Tag Archives: IRP

The facts about coal plants Dominion didn’t want you to know

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smokestack

Photo credit Stiller Beobachter

Last winter, during the fight to pass the Virginia Clean Economy Act, Dominion Energy lobbyists went out of their way to save the company’s youngest coal plant in Wise County. It worked. Legislators exempted the Virginia City Hybrid Energy Center from closure until 2045, when Dominion has to shutter all its fossil fuel generation.

VCHEC was approved in 2008 and built in 2013 as a boondoggle for Dominion, earning the company an enhanced rate of return. It was also intended as an expensive gift from then-Gov. Tim Kaine to coalfield Democrats, who went on to lose their seats anyway. Even then, it was a terrible deal for Dominion’s customers and the climate, with all the carbon pollution you expect from coal and a cost that was twice that of cleaner alternatives.

No wonder it proved to be one of the last coal plants ever built in the U.S.

Knowing this, and knowing the determination of this year’s General Assembly to turn the commonwealth in the direction of clean energy, you might not have expected VCHEC to have a lot of friends left in Richmond. But Dominion never told legislators what it would cost consumers to keep its coal plants running. Among all the criticism of the price tag associated with Virginia’s energy transition — much of that criticism coming from Dominion itself — one crucial fact gets lost: It’s coal that is hitting consumers the hardest.

An analysis Dominion reluctantly made public last month as part of its Integrated Resource Planning case shows that VCHEC is far and away the worst performing economically of all the utility’s fossil fuel-burning plants. This one coal plant carries a 10-year net present value of negative $472 million. (The analysts didn’t extend their calculations out to 2045, where it would certainly cross a billion dollars; maybe they were running low on red ink.)

VCHEC isn’t the only coal plant in Dominion’s fleet with a negative valuation, just the worst. In fact, all the Virginia coal plants have negative values.

These are Dominion’s numbers, not those of the Sierra Club or the other environmental and consumer groups challenging Dominion’s plans. The Sierra Club hired a consulting company to run its own analysis, using a standard utility model. That analysis concluded it would be cheaper for customers to build more solar now and speed up the closure not just of VCHEC but of all Dominion’s coal plants. This includes even the company’s Mount Storm coal plant in West Virginia, the only one assigned a positive economic value in Dominion’s analysis. From a customer standpoint, all of them should go.

Maybe that’s not too surprising. We already knew coal was dead. But how many of us knew we were paying to prop up the corpse?

Dominion’s lawyers tried to keep the terrible cost numbers out of the public’s hands, contending it was “confidential commercial and financial information that other entities could use to their competitive advantage in future negotiations.” I can imagine these future meetings: the other entities would be so busy mocking Dominion that, indeed, negotiations might stall permanently.

Fortunately for all of us, the Attorney General’s Office of Consumer Counsel persuaded the SCC the information should be public. Some information truly is confidential; this is merely embarrassing. Dominion’s customers—and the General Assembly—should know what it’s costing us to prop up coal.

This article originally appeared in the Virginia Mercury on September 24, 2020.

The analysis Dominion ultimately produced, showing 10-year Net Present Values for certain of its generating units, under various scenarios. Notice biomass doesn’t do too well either. The analysis omits some additional units, apparently because they are already scheduled for retirement.

What part of ‘zero’ doesn’t Dominion understand?

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Photo courtesy os the Sierra Club.

The more things change, the more they stay the same.

Dominion Energy Virginia filed its 2020 Integrated Resource Plan on May 1. Instead of charting the electric utility’s pathway to zero carbon emissions, it announced its intent to hang on to all its gas plants, and even add to the number. In doing so, it revealed a company so thoroughly wedded to fracked gas that it would rather flout Virginia law and risk its own future than do the hard work of transforming itself.

The Virginia Clean Economy Act may be new, but Dominion can hardly claim to be surprised by the commonwealth’s move away from fossil fuels. Gov. Ralph Northam’s executive order last September set a statewide target of zero carbon emissions from the electric sector by 2050. “Challenge accepted,” said a Dominion spokesman at the time, and in February of this year the company claimed it was embracing a 2050 net-zero-carbon goal company-wide. A month later, passage of the Clean Economy Act moved the deadline up to 2045 for Dominion, keeping it at 2050 for utilities that lack Dominion’s head start of 30 percent nuclear power.

Dominion’s IRP, however, does not accept the challenge to get off fossil fuels. It rejects the challenge, directing a giant middle finger at the governor and the General Assembly. Dominion’s “preferred” plan keeps the utility’s existing fracked gas generating plants — currently 40 percent of its electric generation — operating through 2045. The IRP acknowledges this violates the law, so it argues against the law.

The IRP posits that if Dominion stops burning gas in Virginia, it will instead simply buy electricity from out of state, some of which will be generated by gas, and this will cost more money without reducing carbon emissions at the regional level. Better, then, to keep burning gas in Virginia.

It gets worse. The IRP actually proposes increasing the number of gas combustion turbines in Dominion’s fleet. The VCEA imposes a two-year moratorium on new fossil fuel plants, so Dominion’s timetable has these gas peaker plants coming online in 2023 and 2024. The justification is vague; the IRP cites “probable” reliability problems related to adding a lot of solar, but it offers no analysis to back this up, much less any discussion of non-gas alternatives.

Dominion’s flat-out refusal to abandon gas by 2045 poisons the rest of the document. The IRP is supposed to show a utility’s plans over a 15-year period, in this case up to 2035. And for those years, the IRP includes the elements of the VCEA that make money for Dominion: the build-out of solar, offshore wind and energy storage projects. It also includes money-saving retirements of outmoded coal, oil and biomass plants, as the VCEA requires. Heck, it even includes plans to close a coal plant the VCEA would allow to stay open in spite of its poor economic outlook (the Clover plant, half-owned by Old Dominion Electric Cooperative.)

But the IRP proposes no energy efficiency measures beyond those mandated by the VCEA between now and 2025. Dominion hates energy efficiency; it reduces demand, which is bad for business. So the company has made no effort to think deeply about how energy efficiency and other demand-side measures can support a zero-carbon grid — or, for that matter, how customer-owned solar can be made a part of the solution, rather than part of the problem.

This isn’t surprising: a plan that contemplates keeping gas plants around indefinitely looks very different, even in the first 15 years, from a plan that closes them all within 10 years after that.

A company that really accepted the challenge of creating a zero-carbon energy supply would not just get creative in its own planning; it would look beyond generating and supplying electricity, at the larger universe of solutions. It would advocate for buildings constructed to need much less energy, including for heating and cooling, to lessen the seasonal peaks in energy demand.

It would want the state to embrace strong efficiency standards. It would press its corporate and institutional customers to upgrade their facilities and operations to save energy, especially at times of peak demand. It would partner with communities to create microgrids. It would invest in innovation.

In short, it would ask “How can we achieve our fossil-free goal?” instead of asking “How can we keep burning gas?”

It’s not hard to understand why Dominion clings to gas; its parent company is fighting desperately to keep the Atlantic Coast Pipeline project alive in the face of spiraling costs (now up to $8 billion), an increasingly uphill battle at the State Corporation Commission to stick utility ratepayers with the costs of a redundant gas supply contract and a dearth of other customers anywhere along the route.

What is really hard to understand, though, is why Dominion chose to be quite so transparent in its disdain for the VCEA. Senator Jennifer McClellan and Delegate Rip Sullivan, both Democrats, who introduced the law and negotiated its terms with Dominion lobbyists and other stakeholders through many long days and nights, reacted to the IRP with entirely predictable outrage. In a statement they responded:

“The VCEA requires Virginia utilities to step up to the plate and be active leaders in carbon reduction. Dominion Energy’s IRP is tantamount to quitting the game before the first pitch is thrown. The law sets clear benchmarks for Virginia to reach 100 percent clean energy by 2045, not for utilities to plan to import carbon-polluting energy from West Virginia or Kentucky.”

Senator McClellan, it might be pointed out, could be on her way to becoming Virginia’s next governor. Most companies would hesitate to offend a leader of her stature, as well as such a prominent Democratic leader as Delegate Sullivan.

A growing number of legislators also seem interested in ending Dominion’s monopoly and bringing retail choice to Virginia. Though the bill that would have done that didn’t make it out of committee this year, the high-handed tone of the IRP will push more legislators into the anti-monopoly camp.

Arrogance and complacency seem like dangerous traits in times like these, but that’s Dominion for you. It will rise to any challenge, as long as the challenge doesn’t require anything the company didn’t already want to do.

A version of this article appeared in the Virginia Mercury on May 14, 2020.

Want a better understanding of how this year’s legislation works? I’m presenting the ins and outs of over a dozen bills in these three webinars:

  • What to expect when you’re expecting an energy transition, May 14, 2020 (recording available here)
  • New solar opportunities for homeowners, businesses and nonprofits, May 21, 2020, 5:30 p.m., register here
  • New tools for local governments to cut carbon, May 28, 2020, 5:30 p.m., register here

Ignoring state climate rules, Dominion decides what carbon regulations should look like

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woman in dinosaur costume holding sign reading clean energy now

Four out of five dinosaurs agree. The fifth, that would be Dominion. Photo courtesy of Sierra Club Virginia Chapter.

For several years now, Dominion Energy Virginia has factored into its plans an assumption that electricity from carbon-emitting power plants will eventually include a cost reflecting CO2’s role as the primary driver of global warming. Dominion says it has even integrated this into its corporate goals, targeting an 80 percent reduction in CO2 emissions by 2050.

That promise may be more propaganda than corporate lodestar, but in any case the utility’s Integrated Resource Plans regularly point to the probability of future carbon regulations as a reason to build new renewable energy facilities and close old coal plants.

Planning for constraints on CO2 emissions proved wise this spring when Virginia’s Department of Environmental Quality finalized a state carbon cap-and-trade program. The DEQ regulations call for Virginia power plant owners to trade carbon allowances with those in the member states of the Regional Greenhouse Gas Initiative (RGGI). A Republican budget maneuver has delayed implementation of the new rules, but once they take effect they are expected to hasten the retirement of expensive old coal plants and support investments in new renewable energy projects.

But it’s not the DEQ regulations that Dominion is planning around. The utility’s 2019 update to its 2018 IRP, filed with the State Corporation Commission on Aug. 29, treats the DEQ regulations as hypothetical. Instead, it posits some unspecified future federal carbon regulations that, apparently, it would like much better.

The update describes three alternative scenarios, down from five in the 2018 IRP. The first is a “base case” that assumes no carbon emission constraints. The second assumes the state carbon limits take effect as well as some future federal regulations, and the third assumes federal (but not state) limits. However, the cover letter makes it clear that only the third scenario actually describes what Dominion intends to do. As it happens, that is the most expensive— and most profitable —plan.

The primary feature of the base case is that it keeps some old coal units running that will be closed in the other scenarios. According to Dominion, this makes it the least-cost approach to meeting electricity demand. Whether that’s true is a matter of dispute; these units hardly run at all any more, and experts for environmental organizations in the IRP hearing testified that retiring them will save money for customers.

It suits Dominion’s political strategy, however, to pretend that coal remains a low-cost option. This fiction makes coalfield legislators happy, and it allows Dominion to blame rising electricity rates on environmental regulations instead of on its own profligate spending and excess profits.

But Dominion Energy made a big bet on fracked gas, not coal. It won’t fight to keep outdated coal plants online and spewing out CO2 if it’s cheaper to close them. Gas plants are another matter. Dominion Energy’s massive investments in gas transmission and storage make the company keen to keep Virginia gas plants running full-tilt, and to build as much new gas generation as possible.

For that reason, Dominion hates the DEQ regulations. It warns the regional cap and trade plan will result in power from outside the state replacing electricity from Dominion’s combined-cycle gas plants, which provide baseload power. Dominion argues this will lead to higher, rather than lower, carbon emissions as well as higher consumer costs.

DEQ and others disagree on both counts, though the SCC takes Dominion’s view. So although Dominion labels its second scenario RGGI-compliant, it treats the DEQ regulations as hypothetical, as if Gov. Ralph Northam might change his mind any day now and order them scrapped.

Instead, Dominion offers its third scenario, positing only unspecified and (with Trump as president) truly hypothetical future federal carbon regulations. In Dominion’s fantasy, a federal plan will be strong enough to support Dominion building profitable new renewable energy and storage projects, but not so strong that it can’t also build a bunch of new gas plants.

Ergo, that’s what Dominion is shooting for. The cover letter accompanying the IRP update makes it clear that Dominion is already pursuing projects that appear only in the third plan. These include a 300 MW pumped hydro storage project that will take a decade to develop and cost upwards of $1.5 billion (if indeed it pans out), and an 852 MW offshore wind project slated for 2025, a year later than what Dominion told investors in March.

The third scenario also includes more than 3,000 MW of solar between now and the end of 2034, but that’s actually a whole lot less solar than under the RGGI scenario. Even the base case has more solar. Go figure.

Still missing is the rest of the 2,000 MW of offshore wind that the Virginia lease area can support. Also still missing are thousands more megawatts of wind and solar that Virginia would need if, instead of a gas-friendly plan, the federal government were to enact regulations actually sufficient to the climate crisis.

Dominion has not even modeled that possibility. The update’s third scenario still includes 10 new fracked-gas combustion turbines, a total of 2,425 MW, with two units coming online every year from 2022 through 2026.

Maybe the Dominion executive team thinks it knows more than the rest of us do about the federal climate plan we’ll see once Donald Trump is sent packing in 2020. More likely, Dominion is simply using its IRP carbon assumptions to bolster its case for more spending and higher profits.

In which case, the more things get updated, the more they stay the same.

 

This article originally appeared in the Virginia Mercury on September 13, 2019.

At long last, Dominion decides it’s game on for offshore wind

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Offshore wind turbines

The Block Island wind farm in Rhode Island. Photo by Ionna22 via Wikimedia Commons.

When utility regulators gave Dominion Energy Virginia the go-ahead to build two offshore wind turbines last November, it was still unclear whether the pilot project might be the end as well as the beginning of offshore wind in Virginia.

Now, however, Dominion seems to have decided it’s game on. Although the company hasn’t issued any public statements about its intentions, its presentation to investors in March included $880 million in spending on offshore wind through 2023, over and above the cost of the pilot project.

This came as a surprise to everyone, including Virginia regulators at the State Corporation Commission. Commissioners were not pleased that Wall Street heard the utility’s plans before they did. Dominion’s 2018 Integrated Resource Plan did not propose building a full-sized offshore wind farm any time in the next 15 years.

Nor had the 2016 and 2017 IRPs, even though the company has been sitting on a lease for an area of ocean that could provide at least 2,000 megawatts of offshore wind power, enough for 500,000 homes.

At a hearing on the IRP this month, the company promised regulators it would submit detailed information in its future filings, and confirmed that it currently has its sights set on 2024 for the first commercial wind farm.

For now, however, Dominion remains focused on getting the two test turbines up and running in a state-held lease area 24 miles out to sea from Virginia Beach. If all goes according to plan, the Coastal Virginia Offshore Wind project will be up and running by late summer 2020.

The two, 6-MW turbines will contribute only enough electricity to the grid for about 3,000 homes, but they will be the first turbines in federal waters anywhere in the U.S.  (The nation’s first wind farm, off Block Island in Rhode Island, is closer to shore in state waters.)

With that finish line in sight, state officials, developers, business people and offshore wind researchers were at Old Dominion University in Norfolk Tuesday night to share their vision of how Virginia will leverage its baby steps into a multi-billion-dollar industry that could “reinvent” Hampton Roads.

The town hall forum, organized by the Sierra Club, emphasized the workforce, supply chain and port opportunities if Virginia succeeds in becoming a commercial hub for offshore wind farms all along the East Coast. Gov. Ralph Northam’s administration hopes to find success with this plan even if Virginia lags other states in building wind farms.

Thomas Brostrøm, president of Ørsted North America, the Danish developer that is partnering with Dominion to build its pilot, described the size of the opportunity. The “pipeline” for projects in the U.S. has now reached 20,000 MW, mostly in New England, New York, New Jersey and Maryland. A buildout of 1,000 to 1,500 MW per year is enough to support a U.S.-based supply chain, he said. This is important not just for American businesses but also for customers, since local manufacturing means lower costs.

Brostrøm also agreed with elected leaders and port officials at the forum that Virginia’s deep-water port and unobstructed access to open ocean makes it a particularly attractive base of operations for an industry that has to transport turbine blades the length of football fields.

According to Jennifer Palestrant, director of the SMART Center for Maritime and Transportation at Tidewater Community College, the area’s ability to provide a workforce and job training needed for the new industry is also a given.

“Virginia has been building ships for 300 years,” she told the audience. “We’ve got this.” Workforce training “is in the bag.”

No doubt Virginia’s port and workforce advantages merit this home-state boosterism, but leaders in other states make similar claims. Those states also aren’t leaving anything to chance; while dangling subsidies for offshore wind energy, they are requiring developers to work with local communities and businesses.

Dominion’s decision on whether and when to move forward with a commercial wind farm will thus have a huge impact on how much of the industry Hampton Roads can attract. Mark Mitchell, the company’s director of generation projects, told the town hall audience that one of the most important pieces of information the company wants to gain from CVOW is the capacity factor of the turbines — that is, how much electricity they produce as a percentage of their full “nameplate” capacity.

Currently Dominion expects the test turbines to perform at a capacity factor of 42%. If the turbines do better than that, it means they can produce electricity at lower cost. If they perform less well, costs will be higher. Virginia is at a disadvantage compared to states further north, where stronger winds drive higher capacity factors. And with lower energy prices overall than northeastern states and no subsidies to offer, getting offshore wind to pencil out here is harder.

But Mitchell sounded confident about the future of the industry in Virginia.  As Dominion sees it, he said, offshore wind is important for achieving carbon reductions, and it complements solar “without solar’s land-use issues.” By 2024, he projects costs will fall enough to make an offshore wind farm attractive. “We see the economics coming in to support that,” he said.

This is wonderful news, and also a sudden and remarkable about face for a company that has worked at a snail’s pace since winning the development rights to the Virginia lease six years ago. Other states started later and are on track to finish earlier.

From this we draw two conclusions, one surprising and the other, not so much. First, IRPs are meaningless. Far from revealing the utility’s plans for 15 years, they don’t even tell the SCC what Dominion is thinking at that very moment.  Eat your hearts out, commissioners; to this company, you are irrelevant.

And, more obviously, Dominion follows the money. None of the reasons Virginians want offshore wind — clean energy, jobs, business development, climate mitigation — mattered until a pathway to profit opened up.

No doubt Dominion needs a new profit center. For years the company expected wealth to flow from a planned $19 billion nuclear reactor at North Anna, until the economics grew from challenging to impossible. Currently it’s gambling on the $7 billion-plus Atlantic Coast Pipeline, which is facing a similar cost spiral amid a morass of lawsuits and unresolved questions of whether it has any real customers.

Offshore wind offers an entirely new business opportunity with almost unlimited potential, and one with the added benefit of working with, not against, public opinion and advances in clean energy technology.

Building a commercial wind farm in Virginia may be just the beginning for Dominion. An industry source told me the utility’s parent company, Dominion Energy, is negotiating to buy a $400 million, offshore wind turbine installation vessel.

If true, investing in one of these specialized ships could be a canny business move, since the offshore wind industry is facing a severe shortage of them worldwide, and the U.S. currently has none at all. The purchase would indicate Dominion sees an opportunity to make money on the booming offshore wind market in the Northeast, regardless of what happens in Virginia.

Before the town hall, I asked Dominion for confirmation of its plans and received this response:

“Onshore construction activities associated with CVOW are slated to begin soon.  Additionally, the company is in the early phases of developing a construction operations plan for the larger commercial lease area and expects to have a high-level timeline soon.

“As the first approved offshore wind project in federal waters, CVOW has already provided many valuable lessons learned which will ultimately benefit our customers and the environment as we move through the dozens of required surveys, reports and assessments as part of the construction operation plan for larger scale development. Mark [Mitchell] will provide remarks next week [i.e., at the Sierra Club town hall] and we will share additional information as it becomes available.”

If this seems like disappointingly little information, take heart: you now know at least as much about Dominion’s offshore wind plans as the SCC does.

This article first appeared in the Virginia Mercury on May 30, 2019. 

 

A revised generation plan leaves Dominion’s case for its pipeline in shambles

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In December of last year, regulators at the State Corporation Commission (SCC) took the unprecedented step of rejecting Dominion Energy Virginia’s Integrated Resource Plan (IRP). Among other reasons, the SCC said the utility had over-inflated projections of how much electricity its customers would use in the future.

On March 8, Dominion came back with a revised plan. And sure enough, when it plugged in the more realistic demand projections used by independent grid operator PJM, and accounted for some energy efficiency savings, the number of new gas plants it planned for dropped in half. Instead of 8-13 new gas combustion turbines, the revised plan listed only 4-7 of these small “peaker” units.

Yet there is a good chance Dominion is still overinflating its demand numbers.  Although the re-filed IRP is short and vague, it appears Dominion isn’t figuring in the full amount of the energy efficiency programs it must develop under legislation passed last year.

SB 966 required Dominion to propose $870 million in energy efficiency and demand-response programs designed to reduce energy use and the need for new generation. But Dominion has proposed just $118 million in its separate demand-side management filing (case PUR-2018-00168).

Moreover, the company has concocted a theory whereby it can satisfy that $870 million requirement by spending just 40 or 50 percent of it and pocketing the rest. In its DSM case Dominion argues that since the Virginia Code allows a utility to recover lost revenue resulting from energy efficiency savings, it can simply reduce the required spending by the amount of lost revenue it anticipates.

It’s a great theory, and suffers only from being wrong. (Oh, and also from infuriating legislators, energy efficiency advocates, and pretty much everyone else who was involved in crafting SB 966.)

It also indicates that Dominion’s demand figures in the IRP are based on plans to spend just a fraction of the $870 million in energy efficiency, achieving much less demand reduction than backers of the law envisioned.

If the SCC decides Dominion can’t withhold hundreds of millions of dollars in efficiency spending, that additional spending will have to be factored into demand projections. Thus the IRP’s demand projection can only go down—and with it, the number of gas plants that might be “needed.”

And yet even the resulting number is likely too high. Several of Dominion’s large corporate customers have been trying to leave its fond embrace to seek better renewable energy offerings elsewhere. (The SCC recently rejected Walmart’s effort to defect.) If they were allowed to leave, how much would that further reduce the need for new generation?

For that matter, those customers and many others, including many of the tech companies responsible for what demand growth there is, say they want renewable energy, not fossil fuels. Dominion claims the renewable generation will have to be backed by gas peaker plants, but energy storage would serve the same purpose and further reduce the need for gas. The SCC will rule on that question when—and if—Dominion ever requests permission to build one of those peakers. It is possible the utility will never build another gas plant.

That’s bad news for Dominion Energy’s other line of business, gas transmission and storage. With demand for new gas generation falling off a cliff, Dominion’s ability to rely on its customer base as an anchor client for the Atlantic Coast Pipeline becomes increasingly doubtful.

Dominion may actually have conceded as much in its re-filed IRP. In response to the SCC’s order that Dominion include pipeline costs in its modeling of the costs of gas generation, Dominion merely stated, without discussion, that it is using the tariff of the pipeline owned by the ACP’s competitor Transco, which supplies gas to Dominion’s existing plants.

This statement continues a pattern of Dominion avoiding any mention of the ACP in SCC proceedings, lest it invite hard questions. But Dominion can’t have it both ways. If it will use Transco, it doesn’t need the ACP. If it plans to use the much more expensive ACP and just isn’t saying so, it has lowballed the cost of gas generation and is misleading the SCC.

This is unfair to customers, and it may backfire on Dominion. The ACP received its federal permit on the strength of contracts with affiliate utilities, but Dominion hasn’t yet asked the SCC to approve the deal. Leaving the ACP out of the discussion in the IRP year after year makes it harder to win approval. When and if the company finally asks the SCC for permission to (over)charge ratepayers for its contract with the ACP, it will not have built any kind of a case for a public need or benefit.

This is not just a risk that Dominion Energy chose to take, it is a risk of the company’s own creation. It defied the Sierra Club’s efforts to have the SCC review the ACP contract early on, knowing it would face vigorous opposition from critics. But since then, its chances for approval have only gotten worse. Back then, the pipeline cost estimate came in at $3 billion less than it is today, Dominion Virginia Power was halfway through a massive buildout of combined-cycle gas plants, and the IRP included several more big, new, gas-hungry combined-cycle plants.

Now the ACP’s cost has climbed above $7 billion and may go as high as $7.75 billion, excluding financing costs, CEO Tom Farrell told investors last month in an earnings call. Meanwhile, the IRP includes an ever-shrinking number of gas plants, to be served by a different pipeline.

One investment management company told clients in January the spiraling price tag may make the ACP uncompetitive with existing pipelines. And Farrell faced a host of cost-related questions in his call with investors.

But Farrell downplayed the risk when it came to a question from Deutsche Bank about the need for SCC approval. Managing Director Jonathan Arnold asked, “On ACP, when you guys are talking about customers, does that include the anchor utility customers, your affiliate customers? Does whatever you’re going to negotiate with them need to be approved by the state regulatory bodies?”

Farrell’s answer sounds nonchalant. “In Virginia, it’s like any other part of our fuel clause. It will be part of the fuel clause case in 2021 or 2022 along with all the other ins and outs of our fuel clause.”

Oh, Mr. Farrell, it is not going to be that easy.

An earlier version of this article first appeared in the Virginia Mercury on March 20, 2019.

SCC cracks open the door on Dominion’s Atlantic Coast Pipeline costs

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map showing VA and NC route of Atlantic Coast Pipeline

Costs to build the Atlantic Coast Pipeline are pegged at $7 billion. Partner Dominion Energy plans to charge captive electricity customers for the cost, regardless of whether the pipeline is needed. Image via the Federal Energy Regulatory Commission.

Dominion Energy Virginia employees were briefing a stakeholder group on the company’s Integrated Resource Plan (IRP) last Friday morning when text messages started popping up on phones all over the room: the State Corporation Commission had just rejected the IRP and ordered a do-over.

Awkward.

The SCC has never rejected a Dominion IRP before, mostly because the plan doesn’t have a binding effect. It is simply a way for Dominion to show regulators how it might meet the needs of customers over a 15-year period. If the company actually wants to build new generation or implement new programs, it still has to get permission through a separate proceeding.

But the IRP is important in establishing the context for new generation or programs. The SCC’s order on Friday shows commissioners think the company has presented a picture so distorted as to be unreliable.

The SCC order gives Dominion 90 days to correct a list of items it says the company got wrong, from unrealistically high demand forecasts to overly-optimistic assumptions about solar energy.

The order also instructs Dominion to look at an option the company ruled out: building yet another big combined-cycle gas plant. The SCC says it doesn’t necessarily want Dominion to build such a plant, only that the company ought to construct a true least-cost scenario to compare all other options against, and a least-cost option might include more baseload gas.

Then, buried down in footnote 14, the SCC added this:

The record reflects that the Company did not include fuel transportation costs in the modeled costs of certain natural gas generation facilities. Tr. 610. For purposes of the corrected 2018 IRP, the Company should include a reasonable estimate of fuel transportation costs, including interruptible transportation, if applicable, associated with all natural gas generation facilities in addition to the fuel commodity costs.

Wait a moment. Did the SCC just ask Dominion about the cost to ratepayers of its Atlantic Coast Pipeline?

Or does it just want to see different kinds of natural gas facilities modeled on an apples-to-apples basis, which Dominion failed to do? Even if it is the latter, can the SCC really open the door on transportation costs at all without letting the $7 billion elephant into the room?

If that happens, Dominion will find this the most expensive footnote in company history.

Dominion says the footnote is absolutely not about the ACP, and the company is shocked that anyone might think that. In a statement quoted in Energy News Network, the company lambasted environmental groups for perceiving a link between fuel transportation costs and a pipeline that provides fuel transportation:

“Instead of supporting Dominion Energy and policymaker’s (sic) push for carbon-free generation, [the Sierra Club and SELC] are distorting the SCC’s official order to pander to their donor base without regard for the truth,” the statement said.

This begs the question of how Dominion plans to comply with the order without mentioning its parent company’s pipeline. The company’s hysterical attack on its environmental critics seems designed to beat back expectations for the ACP’s cost to ratepayers becoming an issue in the IRP.

Footnote or no footnote, the SCC really should look at those pipeline costs

Admittedly, dropping a bombshell in a footnote would be only slightly more surprising than the SCC taking up the pipeline question at all right now. Pipeline critics have been trying in vain for two years to get the SCC to examine the contract between various Dominion subsidiaries obligating Virginia customers to pay for 20 percent of the ACP’s capacity. This blatant self-dealing is central to the pipeline’s profitability.

The SCC has previously refused to question the deal, and the Virginia Supreme Court refused to force the Commission to do it. The SCC maintained at the time that it could wait for the pipeline to be built before it decides whether it is fair to charge ratepayers for it. But it doesn’t have to wait; the Supreme Court says the SCC can take up the question any time.

And it should, because the SCC’s very silence encourages Dominion to think it will get away with charging customers for a hefty portion of the $7 billion pipeline. It is long past time for Dominion to present its evidence on the ACP.

As the SCC’s IRP order found, “the load forecasts contained in the Company’s past IRPs have been consistently overstated” and the SCC “has considerable doubt regarding the reasonableness of the Company’s load forecasts.” These questionable load forecasts, of course, underpin Dominion’s case for the ACP.

William Penniman, an energy lawyer who served as an expert witness for the Sierra Club in Dominion’s 2017 IRP case, testified that, based on publicly-available ACP filings, the contract with the ACP could cost utility customers in Virginia over $200 million of fixed charges annuallyfor 20 years—over $4 billion over the 20-year life of the contract, whether or not it ships any gas at all. He also showed that, even if more gas were needed, other pipeline options were much cheaper than Dominion’s affiliate deals.

And, given that Dominion already has contracts with another pipeline company to serve the utility’s existing gas plants, the money paid for capacity in the ACP will be entirely wasted—unless, of course, Dominion builds a bunch of new gas plants or drops lower-priced transportation arrangements in favor of its costly affiliate deals.

The pipeline came up again in the 2018 IRP. Gregory Lander, a witness for the Southern Environmental Law Center pointed out that Dominion’s IRP merely embeds the costs of the ACP into its generation scenarios without quantifying or justifying them.

“In essence,” Lander testified, “the IRP asks the Commission to accept that the Atlantic Coast Pipeline is built and that ratepayers should pay for it without ever explaining to the Commission what those costs are and why they are justified in a least-cost planning exercise.”

Rather than challenging the expert testimony, Dominion sought to exclude it, hoping to keep all mention of the ACP out of the case. In another footnote in its IRP order, however, the SCC specifically admitted Lander’s testimony, without finding facts.

Dominion would prefer the SCC to consider the ACP a “sunk cost.” Dominion’s theory goes like this: Since the contract obligates the utility to pay reservation charges for roughly half of the ACP’s capacity regardless of actual usage, that expense shouldn’t be factored into the cost of building any new gas plant. Instead, it argues, the SCC only needs to consider the cost of paying for the fuel itself.

That’s like buying a Ferrari and then saying the only expense of owning it is the gasoline. (And meanwhile, the trusty station wagon is running just fine.)

If the SCC is finally interested in the ACP’s cost to ratepayers, Dominion’s IRP do-over will have to be just the first step in a more thorough analysis of what Dominion’s self-dealing will cost Virginia consumers. There is plenty of evidence to suggest that will not go well for Dominion.

But what’s up with the SCC and gas?

Footnote 14 is not the only oddity in the SCC’s order. On the one hand, the SCC rightly says a fair accounting of a gas plant’s cost necessarily includes all the cost of transporting the fuel. On the other hand, even before it sees the transportation costs, the SCC seems to assume that a new baseload gas plant would be the economic thing to build, were it not for pesky carbon regulations and the General Assembly’s measures to promote renewable energy.

A major theme of the SCC’s order is the commission’s desire to force lawmakers to confront their own profligacy in passing the giant 2018 energy bill that the SCC opposed. SB 966 allows Dominion to redirect billions of dollars in over-earnings away from ratepayer refunds to massive spending on grid projects like undergrounding wires, with only limited regulatory oversight. The SCC thinks this is going to be bad for customers, and it wants legislators to appreciate just how bad.

That’s understandable, but it doesn’t excuse the SCC’s insistence on regarding gas as a low-cost option. Even Dominion knows better.

Dominion just announced the opening of its latest huge new combined-cycle plant in Virginia. The Greensville station joins a glut of new gas plants fed by Appalachia’s fracking industry. The oversupply is so bad that our regional grid already has almost 30% more power supply than it needs to meet peak demand—and grid operator PJM doesn’t expect this situation to change any time soon.

Most of the other new gas plants in PJM are funded by private equity. If they go bust, utility customers won’t be the ones to suffer. But Virginia’s regulated monopoly system means customers are precisely the ones who suffer when a utility’s bet on gas goes sour.

So Dominion’s IRP instead envisions a steady build-out of smaller gas plants it hopes to justify as complements to new solar farms. The idea is that these combustion turbines, often called “peaker” plants, will provide electricity to fill in around the variable output of solar panels.

Yet peakers are idle most of the time, making them questionable investments as well. Other states achieve the same reliability results at lower cost using demand response and battery storage.

The Rocky Mountain Institute (RMI) issued a report in May of this year comparing new gas generating plants—both combined-cycle and peakers—to well-designed clean energy generation portfolios. In almost every case, renewable energy, storage and demand response already beat gas on cost, even without considering environmental benefits.

And moreover, the trends favor clean energy, as RMI’s press release stresses: “More dramatically, the new-build costs of clean energy portfolios are falling quickly, and likely to beat just the operating costs of efficient gas-fired power plants within the next two decades.”

So in telling Dominion to present a gas-heavy scenario as low-cost, the SCC is asking the impossible. Whether the Commissioners know it or not, Dominion isn’t the only one here presenting a distorted picture.

This post originally appeared as a column in the Virginia Mercury on December 14, 2018.

For Dominion, the answer to every problem is more gas

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Dominion Energy Virginia just released its 2018 Integrated Resource Plan (IRP), and the message it conveys could not be clearer: no matter what happens, the utility plans to build more fracked gas generation.

The IRP lays out five scenarios for meeting electric demand over the next 15 years, each one responding to a different set of assumptions. Yet weirdly, no matter which assumptions you choose, Dominion’s plan involves building a little bit of solar and a lot more gas.

Dominion Energy Virginia IRP; table showing alternatives considered

Dominion’s “Alternative Plans” (from page 24 of the IRP) prove to be very short on actual alternatives.

Everywhere you see “CT” in the table, that’s another gas plant–and they show up in every “alternative.” Assume no carbon tax? Great, Dominion will build gas. What if Virginia follows through on plans to cut carbon by joining the Regional Greenhouse Gas Initiative (RGGI)? No problem, Dominion will build gas. How about if the Feds impose a national carbon plan? Alrighty then, Dominion will build gas!

Seriously, folks, if fracked gas is always the answer, somebody isn’t asking the right question.

The question we’d like to see addressed is how the utility intends to help Virginia transition to a clean energy economy. The question Dominion seems to be answering is how to create a need for the Atlantic Coast Pipeline.

This isn’t a surprise; Dominion’s parent company, Dominion Energy, is the majority partner in the pipeline, and the pipeline’s approval was premised on the utility “needing” the pipeline to serve its gas plants. It’s a blatant conflict of interest that the SCC should have addressed by now, but it declined to do so. (The Sierra Club has taken the SCC to court over this dereliction of duty.)

Dominion would prefer we talk about its plans for more solar. It is true the 2018 IRP proposes more solar generation than the 2017 IRP did. Last year’s IRP revealed that solar had become the lowest-cost energy in Virginia, but it forecast only 240 MW per year. This year’s IRP shows solar increasing over the next few years to a maximum of 480 MW per year beginning in 2022 (about half of what North Carolina installed in 2016). To put that in perspective, Microsoft recently announced it was contracting for 350 MW of Virginia solar to be built in one fell swoop, to serve just its own operations.

Meanwhile, the IRP notes that Dominion’s newest combined-cycle gas plant, the 1,585 MW Greensville behemoth, will enter service next year. Running at full capacity, it would provide the equivalent amount of electricity to 13 years’ worth of planned solar construction, since the expected output of a solar farm is about 25% of its “nameplate” capacity. (To be fair, the Greensville plant will likely run at more like 75-80% capacity. But it follows three other new gas plants Dominion built this decade. Together the four plants add a total of  4,862 MW. And those are nowhere near all the gas plants Dominion operates.)

The fact that all of Dominion’s IRP scenarios look alike and rely heavily on gas seems to be intended to send a message not to the SCC but to Governor Northam. Dominion doesn’t like the carbon reduction rulemaking now underway at the Department of Environmental Quality, which aims to lower emissions from Virginia power plants by 30% between 2020 and 2030. So the IRP “assumes” Dominion will comply by purchasing dirtier power from states not subject to regulation, actually driving up both cost and carbon emissions. Meanwhile, it’s going to build gas no matter what.

Welcome to Dominion’s game of hardball, Governor Northam.

Of course, the IRP is only a planning document. The SCC may approve it but still reject a proposed facility when the utility asks for permission to build it. Market watchers will question whether Dominion will be able to justify all—or any—of the 8 proposed gas combustion turbine facilities in hearings before the SCC. Virginia has too little solar now to need combustion turbines for back-up, and by the time there is enough to challenge the capabilities of the grid, experts predict battery storage will be the better and cheaper choice.

But never mind that; for Dominion, what matters now is justifying the Atlantic Coast Pipeline.

Dominion Power promises huge solar investments and a lower carbon footprint—or does it?

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Dominion Virginia Power says energy from solar farms is now a low-cost option. Photo credit Kanadaurlauber.

Dominion Virginia Power released its updated Integrated Resource Plan (IRP) this week with a press release that promised thousands of megawatts (MW) of new solar power and a dramatically lower carbon footprint. In a remarkable turnabout, the Executive Summary declares, “The Company must now prepare for a future in which solar PV generation can become a major contributor to the Company’s overall energy mix.”

Alas, a closer look reveals Dominion will actually increase its carbon emissions over the period studied. Meanwhile, the solar would be built at a rate of only 240 MW per year over the 15-year period covered by the IRP, about the same amount being installed in Virginia this year. (Over 25 years, Dominion says its solar could reach 5,200 MW, which means the pace of installation would actually drop in the out years.) That should elicit yawns, not excitement.

The solar numbers pale in comparison to the more than 4,600 MW of new natural gas combined-cycle plants Dominion has been building just in this decade. (Remember that solar farms generate electricity at about 20-25% of “nameplate” capacity on average, while combined-cycle gas plants nationally average 50-60%, and can achieve 70% or higher.*) And even come 2032, the new solar will make up only a tiny fraction of a generation portfolio that consists almost entirely of coal, gas and nuclear.

I’ll be interested to see the numbers analyzed, but my guess is that all the renewable energy Dominion proposes to build over the next 15 years represents no more than 5-10% of its total electric generation. That’s too little, too late, in a state that can do so much better.

So the more things change, the more Dominion stays the same. Behind the hype being offered to the press stands a utility that is still committed to fossil fuels and nuclear power.

Virginia utilities file IRPs with the State Corporation Commission (SCC) every year. The plans are supposed to reflect the utilities’ best sense of how they will meet consumers’ needs for electricity while complying with state and federal laws and policies. This involves some guesswork about the direction of future regulations, including regulations of CO2 emissions.

In spite of President Trump’s determination to roll back climate protections while he is in office, Dominion’s IRP assumes an eventual price on carbon. Most utilities nationwide are doing the same thing. But given the uncertainties, Dominion has chosen (as it did last year) to model different scenarios instead of committing to a single plan.

Even the low-cost plan that wouldn’t comply with the EPA Clean Power Plan contains just as much solar as the other plans, reflecting the company’s assessment (on page 3) that solar is now “cost-competitive with other more traditional forms of generation, such as combined-cycle natural gas.”

Yet the carbon reductions Dominion promises in its press release appear to be something of a sleight-of-hand. For one thing, Dominion has chosen to compare its CO2 output in 2032 to its output in 2007, not 2017. CO2 emissions were markedly higher in 2007 than now, with the shale gas boom and the rise of renewables leading to massive coal retirements in the interim.

Moreover, a careful reading of the press release reveals the reductions Dominion promises are per-capita, not overall. A chart on page 115 of Dominion’s IRP shows every one of the scenarios Dominion studied will actually increase the company’s total CO2 emissions between now and 2042.

That reality exasperates climate activists. Glen Besa, former Director of the Virginia Chapter of the Sierra Club, comments, “The only impression you could have reading Dominion’s release was that it was making dramatic reductions in carbon pollution, which obviously is not the case.”

CO2 emissions would not increase if Dominion were simply shutting down coal and building more solar. But all of the alternative scenarios Dominion models for its IRP contain more gas plants: at least another 1,374 MW of gas combustion turbines in all plans, and 1,591 MW of combined cycle gas in some scenarios. Combustion turbines are more flexible than combined-cycle plants and so are better for meeting spikes in demand and integrating renewable energy like solar, but while they run less often, they are typically higher-polluting. Many utilities are using demand response or installing battery storage instead; Dominion appears to prefer gas.

All this gas means higher CO2 output. Not incidentally, burning more gas also means more business for Dominion’s parent corporation, Dominion Resources (soon to be known as Dominion Energy), which is heavily invested in gas transmission. And crucially, Dominion Energy needs more gas power plants to justify building the Atlantic Coast Pipeline. So building more gas plants serves the interests of Dominion’s affiliates, not its customers.

The problem with building new gas plants is that it lowers carbon only so far compared to coal, and then you’re stuck at that level for the life of the gas plants, unless you’re willing to abandon them early. That’s why any utility that’s serious about protecting ratepayers from stranded costs has to invest in wind, solar, energy efficiency and storage, not natural gas.

Speaking of wind, the IRP includes the 12 MW pilot project known as VOWTAP in all of the plans, even though Dominion lost millions of dollars in federal funding when it would not commit to building the two test turbines by 2020, three years past the original deadline. But none of the scenarios studied include any land-based wind, and none include a build-out of the federal offshore wind energy area Dominion bought the rights to, which could support at least 2,000 MW of offshore wind power. This is a strange omission given that Dominion continues to include a scenario in which it would build the world’s most expensive nuclear reactor, known as North Anna 3.

Polls consistently show overwhelming public support for renewable energy. Yet right now, ordinary Virginia ratepayers have no access to renewable energy unless they put solar on their own rooftop. Corporations like Amazon Web Services and Microsoft account for the bulk of the solar energy being installed in Virginia, with most of the remaining going to the military, state government, universities, and schools.

So 3,200 MW over 15 years won’t even begin to satisfy consumer demand. North Carolina installed almost 1,000 MW last year; I’d like to see Dominion set that as an annual target, bringing it up to the 15,000 MW over 15 years it modeled for last year’s IRP (before hiding the encouraging results from pubic view). Round out the solar with other cost-effective clean energy options, and we will see the kind of carbon reductions that don’t have to be fudged in a press release.

*On page 88 of the IRP, Dominion provides it own capacity factor forecasts: solar 25%, combined cycle gas 70%, gas combustion turbines 10%, nuclear 96%, onshore wind 42%, offshore wind 42%. The chart does not include a number for coal.

Dominion ditches plans for onshore wind in Virginia, but grows bullish on solar

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Not for you, Virginia.

Not for you, Virginia.

Well, now it’s semi-official: in spite of what it has been telling customers for years, Dominion Power is not going to build onshore wind in Virginia. Speaking at an Edison Electric Institute conference in Dallas on November 13, Dominion Resources Executive Vice President and CFO Mark Gettrick spelled it out:

“When the wind business first got started, a decade, a decade and a half ago, we built two wind projects early on [Mt. Storm, in West Virginia, and Fowler Ridge, in Indiana], and we elected not to build any more. We steered away from wind. We do not think wind would ever be a good resource on land, in Virginia anyway, and so we elected not to pursue incremental wind projects.”

Someone should probably let the rest of the company in on the secret. Dominion’s website still insists the company has three Virginia onshore wind projects in development, and it included 247 megawatts’ worth in its latest Integrated Resource Plan (IRP). But the plan reflects the company’s cooling enthusiasm for wind energy, with the projects now slated for 2022-2024.

This is disappointing news, but it certainly isn’t a surprise. Dominion proposed its Virginia wind farms back before fracking caused natural gas prices to nosedive, undercutting the economic case for wind. At that point, Virginia’s lack of a real RPS meant Dominion had no incentive to build higher-priced generation, and every reason to believe the State Corporation Commission would reject a wind project, as it did similar proposals from Appalachian Power.

But though it is abandoning wind, the company is enthusiastic about solar. Gettrick said Dominion sees “gas and solar” as the way to comply with the EPA’s Clean Power Plan, which will require states to lower their carbon emissions from electric generating plants. Gettrick said:

“We see a growing need in Virginia to install solar for native load compliance with carbon. So that’s what we’re doing . . . So watch where we go with solar. We like the technology, the cost continues to drop, and we see it as a cornerstone for future development in Virginia.”

Advocates may wonder, why solar and not wind? Wind would seem to be cheaper, after all, and a single utility-scale turbine provides more power than hundreds of home solar systems.

The IRP offers part of the answer. For a utility, not all power is equal. Dominion has plenty of power for times when demand is low; the challenge is filling in the peaks and valleys of demand above that minimum level. Dominion needs the most power on summer days when solar produces well but wind does not.

The other part of the answer is price. This will surprise people who have seen the rock-bottom prices of wind power in places like Iowa and Texas, where wind outcompetes even natural gas. But it’s cheap to build wind among cornfields or on open rangeland, where access is easy. It’s more expensive to do it in the eastern mountains, where narrow, winding roads pose logistical challenges. The result is that wind power in the Southeast will cost about double what it costs in the Plains, according to the most recent Lazard analysis.

By contrast, Lazard calculates that utility scale solar power costs only about 20% more in the Southeast than it does in the dry, sunny Southwest, where utility-scale solar has reached grid parity. So while the best wind prices are well below the best solar prices nationwide, solar may be cheaper than wind in Virginia.

Lazard’s analyses are based on actual projects, but it also makes some predictions about where prices are headed. It projects unsubsidized utility-scale solar prices of six cents per kilowatt-hour by 2017, confirming predictions of widespread grid parity made by other analysts like Citibank and Deutsche Bank.

If you’re concerned about meeting EPA carbon emissions rules, or just concerned about the environment, period–or you want a reliable and stable-priced resource to hedge gas–solar makes very good sense.

Given these price trends, Dominion’s enthusiasm is entirely understandable. But surely it has some explaining to do, after years of trashing solar to legislators and the SCC. It has gone so far as to slap standby charges on customers who generate their own solar power. And as we’ve seen, its own forays into rooftop solar can’t be counted a success.

But perhaps we could all let bygones be bygones. If Dominion would focus its efforts on utility-scale solar while allowing the removal of barriers constraining the private market for commercial and residential solar, all of us would be winners.