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Welcome to the Tenth Issue of Currents 2024, our energy e-newsletter.
WV COMMERCE SECRETARY JAMES BAILEY TO JOIN SPILMAN
Spilman is excited to welcome James Bailey, current WV Commerce Secretary, to the firm beginning October 21. Mr. Bailey brings extensive public sector experience and will focus on government relations, government contracts, public finance, and general corporate law. His addition bolsters the firm’s already strong capabilities in navigating the complex intersection of business and government. Click here to learn more about James and his practice.
UPCOMING INDUSTRY EVENTS
Spilman is sponsoring the ABA's Forum on Construction Law Fall Meeting, October 23-25 in Pittsburgh, PA. Attendees will hear from the foremost experts on the details of the designer's role and responsibility in the construction process. Click here to learn more.
We are very pleased to sponsor the Independent Petroleum Association of America's 95th Annual Meeting on October 26-27 in Boca Raton, FL. Our own Jim Elliott will be moderating the session “Methane Management Challenges Continue”. Click here to learn more.
Thank you for reading!
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Natural Gas is Not Going Away | |
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By David L. Yaussy
While net-zero remains a dream for many, the electricity market is providing a wake-up call for anyone believing that natural gas will be replaced in the near future as the plurality winner in the electricity-generation business. As this article by Oil Price notes, natural gas is providing 46 percent of the nation’s power generation so far this year, up 5 percent from last year.
The primacy of natural gas is not likely to change soon, as new gas plants, mostly efficient combined-cycle generators, are proposed across the country. According to Sierra Club data cited by this Bloomberg article, the first half of 2024 has already seen as much gas-fired capacity proposed as in all of 2020.
Click here to read the entire article.
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“The companies jointly proposed the projects through PJM’s Regional Transmission Expansion Plan Open Window process in September.”
Why this is important: One of the primary criticisms of transmission infrastructure projects in recent years has been the lack of coordination among utilities, with each utility proposing individual projects within their borders, not seeking to work collaboratively with their neighbors. Often this go-it-alone strategy has resulted in increased costs. Thus, this joint effort by FirstEnergy, Dominion Energy, and American Electric Power to partner on a larger set of projects could provide customer benefits in the form of decreased costs and economies of scale. As the article notes, however, this project is not a foregone conclusion. The proposal has been submitted to PJM, the regional transmission operator in the area, who will study the project before determining if it should be approved (and subject to cost recovery from PJM-member states and their ratepayers). It is also not clear whether there is any possibility that these projects would be constructed by a third-party entity, or whether they could only be constructed by these monopoly utilities, potentially at higher cost to customers. --- Carrie H. Grundmann
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“The agreement will span 20 years, and the plant is expected to reopen in 2028.”
Why this is important: Microsoft and Constellation Energy entered a deal to restart Pennsylvania's Three Mile Island nuclear plant to help power Microsoft's growing artificial intelligence (AI) goals. While Three Mile Island is the site of the country's worst nuclear power incident, the agreement will only revive the plant's undamaged reactor, which closed in 2019 for economic reasons.
With the immense amount of power required by data centers for AI, technology companies are looking for sources of clean, reliable power generation. With the increased generation requirements in the coming years, nuclear-power advocates view this as a window of opportunity to unwind the planned closures of existing plants and to design small modular reactors to achieve the country's power needs. The upshot of this article is that, as additional generation sources become increasingly necessary, nuclear power is being pursued as a part of the solution. --- Steven W. Lee
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“Should Ohio rely on clean, renewable energy, or turn to the more controversial nuclear option?”
Why this is important: Microsoft's plan to build a $420 million data center in New Albany, Ohio highlights the complex interplay between technological advancement, economic development, and energy consumption. The project is set to create at least 30 full-time jobs with an annual payroll of $1.5 million, however, it raises questions about how to power such energy-intensive facilities sustainably.
As the growing demand that data centers place on the electric grid increases, the debate regarding powering them has intensified. Consequently, some of America's biggest data centers have proposed different solutions to support balancing potential strain and growing the grid's capacity. Some companies like Amazon attempt to utilize renewable energy sources, such as solar farms in Ross County, Ohio to meet its energy demand. Other companies, such as OKLO, are advocating for nuclear power as a potential solution. OKLO representatives believe their planned experimental nuclear reactors in Pike County, Ohio could meet the energy demands of new data centers. Microsoft's recent agreement with Constellation Energy to source power from the Three Mile Island nuclear plant (as discussed above) has further fueled this debate. As Ohio considers its energy future, the article suggests that the state faces a critical decision between relying on clean, renewable energy sources and exploring more controversial nuclear options. --- Hikmat N. Al-Chami
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“The court declined a request for emergency relief sought by nearly a dozen states and the energy sector, which had argued the EPA's new standards are not necessary under the Clean Air Act because they yield no quantifiable public health benefit.”
Why this is important: The U.S. Supreme Court has refused to stay enforcement of the new Environmental Protection Agency’s Clean Air Act standards. The new rules require the removal of mercury and other toxic gases from coal-fired power plant emissions. It is widely expected that for older power plants, the cost of compliance will result in the closure of the plant instead of retrofitting them with expensive new emissions controls. This same issue arose in the Obama administration when earlier new Clean Air Act amendments were not stayed and many plants across the U.S. closed rather than comply. In the end, the rules were invalidated in litigation -- but the power plants never reopened. --- Mark E. Heath
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“But what’s been too often left out of the conversation is that AI’s huge demand for concentrated and consistent amounts of power represents a chance to scale the next generation of clean energy technologies.”
Why this is important: The growing demand for power from artificial intelligence (AI) data centers presents both a challenge and an opportunity for the clean energy sector, according to Michael Kearney and Lisa Hansmann of Engine Ventures. They argue that the United States faces a critical juncture in the race for AI supremacy and clean energy leadership, with significant geopolitical implications, and its winner will dominate the global economy in the 21st century.
The fight for dominance in AI will result in a growing need to access more electric power to service its data centers. AI data centers could add the equivalent of three New York Cities' worth of load to the grid by 2026, potentially doubling their share of U.S. electricity consumption to 9 percent by the end of the decade. Reportedly, Sam Altman, CEO of OpenAI, even pitched the White House on the need for AI data centers requiring five gigawatts of capacity. This unprecedented demand for power density necessitates novel clean energy solutions, such as advanced nuclear fission, next-generation geothermal power, and potentially nuclear fusion. Organizations argue that expanding the use of non-renewable energy sources to power utilities’ grids would be detrimental both ecologically and economically. Such organizations cite the Texas winter storm of 2022 as an example of the vulnerabilities of natural gas plants, which accounted for 70 percent of the outages.
The convergence of AI and clean energy technologies could accelerate development in both sectors, with AI already being used to overcome barriers in fusion research and geothermal resource discovery. With China currently leading in clean energy investments and outspending the U.S. two to one on nuclear fusion, the leveraging of AI's power demand to scale next-generation clean energy technologies is crucial for maintaining U.S. competitiveness in both AI and energy production. --- Hikmat N. Al-Chami
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“Solar energy fosters greater energy autonomy, reduces political dependence on centralized systems, improves governance and contributes to lower carbon emissions.”
Why this is important: The article highlights the increasing adoption of distributed solar energy in emerging economies, emphasizing its potential to accelerate clean energy transitions while improving energy access, stability, and affordability.
In emerging economies, the falling costs of solar technology and supportive policy environments are driving growth; however, challenges like financing, regulatory constraints, and a shortage of skilled labor remain a barrier. The article stresses the importance of private and public partnerships to collaborate on innovative business models to enhance accessibility to solar energy.
According to the article, a shift to distributed solar could support broader sustainable development goals by providing reliable electricity, reducing reliance on fossil fuels, and fostering economic development, particularly in emerging economies with limited grid infrastructure. The article does not address, however, potential drawbacks and costs associated with the intermittent nature of solar power. --- Schenley N. Kent
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“After a few industry hiccups, the proverbial winds seems to be blowing back in the right direction for offshore wind projects that the Biden administration and many states, including North Carolina, are relying on to help them tackle carbon emissions from their power sectors.”
Why this is important: Offshore wind has been raised as a potential renewable resource that the U.S. should develop, given the precedent set for offshore wind use in Europe, where 3.8 gigawatts (GW) of new wind power capacity was installed in 2023, according to the WindEurope Intelligence Platform, who expects offshore wind installations between 2024-2030 to take the EU to 393 by 2030. Given the push by the Biden administration, as well as state legislation such as the Virginia Clean Economy Act of 2020 and North Carolina House Bill 951 passed in October 2021, the development of offshore wind is being seriously evaluated as one of the various solutions for the production of clean energy. Now, in the wake of back-to-back major hurricanes that caused unprecedented destruction from Florida throughout the Appalachian Mountains, it is evident that renewable energy sources such as offshore wind are needed more than ever to reduce greenhouse gas emissions.
Offshore wind development presents both logistical and economic challenges in the U.S. As of now, there are three operating wind turbines off the coast of the U.S.: (1) Rhode Island - Block Island Wind, producing up to 30 MW with 5 turbines since 2016; (2) Virginia - Coastal Virginia Offshore Wind Pilot Project, producing up to 12 MW with 2 turbines and completed in 2020; (3) Massachusetts and Rhode Island – South Fork, producing up to 132 MW with 12 turbines since March 2024. This article presents current information on projects off the East Coast of the U.S. Four state coastlines -- Virginia, North Carolina, South Carolina, and Georgia -- represent 82 percent of the East Coast’s wind resource in shallow water and 45 percent of the East Coast’s total wind resource according to the National Renewable Energy Lab (NREL).
In this four-state territory, Dominion Energy is building the largest offshore wind farm 27 miles off the coast of Virginia that is currently under construction. Once construction is completed, which is estimated to be in two years, the farm’s 176 turbines are expected to generate up to 2.6 GW of power. Farther south, in Brunswick County, North Carolina, TotalEnergies Renewables USA and a Duke Energy Subsidiary have leases from the Bureau of Ocean Energy Management (BOEM). These two wind farm projects spanning approximately 140 miles of ocean are in the infant stages of planning and survey work. Development in this area of the country has been supported, in part, by North Carolina Governor Roy Cooper’s Executive Order that set a goal of 2.8 GW of offshore wind generation by 2030 and 8 GW by 2040. To put this in perspective, 2.4 GW could produce enough power for 750,000 homes, while 8 GW could provide power for roughly 2.3 million homes.
As set forth in the most recent version of its Carolinas Resource Plans, Duke Energy proposed plans to add 2.4 GW of offshore wind to its grid by 2035. These plans, which include both offshore wind and a variety of other energy sources to meet customer loads, have been presented to the North Carolina Utilities Commission in Docket E-100, Sub 190, and to the South Carolina Public Service Commission in Dockets 2023-8-E and 2023-10-E. Decisions on these proposals remain pending in each state, with the South Carolina decision expected by the end of November 2024 and the North Carolina decision expected by the end of December 2024. We will report back to our readers once these Commission Orders have been issued to address any approvals with regard to further development of offshore wind. --- Stephanie U. Eaton
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“While electric vehicle registrations in the United States have surged by 142% since the beginning of 2023, the pace at which public charging point installations are growing has been just 22%, risking undermining the current momentum of EV sales in America.”
Why this is important: The number of electric vehicles on the road has continued to rise exponentially, but the lack of charging stations remains a major obstacle to further expansion. To sustain the growing interest in electric vehicles, states will need to find ways to increase the number of charging stations. Two key factors that deter consumers from purchasing electric vehicles are the limited number of charging points and their lack of accessibility. Many consumers are hesitant to make the switch due to the risk of being on the road without a nearby charging station when the battery runs low. It's almost impossible to find a road without easy access to a gas station, but the same cannot be said for charging stations.
The lack of a standard plug for charging electric vehicles also contributes to the slow growth of charging stations. This lack of uniformity means that some charging points can only serve certain vehicles. It is crucial for the electric vehicle industry to ensure an adequate number of charging stations are available. The location of these charging points can even impact broader industries like tourism and economic development. Drivers of electric vehicles may avoid visiting areas without sufficient charging stations, fearing they might run out of power and become stranded. Those who own electric vehicles cannot relocate or move to an area that lacks a sufficient number of charging points to satisfy their charging needs.
Due to the increased utilization of these charging points, fast-charging stations have become profitable. Now that there is a demand, there is also a financial incentive to build more charging stations. That demand will only continue to grow as more consumers switch to electric vehicles. Some state governments have even introduced plans to limit the number of gas-powered vehicles sold within their borders and are offering tax breaks to those who purchase electric vehicles. These state policies and concerns about the environment reflect the growing trend toward electric vehicles. The number of electric vehicles being purchased by consumers will continue to rise. Those who act quickly in expanding charging infrastructure will help sustain the electric vehicle ecosystem and will be rewarded financially.
Governments and private companies must collaborate to develop a reliable, widespread charging network that addresses the needs of all users. Public-private partnerships, investment in fast-charging technology, and standardization of charging systems will be key to overcoming current limitations. By prioritizing infrastructure expansion, stakeholders can eliminate barriers for potential buyers and accelerate the transition to a more sustainable transportation system. --- Nicholas A. Muto
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“The state is betting $50 million on a plan to produce hydrogen and graphite from coal with no greenhouse gasses — an approach never done before.”
Why this is important: Pleasants Power Station, a coal-fired plant in West Virginia, has been at risk of shutting down along with many other coal-fired plants around the country. As government officials sought to prevent the power station's permanent retirement, Omnis Energy, a company relatively new to West Virginia, proposed an innovative use for the power station. While still using coal, Omnis believes that it can use revolutionary technology to produce a high-value mineral and generate greener electricity, while also maintaining jobs.
To support this endeavor and to keep Pleasants Power Station operational, the West Virginia Economic Development Agency provided a $50 million, 1 percent loan. According to the article, the viability of the community that has developed around the Pleasants Power Station depends on the continued vitality of the power station from the jobs it provides. While the success of this novel technology remains unknown, the impact of this effort will be far-reaching for West Virginia. --- Steven. W. Lee
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“At the end of 2023, WindFloat Atlantic was resilient in the face of Storm Ciarán, weathering wave heights of 20 meters (66 feet) and wind gusts up to 139 km/hr (86 mph).”
Why this is important: The world’s first partially submersed wind farm has survived a major storm and continues to increase power generation. Portugal’s WindFloat Atlantic has been installed for four years, is 12.4 miles offshore, its electric production has risen to a cumulative 320 MWh in July 2024 - enough to power 25,000 homes, and its power replaced 33,000 tons of CO2 emissions that a traditional power plant would have generated. The plant’s base is submerged and floating in the sea and recently survived a storm with 86 mph winds and 66 foot waves. Wind farms at sea are being built and studied around the globe, and studies of the Portuguese farm have shown 270 species are co-existing with the wind farm. --- Mark E. Heath
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“Appalachian Power and Dominion are confident the power grid will be able to support the increase in demand for electricity.”
Why this is important: Virginia’s transition to electric vehicles (EVs) is placing new demands on the state's power grid, challenging utilities to balance increased electricity needs with existing energy goals. This shift in transportation is occurring alongside Virginia's implementation of the Clean Economy Act, which aims to transition major utilities to zero-carbon generation sources by 2050. The move towards EVs is part of broader efforts to address emissions from the transportation sector, which accounts for one-third of the state's total emissions according to the article.
Virginia's largest utilities, Dominion Energy and Appalachian Power Company, are actively preparing for the projected surge in electricity demand from EVs. Dominion Energy is pursuing a mix of zero-carbon generation sources, including solar, offshore wind, and nuclear, to meet its projected load growth. However, the utility is also proposing a carbon-emitting natural gas plant primarily to support data center growth. This highlights the complex interplay between various sources of increasing energy demand. While utilities express confidence in their ability to meet EV-related needs, concerns persist about the potential strain on the grid, particularly in rural areas. The Southern Environmental Law Center and other conservation groups are monitoring the transition, advocating for comprehensive planning and policies that ensure the shift to EVs remains sustainable and cost-effective for all Virginians.
Such debate emphasizes the importance of balancing grid reliability, environmental impact, and cost-effectiveness as the state navigates the complexities of evolving energy demand, particularly in rural areas where infrastructure may be less robust. --- Hikmat N. Al-Chami
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“On August 6, 2024, the U.S. Court of Appeals for the D.C. Circuit issued an order vacating the Federal Energy Regulatory Commission’s authorization of NextDecade Corporation’s Rio Grande LNG facility at the Port of Brownsville.”
Why this is important: What is the point of spending years and substantial resources in permitting LNG export facilities in compliance with existing procedures when a federal court ruling can usurp the entire process? Despite the applicant's extensive efforts to comply with permitting requirements, the U.S. Court of Appeals for the D.C. Circuit has blocked the permit for an LNG export facility in Brownsville, Texas based on environmental considerations that were not part of the original process. This is part of an ill-considered effort to block the exports of clean-burning LNG produced in the United States to foreign consumers whose alternative suppliers are less environmentally and geo-politically well-intended. The ultimate result of this sort of judicial interference is to damage our domestic economic well-being and undercut support for our international allies that rely on this energy source. --- William M. Herlihy
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Here is a round-up of the latest statistics concerning the energy industry.
ELECTRICITY
PETROLEUM
NATURAL GAS
COAL
RENEWABLES
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