Five-Year Dominion Spending to Upgrade Grid

Dominion's five-year spending priority: upgrading the grid.
Dominion’s five-year spending priority: upgrading the grid.

by James A. Bacon

Dominion Virginia Power plans $9.5 billion in capital expenditures through 2020, almost two-thirds of which will go to upgrading the company’s transmission lines, substations and distribution system. Other priorities include $700 million for new solar generation and, if approved by the State Corporation Commission, additional funds for undergrounding vulnerable distribution lines.

“We know our customers expect high reliability, clean energy and reasonable rates,” said Robert M. Blue, DVP president in a statement. “We focus on that in everything we do, from building new infrastructure to day-to-day maintenance and fast storm response.”

The capital spending, which will average nearly $2 billion a year, represents a major step-up from the past seven years in which Dominion spent $8 billion, much of it for environmental control equipment to reduce coal-fired power plant emissions of toxic chemicals.

Dominion has the fastest-growing demand for electricity of any utility in PJM Interconnection, which manages wholesale markets and the reliability of the regional electric grid for a 13-state region plus the District of Columbia. The company added 430,000 customers in the past decade, the press release states. Dominion also serves an increasing number of energy-intensive date centers in Northern Virginia.

“Our modern way of life requires lots of energy – and that means infrastructure,” Blue said. “To keep up with energy demand and meet new clean air requirements, Dominion Virginia Power and its parent company are constantly building everything from power stations to power lines, substations to natural gas pipelines.”

Of the $9.5 billion in planned expenditures, Dominion proposes to allocate $3.6 billion for transmission lines and substations, $2.4 billion for its distribution system, and $3.5 billion for new generation and environmental improvements.

While policy makers tend to focus mostly on electric rates and environmental impact, Dominion also emphasizes the reliability of the electric grid. Blue said that reliability, measured by minutes lost due to routine service disruptions, has improved 25% since 2008. “Our reliability in 2015 was 98.8%, which translates into approximately 2 hours of outage time per customer over the whole year.” (Reliability metrics do not take into account outages from major storms.)

Dominion’s proposal to run power lines underground would focus on the most outage-prone tap lines. The idea is to enable electric power to be restored more quickly to customers in the event of a hurricane, ice storm or other major weather-related disruption, which historically has hit the state on average every couple of years.

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10 responses to “Five-Year Dominion Spending to Upgrade Grid”

  1. It is not clear how the $2.4 billion for distribution will be spent. Dominion Resources does have a subsidiary that specializes in modern distribution grid improvements, so this is likely to be a good share of the expenditures. It is not clear if this is primarily for better data collection (smart meters) and replacing slow responding electro-mechanical devices with more modern digital devices. These enhancements will improve reliability and lay the ground work for more Demand Response possibilities, but the plans might not include the types of improvements that would encourage and accommodate more distributed generation.

    The $3.5 billion for generation and a good portion of the $3.6 billion for transmission and substations are probably related to the two new Southside combined cycle plants and re-firing coal plants with natural gas.

    Many utilities are upgrading substations with faster acting controls that can be monitored and directed remotely. Dominion has many capable employees who are concerned about reliability, so these projects will be helpful. The question is – are these programs just an update of an old central station utility model or are they early steps in a transition into a 21st century energy company? Based on Mr. Farrell’s comments, it appears to be more a refinement of the business as usual scenario.

    1. TomH, You raise a good question to ask — how much of this money spent on distribution is business-as-usual stuff, and how much is smart grid? My sense is that a large chunk of it is undergrounding cable…. which, in your schema, would be business-as-usual.

    2. Undergrounding ought to be business as usual for distribution lines, although it can become much more expensive for the higher voltages due to heat buildup and the need for cooling. For distribution, it’s a relatively simple tradeoff between higher installation cost for undergrounding and lower maintenance and greater customer satisfaction due to storm outages. Connecting a new house to an underground line costs more, but then there’s no overhead line to the house afterwards. Connecting an existing house with an existing overhead service drop to a newly undergrounded distribution line can be a big hassle (many customers will refuse to pay to change what they are used to, and nobody wants a trench dug through their existing yard).

      As for substation upgrades, in addition to increasing transformer capacities, there are lots of changes being made these days due to the computerization of controls and the installation of monitors to provide real-time feedback on system conditions, local outages, etc.

      None of this answers TomH’s question, “are these programs just an update of an old central station utility model or are they early steps in a transition into a 21st century energy company?” We still need a reliable, modern grid even with distributed generation, so I’m not sure I understand what difference the answer to his question makes (for distribution investment purposes, that is).

      1. That’s “fewer storm outages” of course.

      2. Acbar,

        I agree that we need a more modern grid no matter what. I guess what I am trying to get at is more a matter of degree or attitude. I am certainly not an expert in the equipment or measures that are necessary for grid improvements.

        For example, many of the opportunities for effective demand response measures depend on the nature of the customer relationship. If the utility is not considered a trusted partner, then many of these programs don’t succeed or require a third-party to successfully implement them.

        If the utility encourages third-party development of distributed generation its policies and plans for grid improvements will be different from those utilities which are opposed to this and want to control it all themselves, thus limiting the speed and extent to which these options are developed.

        In matters such as net metering, some utilities make it easy, some are making it more expensive and difficult to gain approvals and connections.

        When Austin Energy had a thorough review of what its net metering charges and credits should be, they found that the value to the grid and to non-solar customers was much greater than they had assumed and increased the credits for residential solar as opposed to the higher connection charges imposed by other utilities that claimed these customers were receiving an unfair subsidy.

        I’m sure each utility’s situation is somewhat different, but it makes a big difference when the issues are approached with an open mind or preconceived notions.

        Grids will be modernized no matter what. Utilities of all stripes are sensitive to cost and reliability issues. But they will not necessarily be developed in a way that is open to easy access by third-party and customer installed facilities unless the utility encourages it or is directed to do so by regulators.

        This is a big change, especially for utilities that are accustomed to calling the shots in a way that serves them best. Many of our industries are being asked to make a change to a more customer centered and societal centered point of view, especially those that are partially regulated such as energy and health care.

        1. TomH, I agree with your comments, but I am more optimistic (for the reasons mentioned earlier re ‘Clean Power Plan Will Cost Virginia “Billions” Says Dominion Chief’). I especially agree, “If the utility encourages third-party development of distributed generation its policies and plans for grid improvements will be different from those utilities which are opposed to this and want to control it all themselves.” No question, Dominion likes to be in control of its risks. But don’t forget the moral of that old story about brother rabbit and the tar baby.

      3. TooManyTaxes Avatar

        We moved to our present house back in 2008. Every time the wind blew more than 20 miles per hour, it seemed we lost power. Some incidents were off and then back on, but a number lasted for a number of hours. And, since we seemed to be a smaller group of homes connected to the same feeder line, it often took a long time for power to be restored.

        Having had enough, I wrote a strong letter to Dominion and threatened to file a VSCC complaint. Soon thereafter, I got a call from one of Dominion’s engineers. He was appalled at the number of times Dominion had to restore our feeder line and the associated costs. Long story short – Dominion replaced two feeder lines into our neighborhood. The number of outages is down to next to nothing. When the Derecho hit, once the main line into our part of McLean was restored, our entire neighborhood was back on power. Maintenance and replacement of poor quality plant can reduce costs and provide more reliable service.

  2. LarrytheG Avatar

    I was gonna say – we spend capital money on buying new school buses and sheriffs cars – replacements – with whatever new things are in them but it’s not like we are transitioning to a different way of doing business ..

    and I’m quite sure Dominion would be trumpeting their new initiatives.

    If I heard they were spending some of that money for smart meters or to pilot a gas plant with solar on site… I’d be impressed.

    but this sounds pretty much like business as usual…with them spending some money on the more vocal in NoVa who want their electric lines buried – and keep their trees.

    I want to know what new things Dominion is planning… not that they have a capital facilities replacement process.

  3. LarrytheG Avatar

    What I would like to hear from DVP – how it intends to deal with the clear technological changes that are coming .. some of them here.

    I don’t consider spending money on traditional capital facilities and burying lines to be a forward-looking plan given the changing landscape for power generation – the shift away from coal, more reliance on gas and incorporation and accommodating wind/solar – as well as the advent of demand management – at the consumer level -that will impact DVP as well as ratepayers.

    The thing about any industry – such as Kodak or Blockbuster Video is that not all of them are tuned in to fundamental changes – and they fail – as they should and are replaced by more nimble and innovative enterprises.

    The problem with govt-sanctioned monopolies like DVP is that they are protected from that fate – but it comes at a cost to ratepayers and consumers – who – will avail themselves of whatever technology is available to reduce their costs – and especially so if DVP ends up trying shift such costs to ratepayers.

    The utilities that are going to prosper – IMHO – are the ones who will invest in modernizing their grid – to be able to opportunistically use the changing technology to THEIR advantage – as opposed to trying to use govt to shield them from that change -which I feel is the path that DVP is now taking with their “freeze” deal with the GA.

    that “freeze” is not going to help DVP no ratepayers – if DVP uses it to try to build more obstacles to consumers utilizing evolving technologies … and in that regard – that “protection” may well be contributing to deterioration of DVP as an effective and modern utility.

    DVP cannot stop the changes that are coming. They cannot really insulate themselves from it – ultimately .. all they can do is delay it and cause disruptions to themselves and others that want to adopt the new technologies.

    And really, you’d think the guys who run the GA – who see themselves as guardians of the free market and private enterprise – would act that way and not succumb to, what boils down to – as protectionism of a monopoly.

  4. LarrytheG Avatar

    “Beyond the math: Preparing for disruption and innovation in the US electric power industry”

    Part of a Deloitte series on innovation

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