Cost, Reliability and the Zero-Carbon Grid

Dominion’s Scott Solar Facility.

by James A. Bacon

Kevin Hennessy, Dominion Energy’s senior director of state affairs, expresses confidence that the electric power company can meet the Northam administration’s goal of creating a zero-carbon electric grid in its service territory by 2045. It does take a leap of faith that electric batteries or some other energy storage system will make great strides in efficiency, he admits. Also, he caveats, it’s essential to continue generating nuclear power. Further, he acknowledges, costs and rates will go up. But the job can be done.

Ask Hennessy about gubernatorial candidate Terry McAuliffe’s plan to accelerate the shift to a zero-carbon grid by 2035 — a decade earlier — and you get a very different response. The Dominion exec professes not to know much about the proposal, which appears in McAuliffe’s plan for fighting climate change, and did not address it directly. But he does observe that Dominion’s internal projections show consumption of natural gas through 2035 — even as solar and wind generation surge.

Because wind and solar are intermittent power sources, the utility must maintain a fast-reaction capability to dial production from other sources up and down. Combined-cycle natural gas plants are the only viable alternative right now. Electric batteries are in the pilot project stage. Likewise, hydrogen fuel cells are highly experimental.

“As coal ramps down, gas will continue to ramp up through 2035,” Hennessy says. “Unless there’s a breakthrough in the price and duration of batteries, it puts the pressure on us to maintain a mix of energy sources.”

I had the chance to debrief Hennessy over coffee this morning. I wanted to query him on how Dominion plans to reach its zero-carbon goals without inflicting Virginia with a Texas-style grid meltdown, California-level electricity rates, or disruptions like the wind-dependent United Kingdom is experiencing now as a result of unseasonably weak winds.

Dominion’s challenge is to balance three competing criteria: reliability, cost, and sustainability, he says. Reliability tops the list. Dominion’s number one job above all others is to keep the lights on. All the time. Not just 364 days of the year, but during the hottest hour of the hottest day.

In Hennessy’s estimation, cost is number two on the list, although he sounds less emphatic than he does when it talks about reliability. And, of course, Dominion wants its energy to be clean. Even if a green ethic was not a part of the company’s traditional corporate culture, political pressure has elevated sustainability as a top priority.

Regarding cost, Dominion has increased its rates less than 1% annually since 2008, Hennessy says. (That sidesteps a huge debate over the size of Dominion’s excess profits and the reinvestment of those profits in its grid-transformation projects, but that is a separate issue.) Looking ahead, the company expects rates to increase 2.8% annually. The shift to a cleaner electric grid will cost ratepayers.

(The McAuliffe plan engages in magical thinking. It maintains that ratepayer costs can be brought down through investments in energy-efficiency: a mere 2% annual investment in energy-efficiency programs over ten years could reduce power bills by 12%, it says. But the State Corporation Commission has analyzed a dozen or more energy-efficiency programs and found only a few that provide a worthwhile return on investment.)

While Dominion is not moving as rapidly as some environmentalists would like, it has pivoted dramatically from coal, nuclear and natural gas toward wind and solar. Plans are far advanced to build a $7.8 billion, 2,6 gigawatt wind farm off Virginia Beach, the first of two phases of development. Meanwhile, over and above previous solar investments, the company company committed last month to 11 new utility-scale and some smaller projects, including battery-storage, capable of producing 1 gigawatt of output.

Ramping up renewable energy production to about 30% of total output is possible without risking significant disruptions to the stability of the electric grid. Going beyond that level entails far more risk and more re-engineering of the grid. The McAuliffe plan suggests that solar can make huge inroads by retrofitting panels on rooftops in a so-called “distributed” grid, but that ignores the reality that small-scale projects cost far more than utility-scale projects with huge economies of scale. Apparently, McAuliffe is banking on massive subsidies from the infrastructure bill that is hung up in Congressional deliberations.

Battery storage is often touted as the solution to the intermittency of solar and wind. Dominion has four pilot projects. One is a combined “solar plus” project in Powhatan County, combining a solar facility with storage. The idea is to store excess solar electricity in the batteries and release it up to four hours later when the sun has gone down but residential demand has picked up. The second project, in the Town of Ashland, is designed for an entirely different use: to extend the life of other equipment on the grid. It represents a potential operations & maintenance improvement.

There is no pretense that battery storage is economically feasible on a large scale at present, that batteries can shift supply more than a few hours, or that they could help weather an extreme weather event lasting several days such as the Polar Vortex. Hennessy also is candid that Dominion is betting that technology will bring the cost of battery storage down, and that surging demand for cobalt, nickel and lithium — critical elements in batteries — won’t outpace production and drive up prices.

“It’s not a panacea, it’s a journey,” says Hennessy. “Can we shift load? Can we sculpt load? We’re still trying to figure out the best value.”

Other energy-storage candidates are hydrogen fuel cells, but that technology is even more experimental, and pumped-storage dams, for which there are a scarce number of sites.

Another challenge meeting a 2035 goal for a zero-carbon grid is finding locations for solar farms. Sites are limited. Large-scale projects need to be located close to existing transmission lines or the economics don’t work. Small projects can tap into local distribution lines but they lack the scale need to meet the politically mandated targets. Some localities don’t want solar farms at all. Others are willing to tolerate a limited number. Getting projects permitted can take a couple of years. And then the large-scale projects sit in a queue a few years more awaiting permission from PJM, the regional transmission grid.

“We’re issuing RFPs, talking to localities, talking to landowners,” says Hennessy. Dominion and its solar-development partners have captured the low-hanging fruit, so to speak. Getting permits could get increasingly different over time, he worries. Dominion is exploring options like siting solar farms on old strip mines, where there are few alternate uses of the land. Meanwhile, he adds, “we’re trying to be thoughtful and deliberate about the conversations.”

I raised one more issue. By moving to an all-electric economy, including buildings and automobiles, are we creating a system vulnerable to catastrophic failure? Hennessy does not answer that question directly. He says, “We have always been advocates of a diversified fuel mix.”