Tag Archives: Attorney General

Is offshore wind expensive? Not compared to the alternatives

by
offshore wind turbines

A massive wind farm 27 miles off the coast of Virginia Beach moved one giant step closer to reality last November when Dominion Energy filed its Coastal Virginia Offshore Wind development plan with the State Corporation Commission. Dominion expects to begin construction on CVOW in 2024, and have all 2,587 megawatts of power connected to the grid in 2026.

But the wind farm’s price tag of $9.8 billion, and its $87 per megawatt hour levelized cost of electricity (LCOE), is causing heartburn over at the attorney general’s office. Scott Norwood, an expert for the Division of Consumer Counsel, criticized the project on three main grounds: that the cost of building CVOW is more than building a new nuclear reactor and 2-3 times as much as building solar facilities; that Dominion has overstated the benefits of the project; and that in any event, Dominion doesn’t need the energy before at least 2035. 

Recognizing that the General Assembly already made most of these points moot by declaring the project to be in the public interest, however, Norwood also recommended the SCC adopt consumer safeguards including periodic status reports and cost oversight. 

Anyone familiar with Dominion’s tendency to pad profits will say “Amen” to the call for strict SCC oversight. With a project this huge, the SCC must be especially vigilant.  Some of Norwood’s criticisms, however, seem more calculated for effect, while others miss the point. 

Norwood certainly knows his comment that CVOW is more expensive than nuclear is not true. The price tag of the only two nuclear reactors under development in the U.S. has ballooned so high ($30 billion and counting) that it almost makes Dominion’s former dream of a third nuclear reactor at North Anna look good. Norwood’s own devastating testimony likely helped kill the North Anna 3 project, which would have delivered electricity for $190 per megawatt-hour.

Norwood says Dominion has fudged the CVOW numbers and the project will cost customers more than the company admits, but still, Dominion would have to gold-plate every turbine before it could touch the cost of nuclear. 

This wasn’t the first time the General Assembly put its thumb on the scale for a Dominion project. The habit goes back to 2008, when a Dominion coal plant, the Virginia City Hybrid Energy Center, became the first project legislatively deemed “in the public interest.” Even back then its projected levelized cost of electricity was $93/MWh. Today, VCHEC loses so much money for customers that Dominion faces pressure at the SCC to close the plant. 

For that matter, I also see that my latest electricity bill from Dominion includes a non-bypassable charge for coal ash disposal of $5.68—an amount that exceeds the charges for participation in RGGI, new solar projects and the RPS program, combined. Pollution is also a cost of using fossil fuels, but it’s never included in the LCOE. 

Mr. Norwood did not suggest Dominion pursue new nuclear or new fossil fuel plants instead of offshore wind. If Dominion needed new generation, he says, solar is the low-cost alternative. It’s cheaper to build, and it produces electricity at a lower cost than offshore wind. He’s right: if all you cared about was LCOE, no one would build anything but solar in Virginia. 

But as critics never tire of pointing out, solar can’t provide electricity 24/7. Offshore wind has a hidden superpower: while solar production peaks in the middle of the day, the wind off our coast can produce electricity both day and night, is often strongest in the evening when demand rises, and is stronger in the winter when solar is less productive. Solar and offshore wind are complementary, and we can’t get to a carbon-free grid without both. So yes, we need CVOW.

Virginia’s leaders are also taking the long view on cost. In any new industry, early projects are more expensive than later ones. Europe’s 30 years of experience developing an offshore wind industry shows costs fall steadily as project experience and new technology enable developers to produce more energy with fewer turbines. States up and down the East Coast are pursuing offshore wind projects not only because they want clean energy, but because they expect these early investments to lead to lower-cost power as the industry achieves scale. 

State leaders also see economic development and job growth as important benefits, and those aren’t reflected in LCOE either. This is another area where SCC oversight can ensure the greatest public benefit from CVOW. Testimony filed by a Sierra Club expert urges that Dominion’s economic development plan be revised with specific metrics around the VCEA’s goals for diversity, equity and inclusion in the offshore wind workforce. Like reducing pollution, creating jobs for residents from low-income and minority communities adds to CVOW’s overall value.

Having criticized the VCEA’s overly-generous cost cap myself at the time, I agree with the AG’s office that the SCC has to keep a tight watch on expenses as Dominion moves forward with CVOW. But move forward it should, because Virginia needs offshore wind. 

This commentary originally appeared in the Virginia Mercury on April 1, 2022.

Dominion admits cost of North Anna 3 will top $19 billion

by

photo by Peter Burke/Wikimedia

A nuclear plant in Pennsylvania. Photo by Peter Burke/Wikimedia

Dominion Virginia Power is projecting that the capital cost of a third nuclear reactor at its North Anna facility will total over $19 billion, according to filings in its 2015 biennial review before the State Corporation Commission (PUE-2015-00027).

This works out to over $13,000 per installed kilowatt, according to the testimony of Scott Norwood, an energy consultant hired by the Attorney General’s Department of Consumer Counsel to analyze Dominion’s earnings evaluations. He notes that this capital cost is “approximately ten times the capital cost of the Company’s new Brunswick combined cycle unit,” which will burn natural gas.

As a result of this high capital cost, the “total delivered cost of power from NA3 is more than $190 per MWh in 2028.” That translates into 19 cents per kilowatt-hour.

By comparison, in 2014 the average wholesale price of electricity in the PJM region (which includes Virginia) was 5.3 cents per kWh. Dominion currently sells electricity to its customers at retail for between 5.5 and 11 cents/kWh.

In other words, NA3 is ridiculously expensive.

Dominion had kept its cost projections for NA3 secret until this rate case forced the disclosure. Previously, executives had acknowledged only that the cost would be “far north of 10 billion.”

This cost revelation may point to the real reason Dominion pushed so hard for SB 1349, the 2015 legislation that insulates the company from rate reviews until 2022.

As Norwood testifies, “DVP forecasts a dramatic increase in NA3 development costs over the next five years, during which there will be no biennial reviews.”

These costs are dramatic. A table included in Norwood’s testimony shows Dominion expects to have spent $4.7 billion on NA3 development by the end of 2020. By the time the SCC is allowed to review this spending, more than one-quarter of the total cost will have been spent, and Dominion will be looking to ratepayers to cover the bills.

With perfect deadpan, meanwhile, Dominion executives told legislators this year that SB 1349 was necessary to protect ratepayers from higher costs to be imposed by compliance with the Environmental Protection Agency’s Clean Power Plan.

This isn’t the first time legislators have been snookered in the cause of NA3. Recall that in 2014 Dominion succeeded in lobbying for a law that allowed it to shift 70% of already-spent NA3 development costs onto ratepayers, some $323 million. The effect was to soak up the company’s over-earnings so it would not have to rebate millions of dollars to customers.

This year’s snookering was more comprehensive. Given that Dominion has continued to over-earn, those who opposed SB 1349 assumed it was this year’s version of the 2014 maneuver, designed to protect over-earnings this year and for years to come. Now it appears the real purpose of SB 1349 was to allow Dominion to spend freely on NA3 development costs in amounts that it knew would be unacceptable to state regulators, not to mention the public.

That Dominion thought it could do so in secret is especially reprehensible. Lawmakers and the Governor should be outraged by this deception, whether they voted for SB 1349 or not.

The Attorney General’s office is now trying to force Dominion to justify NA3 to regulators before it racks up billions in sunk costs. Norwood recommends that the SCC “initiate a proceeding to address the prudence of DVP’s planned future investments for development of NA3. This proceeding would allow the Company to present its case regarding the need for and cost effectiveness of NA3, including the value of the proposed project from a fuel diversity perspective and as a means to comply with any final version of the Environmental Protection Agency’s proposed Clean Power Plan and other potential future environmental regulations.”

In reversal, Virginia AG says localities may ban fracking

by

fracking signVirginia Attorney General Mark Herring issued an official advisory opinion on May 5 holding that Virginia localities have the right to prohibit hydraulic fracturing (or “fracking”) as part of their power to regulate land use within their boundaries. The letter reverses a two-year-old opinion by former Attorney General Ken Cuccinelli.

Herring’s opinion cites §15.2-2280 of the Virginia Code, which grants broad zoning powers to localities. These include the power to “regulate, restrict, permit, prohibit, and determine” land uses, such as “the excavation or mining of soil or other natural resources.” Thus, writes Herring, “I conclude that the General Assembly has authorized localities to pass zoning ordinances prohibiting fracking. The plain language of the stature also authorizes localities to regulate fracking in instances where it is permitted.”

Herring’s opinion comes in a letter to Senator Richard Stuart, who had asked whether Virginia law allows localities to prohibit “unconventional gas and oil drilling,” commonly known as fracking, and whether they may use their zoning authority “to regulate aspects of fracking, such as the timing of drilling operations, traffic, or noise.”

The letter overrules a January 11, 2013 opinion by then-Attorney General Ken Cuccinelli, which held that the General Assembly had preempted localities’ right to regulate or ban drilling when it passed the Virginia Gas and Oil Act. Under §45.1-361.5, localities may not “impose any condition, or require any other local license, permit, fee, or bond to perform any gas, oil or geophysical operations which varies from or is in addition to the requirements of this chapter.”

But, Herring notes, the statute “also includes a savings clause stating that the Act does not ‘limit or supersede the jurisdiction and requirements of . . . local land-use ordinances.’” Thus, it explicitly preserves local zoning authority to prohibit or limit fracking.

Herring concludes, “To the extent that the 2013 Opinion conflicts with this conclusion, it is overruled.”

Interestingly, if localities choose to restrict fracking but not prohibit it, they may actually leave themselves more open to challenge. Herring’s opinion reaffirms that portion of Cuccinelli’s opinion that upheld the right of localities to impose some restrictions on fracking, short of outright prohibition. However, the restriction must be “reasonable in scope” and “not inconsistent with the Act or regulations properly enacted pursuant to the Act.” As a result, a fracking company might have a better shot at challenging a restriction than it would an outright ban.

Herring adds, “Determining the extent to which particular zoning restrictions on fracking may possibly be preempted by state law will be governed by the particular facts, restrictions, and regulations at issue. Consequently, I can express no opinion on whether any particular zoning restriction has been preempted.”