Welcome to the second 2024 issue of Currents - our e-newsletter focused on energy topics.
Business today is characterized by relentless change. To assist our clients in navigating this dynamic landscape, we pride ourselves on our ever-evolving practice. For 2024, we developed our report titled "ReSolutions" to show how Spilman's evolution translates into real, impactful enhancements to client service.
Thank you for reading!
Challenges and Uncertainties Surrounding Offshore Wind
Renewable energy has become a major topic for governments and private companies alike. As the world attempts to pivot towards renewable energy, offshore wind has developed as a potential part of the solution but comes with significant challenges.
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“They said the process of shipping gas overseas is ‘at least 24 percent worse for the climate than coal’ — a contention that industry groups call at odds with settled science.”
Why this is important: The article explains that the White House's decision to pause approvals of liquefied natural gas (LNG) terminals has fed a contentious debate about whether using LNG is more environmentally sound than coal. Many environmentalists argue that gas is a safer alternative that can help reduce climate pollution. New studies complicate this assertion by pointing out that gas – LNG exports in particular – most likely contribute more to planetary warming than previously thought. With this information, President Biden temporarily halted the approval of future LNG export terminals last month because the claim that LNG is at least 24 percent worse for the climate than coal. This halt provides the Department of Energy additional time to examine LNG's climate impact.
LNG receiving more scrutiny has caused some disruption in the world of energy politics because natural gas has long been championed as having half the coal emissions. New studies find methane leaks are more detrimental to the environment than coal, as the government initially suggested. The heat-trapping effect of methane emissions is more intense in the shorter term than coal's carbon dioxide emissions. Whether these new findings make a difference in the country's race to use gas as the bridge to more renewable energy sources remains to be seen. The United States is the world's largest producer and exporter of LNG, and it expects to double its exports by the end of the decade. Balancing the endeavor to be the world's largest LNG exporter with its ambitious climate policy will continue to be a considerable undertaking for the Biden administration. --- Schenley N. Kent
“A tug-of-war is going on in the legislature over whether Va. stays the course of the energy transition laid out 2020-2021, or rolls it back hard.”
Why this is important: This article’s author is a long-time supporter of renewable energy, thus, the viewpoint strongly favors retaining the Virginia Clean Economy Act (VCEA) and speaks favorably of bills proposed in the 2024 General Assembly session that, from her perspective, either improve upon the VCEA or make it easier for new solar and wind projects to be brought online. By contrast, the article criticizes those Republican-sponsored bills that seek to gut the VCEA or interfere with the decarbonization efforts contained in the VCEA. Finally, the article discusses the Commonwealth’s largest utility, Dominion Energy, and its interest in small modular nuclear reactors (SMRs) as a potential future resource to achieve Virginia’s energy transition, expressing concern about legislation proposed in this session that would allow investor-owned utilities (like Dominion and Appalachian Power Company) to recoup the costs of SMRs from ratepayers even though this technology is not currently viable and is at least a decade away from anticipated commercial operation, assuming the technology comes to fruition.
The fight over Virginia’s VCEA and whether to stay the course is likely to persist beyond 2024 for numerous reasons. First, as the articles notes, the political parties differ strongly on their views of the VCEA and the transition away from fossil fuels. Second, as the costs to comply with the VCEA mount, we expect this will cause legislators to consider appropriate responses to rising costs. Finally, as Virginia undergoes this transition to carbon-free energy, concerns about reliability and feasibility will continually need to be addressed to ensure that power is available 24/7/365. --- Carrie H. Grundmann
“And, the city has quietly renegotiated the agreement to lower the green standards and increase costs to consumers.”
Why this is important: It’s proving more and more difficult for companies and municipalities – in this case, Columbus, Ohio – to meet their renewable energy goals. American Electric Power originally promised to supply a group of customers in that city with 100 percent renewable, Ohio energy. It couldn’t do it. At first it could meet the shortfall by buying renewable energy credits, but when that option terminated, there wasn’t enough available renewable energy in the state to fund the program. The company and the city had to renegotiate for higher rates and a lower level of renewable power. --- David L. Yaussy
“Per data, released by Global Energy Monitor and reported by Bloomberg, China last year also accounted for 68% of new coal generation capacity that came online last year and 81% of newly planned coal generation projects.”
Why this is important: While China continues to support eventual changes to wind and solar sources for electric generation, it continues to rely heavily on coal-fired electric generation. It remains the world leader in construction of new coal-fired electrical generation plants. Last year, 96 percent of the world’s new coal-fired electrical generation plants were built in China and the nation mined 4.6 billion tons of coal. That is over nine times the amount of coal the U.S. mined, and China also imported 474 metric tons of coal from around the world. In 2022, 68 percent of the world’s new coal-fired plants were built in China. China sees a small drop in coal production in 2024 and then stable levels in 2025 and 2026. The world’s largest nation defends its coal-fired plant additions as being used to stabilize its electrical grid as it adds massive amounts of solar and wind generation. Europe and other countries that favor reduced emissions continue to object to China prioritizing stable electrical grids over a greener electric generation portfolio. Time will tell if these changes ultimately result in a drop in CO2 emissions. ---
Mark E. Heath
“At least 15% of counties in the U.S. have effectively halted new utility-scale wind, solar, or both, USA TODAY found.”
Why this is important: In order to achieve an effective energy conservation program for our country, states with geographic characteristics and locations that benefit the transition must cooperate in the move to a more environmentally friendly landscape. State-wide or even county-wide prohibitions on wind and solar power projects are often centered in states that endorse green energy, so why the disconnect? A renewable energy future centered on unconventional power generation facilities is the reality of an emission-free environment, and so solar and wind farms are an essential part of that future. Change is hard and we must be patient. --- William M. Herlihy
“Pumped-storage hydro is attracting a lot of interest, thanks in part to generous tax credits from the 2022 Inflation Reduction Act.”
Why this is important: The article provides an overview of an interview extolling the value of pumped-storage hydropower as a renewable source of energy, spurred in part by credits available through the 2022 Inflation Reduction Act (IRA). As is pointed out, the variability of solar, wind, and other renewable resources is problematic, so storage of power is a necessity. Pumped-storage hydropower – which involves storing water until needed to release to spin turbines and create power – is a proven technology that effectively operates as a power storage facility or energy bank to be utilized when the power grid is in need. The challenges, however, to the development of this type of hydropower include tremendous upfront investment costs and navigating a “cumbersome” regulatory approval process, both of which must be balanced against long-term value, low operating costs, and the importance of emission-free power production. As a result, the interest in pursuing such projects is limited, although a large-scale project is being pursued in the Northwest. --- Derrick Price Williamson
“Reports of inventory sitting on lots, production cuts and cold weather issues, as well as ongoing concerns about a lack of charging infrastructure, have raised questions about the future of EVs.”
Why this is important: The article discusses the factors related to the current state of the electric vehicle (EV) market, focusing primarily on the draw of EVs to both single-family home owners and multi-family building dwellers, thus presenting the need for continued development of both in-home and public-facing EV chargers. Although there are indicators that the demand for EVs is slowing, the article indicates the EV trajectory is continuing apace. Despite the optimism, however, the article does not address other factors pertaining to the expected pace of EV roll-out, including the long-term sustainability of cost-subsidizing government grants or the availability of critical battery metals in an uncertain geopolitical environment. --- Barry A. Naum
“Pennsylvania State Senator Gene Yaw has introduced legislation to repeal the Regional Greenhouse Gas Initiative carbon dioxide cap-and-invest program, saying that it would increase power rates for consumers, cut energy and manufacturing jobs and lead to the closure of Pennsylvania power plants.”
Why this is important: The article details that Pennsylvania State Senator Gene Yaw has introduced legislation to repeal the Regional Greenhouse Gas Initiative (RGGI) carbon dioxide cap-and-invest program, saying that RGGI would increase power rates for consumers, cut energy and manufacturing jobs, and lead to the closure of Pennsylvania power plants. In 2019, Governor Wolf issued an executive order to enter Pennsylvania into RGGI. Pennsylvania’s participation in RGGI has been hotly contested by both parties. Last year, the Commonwealth Court ruled that RGGI is a tax imposed in violation of the state’s Constitution and that the Commonwealth’s participation in RGGI is possibly only through legislation enacted by the General Assembly, not through rulemaking by the Governor, the Department of Environmental Protection, or the Environmental Quality Board. The Commonwealth Court’s ruling has been appealed to the Pennsylvania Supreme Court and likely will take a significant amount of time, thus putting the Commonwealth’s participation in RGGI in the balance until it can be decided by the state’s highest court. In the interim, Senator Yaw’s legislation would eliminate the state’s participation in RGGI, and according to Senator Yaw, bring back “commonsense, environmentally responsible energy policy that recognizes and champions Pennsylvania as an energy producer.” --- Schenley N. Kent
“’Even though a lot of politicians in California wanted to close [Diablo Canyon], they faced the reality that they could not close it and keep their lights on,’ FERC’s Christie said.”
Why this is important: The article notes the key role that nuclear – both currently operational, traditional nuclear reactors and yet-to-be operational small modular reactors (SMR) – plays (or will play) during the energy transition occurring around the country as utilities move away from carbon-emitting generation resources like coal to carbon-free resources like solar and wind. As the only 24/7/365 carbon-free resource, the article notes that (1) many utilities are filing applications with the Nuclear Regulatory Commission (NRC) to extend the life of their current nuclear reactors, something Duke Energy in North Carolina/South Carolina and Dominion Energy in Virginia have both done or are in the process of doing; and (2) the NRC is anticipating 25 applications in the next five years for SMRs, which are small 200 MW nuclear reactors. The North American Electric Reliability Corp. (NERC) has been signaling concerns about grid-reliability in recent years, which only further supports the use-case and need for a base load resource like nuclear if the path toward less carbon is going to be maintained. --- Carrie H. Grundmann
“Fifty years after its creation, the International Energy Agency is being called to restructure into two organizations to better reflect the current energy landscape and needs.”
Why this is important: The International Energy Agency has a split personality. For years, its mission was to provide accurate information about world energy production and use, but in 2015 the IEA pivoted to a position openly advocating for an energy transition away from fossil fuels. It is difficult to be an honest reporter and an advocate at the same time, so one option being considered is to split the agency into the International Energy Information Agency and the International Energy Transition Agency. ---
David L. Yaussy
“Renewables are growing rapidly and nuclear power is on track to reach new all-time high next year, enabling low-emissions generation to outpace robust electricity demand growth.”
Why this is important: The International Energy Agency (IEA) sees the worldwide demand for electricity growing 3.4 percent per year for the next three years. China, India, and Southeast-Asia will create 85 percent of the increase. IEA sees solar, wind, hydro, and nuclear meeting the increased demand – not fossil fuels. It believes by 2026, half the world’s electricity will be generated from solar, wind, hydro, and nuclear power – up from 40 percent in 2023. In 2025, coal-fired electrical generation drops to one-third of electrical power production worldwide. IEA does note the only place electrical demand in not growing is in Africa and that is due to stagnant economies that prevent economic growth. --- Mark E. Heath
"’By my estimate this is enough energy to make over 600 cups of tea,’ professor Stuart Mangles—a physicist from Imperial College London, England—said in a statement.”
Why this is important: Once considered to be out of reach, a UK-based experimental nuclear fusion reactor has continued to provide surprising and promising results for future nuclear reactor development since its initial tests in 2022. This article discusses the performance of the Joint European Torus (JET) project, which in a single 5-second test produced 69 megajoules of energy using only 0.2 milligrams of fuel. Although noting that commercial fusion power production is likely still a long way removed, the article highlights how this groundbreaking development presents promise for global sustainable power production. --- Barry A. Naum
