Dominion Green Energy Conversion Cost Dips, Partly by Sacrificing Reliability

by Steve HanerFirst published today by the Thomas Jefferson Institute for Public Policy. 

The projected consumer cost of Dominion Energy Virginia’s conversion to wind and solar power rises steeply in the utility’s latest capital spending plan. Although slightly reduced from earlier estimates, the utility told the State Corporation Commission its residential customers may see prices jump more than 50% by 2030 and 70% by 2035.

The higher consumer energy costs expected from going “green” became a political talking point during the last election. Another effort is expected in the 2022 General Assembly to revise or repeal the Virginia Clean Economy Act. That 2020 legislation mandated the coming move to wind and solar and the end of fossil fuels, but it passed only narrowly on largely party-line votes.

In 2020, the Commission staff reviewed the company’s capital plan and predicted that by 2030, a residential customer using 1,000 kilowatt hours per month would pay up to $808 more per year. In this recent review, the projection using the SCC staff assumptions comes out to $733 more per year ($61 per month) by 2030, still a 53% increase above 2020 levels.

What changed? For one thing, Dominion altered the plan by removing some additional natural gas generation it was planning to build. The 970 megawatts of new gas plants were intended to add reliability to the system as the intermittent wind and solar plants became a larger part of the daily power mix. Dominion may have lowered its projected costs by sacrificing its safety net.

It left the door open to bringing it back, writing: “Associated reliability analyses are complex, under development, and still ongoing…Future Plans will be updated, as needed, based on the results and findings of these reliability analyses.”

Dominion’s update on what is called its integrated resource plan (IRP) was filed September 1. The case file includes only Dominion-supplied information, with no additional analysis by staff on the record. The SCC accepted it on October 28, making clear in the final order that it was not signing off on the plan itself.

As is commonplace in these cases, much of the detailed information on how costs will rise over the coming decades was declared to be confidential by the utility, and the Commission allowed it all to be hidden from the public. Reducing this secrecy is a needed reform.

So, for example, you cannot see on the chart how much Dominion projects it will charge customers in future years for the carbon allowances it must buy under the Regional Greenhouse Gas Initiative. But RGGI is included, so leaving that interstate carbon tax compact (as Governor-elect Glenn Youngkin has proposed) would have a direct impact on lowering the rate of bill increases. How much it would save is hidden.

One planning element Dominion added, however, was an IRP alternative that it considers a lowest cost option. It would meet all the carbon dioxide reduction targets in the VCEA but would not include all the solar and wind plants that are mandated by that statute. Instead it would meet growing demand by making additional capacity purchases from other suppliers and states (where fossil fuels might remain common.)

Under that plan, that residential customer bill would rise 17% in ten years, up about $20 per month. The company would still be emitting about 18 million tons of CO2 per year.

The other two plans, designated B and C, would rapidly retire the utility’s remaining fossil fuel plants. Plan B would cut most of them, while Plan C would eliminate them all and achieve the zero CO2 emissions by the 2040’s. Plan C provides only a slightly higher consumer cost than Plan B, mentioned at the beginning of this article (an added $733 per year for a household using 12,000 kilowatt hours.)

Dominion disputes the accuracy of the SCC’s method of projecting costs. It claims the SCC is underestimating the future output (capacity factor) of solar facilities and also underestimating growth in sales. Dominion claims Plan B will only cost that homeowner $556 more per year, a 40% increase by 2030.

The IRP summarizes the coming energy conversion by year out to 2036. Both Plan B and C include the full development of Dominion’s proposed offshore wind project, with 2600 megawatts coming online in 2026 and another 2600 constructed by 2033.  Plan B calls for more than 14,000 megawatts of solar resources in the next 15 years, and another 4,000 megawatts a decade after that.

Both Plan B and C assume continued operation of Dominion’s four nuclear reactors, which will require extensions of their federal licenses to operate past 60 years of age. Both include a massive amount of storage capacity, to hold renewable power generated during low demand hours. That is where Plan C, the zero emissions option, differs from B. It requires more storage to compensate for having no remaining on-demand fossil fuel plants inside the state.

Is any of this likely to be changed in 2022? As with many of the plans to unravel legislation adopted in 2020 and 2021 while the Democrats held total control over state government, the Virginia Senate is likely to be the roadblock to VCEA repeal. The Democrats still hold a 21-19 majority there, with a 12-3 stranglehold on the key committee, and one Senate Republican (Jill Vogel of Fauquier) voted for the bill in 2020.

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23 responses to “Dominion Green Energy Conversion Cost Dips, Partly by Sacrificing Reliability”

  1. Stephen Haner Avatar
    Stephen Haner

    Of course, that 1,000 kWh per month is lower than the real average residential usage, which is more like 1,100 kWh per month. So $800 more by 2030 is still the real projection. 🙂

    1. Eric the half a troll Avatar
      Eric the half a troll

      Or about $2.00 a day… egads!!!

      1. LarrytheG Avatar

        or the price of natural gas doubles by 2030 – Egads PLUS!

      2. tmtfairfax Avatar

        Give me a break. Name a big construction project that comes in anywhere near projected costs. The original estimate to pay for the state’s share of the Silver Line project included a 50 cent price increase for the Dulles Toll Road. 25 cents at the main toll plaza and 25 cents at the on/off ramps.

        In 2021, tolls were $1 at the main toll plaza & 75 cents at the on/off ramps. Now $3.25 and $1.50 respectively.

        Since Dominion is seeking to have all of its capital investments and related expenses recovered in tariff rates, it has no competitors that could gain an unfair advantage if Dominion’s financials were published. There is no reason to allow the Company to protect those types of data from disclosure.

  2. energyNOW_Fan Avatar

    Have they assumed inflation continues?

    1. Stephen Haner Avatar
      Stephen Haner

      Comparing the newer report to the old one, I don’t see any indication they are baking in the current spike in inflation which has since appeared. I could be wrong, but those appear to be constant dollars.

      One element which is redacted (hidden by bands of black ink) is future costs for fuel. That is one of the elements more sensitive to inflation, but apparently Dominion’s capital value would collapse if the public could see those forecasts….

  3. Sacrificing reliability is the path of least political resistance. When Dominion increases rates, as it will, it will get a lot of pushback. But if reliability suffers, there won’t be any pushback from the public or politicians unless the system breaks down. Then there will be hell to pay. But who knows, maybe the system won’t ever get stressed to the point where it breaks down, so maybe Dominion will never have to pay the piper.

    I do have one question, which perhaps our friend Acbar can answer. PJM and the North American Electric Reliability Council have a role to play here. Their No. 1 job is preserving system reliability. What will they have to say about this? If Dom needs back-up gas generation capacity (whether it owns the capacity or not), can they ensure that Dom has access to it? If so, how much will it cost?

    1. Stephen Haner Avatar
      Stephen Haner

      When my father was city manager of Roanoke he was in a regular tussle with the school board. He would send back their budget for a trim, and they would cut a million bucks out of the utility line item, knowing that come December (mid fiscal year) they would come complaining the heating bill was not getting paid, and get it restored. This is the same game.

  4. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    Again, thanks for your description of a complex subject. Is there any analysis of how much our electric bills would increase by 2030 if the VCEA went away? After all, the cost of natural gas has increased considerably in recent years. I don’t know how volatile the price of that is.

  5. LarrytheG Avatar

    Mr. Haner does a fine job of providing insight into Dominion, the SCC and Virginia and it is appreciated.

    I think there are about 3.6 million households in Virginia and Dominion has 2.5 million of them with the others divided up with APCO and perhaps a dozen rural electric co-operatives of which one wonders how things play out for them.

    A little surprised that there is apparently no mention of future nuclear.

    Considering the volatility of the price of natural gas these days, I’d also wonder how that plays into this no matter whether Dominion uses it to produce electricity or buys it from others who do … as well as what APCO and the rural Co-ops do.

    I do trust PJM to ride herd on reliability, unless of course Dominion decides to part ways with them

    Finally, I’d wonder what direction Youngkin might go in.

    I thought he had hedge fund experience, so that might be an interesting perspective also.

    1. Stephen Haner Avatar
      Stephen Haner

      There is some discussion of small modular reactors in the future in the text of the plan, and that option certainly is moving along. As to the four old reactors, that’s another recent filing which I ignored during the election and post-election doldrums, but may look at early in the new year. Just a small sum, $4 billion, to run them another 20 years… 🙂

      As to Dick’s question, no, not really. Perhaps the baseline plan in the previous IRP filing was more of a non-VCEA option. The Plan A in this filing is heavily reliant on off-system purchases. Looking at any of the commodity prices a few years out is a crapshoot. We in this country have all the natural gas we would ever need but now are fighting a political battle against those who see it as a poison.

  6. Jane Twitmyer Avatar
    Jane Twitmyer

    Back from a lovely family Christmas and spending the day on the couch I found Steve’s blog post … Dominion’s Green Energy Conversion Cost Dips, Partly by Sacrificing Reliability that sent me to the drawing board.

    Maybe Steve could tell us what numbers those projections rely on. Are they simply only projected demand and a changed variety of generation options? If so it leaves out the very large costs of climate change, especially on Coastal Virginia. Estimates for building or retrofitting seawalls on our coasts range from $2 million to $20 million per linear mile.

    Projections also leave out a changed electricity structure, away from one that is only centrally defined. Efficient buildings and electricity use of Distributed Energy Resources – DERs, will change those projections. Rocky Mountain Institute says … “The benefits appear immediately, and they multiply over time. This isn’t just about adding solar; it’s about everything to do with electricity.”

    Also, 54% of utility executives surveyed noted that DERs could help utilities meet mandates for carbon- emission reductions, and half noted that DERs could improve grid reliability and resilience.” The demand lowering can offset the increases that will occur from electrifying transportation and more, and the new structures can provide a big part of that safety net that Steve says Dominion “might be sacrificing.”

    One success detailed by RMI in Coming Back Stronger … The Atlanta Better Buildings Challenge (ABBC) is a public/private partnership achieved significant energy savings (319 gigawatt-hours annually) and water savings (34.3 million gallons annually), resulting in an estimated $24.5 million in direct savings in 2019. … These building improvement projects also resulted in $52 million added to the regional economy and created or preserved 654 local jobs.”

    Then, there is something called “heat islands”. Mitigation of urban heat islands can potentially reduce national energy use in air conditioning by 20% and save over $10 billion per year in energy use and improvement in urban air quality!

    Rethinking the structure of our electricity production will produce a very different set of numbers. Many think utility bills will not show the jumps projected in Virginia.

    1. Stephen Haner Avatar
      Stephen Haner

      Many others think it is understated. These are basically Dom’s numbers, using the SCC’s assumptions and then their own. As to the data behind the post, I’m always linking to the SCC files and would encourage you to dive in. You too will find much of it redacted, sadly, but various demand management efforts are certainly in the model.

      Please. They plan a $4 billion investment in the nukes, a $10 billion wind farm followed by a second that will cost $12-14B (if we’re lucky.) Oh and enough solar panels to cover Fairfax County. You have to believe in fairy dust not to see what that will do to rates.

      Been a while since you engaged. Hope you’ve been well!

      1. Jane Twitmyer Avatar
        Jane Twitmyer

        Absolutely, thanks for your good thoughts … Just reveling in the ACP win for awhile for which I did a lot of writing! Took your advice and looked at Dominions IRP update from the end of the year

        Arguing against PJM’s lower projections Dominion says … “This implies that PJM forecasts non-data center load in the DOM Zone will decrease by more than 4,500 GWh between 2021 and 2026, an outcome which is not supported by fundamentals.” Could it be that PJM is using the demand declines from efficient buildings it sees everywhere else?

        Utility Dive cites an ACEEE report that the death of efficiency is greatly exaggerated … “’Utility energy efficiency programs continue to be extremely cost effective.’ The report concludes … “supplying about 18% now and potentially becoming the United States’ largest electricity resource by 2030, according to ACEEE.” Recently, Amory Lovins and Rocky Mountain Institute predicted building energy savings of 38–69% to generate $1.4 trillion in positive net present value by 2050 (Lovins & RMI 2011). Dominion’s generic efficiency plans represent “a 5% annual energy savings target for 2026 and beyond.”

        The company plans to continue to rely on nuclear, including requesting more plant operation extensions. Problem … nuclear and distributed, intermittent generators don’t mix well with nuclear which must run continually, as Tom told us. Second, Dominion‘s plan is a vague promise to “continue to transform the Company’s distribution grid to provide an enhanced platform for distributed energy resources” (“DERs”). And third, with higher demand projections nuclear baseload power looks reasonable.

        What is happening in other states? Nuclear is expensive. Five states have implemented programs to assist nuclear… And … Illinois paid $694 million to keep nuclear plants open. And May 5, 2021 — The Biden administration is backing federal subsidies to keep U.S. nuclear … s Indian Point nuclear power plant in New York last month. Finally, an article in Science Direct claims … “All 14 current rationales for mandating or subsidizing uncompetitive coal and nuclear plants lack technical merit or would favor competitors instead. “

        So … is the IRP update a well-conceived route ahead or just a lot of obfuscation to avoid making real change?

    2. tmtfairfax Avatar

      “If so it leaves out the very large costs of climate change, especially on Coastal Virginia. Estimates for building or retrofitting seawalls on our coasts range from $2 million to $20 million per linear mile.”

      And what is the duty of the public to pay billions to protect the property of landowners of ocean-front property? Yes, we will get the bill to protect the naval base at Norfolk. But why should people whose incomes and net worth are likely much, much higher than the average person paying for protecting these private properties? Should the average federal government worker or restaurant manager see a significant decrease in disposable income and lifestyle to protect private businesses or residential owners of estates on the Potomac River or the Chesapeake Bay?

      Much of San Francisco, including most of the Financial District, is built on landfill. Despite being built on granite bedrock, there are sections of Manhattan that are also built on landfill. These were the areas flooded during Hurricane Sandy. And toss in the multi-million dollar beach homes on barrier islands. I’m sure there are countless other examples around the country where people have built expensive buildings where they should never have been built.

      At the very same time, the enviros are supporting, either knowingly or unknowingly, this huge transfer of wealth from ordinary people to the wealthy, they are demanding that people stop living where they want to live and move into as small of an apartment or condo as possible. Protect $3 million homes but make people give up their cars and take transit.

      I’ll take this seriously when I see moratoria on the construction or major reconstruction of private buildings on land that is expected to be under water. Or when a sizable portion of the costs for sea walls is paid by protected landowners. Or when Uncle Sam ends the tax-free status of any organization that spends money to lobby or otherwise influence public policy or opinion. Let the Sierra Club fire a few dozen people and put the money toward expanding sea walls.

      1. LarrytheG Avatar

        TMT – you might want to check out the requirements for FEMA to offer subsidized insurance – i.e. the localities have to agree to change their codes to not allow new construction in flood-prone areas.

        If FEMA were to go away and the insurance market left strictly to the private sector – all HELL would break loose….. AND in the end, only the rich could afford to build in these risky areas and ‘self-insure”.

        I don’t see the enviros supporting FEMA insuring the rich… anyhow … the zealots actually want FEMA to go away and force the reckoning….

        1. tmtfairfax Avatar

          That is a good step, but you haven’t gone far enough. If we expect climate change to cause higher water levels along the seacoast and other tidal areas, those areas expected to be under water or flooded regularly should be identified on maps. And laws passed that prohibits construction or major reconstruction of private buildings in those areas.

          If we truly believe that, in X number of years, certain areas will be regularly under water or should be, when they consist of landfill, it is absurd to allow for new buildings to be constructed in those areas. And this is multiplied many times when the government plans to tax or fee the rest of society to address that flooding.

          If I hit a golf ball in my backyard and it breaks your kitchen window, I am liable to fix it to its original condition. But you have a duty to mitigate your damages. You need to put some type of cover, wood, plastic, etc., over the broken window. You cannot leave what is essentially an open window and, after rain comes in and ruins your hardwood kitchen floor, expect me to pay for replacing your floor.

          Around 1980, the feds stopped new development in the Artic National Wildlife Refuge. They didn’t kick out people living there. But they imposed a rule that limited the ability of people to stay living there until the death of their last child.

          I’m proposing the same basic principle. People can retain their existing property but cannot build new or engage in major reconstruction. Maybe, they get something for their land but, eventually, we won’t have anyone living on barrier islands or other ocean- or bayfront properties. We won’t need to protect them with seawalls, etc. We will protect government facilities but not private ones. Or state and local government can tax these landowners for protection.

          1. LarrytheG Avatar

            Even if they prohibit new building, the existing structures will end up flooded – but not overnight – permanently but rather over time as flooding advances inland during high tides but then falls back at low tides – but less and less so over the years so that those areas will be “gradually” flooded.

            Things like roads, water, sewer, and for some folks their drainfields, etc.. will be rendered unseeable.

            As they are, the value of the properties will fall and so will tax collections to provide services..

            Mortgage companies will be caught holding abandoned properties that people no longer pay their mortgages on.

            And private sector insurance will disappear or be so expensive that only the rich can afford.

            Won’t happen in most of our lifetimes but folks 30 and younger will start to see it…

            It will be a slow thing – like Tangier island slowly going under.

      2. Jane Twitmyer Avatar
        Jane Twitmyer

        Yup, but it is not all about rich coastal homes. Toxic Flooding at Chemical Plants hurts the surrounding low wealth communities. Some are on the James River.

      3. Jane Twitmyer Avatar
        Jane Twitmyer

        Yup. plans are required but it is not all about rich coastal homes …. See: Toxic Floodwaters: the Threat of Climate-Driven Chemical Disaster in Virginia’s James River Waterfront. Public Health risks and vulnerability to chemical spills triggered by extreme weather basically affect low wealth communities, like the ones around the chemical plants on the James.

        Low-wealth communities and communities of color are

        inadequately protected, and as a result, hit the hardest

        Low-wealth communities and communities of color are

        inadequately protected, and as a result, hit the hardest

        Toxic Floodwaters: The Threat of Climate-Driven Chemical Disaster in Virginia’s James River

        Watershed. Center for Progressive Reform.

        Toxic Floodwaters: The Threat of Climate-Driven Chemical Disaster in Virginia’s James River

        Toxic Floodwaters: The Threat of Climate-Driven Chemical Disaster in Virginia’s James River

  7. LarrytheG Avatar

    If natural gas DOES go up substantially in price, will the folks who say the lowest cost fuel be used , then switch to support the truly lowest costs fuels are will “reliability” encourage them to change their position from lowest cost to “most reliable” ? 😉

    1. tmtfairfax Avatar

      How about both lowest “reasonable” cost and most “reasonably” reliable?

      1. LarrytheG Avatar

        wind/solar is eminently reliable as long as you have a gas backup…. 😉 And if you rely primarily on wind/solar and use gas only when it is required, it will be cheaper than an ALL GAS system, no?

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