Coal in Virginia

Executive Summary

Virginia is rightly taking a hard look at how to meet our escalating needs for energy - but are we failing to see a “perfect storm” looming on the horizon? Because almost no new coal-fired power plants were built over the last 25 years, and coal supply exceeded demand during this period, there is a widespread perception that coal is the least expensive and most reliable energy choice. While it’s true that America possesses a lot of coal (26% of the world’s known coal reserves), the perception that America is the “Saudi Arabia of Coal” is the result of a highly successful public relations campaign rather than a close examination of the facts. According to the Department of Energy, the U.S. will become a net importer of coal in the next 5-10 years and will continue to import an increasing proportion of coal into the future.

How can this be? The short answer is that not all parts of the country have equal access to coal reserves, which are mostly located in the western U.S. It is almost universally recognized among geologists and coal industry analysts that eastern coal production capacity is rapidly declining, that nationwide transportation infrastructure is at or near capacity, and that these factors are already causing an increase in the price of coal - a trend that is projected to continue for the forseeable future. These supply issues, exacerbated by increasing competition from 150 new coal-fired power plants proposed across the country, will put states like Virginia that rely on rapidly dwindling Appalachian coal reserves at risk of severe cost increases. Already, demand for labor and materials resulting from the construction of new power plants has doubled the cost of construction over the last two years.

These factors are making imports increasingly attractive in eastern states and some companies, most notably Dominion, are already importing coal from Indonesia and other coal exporting countries. Unfortunately, imports are not a long-term solution as demand for coal from international sources is projected to increase faster than that for domestic sources.

The implications of limited coal transportation and supply for consumers in the eastern US are dramatic. Energy markets are notoriously volatile and an over-reliance on one particular fuel source for electricity can have major impacts on electricity rates as well as energy security and reliability. Virginia, which currently relies on coal for 45% of its electricity production, bears some of the greatest risk as this “perfect storm” of upward price pressures approaches - a familiar situation after our experience with natural gas just a decade ago.

In the context of this “perfect storm,” Virginia is now considering a plan to re-regulate utilities in the state. While Dominion’s plan has rightly been criticized because it is heavily weighted toward Dominion’s interests rather than the interests of ratepayers, the very motivation behind the bill - making it easier to build new coal-fired power plants - creates far more risk to rate-payers than simply giving Dominion greater access to Virginians’ pocketbooks. As outlined in this report, building new coal-fired power plants is an exceedingly risky gamble and the real costs and risks of such a move have not been considered, nor has Dominion been forthright with the public about such risks. This lack of forthrightness is not unexpected, as Dominion’s bill puts the interests of rate-payers clearly at odds with the interests of Dominion’s share-holders. Assuring Dominion of cost recovery for new plants creates an incentive for them to build additional generating capacity whether or not demands could be met through less expensive alternatives, as the costs of fuel, construction and operation of these plants are passed directly to ratepayers and Dominion is assured of a healthy profit on the construction and operation costs. But passing the proposed bill would give ratepayers no oversight and every incentive to make risky new investments in coal-based infrastructure. Virginia’s citizens deserve legislators to make better decisions on their behalf.

Key Recommendations

1. Oppose re-regulation of Virginia’s electricity market as well as initiatives to restructure utilities’cost-recovery of new investments in generating capacity until legislators and the public have had ample opportunity to investigate the full repercussions of such a move. Any legislation that would create greater incentives for Dominion to gamble on risky and costly new infrastructure while Virginia’s electricity consumers shoulder the risk should not be enacted lightly or hastily.

2. Commission an independent study regarding: 1.) the increasing construction costs and projected fuel costs given declining coal production capacity in Virginia and across Appalachia; 2.) the transportation capacity and projected costs of servicing existing and expanded demand for coal from Virginia’s utilities; 3.) a realistic cost comparison of alternative ways to meet Virginia’s electricity demand given revised cost estimates for coal-fired generation; and 4.) the risks to Virginia’s ratepayers and overall economy from re-regulation of Virginia’s utilities and other initatives promoted by Dominion.

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 New Tools Show Impacts of Energy Choices
Data Connect People with Their Power

Washington, D.C.: Thanks to three new on-line databases, Americans can now see where their energy comes from and how their present and future energy choices contribute to global warming. The databases, released by the Sierra Club, the Center for Global Development and Appalachian Voices, break down the carbon emissions from the world’s power plants, making it possible to chart the global warming emissions of each individual coal-fired power plant, both those currently in use and those on the drawing board. Consumers can now even track the coal that powers their homes back to the place it was mined to see its impact on the local community.

"One thing this new data makes clear is that from the time it is mined to when it is burned coal is a dirty business." said Bruce Nilles head of the Sierra Club’s national coal campaign. "There are cleaner, more efficient ways to meet our energy needs, ones that can improve public health, protect our outdoor heritage and fight global warming."

Sierra Club’s New Coal Plant Tracker: www.sierraclub.org/coal

Want to know if there is a new coal plant planned for your backyard? The Sierra Club’s New Coal Plant Tracker can tell you. The Tracker lists every new proposed coal-fired power plant in the U.S., where it is in the permitting process and how much global warming pollution it will emit. Through a collaboration with the Rainforest Action Network, the Tracker can even tell you who is funding many of these dirty new plants.

Center for Global Development, Carbon Monitoring for Action (CARMA): www.CARMA.org

Through this expansive new database you can find the global warming emissions of over 50,000 power plants worldwide. Not only can you find out how much carbon the plants in your state emit, you can also calculate the carbon footprint of the companies that own them. You can even compare the global warming emissions of your state, county or metro area with others across the nation to see how your area stacks up.

Appalachian Voices, Your Connection to Mountaintop Removal Mining: www.ilovemountains.org/myconnection  

Starting Thursday, enter your zip code to find out how your electricity is connected to devastating mountaintop removal mining. Use Google Maps to see how mountaintop removal tears communities apart, poisoning water supplies, polluting the air and destroying our nation’s natural heritage--all while making global warming worse.

The Sierra Club’s new National Coal Campaign is working to ensure coal is mined responsibly and burned cleanly. Across the country the Campaign is fighting to stop the construction of dirty new coal plants and direct the proposed investments into energy efficiency, renewable resources, and other clean alternatives.