71 Pages Posted: 14 Sep 2014 Last revised: 22 Mar 2015
Date Written: 2013
This article explores the measures that West Virginia policymakers can take to position the state for a more sustainable energy future. Throughout its history, energy resources have been a driver for the West Virginia economy, with a heavy emphasis on fossil fuels (coal, oil and natural gas) in particular. In more recent years, the State is moving rapidly toward developing its natural gas resources in the Marcellus Shale.
Going forward, policymakers in West Virginia need to consider a future where the national economy is less dependent on the coal industry. While electricity generation in the U.S. depends on coal for about one half of its fuel source, that dependency is expected to decline gradually over the coming years as older, dirtier coal generating plants are retired in the face of more stringent regulations of emissions by the U.S. Environmental Protection Agency as well as global demands for coal that will continue to raise the domestic price to levels that threaten its cost-competitiveness compared to other fuel sources for electric generation, such as natural gas. West Virginia policymakers can take a number of steps to prepare the State for this new energy future. This article examines some of these options.
First, electric utilities operating in the State need to be required to engage in a rigorous process of long-term planning that takes a critical look at the various resource options for procuring a reasonably priced and reliable electricity supply. Long-term system planning is a process followed in the majority of the states and, in fact, is required by the federal Energy Policy Act of 1992. A rigorous long-term resource acquisition process – also known as “integrated resource planning” – would require sophisticated modeling of various resource scenarios, using a variety of assumptions, in order to determine a portfolio of resources that results in the lowest cost, over time, to utility customers. West Virginia utilities are not currently required to engage in integrated resource planning, and electricity ratepayers throughout the State are paying the price. This article examines the widespread use of integrated resource planning in the U.S., and the advantages of implementing this tool in West Virginia.
Second, an integrated resource planning process would likely result in utilities devoting more resources to energy efficiency and conservation. The “integration” part of integrated resource planning means that supply-side options (i.e., generation) are placed on the same footing as demand-side options (i.e., energy efficiency and conservation) when a utility determines its resource acquisition path. In other words, a utility will decide how much to pay to “acquire” conservation – through energy efficiency programs offered to retail customers – by reference to the costs if would avoid by not having to build new generation, or not investing in emissions reduction technology in existing coal plants. West Virginia utilities currently undertake no such analysis and, as a result, customers have virtually no opportunity to participate in energy efficiency and conservation programs offered by their utilities. These programs simply aren’t offered in West Virginia, in sharp contrast to the programs offered in surrounding states – and in many cases by the same utilities that operate within West Virginia – because the policies in this State do not require or encourage it. Energy efficiency programs in many cases are the most cost-effective means of meeting new demands for electricity, but the analysis demonstrating that is simply not performed in West Virginia. As a result, our utility ratepayers are burdened with high energy bills, with no options to invest in the measures that could reduce them. This article looks at the role of energy efficiency programs in other states, and the policies that can be implemented to stimulate more investment in energy efficiency and conservation.
Third, West Virginia should consider policies that promote the development of renewable resources within the State. Part of the diversification of the electricity generating resources should include increased reliance on the development of the State’s substantial potential for renewable energy production. The majority of the states in the U.S. have a renewable portfolio standard, or RPS, that requires utilities to obtain a specified portion of their electricity supply from renewable resources, which thereby stimulates renewable energy development. West Virginia, for its part, has a renewable and alternative energy portfolio standard requiring that a quarter of each utility’s electricity supply be procured from renewable and alternative energy sources by 2025. Yet “alternative” is defined in such a manner as to include coal-fired generation, “tire-derived fuel” and other “dirty” fossil fuel-based generation that makes West Virginia’s procurement standard unlike any other in the U.S. In fact, the West Virginia standard, as currently written and implemented, requires no new renewable energy generation – with “renewable” defined as most other states to include wind, solar, geothermal, biomass, small-scale hydro --in order to meet its requirements. Thus, there is nothing as a matter of State policy, unlike the vast majority of states in the country, that encourages development of renewable energy resources. This article examines the role of RPSs in promoting renewable energy development and diversification of utility fuel supplies, and will include recommendations for strengthening West Virginia’s renewable and alternative energy portfolio standard.
Fourth, a more aggressive RPS in West Virginia could trigger development of the State’s considerable renewable resource potential. Several large wind projects are already located within the State; these projects, however, were not stimulated by anything in West Virginia’s energy policies, but rather were developed to help regional utilities meet compliance obligations under more rigorous RPS policies of surrounding states. West Virginia has tremendous untapped potential for biomass and geothermal energy, for example, that could be developed pursuant to policies designed to stimulate investment in these industries. In the case of biomass, research is currently underway in the WVU campus to quantify the energy and economic benefits of developing a robust biomass industry in the State, based on the vast forests that could be sustainably harvested to produce a long-term feedstock for biomass-fired electricity generation. Moreover, biomass can effectively be combined with coal in existing coal-fired generating units – referred to as “co-firing” – to reduce the dependence on coal and achieve a gradual “greening” of the energy supply. With respect to geothermal resources, a recent study performed at Southern Methodist University has identified significant geothermal potential in West Virginia that could be tapped as a new source of electricity generation. There are currently no State policies in effect, however, that encourage development of these biomass and geothermal resources. These resources could result in a cleaner supply of electricity, achieve resource diversity that would reduce dependence on ever-more-costly coal generation, and stimulate jobs and economic development in new industries, thereby diversifying the State’s economic base away from heavy dependence on fossil fuels. This article examines policies that West Virginia should consider to stimulate development of renewable energy resources within the State.
Finally, the development of the Marcellus Shale within West Virginia holds significant promise for increased economic activity and reduced dependence on the coal industry for jobs. Because natural gas-fired electric generation is roughly twice as clean as coal-fired generation, the State can benefit substantially as the U.S. moves toward a “cleaner” electricity supply through displacement of coal-fired generation with natural gas-fired generation. But the economic benefits flowing from shale gas development within the State are threatened by the low natural gas prices currently prevailing as a result of the shale gas development around the nation. Quite simply, hydraulic fracturing and horizontal drilling have been “game changers” in the energy industry in terms of unleashing vast quantities of natural gas at relatively low prices, resulting in an over-supply of natural gas that is depressing prices and threatening to dampen the economic benefits of shale gas development as the drilling rigs are idled. Policymakers in West Virginia should be considering measures that could stimulate the demand for natural gas in the hopes of stabilizing natural gas prices at sustainable levels. These measures could include (1) incentives to encourage development of the infrastructure to support the use of compressed natural gas, or CNG, for transportation, and (2) natural gas distribution companies in West Virginia promoting combined heat and power (CHP or cogeneration) for commercial and industrial customers. CHP facilities typically are fueled by natural gas and, in addition to providing on-site generation for large customers, achieve substantial improvement in energy efficiency by capturing the waste heat that would otherwise be released into the atmosphere and using it to heat and cool buildings. This article examines the policies that State policymakers could implement to stimulate demand for natural gas in West Virginia, which would take advantage of the State’s native resources as well as help achieve a balance of supply and demand at a level where the abundant natural gas resources can continue to be developed.
Based on these and similar analyses, this article closes with a number of policy recommendations to be considered as West Virginia embarks on an energy future that will be – and needs to be – far different from its past. It represents a blueprint, or a roadmap, for a sustainable energy future for West Virginia. The article is intended to stimulate the thoughtful discussions that are necessary to place the State on a foundation that is sustainable, not only from the perspective of a “cleaner” energy supply but also in the resilience of a more diversified economic base that is better positioned for the future.
Keywords: renewable energy, energy efficiency, utilities, climate change
Suggested Citation: Suggested Citation
Van Nostrand, James M, An Energy and Sustainability Roadmap for West Virginia (2013). West Virginia Law Review, Vol. 115, No. 3, 2013; WVU Law Research Paper No. 2014-6. Available at SSRN: https://ssrn.com/abstract=2495555