Dominion Seeks Approval for Experimental Wind Turbines

Dominion Energy rendering of the experimental wind turbines.

Dominion Energy Virginia has submitted to the State Corporation Commission a proposal to build two wind-generating turbines 27 miles off the coast of Virginia Beach — arguably the most expensive research project ever funded by the Commonwealth. The experimental turbines will not produce 12 megawatts of electricity at a remotely economic cost. But they will provide data that could pave the way for a vast wind farm that would produce electricity far more economically.

The project will test new designs to anchor the turbines in seabed conditions found off the Virginia coast and to withstand hurricane-force winds. The feedback is necessary before anyone undertakes utilizes the technology in a wind farm with dozens of turbines potentially costing billions of dollars.

The power company has been trying to advance the two-turbine project for several years but refrained from filing with the SCC for fear that the Commission would reject it as too risky and expensive. What’s different this time? First, it has lined up an experienced partner, Ørsted, a Danish company that has installed more than 1,000 turbines in European waters, to manage the project. Second, it has brought down the cost to about $300 million, significantly lower than previous iterations. Third, with the enactment of the Grid Modernization and Security Act, the state has declared wind power to be in the public interest.

And fourth, Dominion says that it can build the turbines without increasing rates. The project, said CEO Thomas F. Farrell II at the announcement in Norfolk yesterday, “will not increase customer rates even a penny.”

Here’s how I understand how that works. Before enactment of the Grid Transformation Act, Dominion would have paid for a large capital project like this one through a Rate Adjustment Clause, in which capital costs would be passed along to customers. The selling point of the Grid Transformation Act is that rates remain frozen but Dominion will apply excess earnings, which normally would be returned to customers, to renewable energy, energy-efficiency and grid-upgrade projects instead. It’s a convoluted way to go about things, but it has the virtue of stability.

I’ll be interested to see how Steve Haner, Bacon’s Rebellion’s electric consumer advocate, responds to this development. 

One last point: Just because the General Assembly has declared wind energy to be in the public interest, that’s no guarantee the SCC will go along. The SCC still has to balance cost, reliability and environmental sustainability — along with risk. Three hundred millions dollars is a lot of money to spend on what amounts to a research project. In analyzing the pros and cons of the experimental wind turbines, the SCC presumably will look also at the pros and cons of the wind farm that the experimental turbines would make possible. Given the lack of an established wind-power infrastructure on the East Coast, how much would a full-fledged wind farm cost to build? How would the cost of electricity compare to other energy sources? And would such an intermittent energy source improve or diminish the reliability of Virginia’s electric power supplies?

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37 responses to “Dominion Seeks Approval for Experimental Wind Turbines

  1. The problem is that – just like the failure to de-regulate when other states were successful at it – one does wonder how committed Dominion actually was to do it and it appears they also are dragging their feet on renewables.

    Remember when the Feds withdrew the $40 million for offshore because it appeared Dominion was not going to move on it?

    I wonder if Dominion has any real intention to truly evaluate it on it’s merits…. or if the effort is just to have it fail – “officially” like de-regulation.

    I have almost zero confidence that we’ll “learn” much at all other than Dominion likely has no intention at all of exploiting offshore wind in anything other than a symbolic/PR sense.

    I’d much rather see a 3rd party that has some track record in onshore or offshore – taking it forward so that what we “learn” is not through Dominion’s eyes because it appears that Dominion is conflicted and sees renewables in general as a threat to it’s basic business model.

    Over and Over – Dominion hires consultants to do “studies”…. coal ash, powerlines over the James… pipelines… and the answers always come back as if they came straight out Dominion’s corporate offices!

    So I fear that this is not going to end well for anyone who has hopes for offshore – which would be fine if it is an unvarnished objective assessment.

  2. If you ever lie awake wondering: Just why did all those virtue signaling pro-environment Democrats line up behind those two hated gas pipelines? What did they get in exchange? Well, here ’tis!! The connection between the two is the worst kept secret in Richmond.

    I have not jumped into the numbers yet. I’ve said before my biggest concern is the 27-mile extension cord connecting the turbines with the shore, and the economics would clearly improve if the turbines were one mile off. So that’s the NIMBY tax, and I am very interested in seeing that calculated. For 12 MW produced it is a cost disaster for consumers but perhaps the natural gas price stability provided by the gas pipelines will compensate a bit! (Assuming we pay a competitive transportation change and not a sweetheart price to get the gas.)

    • “perhaps the natural gas price stability provided by the gas pipelines will compensate a bit!”

      I don’t understand this statement. The two new pipelines will add billions to the cost of energy in Virginia. The ACP by charging utility customers billions of dollars for a pipeline they don’t need since the new power plants have been cancelled. The MVP, because it has no domestic customers, will have to find export customers. Exporting gas will cause the price of gas in the region to rise much faster than it otherwise would. The ACP will have to export too, since there won’t be 80% of the capacity dedicated to new gas-fired power plants. That’s why Dominion wants to connect the ACP to its South Carolina gas network and eventually to the Elba Island LNG terminal just over the border in Georgia.

      The only way to have some “price stability” would be to avoid building the new pipelines and rely on the much cheaper existing pipelines that are increasing their capacity by a greater amount than is being provided by the ACP & MVP combined.

      The only way any policymaker could think that the pipelines are beneficial would be if they believed Dominion’s study that said the ACP would save $377 million per year. If you ignore the flawed assumptions in the study and just include the cost of using the new pipeline (the study did not include it in the calculations) the project is a losing proposition. It’s even worse now that the pipeline is $1.5 billion more expensive than originally estimated.

      Without considering the disruption to Virginia’s land, water and communities, the pipelines will be an economic albatross around Virginia’s neck for decades. The ACP is the most expensive pipeline on the east coast. It won’t provide a lower delivered price of gas.

      This is a giant political gift to Dominion and the other utility holding companies. The ratepayers will pay a heavy price and get nothing in return. Long-term (20 year) contracts exist for all of the major combined cycle units that Dominion intends to build. These existing pipelines will transport gas 3-8 times cheaper than will the ACP, according to information Dominion filed with the SCC.

      It would be foolish to treat the new pipelines as a “benefit” that is gained in order to “give up” something else.


    The industry is far more mature in Europe (note the discussion is about subsidies to keep the real cost hidden), and two US projects north of us are much further along and will produce something like 1200 MW, so I really don’t know what is left to demonstrate, other than the absolute disregard for Virginia consumers held by just about every elected official in Richmond.

    We will have a direct price comparison with Vinyard Wind and I suspect it will be very enlightening.

  4. A much cheaper way to do offshore would be to put it off the Eastern Shore where there are few if any nimby’s as the “shore” is miles of coastal wetlands full of mosquitoes and no ocean view… A 3rd party company would likely choose that location so it could be closer to shore, rather than the one Dominion chose – because they have no dog in who owns the grid on the Eastern Shore

    Steve seems to take delight in calling out all the elected political folks, Dems who have been compromised by Dominion. I, on the other hand, see that as a reason to use 3rd party and get out of the money game…in the GA.

  5. “Rather than the [location] Dominion chose…”

    Are you certain that Dominion “chose” the location? As I recall, the wind rights were leased after an auction (or some other bidding process). Did Dominion “choose” the location of the lease rights, or did the state designate it?

    If the wind farm was located off the Eastern Shore, it would compound the problem Steve discussed above — it would have required a much longer (and more expensive) electric plug.

    There may be valid reasons for being suspicious of Dominion but I don’t think this is one of them.

    • well.. should check the lease area(s), I agree and I did check and it appears that the lease sites for Virginia do not include the Eastern Shore -just off of Virginia Beach.

      Still – I don’t think Dominion is an objective player in renewables or for that matter coal ash or power lines over the James… pipelines – they have a direct interest in these things – and a preferred outcome and having them do studies on their merits – as if those studies are totally objective is not believable especially with renewables which they clearly do not embrace themselves AND they use their monopoly and legislative power to undermine would-be solar competitors.

      Offshore wind is just starting and we need a 3rd party who will not benefit whether offshore generates good numbers or bad… and I just think it’s preordained the numbers will be bad if Dominion is doing the pilot just like their Coal Ash “Study” pretty much backed their preferred approach and highballed the numbers for moving it to lined pits. In both cases – we need a 3rd party doing those numbers.. trust but verify…

      • “Especially with renewables which they clearly do not embrace themselves” —

        Don’t agree with that comment. Dominion could very profitably invest in off-shore wind power. I think they think so too, and a purpose of this “experiment” is to give them and the SCC and potential business partners the assurance that it’s a good investment. That is not a bad thing; what’s bad about it is the assumption that all this investment should be done with the Commision’s guarantee of a regulated rate of return on rate base. This investment in new wind generation should not be ratebased!

        • Hear, hear, Acbar. Dominion has already convinced the GA to give it primary responsibility for developing solar in Virginia. With a utility in control, we will get nothing but utility-scale projects that also require new transmission (another addition to the ratebase). It is unnecessary to give the utility two times the project cost in profits.

          Numerous states have decoupled the cost of generation from retail sales of electricity. All five of the states that lowered rates this past year have done so (including Maryland).

          This is a good time to do it since there are no plans to add new conventional generation in Virginia, for at least the next decade.

  6. There’s a lot going on here and I fear the endemic [and well merited] cynicism here about Dominion is getting in the way of a fair assessment of the merits of this experimental project.

    The Nantucket and Block Island windmills are built on a shallow layer of sand over rock. It’s one thing to anchor a windmill in a hurricane-proof manner over rock. But the coastal sand along Virginia’s coast is far thicker, the continental shelf rock far further down. It ain’t the same beast at all.

    About that 27 mile distance: the wind 27 miles out is greater and steadier than near the coast, as shown on various websites. The cost of an undersea transmission line from the wind farm area to the coast is not trivial, but once you’ve got the dredging equipment up and going to place it under the sand, the incremental cost to add a few miles to the length of the line probably isn’t that great. So going further out is where a big wind farm would want to be located and this will test the ocean floor bracing for just such a location. So I don’t think it’s fair to label the choice of location a “NIMBY tax.” Larry may be correct, there may be a cost benefit tradeoff that favors a location closer off the Eastern Shore and south of Chincoteague, absent NIMBY objections; but this more distant location is the place to go for proof of concept regardless of NIMBY. You can be sure the Danish company with its North Sea experience is in favor of this.

    As for why should Dominion do this at all? Yes, it is true, “Dominion will apply excess earnings, which normally would be returned to customers,” to this project pursuant to the recent legislation. Nothing about this makes me feel any better about that grotesque abuse of the regulatory compact by the GA; but that is spilt milk for purposes of this discussion. In addition to quashing the appropriate return of ratepayer funds, funds that ought to go back to ratepayers unless the SCC approves their expenditure for another purpose the Commission determines after hearings and testimony is “in the public interest,” the GA has undermined normal regulation in a disastrous way; moreover this experiment presages another round of construction of new generation by Dominion for ratebasing, a totally inappropriate use of ratepayer funds in a competitive mid-Atlantic wholesale electricity market like we have today. But those are NOT reasons not to do this experiment — not reasons that ratepayers shouldn’t pay the cost of it.

    • I’ve heard that argument in favor of the more distant location. I am a skeptic, but I’m willing to be persuaded. It may not be a NIMBY tax. The cost of the long connection also gets more reasonable when two turbines becomes 20 or 120, so it will be important what size line they install. Hey, I’m all for power sources with free fuel and OSW should have a higher capacity factor than most onshore locations.

      Enough about the excess earnings. Whether they are paying for this with my stolen refunds, or with a future rate adjustment clause, it is RATEPAYER money, not stockholder money. They never put their stockholders at risk.

      • That is exactly right. Off shore wind farm investment should be a shareholder investment at shareholder risk. I can see ratepayers helping to fund a proof-of-concept experiment towards a new technology that will lower their rates if successful; but that contribution should be weighed by a third party, the VSCC.

  7. Well I think both Acbar and TomH are expressing reservations about how Dominion is approaching offshore – in a different way than I but at the root of it is a lack of confidence and trust that Dominion does not have it’s own interests ahead of the bigger picture public interest – on the feasibility of offshore wind.

    I just feel that they tend to cook the books on things they have the lead on , that they also have a stake in the outcome. In my view, this was never more clear than on the coal ash cleanup issue where they paid a consultant to bring back a conclusion that is at odds with what other states have done – and at a high ball cost that is so high and imprecise in range as to not end up being even a basic framework to move forward on. The net result of that “study” was basically to bolster Dominion’s preferred outcome instead of an objective look at feasible options – to include relocating the ash in lined pits.

    For instance, they cite the use of trucks to move the ash as a major cost component – when every single one of the sites has rail access.. but not a word about that.

    Similar behavior with the James River powerline crossing where they basically refuse to consider and cost-out other downstream crossings, they just ruled them out from study at all!

    For offshore wind – they have dragged their heels for years citing “costs” AND wanting ratepayers to pay… Where is the proposal to use the overcharges for Grid Transformation – for an offshore pilot or for coal ash cleanup instead of Dominion choosing how to spend that money on things they choose with little or not transparency and accountability on ROI?

    They are looking out for themselves way more than the public interest on these issues… in my view. They are using as much of their monopoly power and influence in the legislature to pretty much prioritize what is in their own best interests to the point that it harms objectivity in these studies and decisions.

    The “failure: of de-coupling is a prime example. It’s worked in a lot of other states …IS working… and in Virginia … it “fails” with no real honest analysis as to why much less an attempt to fix the flaws and have a second go at it. It’s like Dominion and the Va GA could not wait to bury it and move on.

    So, no… I think we are not being objective about what is in the public interest because Dominion has too big a grip on the process and chooses path that helps them – even if those paths are not the best for ratepayers. I do not expect them to harm their own interests – but I do expect them to exhibit more objective stances that the public can trust these “studies” and pilots.

    I do not advocate harming Dominion. They need to stay strong and viable as a company as Virginians depend on them vitally… but we are not moving forward like we should – because of Dominion’s reticence and tendency to cook the books to primarily benefit themselves… on the decision points.

    So I do expect the offshore wind “experiment” to “fail”.. just like de-coupling did and a proper coal-ash cleanup has… just like not having enough gas and having to build an unneeded pipeline….etc..

    When/if offshore wind becomes a wildly successful venture beyond our wildest dreams with Dominion getting mucho attaboys… I’ll issue the requisite hat-eating Mea culpa but I fully expect this thing to face-plant with Dominion coming back and saying ” Gee we tried but these things are financial losers”… – I’d like to see a more objective 3rd party involved in the assessment.

  8. in terms of WHERE you would feed offshore wind into the grid –

    The understanding I got from prior discussions is that it really don’t matter WHERE you connect a power generator to the grid. It DOES matter how long a cable you use to feed into the grid.

    But putting power into the grid on the Eastern Shore rather than Virginia Beach – is there any difference? Right now – Dominion can and does power from PJM that is generated outside of Dominion’s service area – but once purchased is put into the grid at the location where it is generated and Dominion then “uses” it where they need it.

    If Amazon puts solar panels on the Eastern Shore – doesn’t that power get put into the grid and used – when it is available?

    See, these are basic issues that people need to understand about renewables including offshore wind… and it’s pretty relevant with regard to locations that will encounter NIMBY or not.

    • There is a specific existing substation right near the Virginia Beach oceanfront that is apparently a very good choice to make the connection.

      • Maybe but that doesn’t allow us to take advantage of the wider connections and generation on other farms along the coast, either to ship out our wind or import some power from the north, both of which add to PJM grid reliability.

  9. Oh dear … so much to rave about that I dug into old writings for this comment …
    On June 16, 2011 the U.S. Department of the Interior (DOI) and 10 East Coast states established the Atlantic Offshore Wind Energy Consortium (AOWEC) to promote the development of wind resources on the Outer Continental Shelf. Virginia was part of that ‘Smart from the Start’ group, states whose coastline are part of the Mid Atlantic Bight.

    The Bight is the continuous, shallow platform of the continental shelf that runs roughly from Cape Cod to Cape Hatteras, North Carolina. This includes Virginia’s Atlantic coast. Fully developed it is estimated to be capable of producing 70-85% of current US electricity demand. The low water depth and proximity to the populous East Coast makes the Bight nearly perfect for offshore wind development. In addition, further from shore the wind speeds are generally greater, the wind itself is steadier and the blades used can be larger, meaning turbines generate more power than on-shore turbines. And the ‘sea breeze effect’ of wind farms this far offshore means that the power generated from the offshore turbines occurs during times of high electricity use. Finally, transmission loss is minimized as the power is produced close to the major population center. 75% of the population lives in relatively proximity to our coastline.

    Because of the Bight, East Coast off shore wind could produce the “equivalent of 70% of America’s current electricity generation, or on average, 330 GW of electrical power,” according to researchers at Stanford University and the University of Delaware. The Bight’s offshore wind energy potential exceeds the region’s current demand for 73 GW of electricity, and would reduce by 68% the region’s CO2 emissions. These percentages are in the range of the global reductions needed to stabilize our atmosphere and will maintain our energy/financial security.

    The AOWEC was established to coordinate state and federal efforts relating to permitting, environmental studies, technical and financial barriers, and infrastructure needed to deploy and maintain offshore wind power plants. Bringing the output ashore would be easier with coordinated efforts by the states. It would also be made easier by the announced Atlantic Wind Connection’s (AWC) plans to build an offshore transmission backbone for wind farms on the Atlantic Bight between NY and MD. In the initial phase, the plan will be able to connect 6,000 MW of wind energy to the Eastern Grid.

    According to a release from the Atlantic Wind Connection the Mid-Atlantic region offers more than 60,000 MW of offshore wind potential in the relatively shallow waters of the outer continental shelf. These shallow waters, which extend miles out to sea, allow for the development of large, distant wind farms, mitigating visibility issues and allowing for greater energy capture from stronger winds. The AWC saw the transmission potential for Offshore Wind on the Mid-Atlantic Bight is 6000MW by 2017. AND here we are in 2018, but at least offshore wind is now underway.

    Connecting the farms at sea minimizes the issues of bringing the power to the grid onshore, and as the say, the wind is usually blowing somewhere along the coast. One of those 5 land connections was to be at Norwalk. Interesting that Dominion’s bid for the leases included a stipulation that they did not have to use the Atlantic Connection. Not sure where that all stands 5 years later.

    Finally, Dominion’s reason not to build on their 2013 leases has been cost, but costs are dropping rapidly as supply chains and construction capabilities develop as Steve pointed out. This industry development is part of the Governor’s new argument for our offshore wind development in Virginia’s Energy Future. According to the September 2010 NREL analysis, ”offshore wind would create approximately 20.7 direct jobs per annual megawatt in the United States. If 54 GW were installed in the U.S, more than 43,000 permanent operations and maintenance (O&M) jobs would be created, while more than 1.1 million job-years would be required to manufacture and install the turbines (NREL White Paper).

    It has been advocated before because Virginia is well suited to accommodate what is needed. Interestingly with the expertise of offshore oil behind them, the companies that provide services to offshore fossil fuel are following Gulf Island Fabrication into the offshore wind industry. The foundations that company built for the Block Island Wind Farm were modeled after oil platforms. Question … Why do we need pilot platforms?

    In addition to building the very large offshore turbines that need to be produced close to their future home, there are 8,000 parts to a windmill. In North Carolina the federal government estimates that building enough wind turbines for the NC coast to replace 10 nuclear plants would create 50,000 local jobs and provide $22Billion in local economic benefits over the next 20 years.

    Cost is no longer an excuse and we don’t have to insist that offloaded health and environmental effects of fossil fuels be included in a cost comparison, although generation offshore meets peak demand, which is the most expensive power to produce, would make prices even better. In the U.S., we have seen a substantial decline in costs between the $244/MWh paid for Deepwater Wind’s Block Island project and the price of $132/MWh offered in May of 2017 to the developers of the Maryland project. Now, the first large-scale offshore wind farm in the U.S., Vineyard Wind project, proves that renewable energy is cheaper than ever. It offers a total levelized price of $65 per megawatt-hour.

    “Dominion wins offshore leases but building won’t start soon…They say natural gas is the lowest cost choice today … Dominion Power will make the jump into renewable power with the award of the leases for 2000MWs of offshore wind. The leases do provide Dominion the opportunity to demonstrate their voiced commitment to renewable energy. Trouble is that jump won’t come for 10 years.” Having outbid several companies for those leases on federal waters, now 7 years later they will build 2 test platforms .. What next? Just that 14% pipeline?

  10. I think Jane Twitmyer added some pretty relevant comments and facts to the discussion.

    Dominion has CHOSEN to invest 5 billion dollars in a pipeline to power gas turbines and has shown reluctance to invest 300 billion in a power source that has a proven record of competitive low costs – but a high up-front cost just like pipelines and Nukes. To be honest, I don’t think I’ve seen any kind of actual cost analysis for the turbines.. just “talk” about it being “expensive”.

    Hells Bells – 5 billion dollars for a pipeline or twice that for a Nuke is not exactly chump change either and Dominion clearly favors gas and nukes over offshore wind.. I’d like to see some cost comparisons myself..

    I WILL say this on Dominion’s behalf. You’d think that offshore wind is tailor-made for the worlds islands that currently burn imported diesel oil for electricity at about 3-4 times the cost of mainland fossil fuels and nukes.
    I’d sure like to see that aspect also addressed in an analysis…

    Perhaps we’re going to see Virginia hire a 3rd party to bird-dog this?

  11. TKS Larry. Glad you found some useful info. … Back when I was writing that offshore stuff folks were calling it ‘medieval’… a tag that evidently resounded.
    The Gov announced your third party evaluation last week … the international energy consultants BVG Associates have been hired to leverage the state as a coastal leader for the offshore wind industry for input into the 2018 Virginia Energy Plan.

    Regarding islands … It will happen, but most are waiting for the innovations in the form of floating platforms. Most coastlines don’t have the shallow and wide geology of our Mid Atlantic Bight. Statoil has been testing floating wind turbine technology for about nine years off the coast of Norway. Last fall it planned to commission the first commercial wind farm, called Hywind, in the waters of the North Sea about 15 miles off the coast of Scotland. Success will greatly expand offshore wind and The Donald can’t complain about the blocked view from any new wind farms on the North Sea.
    “ The turbines float on giant vertical stafts that end in massive underwater weights that stabilize the turbines. Each base is then anchored by cables to the sea floor, about 300 to 400 feet below the surface. Other designs for floating turbines include tri-point platforms and wide-base foundations floating near the surface, both tethered to the seafloor with cables.” (Inside Climate News)

    And here is what is in the works on The Bight…
    • New Jersey’s incoming governor has pledged 3.5 gigawatts by 2030.
    • New York’s governor has a goal of 2.4 gigawatts by 2030.
    • Massachusetts is calling for 1.6 gigawatts by 2027.

    Regarding comparative costs … Lazard estimates 2017 average levelized cost of new utility-scale electricity from nuclear at $148/MWh (14.8¢/kWh), coal at $102/MWh, natural-gas-combined-cycle at $60/MWh, utility solar at $50/MWh, and onshore wind at $45/MWh. That is why the Vineyard price was so stunning. It offers a total levelized price of $65 per megawatt-hour and unlike the gas combined cycle energy, there is no worry about rising gas prices or paying more for gas generated electricity because of the capital cost of transporting gas by those new pipelines.

  12. I presume that levelized costs includes the transport from where extracted to point of use … and from point of use to long term storage for nukes.. and cost of cleanup of coal ash for coal?

  13. “LCOE accurately compares the economics of different generation technologies by measuring the total cost of first building a power plant, then operating it over its assumed lifetime.” There are estimates for capital costs and fuel cost futures but not environmental or health damages. I doubt coal ash got included as the numbers aren’t settled into rates or the operating costs of a coal plant.

  14. A few things to keep in mind about offshore wind. Although being offshore with high towers will stabilize wind production, it still has a diurnal rhythm to it (land-sea breezes). Some of the most constant winds occur at night. This makes wind energy the enemy of nuclear. Not only because of its lower price but also the fact that wind can displace nuclear from night-time dispatch and make its must-run nature difficult to manage as higher percentages of wind energy enter the system.

    I think that is one reason that Dominion wants to put wind generators in the rate base (besides the fact that they want everything in the rate base to earn more profit) and perhaps are no too eager to see wind succeed here. Or perhaps they are just wisely hedging their bets.

    Most other wind farm developments are accomplished by third-parties. The utilities make their money by building transmission to bring wind energy to the market. It could be different in the east, however. Several utilities in the northeast are owned by the Spanish energy company Iberdrola. Spain has the highest level of renewable generation in Europe, much of it from wind.

    We cannot develop a successful long-term energy plan until we decouple generation from retail. Otherwise the utilities will always want to build more and own it all, even if it is a bad idea. We cannot decouple for future projects unless we provide the utilities with other streams of income that keep them financially healthy. It is a complex task to sort this out, but several other states have made a lot of headway on this and we can learn from their experience.

  15. ” We cannot develop a successful long-term energy plan until we decouple generation from retail. Otherwise the utilities will always want to build more and own it all, even if it is a bad idea. We cannot decouple for future projects unless we provide the utilities with other streams of income that keep them financially healthy. It is a complex task to sort this out, but several other states have made a lot of headway on this and we can learn from their experience.”

    Trying to sort this out. does “build more and own it all” mean any/all forms of generation including wind?

    But I also don’t understand why decoupling “separates” generation from retail”….

    Perhaps explaining how this DOES work in some other states – successfully.

    My…feeble minded perception is that Dominion is using it’s monopoly and influence in the legislature to hold on to a business model that is getting more and more out of sync with how the industry is evolving.

    They are fundamentally opposed to decoupling and that’s essentially why it did fail in Virginia but succeeded in other states. It was not that de-coupling was a fatally-flawed concept; it has worked successfully (I think) AND the energy generators and providers still exist in those states as businesses.

    To this day – I do not understand why Dominion cannot also be in the energy technology business to include a modern version of the “All electric House” that electric companies used to tout way back when.

    Why can’t Dominion, for instance , sell integrated home systems that have grid,solar and backup generators along with “smart” home devices to monitor and control electricity use?

    I already have too much in this one post so I’ll give it a rest until hopefully others can weigh in but we are well into the 21st century now – and energy is going through fundamental and rapid changes and we still have our electricity providers hanging on to things that are becoming more and more obsolete. I don’t think anyone ever said that we must protect Kodak from changes in the industry so they could still operate but I for some reason, because Dominion has such influence over the GA, we have to “help them” make the transition? I think that they have to want to change also… surely they see that where they’re currently headed is not going to be sustainable either.

    • When Virginia utilities get paid more only when they build more or sell more electricity, it is understandable when they continue to try and do that.

      I am only suggesting that we revise their incentives so that the utilities benefit when they do things that also benefit their customers.

      By separating out generation, the decision to build more power plants would be made based on whether the wholesale market will pay enough to make the investment in a new plant worthwhile, just as an independent power producer does.

      In Virginia, utilities over-estimate load growth to make it appear a new plant is needed so they can add assets to the rate base. Our utilities have supported the mistaken notion that we should have all the power plants we need mostly within our borders. This would add to their ratebase.

      If we need additional energy for just five years, why should we build a new power plant that takes 40 years to pay off? In the age of regional ISOs, such as PJM, we should look to the least expensive ways of obtaining our energy, just as they do in the deregulated states. Including saving the energy using energy efficiency instead.

      In Virginia, our utilities obtain revenues from the wholesale market and a subsidy from the ratepayers. Without a regular rate review, if these two streams of income return more than the authorized rate of return, the utility keeps the surplus.

      Utilities should be allowed to offer a variety of energy services, but on an equal footing with independent suppliers. They should not receive a ratepayer subsidy and a guaranteed profit to do so. For example, allowing a utility to put the solar facilities they build in the ratebase increases the cost of those projects considerably, resulting in higher costs to customers compared to what they would pay if the utility negotiated a PPA with an independent producer.

      This would provide the same amount of energy, but at a lower cost to customers. But it would also lower the utility’s profit, so we need to provide the utilities with other ways of making money that serves our interest.

      The “wires” are the natural monopoly. Interstate transmission is managed effectively by the regional transmission organizations (PJM for us). And it appears to be fairly reimbursing the utilities that own the transmission lines.

      We need a new scheme for the distribution system. This is where most of what we consider “grid modernization” will take place. By creating a “platform” where transactions of all sorts can take place, a utility plays a crucial role and gains many new revenue opportunities. This also opens up opportunities for many innovative businesses to provide energy and services that have value to customers. This is the win-win-win solution that we should be striving for.

      If an another organization can develop offshore wind at a lower cost than Dominion, they should be allowed to do so. Dominion should be fairly paid to transport the energy and sell it to their customers. If we leave the development of new energy resources only in the hands of our utilities, some promising options might remain underdeveloped or we will pay much more than we should because the projects have been added to the ratebase.

  16. For what it’s worth, here is a piece I did on East Coastoffshore wind for Slate magazine in 201e3:

    It is pretty dated now. The Cape Wind project went famously bust about three or so years after my piece came out.

    That said, I can’t understand why Dominion needs to “test” whether wind turbines can handle weather when many of them are in the North Sea area.

    Reasons that they may be planned 20 plus miles off of Virginia Beach include keeping them out of view of beach tourists and out of the landing and takeoff flights paths of high performance jets at Oceana Naval Air Station.

    • Peter … Don’t see a real need to test either, but certainly the load of cheap gas and that $ 330MWhr price tag has kept offshore wind and Dominion’s 2000MW 2013 lease in the remote background. Amazing that the Vineyard price is now $65/MWhr … This time is a go.

      Just want to add that the floating turbines are the issue holding back other places. Denmark has kept their windmills close to shore, a problem on our coast environmentally. And in VA the leases areas are reduced by Security type measures…radar, military etc, but taken into account.

      Our advantage is …we have the shallow waters that go out 30-40 miles before they hit the continental shelf, so the coast between Cape Cod and Cape Hatteras is ideal. Out there the wind is stronger, more reliable, they can use bigger blades and the capacity value is higher. Best, they can take advantage of the distance and still can plant the windmills on the ocean floor That is the gift of our geology … The Mid Atlantic Bight! ! (See my 2nd comment for a description of those floating windmills. When they are proven, the islands will begin to get off all that diesel.)

  17. Good article Peter -thanks! And relevant commentary Tom – thanks!

    I will say this. It’s not like the coastlines of the US are chock-a-block with offshore wind and Dominion is the sole holdout from a dozen or more utilities!

    In fact – it seems to be the Govt that is taking the lead on it – not the free market/private sector which leaves us head-scratching if the levelized costs are what they are – indeed – not a single island out of 10,000 + who all burn diesel – have replaced their diesel with offshore wind!

    However, I still think Dominion has an essential conflict of interest – because they’re invested in fossil fuels and nukes.

    The idea that whatever they do – the costs can be rolled into their base rates is troubling…or to put in another way – if they can’t roll the costs of offshore into the rate-base – it directly threatens their investors…

    If offshore can’t succeed without govt money and/or giving the utilities special consideration- that too worries me because it then puts it in the same realm as Nukes..

    It COULD BE that offshore is problematic… especially if Islands with their own govt-operated utilities are not gung-ho …. I dunno… it’s an obvious question.

    Switching gears a bit – Have folks heard they want to convert Hoover Dam to a pump-storage facility that would pump upstream with wind/solar power…and essentially use Hoover/Lake Mead as a giant storage battery? In concept – you could do ANY river with a dam that way… just keep cycling the downstream flow back upstream to cycle back through the turbines …

  18. Islands have some challenges with offshore wind. Islands in the Pacific Ocean such as Hawaii are 30,000 foot tall mountains in 25,000 feet of water. Not a good situation for anchoring offshore wind. Many of these islands are dependent on tourism. We found that on Kaua’i having wind generators in the scenic viewscapes would probably cost more in lost revenue than they would add in lower cost electricity.

    Carribean islands are mostly in sandy areas which also might not be a good anchorage for offshore turbines. Same issue for tourism dollars.

    The Great Plains wind generators are the lowest cost producers of electricity in the US now. It took a while to create stable, affordable off-shore oil drilling platforms. It will probably take a bit of experience to get the offshore wind structures figured out. I’m surprised they haven’t done more on the Great Lakes, but perhaps ice presents a problem that doesn’t cause an issue in the ocean.

    • Tom, You mention the Great Lakes … without looking it up, I remember that Cleveland got the money the FEDs had designated for VA’s offshore wind pilot. Dominion did not plan for, and choose to not develop, those 2 pilot winds a few years ago, so lost the $. Said the bid would be too expensive.

      Cleveland did a terrific job of putting together a test designed to pilot the ice issue on the Great Lakes.

  19. Not to belabor, but e’re talking about a LOT of islands throughout the world – many of them where there are nearby rock/uninhabited islands – and there are almost no scenic/NIMBY issues – they just need affordable power . Think of Islands near Alaska… Indonesia, places like Tasmania.. Falkland Islands… Greenland… Japan… on and on… places where they pay 3-5 times more for electricity – and if they powered a typical house their bills would be 500-800 a month – so they don’t even have typical HVAC or even electric ranges or fridges…and some places don’t have power 24/7 – just a few hours a day.

    Surely these places would willingly choose a cheaper source of electricity..

    • It’s the same issue we talked about with solar. You need an industry infrastructure to develop and maintain new energy technologies. You can maintain a diesel generator in these locations because lots of people understand engines. It’s different with solar panels and wind turbines. It doesn’t make sense for providers to do small one and done installations in remote locations and doesn’t pay to have a maintenance person and spare parts sitting around all of the time.

      There is a lot more to it than just saying if wind and solar are so much cheaper why don’t they do it?

      Island economies are shaped by different forces than what we experience here. Things that are cheap here, bananas and potatoes for example, are expensive there. They contain a lot of water, are heavy and expensive to ship, so they cost about three times more than they do here. What makes sense to us doesn’t always apply in other locations.

  20. re: ” . They contain a lot of water, are heavy and expensive to ship, so they cost about three times more than they do here. What makes sense to us doesn’t always apply in other locations.”

    AND – you can make that SAME POINT with respect to importing fossil fuels to generate electricity!

    If you need a diesel engine to generate electricity – you get a guy and/or train someone…ditto other technologies… it’s not that different…. People all over the US have home-built solar .. it’s really not that magical…. but I will admit it takes time… you just can’t conjure up a solar expert to transition …but on the other hand – neither solar nor wind will 100% replace… they will supplement and hopefully reduce the amount of fuel oil needed 24/7.

    All in all – Solar SHOULD BE a lot less day-day-maintenance than the diesel… and like with diesel – you usually have two or more so that if one goes down – you have redundancy to continue.

    There are a LOT of islands without native fossil fuels in the world. It’s hard to believe than none for a precious few have been able to transition especially since some of these islands are the size of Puerto Rico where you certainly COULD stick with your diesel and slowly add solar and wind and slowly cut back on the diesel use – rather than a complete replacement which is much, much further away even with the advent of “storage”.

    I’m all for the conversation but I am also a hard-core pragmatist… and feel that we have to face the realities the way they are – even as we keep our optimism… that change is going to happen.. just not yet.

  21. I think this will be my last time around on this, but one last time:

    My point was all about pragmatism. The infrastructure to build and maintain modern energy technology does not exist yet in many remote locations. It is not the cost of the technology that is the stumbling block.

    What we take for granted on the mainland does not exist in the same way in many of these locations. Diesel fuel is easy to come by (but expensive) because all of the trucks and buses and industries use it.

    Change is happening, faster than we realize or are changing our systems to react to it. But don’t expect the islands to be leading a technological change even though costs should say they should. Kaua’i was in a good position because of the high electricity cost. But it was the huge supply chain that exists in Hawaii for the military that made it possible to develop a solar and storage system. Most other islands do not have that advantage.

  22. re: last time around..

    agree .. that horse is well beat and we simply do not have the same view:

    ” But don’t expect the islands to be leading a technological change even though costs should say they should. Kaua’i was in a good position because of the high electricity cost. But it was the huge supply chain that exists in Hawaii for the military that made it possible to develop a solar and storage system. Most other islands do not have that advantage.”

    It really IS about money. If on a given island – people can have MORE electricity for LESS than what they are paying right now – the supply and logistics will take care of the problem… whatever boat that brings fuel oil, a boat much like can bring parts for diesel motors as well as solar and wind pieces and parts.. and 99% of the islands in the world – DON’T have the
    “military” on them either but you would think that even the military would be interested in a more diverse and resilient energy supply also.

    I’m not sure we know exactly why renewables are largely not yet being adopted on 99% of the worlds islands…but it just seems to me that we’re not there yet… but we are fast approaching it .. and once the dam breaks – the technology will spread like wildfire -to the islands – and beyond – though the price differential is much closer where fossil fuels are more easily available and relatively cheap.

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