, but offer another option for people eager to engage in renewable power, who may have been historically sidelined due to the high costs of building utility-scale facilities or the unsuitable geographical characteristics of the places they live.
“When you look at that market we're very excited because just as megawatt-scale wind is a large market, I think distributed wind can be as big of a market or bigger over time,” said Karustis.
“When you have incentives and improvements in the technology, the costs go down, so you can be more competitive and compete, and that's certainly the case with megawatt-scale wind,” he continued. “Just 15/20 years ago, it wasn't competitive with natural gas [and] coal, but it is now. So those government policies have helped and they've driven the technology improvements, so it's all bundled together.”
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