Merchant Power Plant Proposed for Charles City County

power plant

Merchant power plant in Hanover County.

Another independent power producer has filed an application to build a combined-cycle, gas-fired power plant in Virginia. C4GT, managed by Michigan-based NOVI Energy, proposes to locate a 1,060 megawatt power plant in Charles City County.

In a filing with the State Corporation Commission, C4GT stated that the facility “will promote the public interest by, among other things, providing significant economic benefits to the Commonwealth of Virginia, Charles City County and the surrounding area by providing a significant source of new merchant capacity in Virginia. … C4GT would operate the facility as a merchant power plant supplying electricity on a wholesale basis to markets in Virginia and surrounding regions,” reports the Richmond Times-Dispatch.

The proposed plant would be located on 88 acres near the Roxbury Industrial Park and less than a mile from Dominion Virginia Power’s Chickahominy substation.

Bacon’s bottom line: This is the third or fourth (I can’t keep count) application for a merchant plant to be announced in Virginia in recent months. It’s one thing to initiate the permitting process for building a new gas-fired power plant, however, and quite another to actually embark upon construction. I view these applications as a hedge in case the boom in gas-fired generating capacity proves durable.

As Tom Hadwin, a former utility executive, frequently observes in the comments section of this blog, the economics of solar power are improving so relentlessly that solar+battery storage could provide lower-cost electricity than gas-fired power within 10 to 15 years, displacing a lot of gas-fired generation. If his scenario pans out, solar will devastate the revenues and profitability of gas-fired plants financed with a 30- to 40-year life expectancy in mind, especially merchant plants selling into the super-competitive wholesale electricity market.

Evidently a number of players in the industry are more optimistic about natural gas’s long-term prospects. While the public has no way of knowing how serious these merchant generators are about actually building new gas-fired capacity, they are serious enough to spend the money it takes to keep their options open.

Big question for the SCC: Does it make more sense to let Dominion Virginia Power build another big gas-fired power station, for which the company sees a need in the early 2020s, and embed the cost — and risk — in its rate base, or should the commission let independent, merchant generators shoulder the risks and potential rewards of building new gas-fired capacity?