Commission on Energy and Environment

August 18, 2009

Consumer Education Plan

Ken Schrad, from the State Corporation Commission (SCC), gave the report on the Consumer Education Plan, entitled “Virginia Energy Sense,” required by
§§ 56-592 and 56-592.1 of the Code of Virginia. The plan focuses on energy efficiency for residential electric customers with a goal of reducing electricity consumption of retail customers by 10% by 2022. The SCC has submitted proposals for partners to implement the plan and expects to award a contract in the fall of 2009.

Virginia Energy Plan and Governor’s Commission on Climate Change

Steve Walz, from the Department of Mines, Minerals and Energy, updated the Commission on the status of the recommendations drafted in response to the goals listed in the Virginia Energy Plan. Mr. Walz reviewed actual and projected energy consumption as well as actual and projected energy production in the Commonwealth. Mr. Walz also reviewed measures taken to reach the goals outlined in the Virginia Energy Plan.

Nikki Rovner, Deputy Secretary of Natural Resources, gave an overview of the status of recommendations generated by the Governor's Climate Change Commission (GCCC). Mrs. Rovner stated that the majority of the funds from the American Recovery and Reinvestment Act (ARRA) will be used in a manner consistent with the recommendations from the GCCC. The following legislation from the 2009 Session furthers the GCCC recommendations, but did not pass the General Assembly or needs further action: HB 2176/SB 1248 and HB 2105/SB 1339.

A member inquired as to whether the state fleet qualified for the "Cash for Clunkers" or C.A.R.S. program. Mrs. Rovner will find an answer to the question and follow-up with the Commission (State and local governments are not eligible under the C.A.R.S. program). Mrs. Rovner also mentioned that the majority of progress being made towards the GCCC recommendations can be attributed to ARRA funding. Interconnection rules, feed-in tariffs, and combined heat and power are all issues the General Assembly may want to focus on in 2010.

Over the next few years the key challenges identified by Mrs. Rovner are preparing and adapting to the impacts of climate change and focusing and expanding state capacity to ensure implementation of the Climate Change Action Plan.

Offshore Oil and Gas Leasing

Renee Orr, from the U.S. Minerals Management Service, provided an overview of the Minerals Management Service (MMS) and a description of the leasing framework for oil and gas on the outer continental shelf (OCS). Currently, MMS is exploring the idea of leases off the Virginia coast in an area known as Block 220. Mrs. Orr stated that all leases on the OCS are over 50 miles from the closest shore, mainly due to the geologic structure and associated fossil fuels reserves.

A member asked about development of OCS lands between 0-50 miles. MMS is currently researching the extent of possible reserves based on the geology, but as of now it does not look like there will be significant oil or gas reserves.

Offshore Wind Energy Development

Dr. George Hagerman, Virginia Coastal Energy Research Consortium (VCERC)
Dr. Hagerman gave an overview of offshore wind potential off the Virginia coast. Regarding the cost of building an offshore wind farm, Dr. Hagerman noted that the price of steel is very important in estimating costs and with steel prices forecasted to increase, now would be a good time to start a project. In return for an initially higher cost for electricity, offshore wind can provide stable energy prices and add stability to PJM electricity prices. Dr. Hagerman noted that one of the major drawbacks of offshore wind is reliability. However, recent advances in technology and re-engineering of key components are beginning to address the problem. VCERC has recommended that a federal, state, and local task force be established to begin discussions on how to develop a windfarm off the coast of Virginia.

Robert Propes, Bluewater Wind
Mr. Propes spoke on his company’s offshore development projects in Delaware and New Jersey. Mr. Propes explained that his company needed to have a power purchase agreement (PPA) in place before starting a project. Mr. Propes stated that developers take the initial risk in early stage development but that risk is hedged with a PPA that includes a fixed price, long-term contract. A state can also issue an RFP to purchase power for the state thereby reducing the risk for developers.

In response to a question about the number of jobs created and destroyed by offshore wind development, Mr. Propes responded that the majority of the jobs are pulled from other areas, but some new jobs are created as well.

Jim Lanard, Deepwater Wind
Mr. Lanard spoke on offshore wind energy and Deepwater Wind’s projects in Rhode Island and New Jersey. Mr. Lanard stated that offshore wind farms are expensive and risky. Early development of offshore wind farms in Europe can be attributed to heavy subsidies that represented a major policy commitment. Mr. Lanard stated that logistics and timing are among the greatest challenges to offshore wind farms.

Mr. Lanard stated that one of the largest barriers to offshore development in Virginia is that Virginia has some of the lowest electricity rates on the East Coast, which makes it more difficult for offshore wind to compete with traditional sources.

Mr. Lanard urged the Commission members to support the building of a vessel to install outer continental shelf platforms utilizing Virginia shipyards. Mr. Lanard stated that Virginia can help lure offshore wind developers by finding a way for developers to compete with traditional energy suppliers. One option would be enacting a production tax credit tailored for offshore wind. Another way of lowering the cost is encouraging the building of a vessel to install these turbines.

Tim Ryan, President, Apex Wind
Mr. Ryan briefed the Commission on Apex Wind and offered advice for encouraging the development of offshore wind energy. Mr. Ryan advised that VCERC is very important and he encouraged the General Assembly to continue funding VCERC in any way possible. Mr. Ryan reminded Commission members that offshore wind energy is a huge industry in Europe employing thousands of people and dozens of companies.

Next Meeting

The next meeting date will be posted on the Commission’s website and the General Assembly calendar as soon as information is available.

Chairman:
The Hon. Mary Margaret Whipple

For information, contact:
Ellen Porter, Patrick Cushing, DLS Staff