Category Archives: Energy

Dominion to Bury Electric Lines for 6,000 Outage-Prone Customers

A screen capture from a Dominion video shows the machinery used to bury electric lines.

A screen capture from a Dominion video shows the machinery used to bury electric lines.

by James A. Bacon

The State Corporation Commission ruled earlier this week that Dominion Virginia Power can recover up to $140 million on what it has spent to bury about 400 miles of electric distribution lines. By putting the overhead tap lines of the 6,000 most outage-prone customers underground, the electric company hopes to significantly reduce time spent restoring electric power after hurricanes, ice storms and other widespread service disruptions. The benefit to improved reliability will cost customers an average of fifty cents to the monthly bill.

The General Assembly had passed enabling legislation in 2014 but the State Corporation Commission (SCC) turned down Dominion’s first proposal to bury 4,000 miles of overhead lines serving some 150,000 customers on the grounds that there was insufficient data to show a positive cost-benefit ratio. But the SCC approved the pilot program, which will apply retroactively to overhead lines that Dominion has already buried, with the expectation the Dominion will regularly provide data on outages and restoration times to use in evaluating the program.

“If we were to get the full 4,000  miles of underground line, it would cut the typical hurricane outage period of seven to ten days in half,” says spokesman David Botkins. There is no way to estimate what difference the pilot project will make until the data comes in, but he said Dominion targeted “the most outage-prone and most difficult to repair tap lines” in its service territory — “the worst of the worst.”

In granting approval, the SCC wrote, “We find that the [project] satisfied statutory requirements, and is reasonable, prudent, and in the public interest.”

Even with the kind of automated equipment shown in the photo above — Dominion will not be handing the job over to ditch diggers — the expense is considerable. The cost of $140 million spread over 6,000 customers is $23,000 per customer. Dominion’s long-term vision, covering about 150,000 customers, would cost an estimated $2 billion.

But Dominion contends that cost-per-customer is not a relevant metric. Payback will accrue to all customers when restoration is shorter following large weather events, allowing the Commonwealth to return to normalcy sooner, says Botkins. In fact, an industry expert estimates that the economic benefits of the first 400 miles of undergrounding exceeds the cost by a ratio of over 2 to 1.

Stated the SCC ruling:

Dominion should be prepared to establish, with specificity, how the [Strategic Underground Program] has resulted in demonstrated system-wide benefits, as well as documented local benefits to the neighborhoods in which distribution lines have been placed underground. The Company has the burden to collect the data necessary to measure … “whether the SUP can be a cost effective means of ensuring reliability for its entire system.”

The buried lines are scattered throughout more than 80 cities, towns, and counties in Dominion’s service territory. In a typical example, The company placed 11 miles of overhead lines to underground in King George County; 24 separate projects impacted 68 customers.

In major outages, Dominion has a hierarchy of response. First, it attends to hospitals, water pumping stations, emergency centers and other critical needs. Next it tackles major circuits where a single repair job can put a large number of customers back on line. Then the company works its way down to subdivisions with a few customers, and finally to individual houses.

“The overhead lines in the back lots are very labor intensive,” explains Botkins. “It’s hard to get the truck back in there. The crew has to do a lot of the work by hand. It’s very time consuming.”

Fed Official Still Optimistic about Offshore Wind

Wind turbines off the Danish coast.

Wind turbines off the Danish coast.

by James A. Bacon

As the cost of offshore wind energy in Europe continues to decline, Abigail Ross Hopper, director of the federal Bureau of Ocean Energy Management, believes that offshore wind will come to the United States eventually.

Responding to a question by Dave Mayfield with the Virginian-Pilot what prospect she sees for ocean wind energy by 2050, she said:

I think there will be turbines running up and down the coast, the Eat Coast and the West Coast, and I don’t think it will be a big deal. Just like I’m looking out the window right now and there’s power lines along the side of the road that I ordinarily don’t see because I’m used to them.

Recently, the Dutch government auctioned rights for two large wind farms in the North Sea. The winning bid came in at the equivalent of about $95 per megawatt hour generated — $40 per megawatt hour below the previous low set by a Danish project just last year. That’s still higher than the cost of other energy sources, but the trend-line is moving in a positive direction.

The U.S. has a lot of catching up to do, Mayfield notes. Compared to the 500 wind turbines off the coast of tiny Denmark, there are five turbines off the East Coast of the U.S. — off Block Island, R.I.

Bacon’s bottom line: Europe is driving down costs now because national governments used massive subsidies to build a large and competitive wind industry, with all the supporting infrastructure and expertise required to install wind turbines in the open sea. That scale and expertise does not exist in the U.S. yet, and given the fact that offshore energy policy is driven mainly by uncoordinated state initiatives, there is no sign that it will develop any time soon.

If all East Coast states could coordinate their policies, they conceivably could generate a critical mass sufficient to entice European major players to set up shop in the U.S. For whatever reason, no one has undertaken the task of getting all the states working together.

Here in Virginia, Dominion Virginia Power investigated the cost of building two experimental turbines off the Virginia Beach Coast. That project would have tested, among other things, innovations designed to help the turbines stand up to hurricane-force winds, thus laying the groundwork for the large-scale deployment of offshore wind power. But the cost of the two experimental turbines was so high that the power company did not think it could get State Corporation Commission approval to build. Progress has stalled since the feds pulled a $40 million research grant.

Virginia has the most to gain of any U.S. state from building a vital offshore wind energy industry because Hampton Roads, centrally located along the East Coast and home to a large ship repair industry, is the most logical location for companies to operate. But the McAuliffe administration has done little — at least nothing visible — to build the interstate cooperation needed to achieve European-style economies of scale. Perhaps that’s because the McAuliffe team has chosen to focus on solar energy, for which the economics are considerably more favorable and the development lead times are much shorter. Given the string of recent solar project announcement, the administration arguably made the right decision.

Hecate Announces Solar Deal in Cape Charles

Transparency: outlook murky.

Transparency: outlook murky.

by James A. Bacon

Governor Terry McAuliffe has announced yet another utility-scale solar deal, this one a 20-megawatt project in Cape Charles in Northampton County. The “Cherrydale Project” will generate enough energy to power more than 3,000 households throughout the region, states the governor’s press release.

The project was assembled by a newcomer to the Virginia solar scene: Chicago-based Hecate Energy LLC.

“As a Virginia native with family ties to the Eastern Shore region, the 20-megawatt Cherrydale solar development has been an exciting and gratifying project with which to be involved,” said Preston Schultz, Hecate’s director of development. “We are grateful to Northampton County for their support throughout the development of the Cherrydale Project.”

A quick perusal of the Internet revealed that Hecate’s request for a special use permit ran into local opposition from residents who opposed the loss of 150 prime acres of farmland in land zoned for agricultural  use. On the positive side, according to the Cape Charles Mirror, the project is expected to generate $750,000 in real estate taxes over 35 years, while Hecate offered $200,000 in a “community improvement grant” for Northampton County to use as it wished.

The “permit by rule” issued by the Virginia Department of Environmental Quality contains provisions to ensure that the environment is protected at the Cape Charles site.

“In my opinion, the Commonwealth of Virginia Permit by Rule process strikes the right balance between protecting critical local environmental, cultural and historical resources while at the same time providing opportunities for the new clean energy economy to take root and flourish in the Old Dominion,” Schultz said in the press release.

The 185-acre facility will utilize an “innovative tracking system,” noted the press release, that maximizes energy output from the available sunlight. The facility will interconnect with the Old Dominion Electric Cooperative and A&N Electric Cooperative system.

Bacon’s bottom line: After a slow start, utility-scale solar is taking off in Virginia. As usual, however, the governor’s press release doesn’t provide the data that allows us to calculate the cost-per-kilowatt of the up-front capital investment, much less how the levelized cost (cost of construction, financing, operation and fuel over time) compares to other energy alternatives.

We don’t even know who Hecate will sell the electricity to. The fact that the solar plant will interconnect with two Eastern Shore electrical cooperatives does not tell us who will ultimately buy that electricity. Will it be sold into the PJM wholesale market? Has an Amazon Web Services-like buyer contracted to purchase the power? Will ratepayers of the local electrical co-ops purchase the power?

The deal may be great, it may be a dog. We don’t know, and if other solar deals are any indication, the terms and economics of this one will not be released to the public — although, I must be clear, I have not asked Hecate for details.

Speaking generally, not of this deal in particular, the lack of transparency invites suspicion. If the economics of Virginia’s solar deals were beneficial to ratepayers, one might reason, the players involved would be eager to share the news. The fact that the information is not shared suggests that they have something to hide. I hope my suspicions are unfounded. But the deal makers could dispel them easily by making more information available.

Want more Solar and Wind Power? Then You Need More Gas Backup.

transmission_lineby James A. Bacon

Elona Verdolini, Francesca Vona and David Popp are deeply concerned about climate change and the need to deploy more renewable energy sources. “Decoupling economic activities from fossil-fuel use (and hence, from anthropogenic carbon emissions) is the only way to avoid severe and pervasive impacts from climate change while sustaining economic growth,” they write in a paper just published by the National Bureau of Economic Research.

But they also acknowledge a reality typically missing from economic studies of renewable energy. Wind and solar are not “dispatchable,” that is, they do not generate electricity upon demand; they generate electricity when the wind is blowing and the sun is shining. “This translates into high system costs of renewable generation, as it requires holding significant back-up capacity to ensure a balanced energy supply throughout the day. In fact, these challenges will only further increase as the share of energy generation increases to levels never witnessed before.”

Unless cheap electricity storage options become widely available in the immediate future, “the penetration of renewable energy will increase system costs, as a significant amount of capital-intensive and under-utilized back-up capacity will have to be maintained,” write the authors, who hail from Italy, France and the United States respectively.

Delving into data for 26 Organization of Economic Cooperation and Development (OECD) countries between 1990 and 2013, the authors found that an 0.88% increase in renewable energy capacity is associated with a 1% increase in the share of fast-reacting fossil generation capacity.

“To date [fast-reacting fossil] technologies have enabled [Renewable Energy] diffusion by providing renewable and dispatchable back-up capacity to hedge against variability of supply.  Our paper calls attention to the fact that renewables and fast-reacting fossil technologies appear as highly complementary and that they should be jointly installed to meet the goals of cutting emissions and ensuring a stable supply.”

Bacon’s bottom line: This is essentially the argument that the utility industry has been making, although the implications for Virginia of this high-level conclusion drawn from 26 OECD countries, many of which are far farther along in the deployment of renewables than the United States, are not immediately apparent.

PJM Interconnection, the regional transmission organization that supports wholesale electricity markets for Virginia, has estimated that the electric grid can accommodate up to 30% renewables without threatening the integrity of the electric grid. The current level of wind and solar in Virginia is a tiny percentage of that level, and even Virginia’s voluntary Renewable Portfolio Standard for 2025  is only 15%. So, it’s not as if wind and solar are likely to create the reliability issues seen in countries that heavily committed to renewables.

But this is not an issue we can ignore in the Old Dominion. If solar penetration is merely 1% or 2% of Virginia’s electricity, the need for back-up capacity is de minimus; any needed power can be purchased from wholesale markets. But what happens if solar and wind reach 15%? There is a finite amount of electricity that can be purchased from outside Virginia because there is a finite amount of transmission capacity. At what level of solar/wind penetration would Dominion Virginia Power, Appalachian Power and the smaller electric utilities be required to maintain expensive backup capacity? I don’t know of anyone who has even asked that question.

The question goes to the heart of the debate over energy policy in Virginia in the era of the Clean Power Plan, which will accelerate the phase-out of coal-powered electricity production. Environmental groups have pushed not only for more wind and solar, but they oppose the construction of new gas-fired plants, new pipelines to supply them, and new nuclear units. Some even oppose extending the life of existing nuclear units. Again, that’s fine when solar/wind is a negligible component of electricity output, but it creates problems if renewables come to dominate the system. The NBER paper reminds us that we need to understand the tradeoffs better as we make decisions that we’ll live with for decades. Right now, I fear that we lack the information needed to make intelligent choices.

DEQ Approves Utility-Scale Solar Permit in Buckingham

solar_panelsby James A. Bacon

The Department of Environmental Quality (DEQ) has issued a permit for construction of a 19.8-megawatt, utility-scale solar project in Buckingham County, Governor Terry McAuliffe announced yesterday. Construction of the 200-acre facility is expected to begin early in 2017 and be finished by the end of the year. The cost is estimated to run between $30 million and $35 million.

DEQ Director David Paylor hinted that more solar projects are in the pipeline. “DEQ is looking forward to issuing more of these renewable energy permits in the future,” he said. “Our priority will be to take the steps necessary to protect Virginia’s environment while helping the Commonwealth become a leader in renewable energy production.”

The project is being developed by Firestone Solar LLC, a subsidiary of Virginia Solar, headed by Richmonder Matthew Meares.

“We are very pleased and thankful to Buckingham County and the Commonwealth of Virginia for supporting a 100 percent Virginia-owned and operated utility scale solar developer by approving our Firestone solar project’s state permit,” Meares said in the press release. “We hope this is the first of many such projects by Virginia Solar in the Commonwealth promoting Governor McAuliffe’s goals of helping the environment creating new economic drivers, utilizing Virginia products and services, and attracting business to the Commonwealth.”

Few other details were available about the project from the press release. However, the project has been in the works since at least August 2015. An article in the Farmville Herald indicated that the facility would include “ancillary support facilities and electrical interconnections … to be transmitted on a Dominion distribution line.”

The project could employ 150 workers during the construction phase, but full-time employment after construction would be minimal. Stated the Farmville Herald:

The project would have up to three employees every two months on-site for system inspections, vegetation management and preventative maintenance. … In addition, one employee may be on-site for security at any time, according to the application. There are not expected to be any permanent employees stationed at the site.

Bacon’s bottom line: So much for the miraculous green-energy job creation machine: a couple of low-skilled, part-time jobs. Solar may (or may not) be good energy policy, but promises that it will spur job creation are a cruel delusion. (Not that the alternative, gas-fired power plants, are a big job creator either on a jobs-per-kilowatt basis. But power plant jobs do require a high level of training and education, and they pay well.)

As always seems to be the case with solar projects, the economics of the Firestone deal remain a mystery. It’s not clear who will buy the solar power — whether Firestone will sell into the PJM Interconnection wholesale market or whether it has lined up a specific customer take the electricity, as in Amazon Web Services. Another possibility is that the developer will just flip the project to Dominion Virginia Power, as has happened with other projects in Virginia.

The up-front cost of about $1,625 per kilowatt is more than twice the cost of a state-of-the-art gas-fired plant, but it is considerably cheaper than the $2,250 per kilowatt for the recently announced Oceana Naval Air Station. (That may not be an apples-to-apples comparison, however, because the Ocean deal may have included infrastructure improvements not included in the Buckingham project.) If Virginia Solar is selling its power to a private customer, the cost is immaterial to the general public. But if the power will be passed on to Virginia rate payers, cost is very germane.

There is little information about the developer. Virginia Solar doesn’t even have a website. (The domain name www.virginiasolar.com is available for purchase.) Matthew Meares, the principal behind Virginia Solar, describes his specialty as “solar and wind financial structuring” on his LinkedIn page. That page also describes him as managing director of Richmond-based Sunworks NC, which has a one-page website. The company’s core competencies include financial modeling of various “tax equity and debt structures,” capital structuring, development assistance, technical due diligence, and energy production analysis.

There is a cottage industry of entrepreneurs who do the leg work of identifying prime solar sites, consolidating the land parcels, lining up the regulatory permits and then flipping the project to a player with deeper pockets. The ideal solar site is located near an existing electric transmission line that requires minimal investment to connect to the grid. It is in a rural area where NIMBYs won’t object to its presence and local governments will welcome the boost to the tax base. It also helps when negotiating the acquisition of land parcels to be a no-name firm rather than Dominion Virginia Power, Appalachian Power or any other company that cries out, “Deep pockets!”

Update: Reader Erik Curren pointed me to the www.vasolarllc.com website, which provides a bit more detail. Virginia Solar LLC was behind a 17-megawatt project in Powhatan County, projected to be installed in 2016. “Dominion Virginia Power intends to purchase this project and has submitted it to the Virginia State Corporation Commission for approval,” states the home page.

How to Stop Worrying and Learning to Love the Nuke

Keel-laying ceremony for nuclear attack sub U.S.S. Delaware in April. Huntington Ingalls, owner of the old Newport News Shipbuilding shipyard, is one of the world's leading experts in small nuclear power plants. The ship's crew began extensive training in operating the nuclear reactor long before construction of the ship was complete.

Keel-laying ceremony for nuclear attack sub U.S.S. Delaware in April. Huntington Ingalls, owner of the old Newport News Shipbuilding shipyard, is one of the world’s leading experts in small nuclear power plants. The ship’s crew began extensive training in operating the nuclear reactor long before construction of the ship was complete.

by James A. Bacon

I don’t know what kind of future the nuclear power industry has in the United States, but whatever it is, Virginia wants to grab a piece of it.

The Virginia Nuclear Energy Consortium (VNEC) and the Center for Advanced Engineering and Research (CAER) have announced a plan to join forces to bring more nuclear research dollars into Virginia and create more nuclear workforce opportunities, reports Virginia Business magazine.

VNEC was created in 2013 by the Virginia General Assembly as an independent authority with the goal of making the Commonwealth a global leader in nuclear energy. CAER’s mission is to increase competitiveness for  core, high-wage industries in the Lynchburg area around a knowledge-based research hub.

The two organizations agreed to pursue initiatives related to researching new nuclear technologies, education and training programs, and bringing nuclear-related businesses into Virginia,

“This agreement will help us ensure government, academic institutions, and private commercial entities make the most of Virginia’s capabilities for contributing to the next generation of nuclear technology and education, opening doors for additional research funding, creating opportunities for new jobs, and launching new businesses in the commonwealth,” Sama Bilbao y León, director of nuclear engineering programs at VCU and chairman of VNEC, said in a statement.

It wasn’t clear what resources will be applied to the initiative, although the article did allude to “the historical support” of the General Assembly and the Virginia Tobacco Regional Revitalization Commission as possible sources of financial backing.

VNEC has endorsed the use of nuclear power in Virginia’s electricity generation mix, stressing the need for zero CO2-emissions baseload capacity to offset the intermittent generation of solar and wind. But VNEC’s main thrust is to bolster the economic prospects of key players in the nuclear power industry including AREVA Inc. North America, a Lynchburg-based subsidiary of the French nuclear construction and services company; Babcock & Wilcox, a Lynchburg-based nuclear service firm; and Huntington Ingalls Industries, the Newport News-based builder of nuclear-powered submarines and aircraft carriers.

Bacon’s bottom line: Nuclear power has had a bad image in the United States ever since the Three Mile Island episode, not to mention the Chernobyl and Fukushima disasters. Moreover, the massive safety redundancies built into nuclear power plants make them incredibly expensive. But the industry is working on new technologies that might bring down costs and alleviate safety concerns, the most promising of which is a new generation of smaller reactor.

Virginia has had a good experience with nuclear. Dominion Virginia Power’s nuclear facilities in North Anna and Surry have among the best tracks records in the country. The U.S. Navy in Norfolk has operated nuclear-powered warships without incident for decades. Why not embrace the industry? Why not benefit from other peoples’ unfounded fears?

More on the Oceana Solar Plant: Expensive but No Cost to Virginia Rate Payers

More details dribbling in about the Oceana Naval Station solar power plant…

According to Dominion Virginia Power’s SCC filing, the project is expected to cost $39.6 million, excluding financing costs, or $2,252 per kW. That is roughly three times the up-front capital cost per kW of Dominion’s newest gas-fired power plant under construction in Greensville County. Of course, solar’s “fuel” is free, while the cost of natural gas is not. The truly relevant comparison would be the so-called “levelized” cost, including both capital and fuel, plus whatever value you attach to the reduction of carbon dioxide emissions.

Quoting from Dominion filings, State Corporation Commission spokesman Ken Schrad explains the unusual deal structure, which includes the Commonwealth of Virginia as an integral component:

Through the partnership arrangement, [Dominion] will construct, own and operate the Oceana Solar Facility. …. The electrical output of the facility will be solely dedicated to the Commonwealth, which the Commonwealth has agreed to purchase for a negotiated price for a term of 25 years. … The sale of the energy is occurring pursuant to an agreement entered into between Dominion Virginia Power and the Commonwealth. Under the agreement, the Commonwealth is able to benefit from the sale of the energy into PJM [Interconnection, a regional transmission organization], while also supporting the deployment of additional solar generation in Virginia. …

The consolation for Dominion rate payers is that they are not subsidizing the project. “There will be no impacts to the Virginia jurisdiction cost of service, base rates, fuel rates, or [Rate Adjustment Clauses] as a result of [Dominion’s] ownership and operation of the project during the 25-year term of the agreement,” writes Schrad.

This is a highly unusual deal structure. The McAuliffe administration probably deserves kudos for creativity, but I still have questions about the structuring, cost ad risk allocation of the deal. Alas, it just turned Margarita time in Emerald Isle, N.C., so I must demur.

Maybe readers can provide insight. For anyone interested in digging into the details, the case number is PUE-2016-00079. The documents have been filed but, as of this moment, not yet posted online.

— JAB