Pennsylvania is considering joining. West Virginia should join in the public interest.
From an Article by Sean Sublette, Richmond.com, February 5, 2022
RGGI Map ~ States in blue are part of the Regional Greenhouse Gas Initiative.
With discussion ramping up about the Regional Greenhouse Gas Initiative (RGGI) in Virginia, we took a closer look at what it is, where the money goes, and what it costs Virginians. At its core, RGGI is a market-based effort to reduce greenhouse gas emissions from power plants. These gasses are directly tied to observed planetary warming.
Virginia joined RGGI through an act of the General Assembly on January 1, 2021. Ten other states, in the Middle Atlantic and the Northeast, are also involved in the initiative. Since its inception more than a decade ago, emissions in the RGGI states have dropped more than 50 percent, roughly twice the rate of the national average.
The individual states allow the non-profit RGGI facilitators to set a maximum level on the amount of greenhouse gasses released from power plants within their borders. That maximum, often referred to as a cap, lowers incrementally each year. Four times a year, utilities purchase allowances to emit carbon dioxide (CO2). For RGGI, an allowance is the price to emit one ton of CO2, and in 2021, that price was $2.38.
In Virginia, all fossil fuel plants with a capacity of 25 megawatts were required to buy carbon allowances at the start of 2021. For reference, Dominion’s Chesterfield Power Station, colloquially known as Dutch Gap, has a capacity of 1400 megawatts, powering about 350,000 homes.
The law passed by the 2020 General Assembly specifies that the money generated by RGGI and returned to Virginia be spent in specific ways. Five percent goes to the Virginia Department of Environmental Quality (DEQ) to oversee the state’s participation in RGGI and plan additional climate change projects. But most of the money is going into two pools.
1. Exactly 45% is for Virginia communities affected by flooding, coastal and inland — RGGI provides the money for Virginia’s Community Flood Preparedness Fund (CFPF), which is administered by the Virginia Department of Conservation and Recreation (DCR). Coastal flooding from sea level rise and inland flooding from heavier rain are both connected to planetary warming.
According to Jessica Whitehead, Executive Director for the ODU Institute for Coastal Adaptation and Resilience, the projects funded by CFPF are “intended to reduce the impact of flooding or improve the community that is vulnerable to floods in ways that help them cope better or adapt more.”
These localities, generally a county or a city, are able to apply for the funding for both planning and physical flood prevention projects. Often, these are wetland and floodplain restoration. Seawalls may sound an attractive solution, but the physics shows otherwise.
Whitehead explains, “One of the challenges of using a seawall, especially during a storm, is that it actually accelerates erosion in front of the wall.”
To demonstrate their commitment, the localities applying for CFPF funds need to match between 10 and 25 percent of the money requested for their project.
In one recent example, funds were awarded to Tappahannock shortly before Christmas for restoration of wetlands to reduce flooding impacts for the publicly owned access to Hoskins Creek and the Rappahannock River.
The money is not solely for coastal locations. Inland flooding also qualifies. In the last few months, money has been allocated for a project to alleviate recurring flooding adjacent to McGuire VA Hospital in Richmond.
For a complete list of the projects where CFPF funds were awarded since October 2021, see the documentation at the Virginia DCR page.
2. Exactly 50% is for energy efficiency programs — The Virginia Department of Housing & Community Development (DHCD) administers RGGI money via their Housing Innovations in Energy Efficiency (HIEE) fund.
Several of the approved projects have already been completed in both rural and urban parts of Virginia. In some instances, rudimentary repairs are necessary before full energy efficiency modifications can be made to qualifying properties. Social services in the local communities often help identify what properties are a good fit for the program.
According to Chelsea Harnish, executive director at the Virginia Energy Efficiency Council, once projects are identified, DHCD puts out a request for one of their vetted providers to do the work. Two of the largest providers are Community Housing Partners based in Christiansburg, which also serves much of the area along Interstate 81, and Project Homes in Richmond.
Several projects are ongoing or in the planning stages, but projects have already been completed to help Virginia families with energy efficiency on the Eastern Shore and Shenandoah County, and for seniors in Nottoway County.
Within HIEE are Affordable and Special Needs Housing (ASNH) funds. This money can go to builders to renovate and build new energy efficient housing for families with lower incomes. The RGGI addition to the ASNH pool of funds helps builders and developers of energy efficient properties leverage additional financing from sources outside of Virginia.
How has it affected energy costs in other RGGI locations?
RGGI has been in place for more than 10 years in many northeastern states. Tim Hamilton, Associate Professor of Economics at the University of Richmond, talked about what RGGI has done to energy costs there.
“Technically the costs were passed along to consumers, but at the same time, the money that came back has such an impact via increased efficiency, total energy consumption and total spending on energy fell in those states. So on the net, spending on energy went down.”
Because electricity is a commodity, Hamilton continued, “if other people increase their energy efficiency, aggregate demand for energy falls. So if a bunch of other people don’t want as much electricity, that directly benefits all energy customers through a lower market price.”
Where does the money come from?
In 2021, RGGI returned $227.6 million to Virginia, which funded the programs above. The money comes from utilities such as Dominion in their purchase of CO2 allowances.
To recover its costs, Dominion filed its first rider with the Virginia State Corporation Commission (SCC) more than a year ago, requesting a surcharge be added to customers’ bills. After a lengthy process, the SCC approved, and the first charge was expected to show up on customers’ January 2022 bills.
At current electricity rates, this surcharge is about two percent on the total electric bill for a typical residential customer. Based on an average household electrical usage of 1000 kilowatt-hours per month, that charge is $2.39 per month.
Dominion filed an additional request with the SCC to recover their costs in December 2021, but withdrew their request a few weeks later awaiting any decisions being made about RGGI from the new administration and General Assembly.
The ultimate goal of RGGI is to reduce greenhouse gas emissions from utilities, and according to Dominion’s Rayhan Daudani, the utility has already started to reduce emissions by extending its generation capacity beyond fossil fuels, “This includes the largest offshore wind project in the nation, transformation of the grid, re-licensure of our nuclear units, energy storage, and solar energy, all of which creates jobs and economic opportunity here in the Commonwealth.”
According to their specifications, Dominion’s wind energy project, 27 miles offshore from Virginia Beach would power 660,000 homes, nearly twice the capacity of the Chesterfield Power Station.
Dominion residential customers are paying approximately two percent on their bill to cover Dominion’s RGGI allowances. That money is then returned to Virginia DEQ from RGGI where it is distributed to rural and urban communities throughout Virginia to ease the impacts of flooding and increase energy efficiency in homes where the economic need is greatest.
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