Category Archives: Energy

The Gas Boom Is Over

Natural gas storage tanks in the Marcellus shale fields. Photo credit: New York Times

By Peter Galuszka

The boom in shale natural gas is over, reports The New York Times.

The trend raises more questions about billions of dollars worth of gas-related projects in Virginia, including Dominion’s plans to build the Atlantic Coast Pipeline and other firms’ efforts to place two big generating stations near Charles City.

The boom in shale gas began a decade ago when hydraulic fracking methods went into wide use in fields such as Marcellus in West Virginia and Pennsylvania, Eagle Ford and Permian in Texas and Williston in North Dakota.

The results were profound as gas displaced coal as a major generator of electricity. A bump in exporting liquefied natural gas (LNG) loomed, as Dominion converted its Cove Point LNG facility to handle exports.

Independent firms such as Chesapeake Energy in Oklahoma led the way. Big energy firms such as Exxon Mobil and Chevron bought up smaller firms and invested billions in shale gas operations. Numerous pipeline projects were announced, including the Atlantic Coast Pipeline and the Mountain Valley projects in Virginia.

The result? Too much gas and resulting price drops.

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Watch Out, Here Comes the Transportation and Climate Initiative

Virginia voter priorities. Source: Click to enlarge.

by James A. Bacon

A new poll from a “nonpartisan nonprofit think tank,” MassInc., has found that 60% of Virginians surveyed support the Transportation and Climate Initiative Framework while only 29% oppose it and 11% are unsure of their feelings, reports The Virginia Mercury.

We know right off the bat that the findings are nonsense. The fact is, most Virginians have never heard of the Transportation and Climate Initiative. Those who answered MassInc.’s questions were responding to a description of TCI provided by MassInc.’s pollsters:

Under the plan, companies that sell and distribute gasoline and diesel fuel to gas stations in the region would have to pay for the pollution created by the fuels sold and used there. Each state in the program would get a share of the money collected from those companies, based on how much fuel is used in their state. States could use this money to make transportation in their state better, cleaner, and more resilient to the effects of climate change. They could also use it to help residents with any higher costs the companies try to pass on to them.

That poll is about as loaded as you can get. Continue reading

S&P Global Slams Dominion for Gas Plants

Dominion Virginia Power’s gas-burning plant in Brunswick County.

By Peter Galuszka

International financial analysis firm S&P Global has issued a scathing report criticizing Dominion Energy Virginia for over emphasizing future electricity demand and proposing unneeded natural gas-fired generating plants.

According to S&P: “An examination of State Corporation Commission, or SCC, records; Dominion’s past integrated resource plans, or IRPs; campaign finance documents; and independent reports, along with interviews with utility analysts and environmental advocates and statements from Dominion officials, shows that the company has consistently over-forecast electricity demand to justify building new capacity, primarily natural gas plants with dubious economics that will ultimately be paid for by ratepayers.”

Dominion plans on adding at least eight gas plants with a generating capacity of 3,700 megawatts by 2033, S&P reports. An update to its 2018 IRP plan would add three alternatives that would add 2,425 megawatts of gas capacity by 2044. Continue reading

Replacing One Existential Threat with Another

by James A. Bacon

I’m a big fan of Nassim Nicholas Taleb, whose thinking on such subjects as “black swan” events, “Intellectuals Yet Idiots (IYIs),” “antifragility,” and “skin in the game” I have incorporated into my commentary on this blog. So, when Taleb invokes the precautionary principle in the context of climate change, I take his argument very seriously.

In a nutshell, Taleb contends the accuracy of climate models predicting catastrophic increases in global temperatures don’t matter. We have only one planet, and if there is even a remote chance that rising CO2 emissions will wreck it, humanity cannot afford to take that chance. The environment is a complex system, he writes. “Push a complex system too far and it will not come back.” The uncertainty surrounding climate change projections, far from being a reason to dismiss predictions of catastrophe, puts the burden of proof upon those who claim absence of harm. Read a succinct statement of his thinking here.

I’ve been pondering this argument for quite a while, and I agree with it… to a point. But I think it is incomplete. In the statement I linked to above, Taleb (and his co-writers) do not explore the implications of their logic. The obvious follow-up question is, OK, if climate change is an existential threat, what do we do about it?

What if the proffered solution to climate change creates its own existential threat? Continue reading

Ignore the ROE Decision. Dominion Gets It All.

Crying All The Way To The Bank

By Steve Haner

After a long, expensive and contentious legal battle producing a huge case record, the State Corporation Commission left Dominion Energy Virginia’s authorized profit margin unchanged Thursday.  The return on equity figure did not go higher, as the utility demanded, and did not go lower, as just about everybody else involved in case demanded.

The SCC order is here.

You will see report after report in news media now that the authorized return is 9.2%, such as this one. This is wrong. The authorized return, because of Virginia’s uniquely pro-stockholder state law, is really 9.9%. The law allows the utility to keep 100 percent of the first 70 basis points of excess profit above the stated allowed profit.  With the large amounts involved over multiple years, that extra 70 basis points is real money out of your pockets.  Continue reading

Northam Appointee Opposes DEV’s Green Tariff

Virginia City Hybrid Energy Center in St. Paul, which burns both coal and wood biomass. It is the centerpiece of Dominion’s proposed 100% renewable service, infuriating environmental opponents. Dominion photo.

By Steve Haner

Is Governor Ralph Northam now on both sides of the electricity retail choice issue? Having sent a strong signal weeks ago that he would oppose 2020 legislation creating competition for all customers, his administration has now intervened in a regulatory dispute asking to protect competitive choice for 100% renewable electricity. You are only free to choose if you choose green?

In order to stop other companies from selling so-called 100% renewable electricity in the Dominion Energy Virginia territory, the utility needs its own version of this shell game approved by the State Corporation Commission. The next hurdle in that long road is a hearing at the SCC Thursday.

When we visited this saga in August, Dominion’s application for what it calls Rider TRG had been filed but few of the likely opponents had responded. A long list of complaints about the idea is now part of the case record, including objections from the Northam Administration filed Friday in the name of the Department of Mines, Minerals and Energy.

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How to Eliminate Regulatory Barriers to Battery Storage

by James A. Bacon

Virginia’s move to an energy future dominated by solar and wind power will necessarily be accompanied by battery storage. Vast arrays of batteries will be needed to store and release electricity to offset the intermittent generation of solar and wind farms. Battery storage is exceedingly expensive now, but the price is expected to decline significantly in the decade ahead. While the speed with which batteries become economical to deploy on a large scale is highly uncertain, there can be little doubt that batteries eventually will become an integral part of Virginia’s electric grid.

A recent state-commissioned report, “Commonwealth of Virginia Energy Storage Study,” suggests that the near-term potential for energy storage in Virginia (over and above the Bath and Smith Mountain Lake pumped-storage facilities) could reach 24 to 113 megawatts of capacity, while the potential grows to between 239 and 1,123 megawatts over the next decade. The study, written by the Strategen consulting firm, recommends establishing a goal of 1,000 megawatts by 2030. (That would be two-thirds as much capacity of the state-of-the-art, natural gas-powered Greensville County Power Station.)

A number of things must happen to achieve this potential. The Commonwealth of Virginia has no control over the pace of technology advance, the global supply of critical raw materials (particularly cobalt and manganese), or the evolution of wholesale electric markets. But it can do a few things. Foremost is to address safety, permitting and environmental issues before they create bottlenecks to large-scale battery deployment. Continue reading

What Will Clean Virginia Be Asking For?

By Steve Haner

“Do you actively support efforts to reduce corruption in government?”   

Of course, any candidate presented with that question will reply yes. What do you expect?  “No, I’m quite passive about corruption in government. Live and let live.”

That was one of the softball questions on the Clean Virginia candidate survey form, which will be taking on added significance given the number of Clean Virginia-funded and endorsed candidates who were successful  Tuesday. You can read the full questionnaire here, and potential 2021 candidates are advised to print it out and start a file on coming roll call votes.  Continue reading

Whoah! Virginia Offshore Wind Now to Cost $8 Billion!

by James A. Bacon

Dominion Energy estimates that the cost of developing a proposed off-shore wind farm in Virginia waters will cost up to $8 billion, The Virginia Mercury reports today, although utility officials do say they “will work hard to bring that number down” as the offshore-wind supply chain develops over time. Dominion’s previous cost estimate for Virginia offshore wind (current only two months ago) was “up to $1.1 billion.”

The Dominion website says that the offshore wind farm will be built in three phases of about 880 megawatts each, for a total of about 2,640 megawatts. That comes out to about $3 million per megawatt. For purposes of comparison, the utility’s newest combined-cycle natural gas-generating facility in Greensville County cost $1.3 billion for a capacity of 1.588 megawatts, or about $820,000 per megawat — roughly a quarter the cost. Continue reading

Prison Sunshine

Solar panels at Haynesville Correctional Center                                                             Photo courtesy of Virginia Department of Corrections

The Virginia Department of Corrections is getting further into solar energy.

The department has recently completed the construction of a five-acre solar farm at Haynesville Correctional Center.  The correctional facility is a medium- security prison in Richmond County, near the town of Warsaw, in the Northern Neck region of the state.

According to a DOC press release, the solar farm is a 852.72 kW photovoltaic system consisting of 2,508 photovoltaic modules.  DOC estimates that it will produce 16% of the prison’s electrical needs, resulting in an annual savings of $120,000. Continue reading

Orsted Drops Projected OSW Capacity Factors

Orsted’s Hornsea 1 wind farm off the coast of England. Source: Orsted

By Steve Haner

The company that will partner with Dominion Energy Virginia to build a massive offshore wind farm off our coast has just cut the energy production forecasts for its own facilities, sufficient to lower its profit margins and drop its stock values.

“Our models weren’t sophisticated enough,” Orsted’s chief financial officer is quoted in one energy industry outletBloomberg’s article, one of many based on the company’s open discussion of the issue yesterday, described the problem this way:

The tests show that the company’s current production forecasts underestimate the negative impact from the so-called blockage effect, which arises when the wind slows down as it approaches turbines. It also underestimated the negative effect of the so-called wake effect, in which wind speeds drop between wind parks, it said.

The change will drop what’s called the lifetime load factor to 48%, down from a range of 48%-50%. That figure represents an estimate of how much electricity the machines produce divided by the potential capacity of the turbines. Since the wind doesn’t always blow strongly enough to turn the wind turbine blades, the load factor is always lower than capacity.

The number seems small, but for a giant windfarm like Orsted’s Hornsea One off the east coast of England, a change could shift income by 10s of millions of dollars every year, according to an analysis by BloombergNEF.

“2% is a big deal,” said Tom Edwards, an analyst at Cornwall Insight. “Over the lifetime that’s a lot of energy.”

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Making Solar Power a Win-Win for Everyone

by Felix Garcia

There is a simple and common-sense approach to energy policy in Virginia. Go to the energy source which provides abundant, safe electricity at the least cost — solar.

Our company is called AgriSunPower (ASP). Along with our co-developer Hecate Energy, our thought process begins with a simple premise. Solar power is the cheapest and most reliable potential energy source which exists today. Why not look for ways to collaborate with a multitude of stakeholders to expand Virginia’s solar energy capacity to feed the growing appetite for green energy?

Chicago-based Hecate Energy is no stranger to Virginia’s burgeoning green energy scene. The company’s successful development of solar farms in Clarke County and Virginia’s Eastern Shore, later acquired by Dominion Energy, illustrate our approach to utility-scaled solar power generation. We base our pitch on economics and economic development. We seek projects in locations where local government believes that solar power is a big win for everybody, and we flip our facility to the local utility that has provided electricity to the community for generations. Continue reading

Dominion Goes Whole Hog for Waste-to-Energy

Hog waste farm: from methane polluter to renewable energy source.

by James A. Bacon

Dominion Energy and Smithfield Foods are investing a half billion dollars to capture methane from hog farms and convert it to “renewable natural gas.” The partnership aims to become the “largest renewable natural gas supplier in the U.S.,” according to a press release issued Wednesday.

A few days ago, I noted how Dominion had sold a $2 billion stake in its Cove Point liquefied natural gas project as part of a larger restructuring of the company away from businesses exposed to market forces in favor of regulated businesses like electric utilities and gas distribution companies. I wondered if Dominion now sees its competitive advantage as its ability to manipulate the regulatory and legislative process.

This new venture, Align Renewable Natural Gas, suggests that Dominion hasn’t abandoned risk-taking ventures entirely. Dominion is making a $250 million bet that a “waste-to-energy” model, demonstrated only in pilot projects, can be implemented nationally. I don’t recall the company having taken a risk of this magnitude to create an entirely new business model before. Continue reading

Bacon Bits: Of DNA and Electrons….

Getting 39,999 right out of 40,000 not too shabby. After 18 years the Virginia Forensic Science Board has wound up its review of 530,000 cases in which DNA evidence was available. The effort identified 13 men who were wrongfully convicted, including the highly publicized cases of Earl Washington Jr., and Thomas Haynesworth, reports the Richmond Times-Dispatch.

One wrongful conviction is too many, those who were deprived of their liberty should be recompensed, and mechanisms need to be put into place to ensure that such tragedies are not re-enacted. But 13 instances of wrongful convictions is a far cry from predictions that the wrongful conviction rate in sex cases could be as high as 15%. Indeed, compared to the perception of prevalent injustice, the numbers are reassuring: The review of DNA evidence ended up reversing only one in 40,000 convictions. If your standard is perfection, then Virginia’s legal system is a failure. Clearly it did fail in at least 13 instances, and it could be argued that there were miscarriages of justice that the DNA review did not uncover. But by any other standard, the fact that 39,999 cases out of 40,000 withstood the review is very encouraging. I wonder how many the court systems of other states and countries would have fared as well.

Does this contract actually do anything? Last week Governor Ralph Northam announced an agreement for state government to purchase from Dominion Energy 420 megawatts from multiple solar farms and the state’s first onshore wind farm. The contract ensures that 30% of the electricity consumed by state agencies and institutions in Virginia comes from renewable sources. “This is an historic announcement for renewable energy growth in Virginia,” pronounced Secretary of Commerce and trade Brian Ball. First question: What difference does it make? If Dominion had committed to building these projects anyway, Virginia electricity customers would have been consuming clean energy regardless. The fact that the state is paying directly for these projects, rather than as a general ratepayer, does not increase the supply of green power by one electron. Another question: What will the state pay for the bragging rights? Will it pay more or less than general ratepayers? The governor’s press release doesn’t say… which is not a good sign. If this were a good deal for taxpayers, I’m sure the governor would have mentioned it.

— JAB

Northam Opposes Coming Retail Choice Bill?

By Steve Haner

Governor Ralph Northam is quoted in a Standard and Poor’s Market Intelligence news article Friday as opposing any efforts to change Virginia’s electricity regulations, which presumably would include the 2020 retail choice proposal gathering steam in the background.

Reporter Michael Copley wrote about Friday’s state solar and wind power purchase agreements and added this near the bottom, under the heading “No changes seen to Va. utility regulation”:

To advance its clean energy initiatives, the Northam administration is partnering with a utility company (Dominion Energy Virginia) that is facing a backlash over perceptions that it uses political donations to wield outsized influence in Virginia. In August, Virginia utility regulators said Dominion Energy Virginia earned $277.3 million above its authorized return on equity in 2018.

Some lawmakers in the Southeast U.S. have called for breaking up monopoly utility businesses such as Dominion’s, arguing that customers would benefit from more competition.

Northam said he does not plan to overhaul utility regulation in Virginia. “I think right now as we move forward, we’re going to work with the system that we have,” he told S&P Global Market Intelligence. “That doesn’t mean it’s a perfect system, but it is a system that we can work with.”

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