If anyone thought having a renewable energy portfolio standard in West Virginia would mean more wind or hydroelectric or solar generation facilities in the state, they were wrong.
As the last of six utility plans for compliance with the 2009 Alternative and Renewable Energy Portfolio Standard are under review for approval by the Public Service Commission, the results are basically in.
The major utilities will meet the state's requirements through 2025 with no new generation.
To the extent that anything comes of the portfolio standard, it's the state's tiny utilities that will be stepping up.
The Portfolio Standard
The West Virginia Legislature passed the Alternative and Renewable Energy Portfolio Standard in 2009 “to encourage the construction of alternative and renewable energy resource facilities.”
But compliance plans filed last December by AEP and Allegheny Energy (now FirstEnergy), which make up 99.6 percent of the state's retail electricity sales, show no new generation needed.
“Monongahela Power and Potomac Edison anticipate they will generate enough credits based upon currently available resources for the 15-year term that no additional development, purchase or procurement will be necessary,” reads the compliance plan for the FirstEnergy companies.
The plan for AEP's Appalachian Power and Wheeling Power is not so explicit, but does not propose new generation to meet the standard.
In fact, the major utilities expect to accumulate surplus quantities of valuable Alternative and Renewable Energy Credits through the period.
The 2009 legislation was introduced by request of then-Gov. Joe Manchin and subsequently weakened, and the outcome is no surprise to some who opposed it at the time.
“We predicted early on when they included things like clean coal and natural gas as an alternative fuel that there would clearly be no need for the utilities to do anything,” said James Kotcon, a board member of the nonprofit Environmental Council. “Then the Legislature added supercritical boilers to the definition — that includes things like Fort Martin and John Amos (coal-fired power plants). sure enough, the utilities file their plans and the plans show they don't have to do anything to meet the so-called standard.”
The first year the utilities are required to present and retire credits is 2015; however, the companies began banking credits in 2011.
AEP
AEP is accumulating credits from numerous sources. Renewable sources include wind power it purchases from wind farms in Indiana and Illinois, as well as hydropower from Appalachian Power's own Claytor Hydroelectric Project in southwestern Virginia with the small, old Winfield, London and Marmet facilities in West Virginia and several others.
Alternative sources include supercritical coal generation at the Amos and Mountaineer facilities, natural gas generation primarily from the Dresden plant that is due to start up in the first quarter of 2012 in Ohio, pumped hydroelectric storage at the Smith Mountain hydro facility in Virginia, carbon capture and storage at the Mountaineer plant and energy efficiency programs that will ramp up over the coming several years.
According to its compliance plan, AEP accumulates a little more than 2 million credits each year, entering the first compliance year with a bank of 8.8 million credits.
But even after the utility begins retiring credits, it earns more each year than it needs. It will retire about 1.7 million credits per year through 2019, so its store of credits continues to rise. Even with the cancelled second phase of the Mountaineer carbon capture and storage project removed from the tally, with other expected changes in generation, the utility will need about 2.7 million credits per year during the 15 percent compliance phase in 2020-2024 but will generate more than 3 million per year.
Steven Ferguson, Appalachian Power's director of regulatory service for West Virginia, said the AEP companies' position is due to foresight.
“We knew something would be coming down, is one of the reasons we started making the decisions to do some of the things we did such as the wind and gas,” Ferguson said.
That foresight has easily met the standard and allowed for the banking of millions of surplus credits.
FirstEnergy
Allegheny proposed to meet what are now FirstEnergy's requirements in part through renewable generation purchased from the Hannibal Hydroelectric Power Plant at new Martinsville.
The utility expects to earn credits for alternative sources through waste coal generation purchased from Grant Town and WVU power plants and through pumped storage at the Bath County Station in Virginia.
And, because these facilities have just been certified by the PSC, FirstEnergy also may earn alternative source credits through the use of biomass — sawdust — as 10 percent of the input at one of its Albright generating units and tire-derived fuel as 10 percent of the input at a Willow Island unit.
Not counting the just-certified units, the utility expects to earn 2.3 million credits per year 2011-2014, accumulating 9.3 million credits through 2014, before the compliance period begins.
It anticipates needing to retire about 1.5 million credits per year for 2015-2019 and about 2.4 million yearly through 2024.
Credits accumulate, to 13.3 million in 2019, then fall slowly. the utility anticipates retiring 4.1 million credits in the first 20 percent compliance year of 2025, and ending the year with a store of 11 million credits.
The Small Utilities
The major utilities are meeting the state's portfolio standard handily.
If anything has been motivated by the standard, it is the purchase of new power or credits by the small utilities that represent just 0.4 percent of sales: the new Martinsville and Philippi municipal utilities, the Craig-Botetourt Electric Cooperative and the Harrison Rural Electrification Association.
They're dealing in much smaller quantities of credits. Philippi will need about 4,000 credits for 2015, for example, and Craig-Botetourt will need just 317.
The new Martinsville and Philippi utilities are contracting for new hydropower with municipal member power provider American Municipal Power of Smyrna, Del., according to their compliance plans, some of which is scheduled to go online in 2014.
HREA expects to purchase wind power from AEP, and Craig-Botetourt plans to purchase credits.
These responses to the portfolio standard represent otherwise non-existent support for alternative and renewable generation.
Cost
Cost estimates in the compliance plans are all across the board.
The incremental cost of the wind power HREA plans to buy from AEP is estimated at about $5/megawatt-hour, or $5/credit.
“It's just hypothetical at the moment,” said HREA General Manager Gary Jackson. “We're just too far out to throw numbers at what's there.”
Craig-Botetourt and the city of new Martinsville use estimates of $15/credit, which the PSC staff notes is perhaps high but also considers reasonable given that no one knows what credits will be worth until the compliance period begins.
Philippi's plan has not yet been approved.
AEP estimates its cost of compliance at about $40 million per year through 2015, then from $52 million to $63 million through 2025, with per-credit cost ranging from $30 early on to $13 later.
Although AEP doesn't have to build or buy anything to meet the portfolio standard, Ferguson asserts that the cost of operating the complying facilities is the cost to comply — it simply doesn't cost the ratepayers anything additional at this time because it was built or contracted for earlier.
The FirstEnergy companies note that they have no incremental cost to comply, beyond the cost of mandated energy efficiency measures. however, because Allegheny was previously ordered to purchase power from other generators that now will contribute to the fulfillment of this requirement, the utility includes the cost of those purchases at over $80 million per year, with per-credit costs starting at $56 and dropping to $21 by 2025.
The PSC was not able to provide an explanation of the meaning or implication of these widely varying compliance cost estimates.
One other approach to a cost estimate: if a utility fails to comply in a given year, the PSC will assess it at least $50 or twice the market value of credits sold to meet the standard times the number of missing credits.
The Future
As a reminder, the point of all this is to move toward cleaner and more efficient generation and use of electricity.
“Greenhouse gas emissions in 2010 set a record and the various energy agencies have concluded the emissions scenarios are now well above what had been considered a worst-case scenario by the Intergovernmental Panel on Climate Change in 2007,” Kotcon said, focusing on the big picture. “There is no credible solution to global warming that doesn't involve a big chunk of energy efficiency and West Virginia is simply not moving in that direction.”
Still, implementation is a few years away, and some things could change.
Solar power advocates in the state, for example, are talking about a solar “carve-out” mandating that a certain share of each year's renewable credits come from solar power. that would change the compliance plans.
Annual utility progress reports are due to the PSC on March 31 of each year.