Lots of Sunlight, Not Much Transparency

Clear as mud

Clear as mud

by James A. Bacon

Two months ago the Department of Navy announced the signing of a contract with Dominion Virginia Power to purchase enough solar electricity to meet 6% of Naval Station Norfolk’s electric power needs for more than 10 years. The next day, Dominion announced the purchase the Morgans Corner Solar Facility, located within Dominion’s North Carolina service territory but developed by Chicago-based Invenergy, Inc. The net result: Morgans Corner would supply green electricity to the naval station.

Key terms of both deals were not released. Dominion did not say how much it paid to purchase the project from Invenergy, nor did the Navy say how much it would pay for the electricity. Invenergy had little to say about anything. There was little tangible information in either press release, nor could I extract information in interviews to determine if the transactions are in the best interest of U.S. taxpayers or Virginia rate payers.

Virginia’s electric power companies are under pressure from a voluntary Renewable Portfolio Standard to generate 15% of the state’s electricity from renewable sources by 2025. At the same time implementation of the Environmental Protection Agency’s Clean Power Plan, which requires Virginia to reduce its carbon dioxide emissions 32% by 2030, will compel power companies to phase out coal-fired electricity production in favor of natural gas and renewables. Given the relative economics of wind and solar in Virginia, it looks like solar will be the main vehicle for reaching clean power goals.

Here’s the problem: These deals are about as transparent as a muddy windshield. As Virginia utilities position themselves to devote hundreds of millions of dollars in renewables — Dominion alone expects to invest $743 million over the next six years — the public doesn’t know what kind of deals are being cut.

When I started digging into this story, I hoped that the Morgans Corner deal might provide some insight into the economics of solar energy in Virginia. After all, Naval Station Norfolk is part of the Department of the Navy, a public agency that one would think would have a commitment to transparency on matters not compromising the safety of our military forces. But after badgering Navy spokesmen for weeks, all I could get was an email response with information that I, for the most part, had extracted already from Navy websites. Dominion was more cooperative — the company set up interviews with two executives — but the company was limited by non-disclosure agreements as to what they could say. As for Invenergy, repeated interview requests yielded no more than a referral to the company’s original boilerplate-laden press release.

Taxpayers are paying for this solar electricity. Why can’t we have access to the terms of the contract? It’s not as if Naval Station Norfolk is a corporation that maintains secrecy for competitive reasons. I feel like something is being hidden from the public. Sadly, the public doesn’t know enough to care.

Here’s what we know…

As part of the Obama administration’s larger goal of reducing government greenhouse gas emissions, the Department of the Navy has set a goal of producing or procuring 1 gigawatt of renewable electricity by the end of 2015 on its way to producing 50% of its electricity from alternative sources by 2020.

According to Diane Corsello, Dominion’s director of business development for solar generation, the utility has developed a “good working relationship” with the Navy over the years. “They reached out to us,” she said, for help in meeting the renewable mandate. The Navy and Dominion explored multiple options for providing green energy to Naval Station Norfolk, including both on-site and off-site facilities.

Around that time, Invenergy was developing a 20-megawatt solar facility in North Carolina’s Pasquotank County, taking advantage of state and federal tax benefits. The company, which specializes in developing and constructing renewable energy projects, had 3,500 megawatts of such projects in the development pipeline as of September. Developing a solar project entails, among other things, acquiring land, typically near a high-capacity electric transmission line, and obtaining a slew of permits before construction can begin.

“It takes a lot of time to develop a site from a greenfield condition,” explained Todd Flowers, senior business development manager for Dominion.

While working with the Navy, Dominion identified the Morgans Corner project as a good match. Invenergy had moved Morgans Corner far along the development process. The 20-megawatt project, which will install 81,000 solar panels on 110 acres, had all its permits and key agreements in place, and construction was scheduled for completion in April 2016.  Dominion could step in and acquire the facility in a “build-transfer” agreement.

“The Morgans Corner project demonstrates Invenergy’s ability to develop and construct utility-scale solar facilities that provide long-term, clean renewable energy,” said Invenergy’s EVP Jim Shield in a press release. “We’re pleased Dominion wants to take ownership of this great project and we look forward to exploring additional opportunities to work with them in the future.”

In turn, Dominion will supply 25 megawatts of electricity to Naval Station Norfolk, equivalent to 6% of its annual consumption, in a 10-year contract with a 10-year option.

Physically, there is no way to deliver the “green” electricity generated by the Morgans Corner facility to directly Naval Station Norfolk. Once the solar-generated electrons enter a transmission line, there is no controlling where they go — they flow through the grid in accordance with the laws of physics. However, mechanisms have been established to certify that Naval Station Norfolk will be consuming green energy.

“We’ll have a meter at the [Morgans Corner] generator and measure every kilowatt generated,” explained Dominion’s Corsello. As that electricity goes onto the grid, Dominion will garner Renewable Energy Credits (REC), which, in the jargon of the electric power industry, will be “retired,” or credited, to Naval Station Norfolk. “For every megawatt hour that’s generated, we will retire an REC on behalf of the Navy.” These transactions will be tracked and certified by PJM Interconnection.

But is it a good deal?

While the parties are open about the legal structure of the deal, they won’t say much about the underlying economics. How much will the green electricity cost Naval Station Norfolk, and indirectly the nation’s taxpayers on a per-kilowatt basis? No answers. “We will not disclose the price,” said Corsello.

The average cost per Kilowatt for Dominion’s residential customers is about 10.9¢ per hour; the rate for large industrial customers is 5.7¢. We don’t know what the Department of Navy will be charged.

I asked Lt. Chika Onyekanne with the Navy Office of Information what price the Navy will pay, and whether the Navy will save money either in the near- or long-term future.

“The rate that the Navy will pay is consistent with the current rate structure over the agreed term,” Onyekanne responded in an email. I guess it all depends on what the meaning of “consistent with” is.

The Navy justifies the move to renewable energy nationally on the grounds that it “promotes more secure and resilient installation operations.” How does that work out in the case of the recently inked solar deal for Naval Station Norfolk, I asked. How is solar energy more “secure” than Dominion’s existing power mix? How is it more “resilient”?

Onyekanne’s response: “Signing long-term contracts for renewable energy helps to increase the DON’s energy security by providing long-term cost stability and diversifying our resources.”

Again, no hard numbers.

The wonderful thing about solar energy is that the fuel is free — and it won’t increase in cost, as many observers think will happen to natural gas. But the benefit of cost stability provided by the Morgan Corner solar plant will be offset to some degree by higher up-front capital costs per kilowatt-hour generated and the need to access backup power when the sun isn’t shining in northeastern North Carolina.

How well, I asked, does the power output of Morgan Corner match up with the electricity demand profile of Naval Station Norfolk? No answer from the Navy. Dominion at least answered the question in general terms. Naval Station Norfolk, the largest naval base in the world, has a rate structure that encourages the facility to manage its peak demand, said Corsello, and most of the solar plant’s generation will occur during on-peak periods, she added.

So, maybe Morgans Corner is a good deal, but, then, maybe the Navy paid through the nose to meet the end-of-year deadline for meeting its 1 gigawatt-per year green-power goal. (A gigawatt is 1,000 megawatts.) At this point, it’s impossible for the public to know.

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21 responses to “Lots of Sunlight, Not Much Transparency

  1. Don’t feel bad. I FOIA’ed the Va. Dept. of Health Professions a number of times. They claimed letters written to the Dept Head as being unable to be released. Those letters complained about the dept, how they were treated, and basically how they felt on the people/process.

    Yet the Dept. Head is quoted saying something from one of the letters. I kid you not, it is in the Va. Pilot. I can send you the email.

    They are doing this to keep themselves and corporations in power.

    • Virginia has lots of loopholes and exemptions in its FOIA law. I haven’t invested the time to figure them all out — and I’ve been a journalist my whole career. It’s got to be doubly tough as a citizen.

    • Jim, you say, “Taxpayers are paying for this solar electricity. Why can’t we have access to the terms of the contract?” Of course I agree, but this is not the first federal procurement contract to suffer from opaqueness! More surprising is the extent to which the opposite party, Dominion Resources, can shield this contract from scrutiny. As a business venture of DR’s unregulated subsidiary Dominion Energy, the SCC may not have the right to review the Morgans Corner solar deal up front, but it certainly can ask questions about that contract insofar as Dominion Virginia Power customers are asked to pay directly for the power resulting from that deal. If the power from Morgans Corner is sold into the PJM energy market and only the renewable resource credits flow directly to the Navy, then arguably the effect on DVP customers is too indirect to support VSCC jurisdiction to review the contract; but if they can review it, they can and should release its contents to the public.

  2. There are about 28,000 MW of solar power installed in the U.S. today. For the Navy to have 1/28th of that capacity seems very high. Perhaps their goal is to use 1 gigawatt-hour of solar energy rather than have 1 gigawatt of installed capacity. There is quite a difference between those two numbers.

    It is possible that Dominion has a power purchase agreement with the Navy rather than putting the output of the solar facility through the normal utility billing function. This provides power at the rate it is produced by the solar panel, plus transmission and distribution costs. This price might be competitive with the Navy’s rate, which is probably a high-volume commercial rate (not industrial) since I suspect their daytime use is much higher than their night time consumption. A solar power purchase agreement could reduce their demand charges, since solar output would be highest during their peak usage period. Demand charges can be up to nearly half the monthly bill for commercial and industrial customers.

    The cost of solar power is dependent on the amount of sunshine, but it is also highly dependent on how the deal is structured. Who gets the tax credit and the accelerated depreciation? What is the cost of financing, the site development costs, etc. Often firms consider their deal structuring ability to be a competitive advantage, so they don’t want the details of the agreement to be made public.

    The energy security issue is real, especially to members of our armed services. To most of us, the cost of securing fossil fuels shows up in higher taxes (for wars) and at the gas pump. Our soldiers pay with their lives. The DOD knows that defense budgets will have to get leaner. So they are doing more with less by securing long-term fixed price supplies of energy they can count on and don’t have to go to war to defend.

    Which is an argument for keeping our strategic source of natural gas at home and affordable.

  3. Dear Jim — Both you and TomH refer to “the energy security issue.” These energy-source deals between a niche supplier of specialty power and a single customer are terrific transactions on paper, but within an ISO-managed grid like PJM’s they are absolutely meaningless when it comes to power-supply SECURITY, for a military customer or anyone else.

    Obviously, the Norfolk Navy Base is not physically better-supplied from Morgans Corner, NC; there is no physical connection between the two except by way of the larger electric grid. Dominion may own and maintain most of those wires but it is PJM that operates all of them. So, the security of the supply of the Navy’s power, to the extent it’s power generated in NC and delivered to Norfolk, resides in the hands of a system operator located near Valley Forge, PA. The Navy hasn’t bought a damned thing in the way of additional security by this contract. Although, most of these green contracts are structured as if to imply additional security, that isn’t what they provide.

    What those contracts do provide is a way for the retail customer to say, I bought all renewable resource generated power (RRGP). Kilowatts of RRGP aren’t any different than kilowatts of regular power and the electrons flowing through the grid are indistinguishable and impossible to track, so it’s impossible to say which electrons go to which customers; but the customer who pays for RRGP at least has the satisfaction of knowing that the amount of RRGP he pays for is actually being delivered into the grid somewhere, matching what he withdraws somewhere else.

    PJM will make sure that Dominion’s substations at the Navy Base are supplied with all the power they need from the grid at all hours, regardless of the sun’s shining. Dominion will meter this supply and bill its retail customer(s), in this case the Navy, for all power delivered by PJM. PJM will pay Dominion for its deliveries into the Grid from all of Dominion’s generators including when, as and if deliveries occur at Morgans Corner. The fact that these deliveries by Dominion may not match up in time or quantity with Dominion’s sales to the Navy at Norfolk is irrelevant, except for billing purposes. The bill depends on whether the deal is structured as an energy market transaction or a pure transmission transaction; that is, whether PJM buys all power received at Morgans Corner and sells its deliveries to Dominion at the Navy Yard at the PJM market price for energy, or re-delivers Dominion’s power back to Dominion for a distance-based transmission charge; the latter is possible under PJM rules although it’s rarely done because it usually ends up costing more (PJM runs a very efficient energy market).

    The important point here is that the NSA and the Architect of the Capitol and DOD – Pentagon and Ft. Belvoir and the Naval Academy and the University of Virginia and Quantico M.B. are all supplied by retail suppliers who buy a mix of power from local generators and from distant sources through the PJM wholesale markets. All of them care about security, but you don’t see special deals with generators as a general rule. By contracting with Dominion to complete the Morgans Corner solar plant, the Navy has not advanced the physical security of its power supply one iota, but it has bought the bragging rights to some renewable-resource generation, whatever that’s worth.

    It’s a fair question, what has this deal cost the Navy, as compared to what the default cost of generic electric power from the grid would have been? But let’s leave “energy security” out of it.

  4. Acbar,

    You are correct about the precise nature of the PJM transaction, as usual. My comment about “energy security” was in the somewhat theoretical sense and I also crossed between talking about oil dependence and electricity generation. That is why my recommendation, in an earlier conversation about this transaction, was for the solar generation to be at the base where it could provide some level of power if the base could isolate itself from the grid during power outages (using a microgrid). That actually would provide a bit more security.

    In a larger sense, I believe that we will be more energy secure when we adapt our system (including energy efficiency) to live off our energy income (solar & wind) rather than continuing to withdraw from our savings account (fossil fuels). That is not sustainable in the long run. Affordable natural gas is very valuable as a fuel to balance variations in renewable output, especially until storage technologies become less expensive. We should not be exporting it for a short term gain, only to charge ratepayers far more for it in the not too distant future.

    Electricity can be used to displace oil by using it more widely in our transportation system. This could be a new market for Dominion and could relieve some of the pressure to raise rates as electric load declines.

    I am concerned that Dominion is treating solar just like any other form of generation and is ignoring its considerable value as a distributed energy resource. I suppose they believe it is in their interest to make others believe that solar is least expensive only when built in large utility scale installations so that they can head off third-party competition and establish a mindset that they can use to erect barriers to entry by others using the GA.

    • My comment was directed more at the Navy itself, posturing to portray this deal as a “security” enhancement. It was Jim who reported, “The Navy justifies the move to renewable energy nationally on the grounds that it “promotes more secure and resilient installation operations.” How does that work out in the case of the recently inked solar deal for Naval Station Norfolk, I asked. How is solar energy more “secure” than Dominion’s existing power mix? How is it more “resilient”?” So often when the military talks about a procurement contract conferring a “security” benefit it’s merely a diversion intended to justify a deal that makes little economic sense on any other grounds.

      Your point about solar generation located physically on the Navy Base is correct; that might have actually provided an emergency-generator function that was worth something in terms of energy security (not much, I’m afraid, but something); but that’s totally lacking here, and my literal-minded response was to disparage the Navy’s “security” claim accordingly. You also said “The energy security issue is real, especially to members of our armed services,” and I think you had energy independence from the Middle East in mind; it’s a stretch to read that meaning of “security” into the Morgan Corner solar deal but I won’t disparage the Navy for that. But finally you add, “In a larger sense, I believe that we will be more energy secure when we adapt our system (including energy efficiency) to live off our energy income (solar & wind) rather than continuing to withdraw from our savings account (fossil fuels).” Yes, completely agree with you there, that’s the real security we need to achieve for our children’s sake if not our own, and closer, too, to what I suppose was intended by the proponents of the Navy’s procurement goal, here, if not the Navy itself, of “1 gigawatt of renewable electricity by the end of 2015”.

  5. If not mistaken – Congress is the one that directed DOD to start developing renewable and alternative energy programs and I’m pretty sure it started back in 2003 under GOP and was expanded in 2009 under Dems.

    http://www.acore.org/wp-content/uploads/2012/01/DoD-Renewable-Energy-Primer.pdf

    Part of the original ratioinale was to upgrade bases so they could operate off grid in the case of grid-crippling emergencies.

    I know the facility that I worked at – had, at some expense – created connections to two different utilities… as well as had backup generators scattered across many buildings.

    how this morphed into buying solar at a remote site where it has no benefit what-so-ever to the base in the event of the loss of grid power – is beyond me.

    this is a prime example of how money gets spent by the govt in ways unintended from the original intent.

    however, unlike others, I do not think we should burn the govt down and start over from scratch.

    this is a normal thing that happens whenever there are humans involved in such enterprises and ventures – private or public.

    However – for those who want to make this ONLY about govt – none other than Walmart is now engaged in a similar strategy … and as we all know -Amazon.. and other data center operations.

    Seems to me that efforts to track down renewable energy efforts toward some govt-directed initiative – as part and parcel of a partisan agenda – really does not get us anywhere.

    The GOP was totally on board with such initiatives back before 2008 during the Bush administration.

    It’s when Climate Change joined the renewable energy arena that partisan things started happening.

    So NOW -we’re trying to find the “smoking gun” of Obama ordering the bases to use Solar ….. to prove ..I guess.. yet another example of leftist thinking infesting the govt..to go along with CPP . or some such awful stuff.

    and of course – all of this will be rolled-back, repealed, stomped out of existence after we throw the leftists out of office and get back to common sense govt …

    at some point – I do expect a vote in Congress to repeal Climate Change itself!

    😉

    • Re: “So NOW -we’re trying to find the “smoking gun” of Obama ordering the bases to use Solar ….. all of this will be rolled-back, repealed, stomped out of existence after we throw the leftists out of office and get back to common sense govt ” — gee, isn’t it amazing how people are finding things to like about George W. Bush in retrospect? He actually saw a distinction between terrorists and Muslims generally? He actually sought to improve our schools and got a bill passed to do so? He actually did something about a middle eastern dictator who badly mistreated his own people? He actually pushed for and signed a bill mandating federal facility procurement of renewable power? Tell that to Hillary and Donald!

      • My support for George Bush’s Middle basic East policy, its thrust and intent, is as unwavering today as it was the day after 9/11.

        I suspect that: After our history that started in the year 20o1 in the Middle East has been collected and thoughtfully considered by later generations (including that history’s currents and consequences still unfolding and far from concluded), I suspect then that those generations of scholars will end up mostly in George W. Bush’s Middle Eastern Corner, in stark contrast to today’s conventional thinking (or gross lack thereof).

        This reappraisal could happen very quickly given the rapidly accelerating pace the history today. By earlier standards, however, this process would typically take at least one hundred years. Thus, we now are only now beginning to see Woodrow Wilson clearly. A still, far too few today understand Teddy Roosevelt. For example, see:

        http://uvamagazine.org/articles/fight_or_flight

        Will these folks never learn? Are they still without a clue a 100 years later. Perhaps these folks at UVA are too busy there trying to relearn what history really is and how it’s is made and how it is discerned.

    • I am not sure if Bush admin started the military renewables push, but it would make sense because the electric vehicle and alternate fuels push also started under Bush. But that was during a period of panic about USA energy security. Daniel Yergin mentions Bush’s concern about energy independence in his writings. Since then however it is a whole new energy world for the North America and USA. So I too find the argument of military energy security silly these days, as we are awash in North/South American fossil fuels.

      In 2008, Obama continued the Bush programs as economic development, but also when Obama first took office, we still did not appreciate the natural gas boom. Not to mention the general North American and South American energy booms. So the justification has shifted from lack of energy supply to, since we apparently actually have energy supply, to carbon reduction mandates. And I guess job-creation is still in there.

      • A good point as well.

        Somehow, this brings to mind the US Nuclear Navy, how its nuclear powered submarines and aircraft carriers brought us an immense security advantage at its deployment and for a long time thereafter.

        Here, as has been pointed out, we can’t know the wisdom or foolishness of this solar acquisition because the US Navy will not tell us the facts, and most likely is hiding the truth from from us.

        Indeed, it’s reasonable to assume now that this failure to disclose the facts is likely being done under orders of higher ups in the Navy or elsewhere by reason of strong political pressure or fear of telling the truth, given the nature and track record of this presidential administration.

        The problem is compounded by the growing realization by ever more citizens that their Federal government does now tell, and has not been telling, us the truth on a whole variety of important issues, but instead hides the truth, or spins it out of recognizable shape for reckless political advantage, or simply flat out lies to us when it serves the Federal Government or its Administration’s private purposes.

        • To illustrate my point:

          If you want to understand better the political corruption that confronts the US Military, I invite you to listen to the Ray Mabus, the current Secretary of the United States Navy at:

          http://www.pbs.org/newshour/bb/navy-secretary-gender-bar-women-marine-combat-roles

          The current refusal of the US Navy to tell us what is going on with regard to the transaction that forced the US Navy to suddenly acquire solar power, and refuse to reveal to us American citizens the facts behind that transaction and the forces that drove it, well then it is quite likely that your answer will be found in the Office of the current Secretary of the Navy, Ray Mabus, and those folks in the White House who tell that Secretary of the Navyt ( and through him the US Navy) what to do, what to say, and what to refuse to to say to the American people. This is how our Federal Government deals with the defense of us and our Nation.

  6. Jim’s article here (Lots of Light, Not Much Transparency) as amplified and explained by Acbar’s follow on comments is Bacon’s Rebellion at its best.

    Among many things, Jim’s article and Acbar’s comments, in my opinion, show how the US Military can be corrupted by its own Federal government. How our nation’s military can forced by its own government into ideological and political games and postures that forces that Military to lie to and hide from the very people (the citizens of this nation) that our military is bound to protect. And in so doing our military is forced to undermine its own legitimacy, as well as weaken its own military capability to defend the nation.

    This exchange, in my opinion, also shows the power of the Federal government to corrupt the very people as well as the institutions it is tasked to serve. It does this by shifting benefits among competing interests based on ideology, political favor, and for political and power advantage (its own and special interests). This encourages citizens so impacted, whether positively or negatively, to fight for financial, social and ideological advantage over other citizens, which of course further corrupts the virtue of individuals within society and our society generally.

    In short, a corrupt US Federal Government is a terribly corrosive and intrusive instrument of illegitimate power. It spoils and ultimately ruins most everything it touches.

  7. Gentlemen, your comments have helped clarify what I should have made the major issue of this story: how an arbitrary 1-gigawatt deadline rushed the Navy into signing a solar deal that in no way advances the Navy’s strategic goals of making Naval Station Norfolk either more “secure” or more “resilient.”

    If the goal is to make the naval station more secure and resilient, the logical action would have been to put the solar facility either on base or very nearby, and then to create a micro-grid that could operate on its own in the event of a disruption to the larger electric grid. Signing a deal with a facility that would have been built in North Carolina anyway does nothing to advance that goal.

    The Navy refused repeated requests for interviews and totally dodged the question in its email response.

    • Let’s hasten to add, the solar purchase by the Navy here DOES promote the goal of more renewable power generation, which indirectly by increasing the volume of solar generation in this country DOES help bring down the manufacturing cost per unit of solar p.v. cells, and those are good things. I just cringe (like Reed) at the Navy’s claim that “security” is served here, at least the kind of Naval-base security most people think of. This procurement contract should make sense solely on cost, or if it doesn’t, we should all be able to see how much of a subsidy for solar is involved. We should also be able to see what Dominion is getting out of this deal if any of Dominion’s retail ratepayers are paying one bit for it.

  8. re: transparency –

    it’s not like you got what you want -transparency-wise – regardless of CPP and Obama..

    say..for instance PPTA

    or for another how much each county, region actually generates in gas taxes

    or the ROI on a given project…

    or here’s a good one at local govt – what the school boards spend local discretionary money on – that is over and above the required match?

    etc, etc.

    I’m not justifying it – I’m just saying that the lack of is not some leftist plot… that the POTUS has cooked up different from other POTUS or govt.

    it’s the inclination of govt to fend off snoopy reporters who are obviously looking for a “gotcha” expose….

    right?

    anything that starts off saying stuff like ” the power of govt to corrupt”….etc, etc, blah blah blah , yadda yadda yadda

    is getting boring SUCH WHINING!

    since when did you have as much govt transparency as you wanted?

    Part of what is going on – is that we have chosen to get ourselves into a hyper-partisan political environment – and govt agencies are well aware of it and do whatever they can to keep another blossom turd from erupting on their agency….

    it’s gotten like the inquisition…. torches, pitchforks and burning at the stake for those who are stupid enough to let some group or individual take them down………..

  9. I’m sure Bessa and his ilk will be all over this shortly .. makes you wonder how much of GDP is squandered by these types of hangers-on.

  10. Totally unrelated to all this wonderful content…

    I loved the art “Clear as Mud” which opened this column.

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