RE:  Repeal CO 2 Budget Trading Program as required by Executive Order 9 (Revision A22)

LS Power appreciates the opportunity to provide these comments on the repeal of the Virginia CO2 budget trading program, the Regional Greenhouse Gas Initiative (“RGGI”).  LS Power has a history of supporting carbon pricing as the most cost-effective means of reducing greenhouse gas emissions from the energy sector and wider economy.

LS Power is an active participant in state and regional carbon programs throughout the U.S.  LS Power generally supported Virginia joining RGGI throughout the multi-year timeframe during which the program underwent significant design changes that culminated, regrettably, in a program that does not meet the standards of what a fair and effective carbon trading program should look like.

LS Power

Founded in 1990, LS Power is a development, investment and operating company focused on the power and energy infrastructure sector. Since its inception, LS Power has developed, constructed, managed and acquired more than 46,000 MWs of competitive power generation and 680 miles of transmission infrastructure, for which it has raised more than $50 billion in debt and equity financing to invest in North American infrastructure. For decades, LS Power has been leading the industry's evolution, often introducing or commercializing new technologies and developing new markets. LS Power is accelerating the decarbonization of the power grid and greater economy through its growing family of energy transition platforms, which consist of the following:

• EVgo, the nation’s largest public fast-charging network for electric vehicles, powered by 100% renewable energy, and currently helping develop Virginia’s EV charging network;
• Endurant Energy, a leading provider of on-site energy infrastructure solutions;
• CPower Energy Management, a leading provider of distributed energy resource management solutions focusing particularly on demand response and energy efficiency, and currently helping hundreds of Virginia agencies and organizations;
• Primary Renewable Fuels, LLC, a waste-to-renewable natural gas development and operating platform;
• REV Renewables, a leader in renewables and energy storage with an operating portfolio of approximately 2.8 GW, including the largest non-utility owned pumped storage hydro portfolio in the U.S., and the provider of solar energy to Virginia Power;
• Rise Light & Power, New York City’s largest generator, and developer of clean energy infrastructure;
• LS Power Grid, developer and operator of approximately 680 miles of high-voltage transmission lines, with more than 100 miles and multiple substations under construction; and
• LS Power Generation, operator of 14,000 MW of flexible, fast-start gas facilities that complement the intermittency of wind and solar resources.

Through its national fleet of utility scale solar, wind, hydro and natural gas-fired generation, its battery and pumped storage hydro projects, its customer-facing distributed energy resources and energy efficiency platforms, and by building the transmission that connects it all, LS Power is at the forefront of decarbonizing the electric grid.

LS Power Investments in and for Virginia

LS Power has a significant investment in the energy infrastructure of Virginia, consisting of a diversified fleet of 2,100 MW of efficient, flexible gas-fueled generation, pumped storage hydro, a renewable gas peaking facility, demand response and electric vehicle charging.

• LS Power’s Doswell Energy Center in Hanover County is a natural gas fueled power generation facility that can provide electricity to more than 1.2 million Virginia households.
• Doswell consists of units that supply power day and night, as well as three “peaking generators” that are activated when demand for electricity is high. These peakers are a key component to energy reliability today and will become even more important when new weather dependent renewables such as wind and solar are powering the grid.  Doswell’s environmental features include technologies to reduce water use by up to 80 percent.
• Doswell pays about $2 million a year in property taxes and employs 30 Virginians, 12 of which are United States Veterans. Last year Doswell distributed approximately $108,000 in community donations.

• The Buchanan County Generating Station, of which LS Power is a 50 percent owner, generates renewable energy credits based on the fuel it uses. It can be online in six minutes to support grid stability and smooth out the intermittency of renewable resources.
• CPower, an LS Power company, has been the sole demand response provider for Virginia state agencies since 2011, with some 590+ participating sites, including 36 state buildings in Richmond.  CPower helps state and local governments reduce energy costs by reducing energy demand and avoiding system emergencies.
• EVgo, an LS Power company, is partnering with Virginia DEQ to build out the Commonwealth’s electric vehicle fast-charger network.
• REV Renewables, a LS Power venture, is a partial owner of the Bath County Pumped Storage Hydropower Plant, which will play a critical role in keeping the lights on by providing long-duration back-up power when weather conditions curtail wind and solar output.

Virginia and RGGI

Virginia’s energy sector has unique and complex attributes that create certain considerations for adopting a RGGI program.  Unlike other RGGI states with competitive electric markets, electricity in Virginia is primarily provided by regulated utilities, cooperatives and municipal utilities that directly pass through the cost of RGGI to their customers. These entities are thus insulated from the economic signals created by a price on carbon.  Without exposure to the economic signal, reducing the operation of high carbon emitting generating units is lost. 

In addition, the ability of regulated utilities to pass through RGGI costs to customers, while competitive generators do not have this option, creates the classic unlevel playing field. 

Furthermore, Virginia is interconnected to states with a large amount of generation not subject to RGGI compliance; namely, Pennsylvania, West Virginia and Ohio).  Higher emitting out-of-state generators can sell electricity into Virginia without paying a RGGI cost, displacing and disadvantaging in-state generators, even those that emit less carbon.  In contrast, all qualified generators in the New England and New York wholesale power grids are subject to RGGI, creating more efficient carbon price carbon signals and avoiding unequal outcomes between generators in different states but within the same power markets.

It is worth noting that the landmark Virginia Clean Economy Act of 2020 provides broad and tangible incentives for Virginia to increase the adoption of renewables and energy storage, which will lead to reduced carbon emissions.

Virginia’s RGGI Program Design is Flawed

RGGI is intended to cause a redispatch of generation supply by putting a price on carbon emissions such that the higher carbon emitting resources would be impacted the most.  However, in Virginia, those economic signals are muted and differentiated because of the mix of utility owned generation and non-utility owned generation.  Utility owned generation passes through the cost of carbon onto its customers while non-utility owned generation cannot, creating a significant difference in the economic signal each of the parties experience and effectively removes economic impacts to utility owned generation.  This is a significant problem in Virginia’s RGGI program what would have to be addressed if RGGI is going to work in the Commonwealth.

Another problematic feature of Virginia’s RGGI program is one LS Power highlighted and sought to rectify with a proposal that was simple, temporary and used by other states.   In its support for legislation enabling Virginia to join RGGI, LS Power recommended the Commonwealth adopt provisions, as other states did when they entered RGGI, to make limited, temporary adjustments to the program for pre-existing agreements that did not contemplate RGGI costs.  LS Power received significant support for its proposal, as its logic and fairness are easily understood, but in the end the proposal was not adopted.

This created unnecessary and inequitable treatment of Virginia-based companies with RGGI compliance obligations and make the Commonwealth’s program an outlier among state RGGI programs.   

This oversight, together with a lack of uniform cost impacts upon Virginia market participants (i.e., some collect RGGI costs directly from ratepayers while others rely on energy markets to recoup RGGI allowance costs), Virginia’s RGGI program failed to achieve the basic elements of fair and equitable treatment that represent the foundation of any properly designed market. Instead, the lack of uniformity and basic fairness in the adopted RGGI rule created winners and losers among market participants for no apparent policy rational.

Such a market design does not reduce carbon emissions efficiently as a well-structured market with uniform economic application should do.  Ideally, the highest carbon emitters would be impacted the most, but due to Virginia’s RGGI design that economic signal was lost. Instead, lower emitting units are facing disproportionately greater impacts, a serious design flaw that does not produce the sought after results from a carbon trading market.

Policy makers had the opportunity to develop a fair and efficient carbon trading market, but the existing program is neither and created unequal and disparate impacts.  Since the Commonwealth has not pursued efforts to correct these market design flaws, LS Power supports Virginia’s discontinuation of its current arrangement to participate in RGGI in favor of  the development of a more rational, fair and equitable approach to reducing carbon emissions in Virginia.