The Bay Citizen

Energy Suppliers & Companies

In the face of the climate change, we seem more and more like the fabled boiling frog: oblivious to our changing environment until it’s too late.

Every year brings new stories of the hottest month on record until the next year, anguished measurements of the shrinking ice-caps and reports of extreme weather. And yet, though more people share the joint beliefs that there is such a thing as climate change and that man’s interactions with the world contribute to that change, there persists an equally large and angry voice ridiculing those who want to curb our behaviours for what they perceive to be the greater good.

Indeed, rather than accept this modern Pascal’s wager, climate change sceptics and deniers rally to preserve the status quo – and few with as much bluster as Republican presidential nominee Donald Trump, who now purports the doublethink that climate change won’t be devastating but local government should invest in protections against the impacts of climate change (as long the federal tier can continue with an unfettered, deregulated industry of cheap fuels).

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While this has put Trump out of step with every other world leader, it may actually prove a canny move among voters and businesses in a country where two words spell political suicide: “carbon tax”.

Taxing Times

Despite successful implementations in British Columbia, Canada, and an interesting experiment in Australia, carbon tax is the WMD in the emission reduction arsenal: equally feared and derided. In the US states where carbon production penalties are considered or applied, such as California, cap-and-trade is the preferred system. Perhaps flippantly, I’d suggest this is likely because cap-and-trade creates new a market, and markets can be gamed, played and won by those with the resources to do so.

On the other hand, a carbon tax, which simply places a tax on the carbon content of all fossil fuels, is difficult to avoid in its simplicity. Indeed, in BC, they have kept the tax as simple as possible, avoiding the pressures of lobbyists to create the loopholes so frequently exploited in financial tax arrangements.

For those in favour of carbon taxes, most visibly former Democratic candidate Bernie Sanders, that simplicity is key. Here is a system that could easily be managed within any budgeting, planning and forecasting software as a standard part of doing business, that can replace complex legislation through a simple financial lever and, best of all for business, that can be designed to be revenue neutral, i.e., other taxes are cut or removed as the carbon tax increases.

Though Democratic nominee Hillary Clinton has vowed to continue in the spirit of President Obama’s environmentally-focused second term, even she will not go so as far as endorsing a carbon tax. Meanwhile, the argument against the tax continues in the same spirit: the costs go to consumers; products become more expensive; and production could shift to countries with laxer standards, increasing pollution.

Why Fear Tomorrow When You Can Fear Today?

In the UK, where we’re a leader change ahead of the US race, it is interesting to note how climate and energy policies are reacted to and, as mentioned, how Trump’s singular rhetoric may actually win votes.

In her career, Theresa May has largely voted against measures to delay climate change, and even voted to impose the same taxes on renewable energy sources as well as polluting sources. This progressed when she became leader, and, some would say, nailed her not very green colours to the mast in scrapping the Department for Energy and Climate Change in favour of the Department for Business, Energy & Industrial Strategy.

Of course, that doesn’t mean that there is no climate change policy but it does certainly mean its visibility as a priority is reduced. It is too early to talk about results but, from an environmentally conscious branding perspective, it is an unmitigated failure.

However, it is not necessarily one that displays her as out of touch from the electorate. In fact, her policies and priorities are in step with a country that fears overpopulation considerably more than climate change, that is concerned about energy shortage but very much undecided on nuclear. White elephant project or not, the Hinckley Point programme aligns with the greater public’s concerns and has maintained her high approval rating.

The fact is that when people are more afraid of losing their jobs to immigrants than of a changed planet, the idea of paying more to keep the lights on is anathema. These fears supported a proportion of the Brexit vote, and by denying climate change and colouring initiatives like carbon tax as bad for normal people, Trump could actually be further fuelling his success.

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Colleges in APCo territory want to use PPAs to install solar facilities like the one recently installed at the University of Richmond, in Dominion territory.

Colleges in APCo territory want to use PPAs to install solar facilities like the one recently installed at the University of Richmond, in Dominion territory.

Facing a withering report from a Virginia hearing examiner recommending denial of its request for a renewable energy “Rider RGP,” Appalachian Power Company (APCo) has responded with a simple message to the State Corporation Commission: um, never mind.

APCo proposed Rider RGP as an alternative to third-party power purchase agreements (PPAs) for customers wanting to install rooftop solar. The proposal would have put APCo in the middle of the deal and created a buy-all, sell-all scheme. But the proposal was roundly criticized at last year’s hearing and in witness statements as convoluted and expensive.

On August 19 APCo asked to withdraw its application, citing changed circumstances. In reality, of course, nothing has changed since the Hearing Examiner’s August 31 report, other than APCo learning it was about to lose.

The company probably doesn’t mind being rejected for a program that witnesses said no one would sign up for. The much bigger issue for the company is that if the SCC adopts the hearing examiner’s view, APCo could lose its battle to block PPAs in its service territory.

For those of you just coming to the story, here’s the Cliff Notes version (this earlier post has the unabridged telling): APCo’s customers want the ability to install solar on their property through PPAs, a financing arrangement in which a solar developer installs and owns the panels, selling the electricity that’s generated to the customer. Often this means the customer can reduce its electricity bills without incurring an up-front cost. For tax-exempt institutions like colleges that can’t take advantage of the federal 30% tax credit for solar, the PPA model means the developer can take the tax credit and pass along the savings.

Virginia utilities say this arrangement violates their monopoly on the sale of electricity. Customers point to two statutory provisions that make PPAs legal. One provision allows customers to buy renewable energy from third parties if their utility doesn’t offer it. (No utility in Virginia does.) The other provision defines a net metering customer to include one who contracts with someone else to install and operate a solar facility on the customer’s property—an apt description of a PPA arrangement. Customers would seem to have the better of the argument, surely, but no bank will finance a PPA when a deep-pocketed utility is threatening to sue.

Dominion temporarily settled the issue in its territory with a pilot program that allows some PPAs, but APCo declined to participate. Under pressure from educational institutions that want solar, APCo proposed Rider RGP as an alternative for its territory. Customers and solar advocates seized the opportunity to seek a clear ruling from the SCC on the legality of PPAs. They argued, and the Hearing Examiner agreed, that Rider RGP wasn’t just badly designed, but unnecessary, given the provisions of the statute that already allow PPAs.

APCo doesn’t want the SCC commissioners to confirm this conclusion. It hopes that by withdrawing Rider RGP, the SCC will dismiss the case and not reach the merits of the argument on PPA legality. It is urging the SCC not to consider the point at all, or if it does so, not to take it up until it considers APCo’s plan, announced in April, to offer a green tariff to customers.

That green tariff is the “changed circumstances” APCo says makes Rider RGP unnecessary. If the SCC approves the green tariff, APCo will offer to sell real renewable energy to customers who want it. APCo clearly believes that having that tariff available to customers closes off the statutory provision that allows customers to go to third-party sellers if their own utility doesn’t offer renewable energy.

The green tariff would not, however, affect the legality of PPAs under the other statutory provision, the one that defines net metering customers to include those who have renewable energy facilities located on their property but owned and operated by someone else. Nor does the offer of a green tariff seem likely to satisfy customer demand for PPAs; buying electricity from a utility through a green tariff is a very different animal from having solar panels on your own roof.

The SCC is considering APCo’s request to withdraw its proposal for Rider RGP. It issued an order asking the parties to the case to comment by September 26. Advocates are expected to oppose APCo’s request and to ask the SCC to rule definitively on the legality of PPAs. By doing so, the Commission would finally bring legal clarity to an issue that has been holding back solar development in Virginia.

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A partial shutdown of the Colonial Pipeline system, a major source of transportation fuels to the Southeast, has disrupted gasoline supplies, leading to higher prices and product shortages in parts of the region.

On September 9, Colonial Pipeline shut down its Line 1 pipeline in response to a leak in Shelby County, Alabama, about 35 miles south of Birmingham. Repair and restoration activities are currently underway, including the construction of a 500-foot, above-ground bypass around the affected section of pipeline. The bypass is expected to allow the pipeline to resume operations on Line 1 as early as today.

Colonial Pipeline is a significant source of transportation fuels supply for the Southeast and East Coast, particularly in the states of Georgia, South Carolina, North Carolina, Virginia, and parts of eastern Tennessee. The U.S. Southeast (as defined by Petroleum Administration for Defense District, or PADD 1 subregion) includes Georgia, South Carolina, North Carolina, Virginia, and West Virginia. These five states represent approximately 12% of total U.S. motor gasoline consumption and 34% of PADD 1 consumption.

Because there are no refineries between Alabama and Pennsylvania that produce substantial quantities of transportation fuels, the U.S. Southeast is supplied primarily by pipeline flows from refineries along the U.S. Gulf Coast and supplemented by marine shipments from the U.S. Gulf Coast and imports.

Colonial Pipeline is a 2.5 million barrel per day (b/d) system of approximately 5,500 miles of pipeline and consistently runs at or near full capacity. Colonial connects 29 refineries and 267 distribution terminals, carrying refined petroleum products such as gasoline, diesel, heating oil, and jet fuel from as far west as Houston, Texas, to as far north as New York Harbor. Various branches of Colonial Pipeline supply markets in central and eastern Tennessee, southern Georgia, and eastern and western portions of Virginia. Colonial Pipeline’s Line 1 carries approximately 1.4 million b/d of gasoline from the Gulf Coast to a major junction and product storage hub in Greensboro, North Carolina. From Greensboro, two pipelines (Lines 3 and 4) carry a mix of fuels farther north to Maryland and Linden, New Jersey, near New York Harbor.

As Colonial Pipeline works to restore service on Line 1, gasoline shipments were temporarily allowed on its Line 2, which normally carries about 1.1 million b/d of diesel, heating oil, and jet fuel, to Greensboro, North Carolina. However, these gasoline supplies were less than the volumes that would have normally been transported on Line 1, and they displaced distillate supplies that would have normally been shipped on Line 2.

Gasoline and other petroleum products also continue to be delivered by Plantation Pipeline, the other major pipeline transporting supplies from the Gulf Coast to as far north as the Washington, DC area. With a capacity of 700,000 b/d, Plantation has about half the capacity of Colonial Line 1 and ships a mix of gasoline, diesel, and other fuels. Like the Colonial system, Plantation also runs at or near full capacity.

Inland markets in the Southeast that depend on shipments from Colonial do not have easy access to alternative supply sources other than long-distance trucking from distant supply points. Markets along the East Coast with access to deep-water ports, such as Savanah, Georgia; Charleston, South Carolina; Wilmington, North Carolina; and Norfolk, Virginia, can receive limited imports from the global market and marine shipments from coastwise-compliant ships originating from the Gulf Coast.

Federal and state governments have issued regulatory waivers and notices in an effort to make additional supplies more readily available. The U.S. Environmental Protection Agency issued waivers that allow conventional gasoline to be sold in metropolitan areas that normally require reformulated gasoline, as well as waivers for Reid vapor pressure specifications. As of September 16, six states have issued waivers on hours-of-service restrictions for truck drivers delivering gasoline.

Because pipeline shipments of gasoline move at approximately five miles per hour, some markets may still experience supply shortfalls several days after service is restored on Colonial Pipeline. GasBuddy, a retail gasoline price comparison site, recently launched a tracking tool to determine fuel availability at thousands of retail stations in the Southeast.

Limited availability of gasoline at some local distribution terminals and the higher costs of alternative supply options will ultimately influence the retail price of gasoline. On September 19, the average retail price of regular gasoline increased eight cents to $ 2.17 per gallon from the week prior in PADD 1C, a region that includes several states along the southern Atlantic coast.

EIA’s This Week in Petroleum, published later today, will also cover this topic.

Principal contributor: Mason Hamilton

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