In 2012, Duke Energy shut down the Dan River Steam Station, a coal-fired power plant in Rockingham County, North Carolina.
Four years later, on a Sunday morning in late October 2016, the plant came tumbling down in a series of controlled implosions. What had been a cutting-edge power plant when it opened in 1949 was now an empty hulk, sliding down into a cloud of dust. If this were a movie instead of a column, this is how it would begin — with a bang. A whole string of them, in fact:
Now, fast forward more than a decade since the closure of the Dan River Steam Station, and nearly a decade since its demolition. The consequences of that plant closure in North Carolina now reverberate across the border into Virginia — in a potentially, and quite unexpectedly, happy way.
Yesterday I looked at how the Inflation Reduction Act that Congress passed, and President Joe Biden signed, last year creates a tax credit for clean energy companies that locate in so-called “energy communities.” The intent is to use tax policy to try to direct clean energy jobs to the places that are losing fossil fuel-related jobs — think coal country. In fact, when the Biden administration rolled out the rules for the tax credits and other provisions in the act, it was billed in the context of coal. The headline on the official press release: “Administration announces clean energy projects to revitalize energy communities, support coal workers and reduce reliance on competitors like China.”
And it’s true that most of the places eligible for these tax credits are the ones you’d expect: much of Appalachia, plus other coal-mining and oil-drilling communities across the Midwest and West.
Not all of the places eligible, though, are former coal-mining communities. In Virginia, some are in the Shenandoah Valley, some are in Southside, some are in the Alleghany Highlands and some are in parts of Southwest Virginia that have nothing to do with coal mining.
They qualify for one of two reasons.
One is that the tax credits apply to certain metropolitan or non-metropolitan statistical areas “that have had 0.17% or greater direct employment related to extraction, processing, transport, or storage of coal, oil, or natural gas.” For now, that brings in a lot of territory (shown in blue on the map above). The Treasury Department advises that people not get too excited if they’re in one of those blue zones: “Only a subset of these MSAs and non-MSAs will qualify as energy communities, depending on whether their unemployment rate for the previous year is equal to or greater than the national average unemployment rate. Annual unemployment rates at the county level for 2022 will be released in April 2023. This map will be updated with the MSAs and non-MSAs that meet both the 0.17% fossil fuel employment threshold and an unemployment rate higher than the national average once the updated unemployment rate requirement once the 2022 unemployment rates are released. The updated map will be released in May 2023.” Got that?
The other, and more certain reason, that a community outside coal country might qualify is that the tax credits apply to places that have had a coal mine close since 1999, or a coal-fired power plant close since 2009. That explains some of the non-coal areas shown in various shades of orange on the map.
For instance, parts of Bland County and Giles County qualify because Appalachian Power’s coal-fired plant in Glen Lyn closed in 2015. Under the rules, the census tract where the plant was located qualifies — and so do adjacent census tracts. Hold that thought.
Parts of Alleghany County, Bath County and Covington qualify for the same reason: A coal-fired plant was retired within the past eight years.
Ditto Waynesboro and adjoining parts of Augusta County.
We certainly don’t think of Alexandria as an “energy community” but parts of Alexandria qualify because at some point, yes, a coal-fired plant there was closed.
Locations in Richmond and Hampton Roads also qualify.
Let’s turn our attention, though, to the state’s southern border. In fact, let’s turn our attention to just south of that border. Because Duke Energy shut down the Dan River Steam Station, part of Rockingham County, North Carolina, qualifies as an energy community eligible for these tax credits. And because the rules apply not just to the census tract where the plant was located, but to every adjoining census tract, that brings in two census tracts in Virginia: Census Tract 105 in eastern Henry County and Census Tract 111 in western Pittsylvania County.
Think of Henry County Census Tract 105 as the part of the county that includes Axton, Irisburg and Sandy Level.
Think of Pittsylvania County Census Tract 111 as the part of the county that includes — drum roll, please — the state’s largest undeveloped industrial park, aka the Southern Virginia Mega Site.
Over the past year, this 3,528-acre site has been in the running for at least three big companies and lost out on all three. Hyundai chose a site near Savannah, Georgia, for an 8,100-job electric vehicle battery plant because that site was closer to being construction-ready. The Albemarle Corp. chose a site in South Carolina for its 300-job lithium processing plant because that site is closer to the company’s headquarters in Charlotte, North Carolina (and its proposed lithium mine in King’s Mountain, North Carolina). And then there’s the case of the Ford Motor Co.’s electric vehicle battery plant that Gov. Glenn Youngkin nixed because of Ford’s partnership with a Chinese battery company that he called a front for the Chinese Communist Party. That plant, and its 2,500 jobs, went to Michigan, which was happy to have the jobs and wasn’t nearly as concerned about the Chinese connection.
Whatever the reason for those companies choosing elsewhere — not much you can do about the South Carolina site being closer to the company’s other operations — this is still frustrating for officials in Danville and Pittsylvania County.
Now comes a quite unexpected gift: The mega site sits smack dab in the middle of a census tract where clean energy companies can qualify for a 10% tax credit. This sure sounds like a good selling point to me.
Would this tax credit have made a difference to any of those other companies? There’s no way to know. In fact, it’s hard to tell exactly what companies might be eligible for these tax credits. The Treasury Department is still writing the rules to define what constitutes “an energy project, or an energy storage technology … located in an energy community.” However, the office of Sen. Tim Kaine, D-Virginia, says electric vehicle battery plants would fall under the definition. If that’s so, that’s a very big deal. Many of the big job announcements these days are electric vehicle battery factories as automakers rush to get into that market — and establish a supply chain that’s in the United States. However, as I’ve pointed out before, there’s a finite number of companies out there, and every announcement (such as Hyundai going to Georgia or Ford going to Michigan) reduces the number by one. With the part of Pittsylvania County where the mega site is being declared an “energy community,” Virginia will be able to wave its hand and say, “Hey, we’ve got a site where you can qualify for a tax break.”
Now for an unintended side effect. It seems safe to assume that, at the very least, solar farms would also qualify for this tax credit. Southside Virginia has already seen a wave of solar development, and not everyone is happy about that. Mecklenburg County has put a cap on the size of a single solar project and planners there are now considering a total countywide cap of 2,300 acres for solar projects. (If everything in the pipeline goes through, the county will have 2,223 acres of solar.) Brunswick County next door has already set a cap on solar, although that cap is much higher, at 8,600 acres.
These energy community tax credits apply to parts of Mecklenburg and Brunswick, too, because Dominion Energy closed a coal-fired plant there in 2019. (Disclosure: Dominion is one of our donors, but donors have no say in news decisions; see our policy. You can be a donor and have no say, too.) It seems likely that these tax credits will direct more solar farms to these parts of Southside — southeastern Henry County, southwestern Pittsylvania County, the entire southern border of Mecklenburg County and part of western Brunswick County. These communities seem to have had no trouble attracting solar projects, for better or for worse; now they may become even more attractive, whether residents there want them to be or not.
Many things have an unintended consequence. Here a piece of legislation written to help coal country may also lead to solar growth far from coal country. On the other hand, if some future tenant of the Southern Virginia Mega Site has a particular desire for clean energy produced on site or nearby, then they’re in luck.