S&P Global Slams Dominion for Gas Plants

Dominion Virginia Power’s gas-burning plant in Brunswick County.

By Peter Galuszka

International financial analysis firm S&P Global has issued a scathing report criticizing Dominion Energy Virginia for over emphasizing future electricity demand and proposing unneeded natural gas-fired generating plants.

According to S&P: “An examination of State Corporation Commission, or SCC, records; Dominion’s past integrated resource plans, or IRPs; campaign finance documents; and independent reports, along with interviews with utility analysts and environmental advocates and statements from Dominion officials, shows that the company has consistently over-forecast electricity demand to justify building new capacity, primarily natural gas plants with dubious economics that will ultimately be paid for by ratepayers.”

Dominion plans on adding at least eight gas plants with a generating capacity of 3,700 megawatts by 2033, S&P reports. An update to its 2018 IRP plan would add three alternatives that would add 2,425 megawatts of gas capacity by 2044.

The new capacity is in addition to the relatively new Brunswick and Greensville Power gas plants that can put out 3,000 megawatts of power and cost more than $2 billion to build, says S&P.

S&P states: “The proposals come as electricity demand in Virginia grew less than 1% from the Great Recession of 2007-2008 through 2017, according to the U.S. Energy Information Administration, and is projected to remain essentially flat for at least the next decade. In an era of little to no demand growth, when it is already removing plants from service long before their planned retirement dates, Dominion continues to add thousands of megawatts of new gas-fired capacity. And since it is a regulated monopoly, the company continues to pass the costs of those plants along to its customers.”

Dominion says that the new gas capacity is needed to act as a “bridge” to cover generation needs as it moves forward with ambitious plans to build more renewable power sources such as wind and solar. Plus, other capacity is needed when renewables can’t work at night or when the wind isn’t blowing.

It also has said that Virginia has attracted a number of jobs-creating data centers that have increased demand for power, but S&P notes that such companies typically insist that they be powered from renewable sources.

The S&P report, issued Dec. 4, is part of a week-long series of analytical stories exploring similar dilemmas in other states as utilities push ahead with natural gas plants that S&P says are not needed.

Curiously, S&P does not mention Dominion’s mother company’s involvement in a partnership to build a $7 billion pipeline from Marcellus shale natural gas fields in West Virginia through Virginia and on into North Carolina. The 600- plus mile-long project has been highly controversial with environmentalists and property owners who have sued over eminent domain issues regarding rights of way. The project has been tied up in a fight over permits for about a year.

S&P also does not note that a Dominion company owns a liquidized natural gas on the Chesapeake Bay in Lusby, Md. that exports gas.

It is important to note that the critical report was issued by a firm that handles financial analysis for investors and thus might tend to be unbiased. A number of environmental groups, however, have praised the S&P report.

(Full disclosure: I worked for the McGraw-Hill Companies which used to own S&P for 18 years and my pension funds are overseen by S&P Global but I never worked for S&P)

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23 responses to “S&P Global Slams Dominion for Gas Plants

  1. I think there can be fair criticism of Dominion on various issues but you gotta give them credit – they do KNOW HOW to make money!

    I mean look.. they get to add profit from coal ash cleanup. They got to keep the overcharges and the tax rebates and they get to charge ratepayers outrageous prices for solar and wind!

    And I think they are betting big on gas because of the impetus to build more solar and wind – just as in California’s case -they went big on wind/solar but they did not prepare for how electricity would be generated when wind/solar were not available. It’s got to come from gas.

    So all these eastern states going to more and more wind/solar – they’re going to go to PJM when they need gas – and that’s where Dominion is planning on becoming the “go-to” provider of gas-generated electricity!

    Is that true? I don’t know but I DO KNOW that Dominion, for all of it’s supposed faults – DOES KNOW how to make money!!!

  2. When S&P says, “Dominion plans on adding at least eight gas plants with a generating capacity of 3,700 megawatts by 2033,” I assume that it gets its figures from Dominion’s Integrated Resource Plan (IRP).

    If that assumption is correct, then Dominion’s “plan” is really a forecast based on various scenarios outlined in detail in the IRP. So, I’m not sure what the cause for alarm is. If the demand projects prove overly optimistic, Dominion will scale back its construction plans.

  3. Jim, I forgot to mention that on Wednesday dominion dropped RFP for some gas capacity. Don’t know details.

  4. AND following the S&PGlobal report Dominion announced ti “suspended a Request For Proposals that targeted up to 1.500MWs of dispatchable peak capacity in Virginia territory, which observers said woudl have likely resulted in natural gas additions.”
    https://www.utilitydive.com/news/dominion-suspends-plan-to-add-15-gw-of-peaking-capacity-as-virginia-faces/568489/
    The RFP was put out in November for ‘balancing’ renewables. And yes, these ‘peakers’ were in the IRP.

    So glad Dominion has finally listened to someone. Several of us have pointed out that there are lots of other way to deal with peak demand, in addition to the inflated demand projections. Alternatives start with efficiency, demand response, and storage, especially since by 2025 storage will beat gas ‘peakers’ on price every time.

    Another way to meet peak demand is the combination of rooftop solar and offshore wind. The wind kicks up just as the output from solar declines in the late afternoon.

    The proposal sure looked like a way to pick up the demand for natural gas to continue to justify the ACP after the removal from the IRP of 2 regular gas plants. Now that it is clear that demand is not rising as Dominion had predicted, and that the IT corporate demand is firmly committed to 100% renewable energy only, maybe the pipeline itself should be reconsidered.

    The export price differential is declining too. Pulling the RFP looks like a good move. RMI predicts new gas plants risk becoming stranded assets. It’s time to take another look at the pipeline.

  5. re: peak demand – how do you meet peak demand when wind/solar are not producing enough – like at night?

    I’m the last person that would like to see Dominion guide our energy planning but at the same time, I’m a serious skeptic of those who say we do not need gas to backup wind/solar.

  6. The Twitterverse has been alive with this article since yesterday, and I had the link and intended to get to it. Deep in a real estate transaction, badly distracted, as my future near neighbor Jim Bacon knows. As has already been demonstrated, the IRP and the company’s public statements to its investors don’t always match up. Another recent example of that was the off-shore wind project costs, but that one thrills Jane and the environmental community.

    Added a link to the story into Peter’s post but here it is again:
    https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/54171542

    • “The Twitterverse has been alive with this article since yesterday, …”

      Translation: A great marketing move by S&P. I am sure their business is booming. So histories Iron Law snaps into place. Bet on the opposite happening, then watch the herd madly disappear over the cliff, rating agencies first. Oldest story in town for this sort of game.

  7. I can’t find the citation address but the info came from NREL. They say the combo of solar and offshore wind can meet all of Virginia’s peak summer demand. Peak demand is the late afternoon into the evening but not all night. Offshore wind picks up late in the afternoon and runs strong through the evening, different from onshore wind.
    This does not work as well in the winter … ???? sun not so good and goes down earlier?

  8. Utility Dive just published the article about Dominion cancelling its plans for 1,500 MW of new gas-fired peakers. Here is the link:

    https://www.utilitydive.com/news/dominion-suspends-plan-to-add-15-gw-of-peaking-capacity-as-virginia-faces/568489/

    It is curious that this announcement came out on the heels of S&P Global’s excellent series on the glut of natural gas infrastructure throughout the nation, especially in PJM’s territory.

    PJM will have a surplus of capacity that is 35% greater than its peak requirements in 2023 and nearly 60% more than what its peak will be in 2027. PJM needs only about a 16% reserve to maintain a highly reliable supply of electricity to the 65 million people it serves.

    Having this information come from such an objective source as S&P Global is shaking up the industry. Utilities have tried to keep the knowledge of this glut of capacity from getting to policymakers and the public. It is also making financial analysts more skeptical about accepting the standard line that we need to keep adding capacity to maintain reliability. S&P Global made it clear that this is about increasing profits at the expense of ratepayers and has nothing to do with ensuring reliability.

    One article in the series also called PJM to task about creating market rules that encourage adding too much capacity.

    We are not in any danger of not having enough conventional generation to maintain system reliability for decades to come. S&P Global projected that there would be an excess of capacity beyond reserve requirements, at least through 2050, based on what is already in development today.

    We should be asking why this is happening and why ratepayers will be stuck paying for it.

    To Larry:

    Currently we have an excess of conventional generation to meet the night-time load. That is why we use the pumped storage facility. Nuclear and coal units cannot easily vary their output so they will continue to generate in amounts that are greater than what we need at night.

    Nothing special needs to be done to deal with variations in renewable output until we get to much higher penetrations (30%+) of renewables in PJM. While variable, the output of renewable facilities is very predictable far enough in advance to make adjustments in dispatch orders within PJM. This can be done with lower-cost cycling units (intermediate load) rather than using high-cost peakers, except during the summer and winter peaks.

    It appears that Dominion was using its plans to build more solar as cover for getting 1500 MW more capacity into the ratebase. It doesn’t appear to be justified from a reliability standpoint.

    As customers in Virginia, we should want to meet short-term variations as much as possible from PJM. We have to provide 100% of the costs for a new peaker that might operate just 5% of the time. Good for the utility shareholders, bad for us.

    NERC and PJM are in charge of assuring reliability. A lot of the “sky is falling” comments related to the addition of a relatively small percentage of renewable generation is not warranted.

    S&P is telling us that we are already paying for a lot of capacity that we don’t need. There is no justified need for more gas-fired generation.

    • Bacon’s Rebellion has been telling Virginia about excess capacity since you and I both started writing and commenting, Tom. But glad to have S&P get the glory for repeating our earlier reports, much of them based on SCC filings, etc.

      Jane, no way in hell can Virginia’s summer peak be met by solar and wind alone. That is religious doctrine, not engineering.

      • I will stick to Dominion all day long again S&P Global, and anyone else on sidelines. Too much complexity, too much risk, to many unknowns, too much instinct grounded in long successful experience, too much to risk and lose in these troubled times to trust sideliners here. Dominion is great company, extremely well run, at top of its industry, and recognized as such for good reason. Virginia lucky to have it in highly uncertain times, that can change rapidly in highly unexpected ways.

      • Well … looks like you’re both .. and you sure set yourself up for that!

        Still haven’t found the NREL paper but here is the NY one … Offshore Wind and Grid Connected PV – High Penetration Peak Shaving for New York City …

        “The coastal wind maxima tend to lag the solar cycle by a few hours; hence the combination of dispersed PV and offshore wind generation could be ideally cited to meet entire peak demand cycle, including the mid-afternoon daytime peak and the evening shoulder peak.”
        ….
        “While wind generation is not known as a reliable peaking resource, local offshore generation is an exception because the same heat waves that drive demand peaks also produce enhanced thermal circulation and sea breezes.”

        The analysis was based on one year’s worth of hourly site and time specific data including electrical demand PV and offshore wind generation. It showed that the synergy of the two resources creates more capacity together than would be expected from each depending on grid penetration levels.

        • I removed my rude comment and I apologize for it, but just cause you can find some paper that makes a claim doesn’t make it true. There will need to be base generation in the mix. I have no idea of the source and plenty involved in this debate have financial incentives to see what they want to see.

          • re: ” but just cause you can find some paper that makes a claim doesn’t make it true. ”

            You might want to repeat that to Jim B on some issues where he proffers some foolishness from a non-objective source with an agenda!

            I find myself a skeptic also on the idea that we can 100% power the grid from renewables, and I am a strong advocate of more renewables – much more and widespread.

            But that 100% claim actually undermines efforts to implement more wind/solar and empowers those, like Dominion who make the point that wind/solar are not “reliable” and will make the grid more fragile and vulnerable to failure. It also provides ammunition to their argument that we will need a LOT MORE natural gas and pipelines.

            No matter WHERE power comes from at night in-state or PJM, – it won’t come from solar and it’s unlikely there is enough wind and pump storage or battery storage to carry the night.

            And, I see no big push from the renewable advocates for more pump storage as a critical strategy – perhaps there is, I’ve not seen it.

            If order for there to be a solid groundswell for a lot more renewables, there needs to be a practical and compelling strategy that the critics cannot question – and we’re not there.

            I’m convinced when I see some of the world’s many inhabited islands that currently rely on diesel fuel 24/7 convert to systems where solar/wind power the day and diesel powers the night – or cost-effective battery storage. Pump storage is not even an option on most islands.

            As long as we do not present a solid strategy for more renewables, Dominion and other critics will continue to effectively argue that 100% renewable energy grid is a hoax from folks whose wants and hopes far exceed the reality.

            No one more than I wants to see renewables take over as much as possible but I cannot align myself with the advocates who claim 100% renewables is possible.

  9. I don’t think we have near enough pump storage to power the night. Show me some numbers to prove otherwise.

    And as far as PJM “plenty of capacity” – where does that nighttime power come from in PJM – NOT renewables!

    By the way, I have no doubt, what-so-ever, that we COULD build enough solar to carry the day – entirely physically and fiscally possible but the heck of it is – that it would be duplicative of the nukes – that have to run 100% 24/7 , all day, all night, – no matter how much solar we have.

    But if we DID have enough solar to power Virginia during the day, I suppose Dom could sell the Nuke power to PGM but if everyone else is generating from solar – might end up with nukes not spinning turbines.

    too bad we cannot figure out a way for solar and nukes to complement each other.

    But we still have the night to cover when solar is down and I doubt seriously we have nowhere near enough pump storage to cover all
    the nighttime demand.

    It looks like Bath has maybe 11 hours at 2700 mw…. that’s good but no near enough.

    here’s an interesting chart:

  10. Larry,
    I was not claiming 100% of all electricity could be produced by the offshore wind and PV solar combo. I am just repeating the analysis that says … here along the Mid-Atlantic Bight the output of the combo is perfectly situated to meet 100% of summer peak demand which is measured as late afternoon and into the evening, in some places listed as 5:30-7:30.

    The reason that it is significant to meet that peak means that the extra demand could require additional generation, like those peaker gas plants Dominion had proposed, but those generators would only run for that short time frame of high demand. Not very efficient but certainly good for the rate-based income.

  11. Just came across another of those peak studies … “With the exception of summer, all peak-time demand for Virginia to Maine can be satisfied with OWE in the waters off those states.”
    Add the PV and we can meet summer too here in VA. They also calculate that about 1/3rd of US demand can be met with OWE.
    This comes from the Dept of Civil Engineering, Stanford University, March 2012

    • Jane – I have zero doubts that we could build enough solar to cover the daytime including peak demand. Realistically, you’d not have to build more than the combined solar and nukes since nukes run 100% 24/7 anyhow and any solar more than that – beyond peak demand, would not be usable.

      But come night – solar is out of the equation and even though night is a lower demand period, it’s still a significant amount of electricity (over and above what the nukes provide – where does it come from ? And I don’t mean PJM – I mean what generates it whether it’s in Virginia or in PJM? Some pump-storage (if it is not used during the day for peak) but what else?

      I’m not saying it should come from natural gas peakers – I agree with Tom that combined-cycle is “better” but it IS gas.

      Both California and Germany have run into the reality that solar/wind alone cannot meet demand – at night. Gas is very costly in Europe especially if it comes from Russia. But how else would they meet demand at night if it was not gas or coal or nukes?

  12. Larry, I was only talking about peak demand … that late afternoon through early evening time frame that is problematic because it only requires more electricity for a short time, and is more than normal demand. It is the highest level of demand.

    That is where the idea of the synergy of offshore wind and solar comes in. By combining the 2 resources the high level of demand in that time frame is covered. Solar output peaks earlier in the afternoon just as the offshore sea breeze effect begins to pick up and generates increased electricity. It is an output timing compatibility that means all those gas peakers are not needed.

    I don’t know how we get to 100%, but we are sooooo far from there and it will take years and years to do the build outs required. I am just saying let’s get going, install the software to integrate what we build and spend our money on demand response, building efficiency and only on renewable resources like solarPV and offshore wind.

    Let’s take it as far as we can and I bet by the time we have done that your questions will be answered.

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