Is a new pumped hydro project needed for the energy transition, or one more Dominion boondoggle?

Back in 2017, two Republican legislators from Southwest Virginia helped Dominion Energy Virginia secure legislation allowing the utility to charge ratepayers for a new pumped hydro storage facility to be built in the coalfields region. 

Dominion Energy headquarters, Richmond, VA
Dominion Energy’s new headquarters building in Richmond, Virginia

The law even deemed the project “in the public interest.” Three years later, Dominion included a new pumped hydro project in its 2020 Integrated Resource Plan. The 300-megawatt facility would be built in Tazewell County and come online in 2030.

But — surprise, surprise — details in the IRP reveal the project to be unneeded and its price exorbitant. That leaves just one question: Will the State Corporation Commission approve the IRP anyway?

Pumped hydro stores surplus energy using two reservoirs, one at the top of a hill and one at the bottom. When you need energy, you release water from the upper reservoir and let it flow down through a hydroelectric turbine to the lower reservoir. When you have a surplus of energy, you use it to pump water uphill to fill the upper reservoir. Repeat as needed. It’s not high-tech, but it gets the job done.

Today pumped storage is used mostly to store surplus energy at night from baseload fossil fuel and nuclear plants that run 24/7, then use the energy to meet the surge in demand during daylight and early evening hours. As wind and solar become bigger players, pumped storage can also help integrate these variable resources in much the same way that batteries can. 

But pumped storage is land-intensive, and each project has to be designed for its own particular site, making it expensive to develop. Or in this case, very expensive. In its 2017 Annual Report, Dominion said its project would cost up to $2 billion and provide up to 1,000 MW of storage capacity ($2 million per megawatt, not terrible for this kind of storage). Three years later the size has shrunk by 70 percent but the cost has actually gone up and now stands at $2.3 billion ($7.7 million per megawatt, genuinely terrible). 

That didn’t stop Dominion from including the 300 MW of new pumped storage hydro in every scenario of its IRP, not allowing its modeling software the option of rejecting it as unneeded or as more expensive than other options.

What was once an interesting project idea now looks a heck of a lot like another Dominion boondoggle.

As Virginia embarks on a transition to 100 percent carbon-free electricity, the ability to store energy has become a hot topic of discussion. How much do we need, and can batteries do it all? The one advantage that pumped storage has over batteries is that a pumped storage facility can supply energy over a longer duration: 10 hours as opposed to the four hours typical of most batteries. For the rare occasions when you really need those extra hours, pumped hydro can be a solution.

As it happens, though, Dominion is already the majority owner of the world’s largest pumped hydro project. The 3,000 MW facility in Bath County, Virginia, has been in operation since 1985. Dominion earns money by selling its energy storage service to the operator of the regional transmission grid, PJM Interconnection. 

Three thousand megawatts is a lot of storage; the Bath County facility is even nicknamed “the world’s largest battery.” So building more pumped storage would only be reasonable if the Bath County facility were already being used to its maximum capacity (or was projected to max out in the future), and if a new facility could meet a need that can’t be met by alternatives like batteries. Unfortunately for Dominion, neither of those is true. Tazewell is a solution in search of a problem. 

Consumers smell a rat. Dominion customer Glen Besa intervened in the IRP case this summer to challenge the inclusion of the Tazewell project. Besa retired a few years ago as director of the Virginia Chapter of the Sierra Club; he is acting on his own behalf in this case, represented by attorney William Reisinger of the firm ReisingerGooch. 

The firm hired energy storage expert Kerinia Cusick. Her testimony points out that the IRP shows the Bath County facility is expected to be used lessover the coming years, not more. The IRP projects capacity factors for the facility will decline steadily from 10.7 percent in 2021 to 7.5 percent in 2035. If an existing facility has spare capacity, there is no good case for building another facility like it.

Cusick also compared the $2.3 billion cost of the Tazewell project to an equivalent amount of battery storage. Not surprisingly, the battery storage won hands down. Indeed, Cusick noted, the cost of battery storage has fallen over the years and is projected to continue doing so. By contrast, she found Dominion had understated the costs of the pumped storage project by excluding items like land costs and taxes. (The real number she calculated, unfortunately, is not available to us. It has been redacted from the public version of Cusick’s testimony.)

In sum, there is no need for the Tazewell project, and no economic case to support it. Adding billions of dollars in unneeded infrastructure to Dominion’s rate base will add profit for Dominion shareholders but drive up electricity bills for consumers.

There’s no way the SCC would let Dominion get away with this if legislators hadn’t used the magic words “in the public interest.” Now the question is whether those magic words are all it takes to ram a project through.

The SCC takes its job of protecting ratepayers seriously; it does not welcome legislative interference. Only grudgingly did the SCC allow itself to be coerced into approving Dominion’s offshore wind pilot when the legislature proclaimed the pilot project in the public interest. In that case, after pointing out the high cost and risks borne by ratepayers, the SCC order concluded by grumbling, “Recent amendments to Virginia laws that mandate that such a project be found to be ‘in the public interest’ make it clear that certain factual findings must be subordinated to the clear legislative intent expressed in the laws governing the petition.”

But the offshore wind pilot was just that, a pilot, and its $300 million price tag represented an investment in a new industry that is expected to become a mainstay of Virginia’s future energy supply. Legislators knew the costs, and judged them acceptable. 

Pumped hydro, on the other hand, is a mature technology. The proposed Tazewell project won’t lead to bigger and better things, driving costs down along the way. Legislators deemed it “in the public interest” for Dominion to locate a pumped storage project in the coalfields because they are desperate for jobs there. But they were misled about the actual cost. That ought to matter.

If it doesn’t matter — if the SCC decides “in the public interest” always means a blank check to Dominion, written by the General Assembly but charged to the account of customers — then legislators need to change the law. We can’t afford another boondoggle.

This article originally appeared in the Virginia Mercury on October 7, 2020.

More 2018 bills: energy efficiency, storage, and electric vehicles

 

This prototype of the 2020 Tesla Roadster is not among the EVs available for test drives at Conservation Lobby Day. I’m using the picture anyway because it is as close as I will ever come to owning one. Photo credit Smnt via Wikimedia Commons.

My post last week covered the significant renewable energy bills, especially solar bills, introduced by the end of the first week of the 2018 legislative session. In this post I tackle three other bill categories of interest to clean energy advocates: energy efficiency, energy storage, and electric vehicles.

There is more to some of these bills than my brief description indicates; I just highlight the points I think are most interesting. Also, as with the solar bills, there may be more bills added in the coming week, so keep checking back for updates.

Energy Efficiency

Virginia’s woeful performance on energy efficiency was the subject of a recent guest post here by my colleague Melissa Christensen. A number of legislators have tried in recent years to turn this around, with remarkably little success.

Delegate Rip Sullivan has worked as hard as anyone on finding legislative fixes. He has several efficiency bills this year. HB 963 is the most impactful, requiring electric and gas utilities to meet energy efficiency targets, and to submit plans to the State Corporation Commission (SCC) for its approval describing how they will achieve the targets. The bill would also require utilities and the SCC to prioritize money-saving efficiency measures over proposals for new generation or transmission facilities.

Taking a narrower approach to the problem, two other Sullivan bills address the four tests the SCC uses to determine whether to approve an energy efficiency program proposed by a utility. The SCC has relied on the Ratepayer Impact Measure (RIM) test to reject programs that otherwise would provide cost-effective energy savings. HB 964 removes the RIM test from the list of tests the SCC is required to consider when determining that an energy efficiency program proposed by an electric utility is in the public interest. Instead, the SCC would consider whether the net present value of a program’s benefits exceeds the net present value of its costs as determined under the Total Resource Cost Test, the Utility Cost Test, and the Participant Test.

Taking a different tack, HB 965 defines the Total Resource Cost Test as a test to determine if the benefit-cost ratio of a proposed energy efficiency program or measure is greater than one. An energy efficiency program or measure that meets the Total Resource Cost Test is declared to be in the public interest. If it fails the test, it would then be reviewed under the other tests.

Delegate Tim Hugo’s HB 1261 proposes another way to undercut the SCC’s over-reliance on the RIM test. The bill provides that an energy efficiency program proposed by an electric utility is in the public interest if the net present value of the benefits exceeds the net present value of the costs as determined by any three of the existing law’s four benefit-cost tests. At least, that is surely the intent. Other reviewers say the bill’s wording could potentially be interpreted in a way that undermines its intent.

Two other Sullivan bills also deserve mention. HB 560 establishes a revolving fund to provide no-interest loans to any locality, school division, or public institution of higher education for energy conservation or efficiency projects. HB 204 would allow localities to adopt ordinances to assist commercial building owners in getting energy usage data for tenants in the building.

Finally, Delegate Bell’s HB 58 would generally require state agencies to use LED bulbs instead of incandescent light bulbs for new outdoor lighting fixtures or when replacing bulbs in existing fixtures.

Energy storage

Energy storage is one of the hot topics in energy today. In most states, the focus is on advanced battery technology, which can take the form of battery packs small enough for residential and commercial customers, or arrays large enough to provide utilities with an alternative to new generating plants. The value of customer-sited battery systems goes beyond being able to use solar energy at night; batteries can also provide grid services and help communities prepare for widespread power outages caused by storms or attacks on the grid.

In Virginia, Dominion Energy currently seems more interested in pumped storage hydropower, a decades-old technology that uses reservoirs to store surplus energy, traditionally energy generated at night from coal and nuclear plants, for use in the daytime. A 2017 law gives Dominion support for pumped storage using old coal mines, potentially a boost for the economy of Southwest Virginia but an unproven technology rife with questions about its economic viability and environmental impacts.

At any rate, energy storage will be playing an increasingly important role in Virginia as elsewhere, and three of this year’s bills address it. Delegate Toscano’s HB 1018 seeks to incentivize customer acquisition of energy storage systems with a tax credit of 30% of an energy storage system’s cost, up to $5,000 for a residential storage system or $75,000 for a commercial system. Delegate Habeeb’s HB 782 addresses energy storage at the utility level. It requires the SCC to establish a pilot program under which Dominion and APCo would submit proposals to deploy batteries, up to 10 MW for APCo and up to 30 MW for Dominion.

HJ 101 (Toscano) is a study bill. It tasks the Department of Mines, Minerals and Energy with conducting a two-year study to determine what regulatory reforms and market incentives are necessary to increase the use of energy storage devices in Virginia (including pumped storage hydropower).

Electric Vehicles

As with battery storage, electric vehicle technology is only just starting to register as an important topic in Virginia, and its impact—on utilities, the grid, air pollution and the economy—is just beginning to be discussed. This may be the year legislators become engaged. DriveElectric RVA, an electric vehicle advocacy group, plans to offer test drives of EVs at the capitol on January 22, Conservation Lobby Day.

Three bills deal with EVs this year. HB 469 (Reid) offers a tax credit of up to $3,500 for purchase of a new electric vehicle. HB 922 authorizes local governments to install charging stations and charge for the electricity (individuals and businesses can already do so). HJ 74 (Reid) requires a study of the impacts of vehicle electrification, including on workers in the automotive repair industry. One of the selling points for EVs is that they require minimal maintenance.