By Steve Haner,
It is ironic that Virginia’s return to the Regional Greenhouse Gas Initiative carbon tax scheme (RGGI) on Wednesday coincides with a heatwave lasting for days. Predictions are that all RGGI-covered coal plants and natural gas generators in Virginia will run at full speed until the weekend, or even longer, to meet the electricity demand.
Energy costs for utilities, and ultimately consumers, in several states will increase dramatically as the Virginia generator units are required to add the cost of RGGI per megawatt-hour they sell beginning Wednesday. Wholesale prices of natural gas may increase by $15-18 per megawatt-hour, depending on plant efficiency, at $35 per ton carbon dioxide emissions.
Wind, solar and batteries power are often praised for their lower production costs. The price that you pay does not reflect the cost of the power. The price that you pay represents the cost of the most expensive generator needed to meet the final portion of daily demand. This is why RGGI can be a huge profit for solar power.
The $35 per ton carbon emissions Virginia natural gas plants will have to add to their prices beginning Wednesday, will increase the price for every solar, wind or nuclear megawatt produced. RGGI will increase the price PJM pays for power generated by a discharged battery. Generators (often independently owned companies) will receive the same amount of money per megawatt-hour as utility-owned coal and gas plants.
PJM will increase the marginal price for out-of-state suppliers when Virginia load serving entities request generation to meet their needs. RGGI means that West Virginia, Pennsylvania and other coal and gas plants are selling more power to Virginia at a higher price .
In the Dominion Zone, PJM’s price for natural gas will be determined by the highest-cost generator (coal plant) and will be higher on Wednesday than it was before the RGGI Tax. Someone with a better understanding of PJM operations should track this price change as it occurs.
The RGGI tax will be added to the coal and gas prices that PJM estimates and contracts the following day’s demand. The RGGI tax will increase the price of coal and natural gas power that utilities must pay in case they suddenly find themselves short of supplies, either because of a sudden rise in temperature or because a generation plant or powerline went out of commission.
As we have explained in this area many times the cost of RGGI allowances is only one part of how RGGI increases everyone’s electricity prices. The impact of RGGI on the wholesale daily or hourly price of PJM is just as bad or worse for you.
The advocates of RGGI are equally concerned that none of the excess dollars – dollars generated from the wholesale price inflation – go to various state spending programs for “good works”. You would think that they wouldn’t just leave all of that money out for others to take.
You are not protected by the RGGI Rebate Scheme that was just adopted by our General Assembly. Residential users of Dominion and Appalachian Power, as well as some rural cooperatives (some , but not all), may be eligible to receive the direct allowance costs. No generator will be able to recover the higher wholesale prices that were collected by the other generators.
The carbon tax rebate might not be 100%. Virginia will sell 21.5 million allowances, but Virginia’s energy producers will emit more than 29 million tons CO2 in 2025. It is possible (will be necessary) that they will need to purchase more allowances. The state will likely not rebate 45 percent of its money collected from RGGI. The money was distributed to other states.
The RGGI rebate game is a joke for Virginia’s energy business customers who are the biggest payers. The business energy customers in Virginia will not receive any rebates and have to pay the full cost of higher energy prices. They will be able to raise prices as they please, and the consumers will pay.
It seems that many people in the Abigail-Spanberger Administration and General Assembly do not fully grasp this. The media is a unique source of confusion and will cheer on RGGI rebates and RGGI. The RGGI supporters are banking on the confusion of people to continue.
If you have read this sermon, thank you, but it’s too late to stop the train wreck. You may want to budget more money for electricity at home or work. As always, the RGGI carbon taxes of $35 per ton are set to increase over time. The next auction will be in September.
