Dominion Long-Range Plan: More Solar, More Gas

Dominion’s 15-year plan affirms more solar in Virginia’s energy future.

Dominion Virginia Energy filed this afternoon its 2018 Integrated Resource Plan (IRP), an updated 15-year strategic plan. The IRP reiterates the utility’s commitment to more natural gas and more solar power as a path to a lower carbon future. There’s a lot to cover here, so I will just hit the highlights today, and I’ll dig deeper into the report tomorrow.

The key assumption behind the plan is that “carbon emissions regulation is virtually assured in the future, either through new federal initiatives or through measures adopted at the state level.”

A proposed regulation from the Department of Environmental Quality, if adopted by the State Air Pollution Control Board, would make Virginia a participant in the Regional Greenhouse Gas Initiative, which would ratchet down carbon dioxide emissions by 30% over 10 years. “Compliance with carbon regulation could, unless mitigated by other public policies, lead to an increase of between $2.23 and $5.81 in 2018 dollars in the typical residential customer’s monthly electric bills by 2030,” stated the company in a press release.

The IRP also incorporates legislation enacted by the General Assembly this year, the Grid Transformation and Security Act of 2018,” under which earnings above the allowed return on investment would be plowed back into investments in renewable energy, energy efficiency, and smart grid upgrades. The plan contemplates construction of the 12-megawatt Coastal Virginia Offshore Wind project to demonstrate the viability of wind turbines off the Virginia coast, license renewal for the Surry and North Anna nuclear units, the roll-out of new energy-efficiency programs, and the possible retirement of older, less-efficient coal, oil and gas power plants.

Dominion’s press release highlighted the growing role for solar energy. Depending on Virginia’s regulatory path, the company could add 4,720 megawatts of solar capacity over the next 15 years — enough to power 1.18 million homes at peak sunlight, and a nearly 50% increase over last year’s 3,200 forecast.

To back up the solar farms when the sun isn’t shining, Dominion forecasts the need to build eight new gas-fired combustion-turbine (CT) units capable of producing up to 3,664 megawatts of electricity, enough to supply the needs of more than 900,000 homes. Unlike combined-cycle gas plants, which ramp output up and down slowly, the CT units provide surge capacity that can nimbly adjust to fluctuating solar and wind output.

The exact details vary with five scenarios reflecting different federal and state regulatory approaches. The scenarios include:

  • No CO2 tax — no new regulations, the least-cost baseline.
  • RGGI participation — compliance achieved by importing “more carbon intensive out-of-state energy and generating capacity;” $1.5 billion more expensive than the baseline plan.
  • RGGI (unlimited imports) — Virginia becomes a full RGGI member, CO2 allowances cost more; costs $3.71 billion more than the base-line plan.
  • RGGI (limited imports) — Virginia becomes full RGGI member, but builds low-carbon capacity rather than imports it; costs $4.04 billion more than the base-line plan.
  • Federal CO2 program — assumes federal CO2 legislation beginning in 2026; costs $3.09 billion more than the base-line plan.

Predictable flashpoints. Inevitably, there will be pushback in the environmental community to Dominion’s plan. First, skeptics likely will dispute the utility’s forecast for increases in peak electricity demand and the need for more generating capacity; Virginia, they will say, needs to deploy energy-efficiency measures more aggressively. Second, they will argue that the re-licensing of the four nuclear units is unneeded. Third, they might contend that battery storage will be more cost effective than gas-fired CT units in offsetting fluctuations in solar production. Fourth, they will say that Dominion is exaggerating the cost of CO2 regulation; indeed, they will argue that the RGGI carbon trading regime will have little impact on costs to rate-payers, and might even reduce their monthly bills.

I’ll dig into each of these issues in the days and weeks ahead.

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14 responses to “Dominion Long-Range Plan: More Solar, More Gas

  1. In 231 pages… the phrase ” per capita electricity consumption” is not found.

    I was hoping to see what Dominion forecasts for Virginia – given all the emphasis on Demand-side technologies… that seem to have dramatically affected other states… and the US average as a whole.

    Here’s what the EIA says: ” Per capita residential electricity sales in the U.S. have fallen since 2010″

    Following sustained growth through 2010, U.S. residential electricity sales have declined in both absolute and per capita terms. Although changes in the weather are a key driver of year-over-year fluctuations, energy efficiency improvements and economic factors have contributed to the decline in per capita residential electricity sales since 2010. Residential electricity sales per household declined even more than the absolute or per capita declines, decreasing 9% between 2010 and 2016.”

    is that not true in Virginia? If so, shouldn’t Dominion be making that case?

  2. Electricity demand is elastic. In recent years in my own case I’ve been switching to low cost lighting, carefully watching for Energy Star products, turning things off when not needed, etc. What I have done in my own residence, multiply by a huge factor for all the business and industrial users who constantly look for ways to conserve and have the capital to invest.

    As the price rises because of the 2018 legislation (I will not use the GTSA acronym Dominion has devised) and because of a future decision by Virginia’s elected leaders to impose the RGGI tax, there will be further economic pressure to conserve. There will also be increased incentive for privately-owned generation or co-generation. I haven ‘t read the report yet, but there is growing reason to doubt that demand will grow much.

    This will be an argument about RGGI. It would be stupid for Virginia to join RGGI. It is possible to lower carbon emissions substantially without joining RGGI. I asked one of my friends on the enviro activist side which he really wanted – lower carbon emissions or RGGI membership. He said the lower carbon outcome, with RGGI being irrelevant. RGGI is a big fat tax increase and then that pot of money will be spent on things completely unrelated to a better environment.

  3. Huh? Why not join RGGI? Based on Dominion’s figures? You buy that?

    Unlike its neighbors, Virginia approached the Renewable Portfolio Standard with its usual softball approach towards business and made it voluntary. The result? Virginia is still far behind other states in renewable energy.

    Not joining RGGI while hoping that carbon emissions will somehow decrease follows the same logic. A regional cap and trade approach is a great idea. Otherwise, it’s back to trusting the utilities.

  4. Carbon emissions have already decreased and as coal plants retire (more retirements are called for in this IRP) and solar expands the progress will continue. We don’t need to layer on the tax. (Let me spend some time with the report and I can get back into this!)

  5. RGGI is probably not so bad for Dominion and our politicians who would view it as justification for the already planned continued major commitment to nuclear. Last I checked Virginia is still considered a predominately nuclear power state, although nat gas is making some move now.

  6. “Analysis of the modeling results also reflects that linking to RGGI is projected to cost Virginia customers about $530 million over the period 2020 to 2030. This includes cost for carbon emission allowances plus increased imported power cost adjusted for reduction in total production cost for Virginia. Furthermore, the modeling indicates that Virginia joining or linking to RGGI will lower allowance prices, thereby lowering the cost of carbon compliance in other RGGI states subsidized, in part, by Virginia electricity customers. Should Virginia join or link to RGGI, the RGGI states outside of Virginia will incur $876 million less in costs related to RGGI allowance purchases for the period 2020 to 2030 than the RGGI states would have incurred without Virginia joining RGGI.”

    That is from Page 41 and concludes about six pages discussing the CO2 regulation issue, admittedly with the utility’s spin. Basically it says if Virginia fully joins RGGI, or stays outside the compact but uses the RGGI model and the RGGI marketplace to sell allowances – costs go up in Virginia and down in the other RGGI states. And, really that is logical if you think about it. Yeah, that’s my goal – cut power bills in MA and NY and shift the cost to me!

    I knew about the first, but really hadn’t focused on the second. The section also highlights that it would logical for the utilities to start buying more power from outside Virginia from states not in RGGI, and that power might actually be from fossil fuel plants. The regulatory scheme could prevent that, but imposing that restriction would just further hike the cost to VA ratepayers.

    That five or six pages is worth a read. I am even more convinced that it will be a stupid move if VA joins RGGI, and I’m now a bit more alarmed about the idea of doing our own parallel mini-RGGI. One ameliorating factor of the Virginia-only plan is that the proposed reg has the revenue generated by selling the allowances flowing back (at least indirectly) to the ratepayers, thus reducing the net cost.

    These reports are a bonanza of data. FYI, there are likely to be additional reports with confidential data open to inspection only by people who participate in the case and sign an NDA. I hope the SCC keeps that to a minimum.

    • There is some subtle stuff going on here.

      As far as total carbon emissions goes, PJM does not, indeed is not allowed to, decide how it dispatches generation on any basis but locational marginal cost. Of course if you tax units emitting carbon in NJ but not in WV, the marginal cost to operate the NJ units become relatively higher and so they will run less. Given the finite universe of generation in PJM today, of course that means the WV units will run more. The bottom line is, RGGI simply should be implemented nationwide, or at least across the entire “Eastern Interconnection” (the “EI” is the continental US grid excluding most of Texas and the western grid on the other side of the Rockies; those areas operate separately).

      But RGGI isn’t intended primarily to benefit today’s ratepayers; it’s intended to influence future generation construction decisions by giving an operating cost advantage to those units with lower or zero carbon emissions. The whole idea of RGGI is to get on with reducing green house gasses long-term, even at the cost (to ratepayers) of a short term operating disadvantage. That works if all new generation has to be constructed under the same RGGI rules. But all other things equal, a natural gas fired unit is likely the most profitable new generation type. If a generation developer knows it can build a new natural gas fueled unit within PJM yet avoid any carbon tax by locating it in WV, that’s what it will do. Only if the entire EI is under RGGI rules will the playing field be leveled for all fossil-fueled versus non-fossil-fueled generation construction going forward.

      It’s not intuitive to me why Virginia’s participation in RGGI would cause the price of carbon allowances in New England to decline. This has to be because Virginia’s RGGI carbon allowances would be plentiful and cheaper than those available without Virginia generation participating; but if so, the sale of those allowances would bring income to the Virginia utilities or independent generators in Virginia that were selling them, offsetting the negative effect on the dispatch of those units. This needs more explanation.

  7. Completely agree, “these reports are a bonanza of data.” Here is the link, taken from the press release that Jim attached.
    And here is another link, to the SCC’s website. I am posting this one because, later, this is where you will have to go to see all the comments posted by protesters and interveners, and any responses or additional materials filed by DVP.
    Then enter the “case number” manually: PUR-2018-00065

  8. ***Confidential Information Redacted***
    Appendix 5F – Cost Estimates for Nuclear License Extensions

    Well, damn – there is the first of the Big Secrets, page 211. The cost estimates for extending the nuke licenses! Why those (expletive redacted.)

  9. I skimmed the report, and note the data is Dominion’s. It would be interesting to compare with data from other sources.

    As far as other states in the Northeast with higher power costs getting more benefits than others, it reminds me of when I was reporting in Ohio in the 1990s. Attorneys general in New York and Massachusetts tried legal action to go after big Midwestern utilities such as AEP that enjoyed cheap, mine mouth coal plants. Not much transportation costs. Yet, the Northeastern states got stuck with the pollution from those coal plants and had to pay for it with higher health care costs and the like. So, what is really fair? Sticking to a parochial state advantage or trying a regional approach with give and take, cap and trade that benefits all?

    The point about nuke costs being redacted is very interesting. I missed that one.

    • You must have an interesting perspective on all that cheap coal fired electricity built to supply the industrial Rust Belt, electricity that ended up being shipped east to the mid-Atlantic. “Coal By Wire” they called it. Along with the cheap electricity the east also was downwind of all the SOx and NOx emissions from the Rust Belt — and still is. If the impact of RGGI on Virginia would be significant, consider the cost for OH or WV to join.

    • Here are other views … pretty different. The big issue that forces Dominion to object is what RGGI does to utility revenues. Finding new revenues…electric cars? .. might help Dominion into their inevitable future.

      The RGGI region gains $1.4 billion in net economic value – or $34 in value added per capita – from the program’s implementation during the 2015-2017 period. Consumers and the broader economy benefit from states spending RGGI auction proceeds on energy efficiency measures, community-based renewable power projects, credits on customers’ bills, bill-paying assistance for low-income ratepayers, greenhouse gas reduction measures, education and job training programs, and other programs.
      • RGGI is boosting employment across the region and in each state, supporting over 14,500 new job-years.
      • Energy consumers overall – households, businesses, government users, and others – enjoy a net gain of over $220 million, as their overall energy bills drop over time.
      • As a group, power plant owners experience net revenue losses, although owners of nuclear and renewable energy power plants have seen slight revenue gains.
      and …

      “Overall results: Over the last three years (2015-2017), the RGGI program led to $1.4 billion (net present value (“NPV”)) of net positive economic activity in the nine-state region. Each RGGI state’s electricity consumers and local economy also experienced net benefits from the RGGI program. When spread across the region’s population, these economic impacts amount to nearly $34 in net positive value added per capita.

      RGGI auctions for the Compliance Period 3 generated approximately $901 million. These auction revenues were distributed to (or held by) states
      and …
      Gov. Ralph Northam, D-Va., approved the proposed program design. The Virginia Department of Planning and Budget testified that the proposed program could generate a cumulative estimated 10-year benefit of $460 million to $680 million, a number that looks conservatve to me.

  10. “So, what is really fair? Sticking to a parochial state advantage or trying a regional approach with give and take, cap and trade that benefits all?”

    The fairest solution is federal, i.e., nationwide; but of course that isn’t going to happen under this administration with this Congress. The next most fair is to impose the price signals of a carbon tax for purposes of influencing new electric generation construction and also getting retail customers used to the cost impact, while recycling the dollars brought in by the carbon tax in some way that’s socially useful to the region — but that may create winners and losers both in utility costs and in the redistribution of the dollars. The northeastern states are relatively homogeneous but adding Virginia does something to the RGGI mix that results in Virginia being a relatively big loser and the others big winners — don’t understand that one.

    Anyway, the biggest obstacle is (surprise!) political. All current costs and benefits of carbon-based generation are already baked into current rates. Why fix what ain’t broke? Especially if you can point out how expensive it would be (in certain respects, perhaps not by other measures) to make the change?

  11. RGGI demonstrates the big fraud within the environmental movement. It preaches moving to renewable energy sources will reduce the cost to generate electricity and provide customers with savings. But RGGI imposes an effective carbon tax that raises the price of some electricity (traditional fossil fuel generated) and attempts to make renewable energy less expensive by comparison.

    If a business advertised its products this way, it would have BBB and consumer protection agency complaints and, probably, a class action lawsuit. It’s pure fraud on the public to make conversion to what is claimed to be lower-cost energy lower-cost energy only because “traditional” energy is priced higher because of an arbitrary surcharge. Many of the enviros are pure fraudsters.

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