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Reduced coal generation by approximately 4,264 MW from AEP plant retirements 2021 – 2030 with an additional 1,310 MW from Rockport 2 lease expiration in 2022.
79 AEP’s Climate Impact Analysis.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
2020 Organized Labor at AEP.
Labor Unions Number of Employees.
International Brotherhood of 3,149 Electrical Workers.
Utility Workers Union of America 476.
United Steelworkers of America 282.
United Mine Workers of America 106.
International Union of Operating 2 Engineers.
Total 4,015.
As of 12/31/20.
WORKING WITH OUR LABOR UNIONS.
As we continue to grow our renewable portfolio, we recognize that the transition to a clean energy future also affects our skilled labor and transient workforce. Workers at coal-fueled power plants are highly skilled and uniquely qualified for the work they do. They include engineers, welders, mechanics, electricians, heavy equipment operators, boiler makers and maintenance staff. At AEP, 14 trade unions perform critical functions to support the operation and maintenance of our coal-fueled generation fleet, logging approximately 10 million craft hours per year doing this work.
When a generating unit is retired, the members of the transient workforce that supports the plant also lose their jobs. This has an economic impact on the affected trade unions, which lose dues-paying members as a result. And all of these workers live in and around the community where the plant is located. At the height of its operation, the Conesville Plant in Ohio had more than 700 union members working at the plant. By the time the plant retired in 2020, fewer than 100 people remained, and all will eventually lose local jobs as the plant is decommissioned.
The skills and number of people needed to operate and maintain a coal-fueled power plant are different than those for a wind farm or solar array; however, AEP has committed to working with the building and construction trade unions to support union labor in the construction of new wind and solar facilities on the AEP system. In Indiana, five renewable projects were built with union labor. We have made a similar commitment to include our unions in the jobs mix in Ohio, West Virginia, and Virginia. In addition, AEP’s Labor Relations team is developing project labor addendums to modify local contracts so those unions can be considered for construction of renewable resources. We’re also collaborating with labor to support workforce transition provisions in federal energy legislation, including the Clean Energy and Deployment Act of 2020.
80 AEP’s Climate Impact Analysis.
The energy generated at the John Amos Plant in West Virginia is enough to power about 2 million homes. The plant employs around 300 people with a payroll of $27.1 million dollars. A retirement analysis is to be conducted at.
Amos with a report due in 2022. The analysis, which will gauge the plant’s economic viability and market conditions, is part of an agreement between.
Appalachian Power and the Sierra Club.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
81 AEP’s Climate Impact Analysis.
REPOSITIONING OUR COMMUNITIES.
Coal production and consumption in the U.S. has been on the decline since peaking in 2007-2008. This is due to a combination of low natural gas prices, an aging coal fleet that is facing economic challenges and less costly renewable energy generation. The corresponding loss of coal-related jobs has hit the central Appalachian region most severely.
In the heart of Appalachia, the states particularly affected by this are Kentucky, Ohio, Virginia and West Virginia. These states have experienced the loss of jobs, the loss of tax revenue to support local public services, and the loss of indirect economic benefits from having a locally employed workforce. Without action, the loss of jobs and population migration away from the region would continue to put pressure on those who remain. Disproportionate rates of poverty and joblessness would be exacerbated by higher electric bills with fewer customers to share the fixed costs of the electric system.
A solution lies in determining how the valued skills of the current workforce can transfer to other industries. AEP’s Kentucky Power operating unit partnered with government, business, and regional leaders to commission a comprehensive regional workforce analysis of the Kentucky Power service territory. The research showed that coal miners and steelworkers, many of whom lost their jobs when coal operations closed in recent years, have the metal working skills that many aerospace companies need. The study concluded that there were eight times the national average of skilled metal workers in the region. This was bolstered by Kentucky’s ranking as the No. 2 state for aerospace manufacturing exports in the country. This effort gave birth to Appalachian Sky, an economic development initiative to market the region to the aerospace industry.
Thanks to this study and a strong regional commitment to economic development, Kentucky Power, AEP Ohio and Appalachian Power worked with its partners to identify and certify 37 counties as AeroReadyTM in the Tristate region of eastern Kentucky, southeastern Ohio and southern West Virginia. This assures aerospace companies that the certified regions, sites and communities are suitable for their operations. Eight additional counties in Virginia are being considered for future study.
In 2019, the seven-county region surrounding Raleigh County Memorial Regional Airport in southern West Virginia and the six-county region around Yeager Airport in Charleston, West Virginia, received AeroReady certification, meaning a total of 21 counties in the state and four commercial airports are now certified. In addition, the AEP Foundation awarded Marshall University, in Huntington, West Virginia, a $750,000 grant to establish an aviation program.
In addition to counties in Kentucky, Ohio and West Virginia that are part of Appalachian Sky, AEP-served counties in Texas, Oklahoma, Louisiana and Indiana also have been independently validated as AeroReady. These efforts help us to pair the aerospace industry with the displaced, highly skilled workforce of the coal and steel industries.
The success of Appalachian Sky has led it to be formed as an independent entity, based in West Virginia at the Huntington Area Development Corporation. Appalachian Sky is seeking 501(c)3 nonprofit status to enable it to secure funding to expand its efforts. For example, Appalachian Sky is applying for a POWER grant from the Appalachian Regional Commission (ARC) to ramp up its efforts. ARC POWER grants are designed to help communities and regions affected by the energy transition to cultivate economic diversity, enhance job training and re-employment opportunities, create jobs in existing or new industries, and attract new sources of investment. Appalachian Sky is the type of initiative that aligns with President Biden’s creation of a Working Group on Coal and Power Plant Communities and Economic Revitalization.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
82 AEP’s Climate Impact Analysis.
COMMUNITY OUTREACH.
When a power plant is scheduled for retirement, the sooner we can engage the local community the more time they have to plan for the loss of direct and indirect revenue. The most important action is to notify the local community as soon as possible. This includes local government leaders as well as the school superintendent, as they need significant lead time to prepare for the loss of direct and indirect tax revenue. In some cases, we also provide economic support to help a community with the transition. When Big Sandy Unit 2 retired, Kentucky Power agreed to contribute $233,000 per year for five years to help the region around the plant transition and attract new industry.
We also provide training opportunities to help local communities develop their economic development skills and connect them with state and regional agency resources. This includes h elping to identify state and federal grants to suport this effort. Our economic development team serves on more than 30 boards and commissions, dedicating time to local Chambers of Commerce, economic development organizations, workforce boards, and a variety of other nonprofits. We use this network to connect community leaders with available resources and help them explore potential new opportunities for economic growth.
Kentucky Power Economic Growth Grant is a partnership between customers and the company to provide economic development funding in the 20-county Kentucky Power region. Commercial and industrial customers pay $1 per month on their bills, and Kentucky Power matches that money dollar-for-dollar with shareholder funds. This partnership generates about $800,000 per year for economic development in the region. A combined public/private partnership with key local stakeholders meets to review the grant applications and award the funds. Kentucky Power Economic Growth Grants have been used for workforce development studies, site development and funding of local economic development offices.
Plant Retirement Notification Timing Process 2 Years Out Notify employees, including union leadership.
Notify communities 1 Year Out Notify Regional Transmission.
Organizations.
As Early as Possible Notify regulatory agencies when retirement date is firm.
Additional Actions Notify State Labor Department.
Hold small meetings with targeted local leaders to discuss plan • Mayor • County commissioners • School superintendent (School officials are one of the most important stakeholders) • Other elected officials.
Communicate with local farmers and neighbors who border the property.
Notify and support local civic groups (e.g., Conesville made local contributions, one of which was to support a community fund to support local commerce and economic development)
These are estimations and subject to change.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
83 AEP’s Climate Impact Analysis.
Challenges to coal-fueled plant site redevelopment can range from the lack of a modern transportation system and remote geographic locations to the lack of a market for available skills. This is especially true for new industrial uses. Additionally, decommissioning yields a very limited amount of developable acreage, making the former plant sites challenging and less likely to be attractive locations for new businesses. To overcome this, AEP often works with organizations in neighboring communities to identify and certify sites for new business development.
AEP has retired or sold nearly 13,500 MW of coalfueled generation in the past decade. The retirement of all or part of these seven plant sites across five states involved working with third-party specialists to decommission and demolish the sites and encourage redevelopment of portions of the sites that were suitable for redevelopment. For example, the Tanners Creek Plant site in Lawrenceburg, Indiana, was targeted by the state for conversion into an inland port because of its location on the Ohio River; however, in 2020, the state decided not to move forward with the plan.
Many state and federal entities offer training programs, loans and grants to encourage redevelopment and help communities diversify. Such entities include JobsOhio and the Appalachian Regional Commission. In Ohio, the state established Ohio Opportunity Zones in 320 economically distressed census tracts among 73 of its counties. The program provides tax incentives for eligible investments in qualified projects located within those zones.
As we prepare for future retirements, we intend to continue our tradition of engaging in economic development, bringing our expertise and resources to attract job-creating investment to affected communities and regions. In addition to scouting for new opportunities, we market retired plant sites for brownfield economic development opportunities. Our team has more Certified Economic Developers (CEcD) than any other utility-based economic development program, providing extensive training and support to local economic development practitioners. We do this because the best thing we can do for our communities is to empower them to be self-sustaining and resilient for the long term.
Conesville Plant in Coshocton County, Ohio, which opened in 1957, retired from commercial operation in May 2020. Through most of its life, the coal-fueled generating facility operated six units.
Kentucky Power Economic Growth Grant is a partnership between customers and the company to provide economic development funding in the 20-county.
Kentucky Power region.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
to expand broadband access to 31,000 unserved or underserved customers in Mingo and Logan counties. In Ohio, we are working to update the law to allow electric utilities to act as broadband facilitators — a role that would allow us to work with ISPs to provide middle mile fiber to expand broadband offerings to rural areas. We expect Ohio to review a comprehensive broadband package in 2020. We are also working with legislators and regulators in other states to gauge interest, explore options and support additional initiatives, such as Kentucky’s KentuckyWired Program, which will expand access to technology and its benefits.
BEST PRACTICES AND LEARNINGS.
AEP has considerable experience with power plant retirements. Always at the forefront of our planning and decisions are our employees and the communities affected by these decisions. While retirement and decommissioning are eventual realities in the life of a plant, the time horizons for this to occur are becoming shorter and shorter. Through the process of researching, benchmarking, and analyzing in preparation for this report, we validated that AEP already has many best practices in place. We also learned that there are areas for improvement. We are developing a resource playbook to capture what we learned and catalog resources and best practices as we prepare for additional plant retirements in the coming years.
84 AEP’s Climate Impact Analysis.
BROADBAND ACCESS.
In addition to delivering modern-day technology to unserved or underserved areas, expanding broadband is a potential new business opportunity for AEP. Providing the means to extend high-speed internet to these areas creates new opportunities for homebased work and helps to power economic stability for customers and communities.
Broadband technology has proven to be critical to the economic development and well-being of rural America and underserved areas where internet coverage is lacking. It helps communities improve their growth capabilities and enhances workforce-training opportunities. It also enhances the communities’ ability to attract large-scale businesses, such as data centers and hospitals.
We are exploring options for the dual use of fiber for grid modernization and enabling Internet Service Providers (ISPs) to make the final connection to areas that lack broadband coverage. We are advocating legislation in many states that would specifically authorize us to invest in “middle mile” fiber infrastructure that we could then lease to ISPs for the purpose of their broadband service expansion, and we are making progress. In 2020, Appalachian Power received approval from the Virginia State Corporation Commission to proceed with the Grayson Broadband Pilot — a program to install approximately 238 miles of fiber optic cable at a cost of at least $17 million. A second pilot location is being identified in Virginia.
In West Virginia, with the Broadband Enhancement Council’s support, we have proposed pilot projects.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
85 AEP’s Climate Impact Analysis.
Best Practices • Encourage early and frequent stakeholder engagement (internal and external) • Timely, actionable and transparent information on an ongoing basis • Engage community leaders ASAP, especially the school superintendent • Provide communities with information about future tax revenue loss after the plant is retired/decommissioned • Hold internal job fairs to expose employees to other parts of the business • Invite outside agencies and organizations to provide training, resume building, interview skills and job fairs • Conduct skills transferability analysis • Offer mentors to support transition • Ask employees to conduct self-assessment to help them determine their future course • Encourage job shadowing with other business units • Engage labor leaders in plant • Communicate with neighbors who could be affected (e.g., a farmer who abuts plant property) • Remain engaged in the community • Activate Economic Development team to begin work with local leaders • Ensure high standards for safety, environmental compliance, budget expectations remain at the forefront • Challenge each other to be the best • Stress importance of learning life skills • Engage other parts of the company early on to support repositioning of plant employees • Expand community development efforts to address competitiveness of local community • Leverage capabilities to review workforce transferability into other occupations, including analyzing the skills and knowledge of an occupation and how they could transfer to other occupations in line with economic development targeted industries • Identify/evaluate other developable properties in/near affected community (which may be more marketable) • Be clear about what is or is not possible with site redevelopment up front • Identify grant availability as early as possible • Know that constant education and engagement are critical as political / government leadership changes occur during the years prior to unit retirement.
JUST TRANSITION: THE PATH FORWARD.
The decision to accelerate the retirement of coal units creates significant burden for many of the communities where the plants will be decommissioned. Losing the economic underpinning of a community brings major change to communities. Ensuring our employees, labor unions, and communities are equipped to make the transition and are supported is important to AEP. We have experience working with all stakeholders through this process from earlier plant retirements, and we have identified best practices along the way. We remain committed to doing all we can to ensure the strength and vitality of our communities because their strength is tied to our own success. This includes partnering with communities, local and regional economic development agencies, government leaders, and other third-party stakeholders.
Just Transition, though not a new concept, plays an important role in our ability to move to a clean energy economy without workers and communities being left behind. We can’t do this alone, but we are committed to helping enable a transition to a resilient, sustainable and economically strong future for these communities.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
86 AEP’s Climate Impact Analysis.
We will do this by providing access to tools, training and other resources, as well as forming public-private partnerships and exploring public policies that can help pave the way forward for communities and workers.
As our nation transitions to a clean energy future, policymakers are considering how to manage the impacts on people and communities. In May 2020, the Michigan Public Services Commission required a local utility to file a community transition plan for the planned retirement of a coal-fueled generating unit. A similar requirement is in place in Arizona. In June 2020, the U.S. House of Representatives’ Special Select Committee on the Climate Crisis, in a sweeping roadmap for achieving net-zero carbon emissions by 2050, offered policy recommendations to protect communities considered to be disproportionately at risk from climate-related economic and racial inequities. Specifically, the committee wants a plan to enable new jobs in the clean energy economy to be good-paying, high-quality jobs, ensuring workers in today’s fossil fuel economy are not left behind. The Biden administration also is accelerating climate policy in the U.S., including initiatives to support the revitalization of energy communities affected by the transition.
CONCLUSION.
This analysis represents the most comprehensive evaluation of climate change risks and opportunities that AEP has undertaken. The results provide valuable insights to inform our clean energy transition, and the process helped to raise situational awareness of the potential future risks associated with climate change. We also learned more about potential new business opportunities that not only meet carbon reduction goals for AEP but also have positive impacts in other sectors.
At the outset of this effort, we identified our project objectives: 1. Identify risks and opportunities related to climate change 2. Inform capital investment, regulatory strategies 3. Advance electrification and EVs 4. Explore impacts of potential future climate policy pathways 5. Inform strategic planning for the corporation.
The desire to accelerate the clean energy transition must be tempered by the absolute societal need for a resilient, reliable electric power system that can meet consumer needs regardless of climate extremes that may occur. The deep freeze that severely hampered the electric grid in Texas this winter was a sobering reminder that the decisions we make about how we power the future must be supported by modern, resilient infrastructure that gives consumers the flexibility and reliability they need, at an affordable price.
We are still learning what went wrong in Texas and identifying the actions needed to prevent it from happening in the future. What it does tell us is that the decisions and policies to advance a net-zero carbon economy must balance this desire with society’s need for reliable, resilient and affordable electric power. These events elevated the risks associated with poor planning, and customers paid a heavy price. Stakeholders must be part of the discussion on solutions, but the decisions must be focused on the customer.