Virginia Commission Issues Final Report on Climate Change

Environmentalists cite energy efficiency and pollution cuts as top priorities

Richmond, VA - After a year of public forums, expert testimony, and committee meetings, the Virginia Commission on Climate Change finalized its "Climate Change Action Plan" today. Virginia's environmental community is encouraged that the commission went beyond its initial charge, calling for the state to cut global warming pollution by 25% over the next 12 years and more than 80% by 2050. However, the commission failed to endorse specific renewable energy policies that will be key to achieving those reductions.

"We are especially encouraged to see that the commission recommends a mandatory energy efficiency standard of 19% reductions in electricity consumption by 2025," said Nathan Lott, Executive Director of the Virginia Conservation Network.  "It's the cheapest and easiest way to reduce our energy demands and curb global warming pollution."

Governor Tim Kaine was on hand at the commission's final meeting to thank members for their service.  It is now up to the governor and the General Assembly to begin implementing the more than 100 recommendations of the commission, including the proposed energy efficiency program.

Environmental groups applauded the commission for its recommendation that the state adopt stronger emissions reduction goals and for its recognition of energy efficiency as an immediate first step to meeting those targets. Environmentalists said the governor and General Assembly should immediately act upon several specific recommendations of the commission, including:

   * Lawmakers should enact a mandatory energy efficiency standard requiring the state to achieve a 19% reduction in electricity consumption by 2025.
   * The Department of Housing and Community Development should incorporate increased energy efficiency standards into the statewide building codes, so that by 2012, resulting codes will be 15% more efficient than 2006 codes.
   * State and local transportation agencies should help cut global warming pollution with expanded funding for mass transit and rail systems, by offering incentives for more fuel efficient vehicles, and by integrating transit and community design.

Environmentalists also criticized the commission for not calling on the state to set a minimum standard energy production from renewable sources such as wind, solar and geothermal.  "Unfortunately, in the absence of a mandatory standard for renewable energy production, it will remain difficult for Virginia to reach the greenhouse gas emission reductions the Commission recognizes are needed," said J.R. Tolbert, Field Organizer for Environment Virginia.

Environmental groups affirmed their plans to work with the Virginia General Assembly and the Kaine administration to implement strong laws that will stem the worst effects of climate change. They called on citizens to stay actively engaged in the legislative process to ensure that lawmakers act swiftly upon the commission's recommendations.

"Reducing Virginia's contribution to global warming will not be easy - but it is critical that the legislature, Governor, and the public work together to ensure these recommendations become reality," said Antigone Ambrose, field organizer with Virginia's Chesapeake Climate Action Network.

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Endorsed by: Virginia Conservation Network, Appalachian Voices, Chesapeake Climate Action Network, Environment Virginia, Piedmont Environmental Council, Southern Appalachian Mountain Stewards, Sierra Club, Southern Environmental Law Center, Virginia League of Conservation Voters.

Points for providing an answer

"The ACEEE report recently released in VA shows clearly how Virginia can eliminate the need for any new coal plants through efficiency alone. By enacting strong policies that set strong targets, reduce peak demand and incentivize efficiency, Virginia can hold energy use steady and start investing in clean energy like wind and solar. It's time that our leaders start investing in what Virginia really needs, not another new coal plant."

So now we are going to start telling people when and how much energy they can use.... Great...

Not to the mention the fact that all these clean energy ideas are nowhere near being ready.  The most optimistic estiamate put clean energy at 10% over the next 20 years.  

Look I think global warming is a problem too.  However I live in reality.  We need more energy and alternative energy is not going to be ready to go online for this type of usage in 50 years let alone 20 years.

I actually believe in conserving too but to maintain current levels would actualyl require a decrease in energy usage due to population growth.  You guys always love to blast Repbulicans with grandma freezin in the cold.  Its kind of ironic with the shoe on the other foot.  

So, in a state like Virginia, I would suggest we go back to Electric Market Deregulation, but do it like Texas did it.  Split Dominion up like Reliant: the transmission piece would still be a regulated monopoly, generation and retail/commercial/industrial sales would be open for competition.  That would at least be one way to eliminate the clout of a large electric utility.

Prices are high enough in Texas that Reliant is differentiating itself from its competitors by offering EEC tools to its customers.  

Alternatively, you could regulate them differently, but politicians of both parties here have proven incapable of giving that any teeth.  Thus, I think a different deregulation law would do the trick.

Wasn't this what got Maryland in such trouble about three years ago?  I seem to remember the Post doing a whole series of articles about 41% price increases in Baltimore and large increases across the state exactly because when they de-regulated, they allowed power companies to sell their generation facilities. Then when deregulation failed to generate the competition promised, the companies had to repurchase their generation facilities at exorbitant price increases.  That's why Virginia re-regulated, isn't it?  Not to defend the re-regulation bill, but how can cost increases like those be a good idea at a time like this?

You seem to be arguing in favor of electricity price increases as a means of encouraging people to be more efficient; is a recession and economic crisis the right time to intentionally increase demands on household income?  Moreover, does it seem like a good time to increase the cost of business? Industrial electric consumption composes about 18% of total energy consumption in Virginia, commerce another 41%. (http://apps1.eere.energy.gov/states/electricity.cfm/state=VA#electricity)

It seems to me that rewarding investment with tax credits and creating positive economic incentives makes a heck of a lot more sense at a time like this than essentially penalizing consumption.  We must decrease consumption, but this doesn't seem like the way to go about it.

In VA, deregulation was designed by Dominion.  They were not required to split up.  They got to recover a "wire charge" from customers who did choose another power supplier which basically made it uneconomical for customers to switch and marketers to sell in VA.  If you notice, the SCC nor the legislature ever did too much research on why their Electric Utility Restructuring Act never produced the desired result.  In addition to the wire charge, rates were basically frozen and capped when the law went into effect.  The caps were not coming off until 2009.  Virginia never experienced deregulation.  Both deregulation and reregulation were written by Dominion; so, obviously, they benefit Dominion immensely without ever threatening their market share.

In Maryland, what occurred was that the price caps expired.  And when they expired, prices were adjusting to market levels.  Not that anyone couldn't have seen that coming from a mile away; and yet, the Maryland legislature acted like it was an unexpected shock.

What Lowell was referring to is correct.  In a free market system, price is the signal by which we make economic decisions.  Deregulation is just an option to get you to market price for electricity which would in turn encourage energy efficiency and conservation.  The easiest way that works is if now it only saves you say $5 to turn up the thermostat but that changes to now $10, you have a more powerful incentive to conserve.  On EE, let's say your utility bill is $1200 annually, you can make an EE investment that costs you $2k, saves you 20% on consumption, and you plan on selling your house in 7 years.  At that rate, your return would be -4%.  But if your bill was $2400, your return would be 15%.  If you want individuals to make the right decision, this is the way to go.  Plus, higher prices would change the economics on investment decisions in new generation.  New construction plus new marketing opportuntities would create new jobs.  

On principle, I am opposed to tax credits.  The Income Tax Code is already junked up enough as it is without adding more stuff to it.  Plus, we never do much work to figure out if tax credits ever acheive the benefit that they were intended to create.  For example, which was the bigger driver of Hybrid sales: high gas prices or the tax credit?  And we currently have an EE tax credit in the code (up to $500).  But has that created a noticable uptick in demand for insulation, doors, or windows?  We give a massive deduction for new capital expenditures called MACRS, but you don't see massive investment in capital as a result of that.  

To your point about positive economic incentives, what would be a positive economic incentive besides a tax credit?  

I absolutely understood the argument that we can increase the incentive to be more efficient by increasing the cost of NOT doing so (i.e. intentionally making electricity more expensive),

I'm just ASTOUNDED that anyone would make that argument in the current economic climate.  I mean, two years ago, sure.  Two years from now?  God willing.  But NOW?  That just seems insane to me.  Every single economic indicator, it seems, tells us that people are struggling more and more and you guys are saying, "Hey, let's pile it on, but it's ok, we're doing it for a noble cause."  I mean, I'd like to think that we're pretty clearly on the same side in the grand scheme, but I find that approach just nuts at a time like this.  

Anyways, thanks for the explanation of the de-reg. issues.  I'd be curious to learn more about Texas' program, if you're willing, or I can do some research on my own.  

To answer your questions though, "For example, which was the bigger driver of Hybrid sales: high gas prices or the tax credit?"  If you believe the autodealers, it was allowing hybrids in HOV lanes that drove the sales waaaaaay more than either of the two factors you list.  You probably didn't mean locally, but I mention it as an example of finding ways that change the cost/benefit calculation without punishing everyone (i.e. higher rates for all).  

You ask, "what would be a positive economic incentive besides a tax credit?"  It's so funny that you do because I was thinking about that very thing this morning in the shower and was sure you'd ask.  What I'd like to see is for the state to set aside a big dollar amount, say $10 million, hopefully get Fed. funds to match it (or better) and call it the 2050 Challenge Fund.  Where does the money come from, you ask?  Good question.  I'll have to think about that further.  

From that fund, I'd like to see us provide small loans to homeowners, small business owners and local governments that they can ONLY use for efficiency.  Solar panels, new windows and hot water heaters, etc.  They'd be very low interest (basically enough so that the fund didn't lose money on the loan) and have a long enough payback period (I'm thinking 15 years) that the individual's ROI would pay for them.  The individual could pay them back early and reap the savings or just let the payback period run and use the monthly savings to service the loan.  You're not asking the consumer/business owner to tie up his capital with a low-return investment (the impediment that we all recognize) and we all benefit with increased efficiency.  

Those are the types of things that I think we should be focusing on to increase efficiency, not intentionally raising the cost of electricity in the midst of the worst economic crisis since the Great Depression.  Love to hear your thoughts.

While I agree that we should diversify our energy resources, your comment is a non sequitur.  If I'm missing the connection, please clarify it for me.

In the push to combat global warming, nuclear is having its day in the sun again.  And that impacts uranium prices plus other commodity prices impact it since you have to transport it to market.  A lot of our supply outside Canada coming from overseas; and thus, affected by global freight rates.  

All that being said coal and uranium prices should be going down next year.  My statements above are related to the longer term outlook.  Short term global shipping rates have declined; decreased demand has dropped the price of all commodities.  Coal is down from it's July high.  So, I would expect the Fuel Recovery Rate for Dominion to adjust down next year assuming they were able to collect all of their deferred costs from higher prices in this last year.

For example, a wind storm blows through the region with 60 mph winds.  It doesn't knock any of your trees down, but it shakes them up quite a bit especially the one next to your house.  It has probably weakened the root structure and made it more susceptible to falling on your home the next time a more moderate gust of wind hits.  You could spend hundreds of dollars now remedying that issue OR you could wait until the tree falls on your house damaging your possessions and maybe injuring you or your family which will cost substantially more money.  So, what seems like the more pragmatic choice?

If what your worried about is whether people who are hurting can afford higher prices, that is what we have a program called LIHEAP for.  Part of LIHEAP funds in Virginia go to help low income people weatherize their homes to reduce their energy costs.  So, the burden can be effectively ameliorated for those who require help.

On the low interest loans, I think that is a good idea; but programs like that require the initiative of individuals.  First, there are a lot of programs out there that people just don't know about and don't take the time to find out about.    So, the question becomes how do you encourage participation in this program?  And I would say you are back to giving consumers a price signal and then offering this program as a helping hand.  

As far as how you pay for that...  At the state level, close to impossible in 2009.  The state has to have a balanced budget.  And revenues are a no-go in the House of Delegates (well, unless they can think of another ridiculous and probably unpopular fee).  At the federal level, it could just be added into deficit spending depending upon how large a program we are talking about.  Or it could be financed through the Cap&Trade Program or through an excise tax.  A lot more options on the federal level.  I mean we could pay for a program like that in VA via Utility Tax that already appears on folks' bills, but taxes are anathema in Richmond.

The information you provided on what's available now to consumers was really helpful and well taken.  However, I'd say whatever level they've set as the threshold for 'low income' probably doesn't get very close to capturing the number of people who would find increased electricity costs extremely burdensome.  Moreover, we all expect that number to grow, as more lose jobs or hours at their jobs.  

You point out, "So, the question becomes how do you encourage participation in this program?"  That is indeed the operative question, and it's our responsibility, elected officials' responsibility, mortgage lenders, real estate agents, home repair folks, Home Depot, local government, you name it to get that word out.  Since I'd like to think I'm fairly well educated and tuned in and I'd never heard of LIHEAP, I'd say lots of folks are dropping the ball.  Some people made fun of the fact that the SCC is going to do an advocacy campaign to the tune of several million dollars.  I think this whole discussion and the programs you've pointed out which I suspect most reading this were oblivious to, proves the need for that campaign.  I hope that they connect with all these different actors and many more I haven't thought to include.  

As well, you didn't speak to the industrial and commercial electricity consumers; if prices went up, they'd pay like the rest of us.  If their costs of doing business go up, one of three things happen: they fire people to cut other costs, they delay expansion or they raise prices.  Those all seem like particularly lousy outcomes right now.

I think your comments on what the last 8 years have taught us about putting off until tomorrow what needs to be done today are well put.  However, I'd say that the current climate is different.  Historically, I'd agree with you.  There is never a good time to increase the cost to businesses and consumers for Republicans, but EVERYONE agrees that this is a special period: especially, historically awful.  I just think that every single policy we implement for the next 18 months has to have as its near term effect employing more people, keeping businesses afloat and increasing the safety net.  Even with the programs that you allude to, I think you'd be hard pressed to argue that it wouldn't have a near term negative economic impact and with the nation on the precipice of a depression, that's a bad idea.  

Again, as I said, two years ago I'd have agreed with you and hopefully two years from now (with a better national economic picture) I'll agree with you again, but it just seems especially wrongheaded to move in this direction right now.  I think it makes far more sense to implement and expand programs that DON'T cost individual consumers and businesses money (or tie up their capital, which we need them to use to expand and create more jobs), than your alternative.  

Lastly, I think you hit the nail on the head as far as funding goes.  Because Virginia must balance its budget, we'd have to take that $10 million from somewhere else because Lord knows a new tax isn't going to fly in the House.  I think the truth is, it probably wouldn't fly in the Senate either, but that's debatable.  Nonetheless, I think one answer is going to be the Federal government.  None of us knows what President Obama's green initiatives are going to look like exactly, but I hope that a lot of the money comes in the form of tightly controlled pass-throughs to the individual states.  Absent that, funding would probably be impossible until our state tax revenues rebound.  

In the end, I think this is where we've ended up: agreeing to disagree.  Thanks for the conversation though!

Or there is Nuclear.  Tons more expensive though and the Feds still need to figure out where they are going to store that waste (cough, Nevada, cough).  Nuclear produces none of that dirty stuff like NOX, SO2, particulates, Volatile Organic Compounds (VOC, it's the smell of fresh paint or new plastics, that new car smell) or even CO2.  But then again you have radioactive waste that decays over centuries (or millennia).  It's a balance, I guess.  =)

I think we're all on the same page about keeping up a high standard of living.  That we all agree the U.S. should remain a first world country.  And that does take a lot of energy.   When we talk about conservation most of us are not recommending we go back to the stone ages.

Let's take indoor heating as a simple example since it's getting cold out.  Does someone NEED to keep the thermostat at 76 instead of 70?  Do they NEED to keep the temperature at a high level while they're out at work all day long?  Or, like my neighbor, do they NEED to keep a window open (just a little) for fresh air and a space heater below so it doesn't get too cold?

Those aren't NEEDS, they're preferences, desires, or optimum conditions.  In a time we NEED, and yes, I do mean NEED, to address Global Warming we can certainly get by without optimum conditions.  No one is going back to third world status if we cut back a little on the temperature.

This can go on and on for just about everything we do or consume.  

Or, for those who consider the higher temperatures critically important, they can invest in the highest level of insulation - thereby using less energy to maintain a higher level of heat.

And yes, any of these solutions will either require a cut back in our current usage or a greater outlay of cash.  The EE solution is an example of cash outlay - it'll cost you to upgrade to the latest and greatest.  Is this ideal?  No, but we really do NEED to address Global Warming.

And then there's the other ideas put forth in this post including other cleaner fuels.  There are a lot of ways we can (must) start addressing our energy/environment problems, but which ever you pick, we NEED to get moving and any solution that has the word coal in it is the wrong direction.

You're being a realist about American consumption patterns and our desire to maintain (or even increase) our use of energy, but you're not being a realist about just how bad Global Warming is.  We're in for a world of shit that no preferred consumption pattern, population growth, or desired way of life is going to get us out of.

This might suprise you but once again we AGREE on pretty much everything

My only point would be we NEED energy now.  There is nothing anywhere that says alternative energy will even come close to providing the energy required (this is the important part) by itself alone.

So lets do it all invest in cleaner technologies AND use what we have.

Whats amazing to me is the my way or the highway approach.  It would be like me spouting off Heritage Foundation documents all the time.  (Great now I can expect a whole bunch of comments just focusing on this last section)