RD106 - Executive Summary of the 2008 Interim Work of the Manufacturing Development Commission


    Executive Summary:
    The Manufacturing Development Commission is charged with assessing manufacturing needs and formulating legislative and regulatory remedies to ensure the future of the manufacturing sector in Virginia. Code of Virginia § 30-275.

    The Commission members are Senators Frank W. Wagner (Chairman), W. Roscoe Reynolds, and Ralph K. Smith; Delegates Harry R. "Bob" Purkey, Watkins M. Abbitt, Jr., Kathy J. Byron, Daniel W. Marshall, III, and David E. Poisson; Secretary of Commerce and Trade Patrick O. Gottschalk, ex officio; and Mr. John Jude Sygielski, Mr. Brett A. Vassey, Ms. Joyce W. Waugh, and Mr. Robert L. Williams.

    The Manufacturing Development Commission held its only meeting in 2008 on August 22 at the McDemmond Center at Norfolk State University.

    Energy Costs

    The Commission received testimony at the meeting that energy costs in the Commonwealth can be reduced by reducing electricity use during periods of high system-wide demand (demand response), reducing the energy input per unit of product (energy efficiency), and by conserving energy.

    The cost of electricity is at its highest at peak demand. Demand response or reducing electricity use during peak demand reduces the average cost per kilowatt hour. Utilities and companies have developed programs for off peak pricing and emergency load shedding (turning equipment off or using backup generators during periods of peak demand that helps to reduce electricity use during periods of peak demand).

    Like the United States as a whole, Virginia has made gains in energy efficiency. Data shows that between 1960 and 2005, industrial energy use in the Commonwealth increased at a rate of 2.2 percent per year (greater than the national average of 1.1 percent per year for the same period); however, between 1990 and 2005, industrial energy use in the Commonwealth increased at a rate of 0.5 percent per year (greater than the national average of 0.2 percent per year for the same period). Save Energy Now is a program of the United States Department of Energy to reduce industrial energy use by 25 percent over the next 10 years. The program consists of plant energy assessments, training curricula on energy improvements, technical publications, new technology development, and state and regional partnerships.

    Offshore Winds as a Source of Energy

    The Commission received presentations concerning the scientific and economic viability of harnessing Virginia's offshore winds to produce power. The following features make the Hampton Roads region a favorable candidate for the harnessing of offshore winds: (i) Class 6 winds located within 10-15 miles of the shoreline, (ii) a robust coastal transmission grid, and (iii) a minimal probability of major hurricane strikes. If there is no reduction in demand for electricity through conservation by 2016, then approximately 5,100 MW of new electricity generation will be needed to maintain electricity imports into Virginia at current levels. If conservation efforts can account for a 6-7 percent energy savings by 2016, then approximately 3,600 MW of new electricity generation will be needed to maintain electricity imports at current levels. Additionally, 1,985 MW of additional generation is anticipated by 2012 from currently planned projects. Thus, after taking into consideration conservation efforts and currently planned projects, approximately 1,600 MW of new electricity generation will be needed from projects that are not currently identified in order to maintain electricity imports into Virginia at current levels.

    The Commission heard estimates that the total capital investment to produce 2,000 MW of installed offshore wind capacity is $6.2 billion over a 10-year build out period. The value of local fabrication and installation contracts to install offshore wind capacity over this same 10-year period is estimated at $200 million per year, while the value of local offshore service contracts after the build out has been completed is estimated at $155 million per year.

    Offshore Oil and Natural Gas Recoverable Resources

    The Minerals Management Service estimates that there are 66.6-115.3 billion barrels of oil and 326.4-565.9 trillion cubic feet of natural gas that are undiscovered technically recoverable resources beneath the offshore waters of the Outer Continental Shelf. The average estimates are 85.9 billion barrels of oil and 419.9 trillion cubic feet of natural gas. These estimates represent quantities that can be conventionally produced without consideration of economic feasibility.

    Governor's Commission on Climate Change

    The Commission also received testimony on the Governor's Commission on Climate Change (the Governor's Commission). The Governor's Commission was established pursuant to Executive Order 59 and is chaired by the Secretary of Natural Resources. The Governor's Commission was to report its findings and recommendations by December 15, 2008.

    The Governor's Commission is charged with preparing a Climate Change Action Plan that will (i) inventory the amount of and contributors to Virginia's greenhouse gas emissions, (ii) evaluate the expected impacts of climate change on Virginia's natural resources, the health of its citizens, and the economy, (iii) identify actions to take to prepare for climate change, (iv) identify the actions that need to be taken to achieve a 30 percent reduction in greenhouse gas emissions by 2025, and (v) identify climate change approaches being undertaken by other governmental entities.

    Climate change approaches being taken by other governmental entities include state greenhouse gas emission targets, renewable portfolio standards, regional cap-and-trade initiatives, vehicle emission standards, and the U. S. Mayors Climate Protection Agreement.

    Commission-related Legislation

    The 2009 Session of the General Assembly passed legislation that (i) repeals the July 1, 2009, sunset date for the work of the Commission, and (ii) adds an additional member of the Commission representing a public institution of higher education to be appointed by the Governor.