PJM operations center, Audubon, Pa. Photo credit: PJM

Who runs Virginia’s electric power industry — the SCC? the General Assembly? or an obscure Pennsylvania company that doesn’t own a single megawatt of generating capacity or mile of transmission line? 

by James A. Bacon

AUDUBON, PA–Some of the most important decisions affecting the price and reliability of electric service in Virginia aren’t made in Dominion Virginia Power’s headquarters in Richmond or Appalachian Power Company’s in Roanoke but in a nondescript office park in Audubon, Pa., a dozen miles northwest of Philadelphia.

That’s where PJM Interconnection oversees the electric transmission grid in a 13-state region that includes Virginia. Its job: safeguarding the integrity of the system by keeping the supply of and demand for electricity in precise balance, and creating wholesale electricity markets that allow members to buy and sell electricity with each other.

As one of ten regional transmission organizations in North America, PJM oversees a $50 billion-a-year electricity market for 61 million people in a territory stretching from New Jersey to Illinois. The company currently estimates that it saves the economy $2.8 billion to $3.1 billion a year by making the grid operate more efficiently. Its capabilities will be in demand as never before as states and power companies gear up to meet stringent new regulations imposed by the Obama administration to combat climate change.

The Clean Power Plan (CPP) mandates sharp reductions in carbon-dioxide emissions nationally. Across the country dozens of CO2-intensive, coal-fired plants will be replaced by generating units using natural gas, nuclear fuel, wind and solar. The transmission grid, erected to connect those coal plants to major population centers, will have to be reconfigured to accommodate electricity supplied from new locations. Drawing upon data showing where the transmission bottlenecks are occurring and where new capacity needs to be installed, PJM will orchestrate the grid restructuring.

Integrating green power sources into the system will be especially challenging. Solar and wind, which don’t emit CO2 and create no radioactive waste, are the cleanest energy sources available to replace coal on a large scale. But both are intermittent, with electric output varying widely by season, time of day and weather conditions. A single utility operating within a confined service territory would be hard-pressed to deal with these fluctuations. A regional approach will make the task easier. PJM can even out some of the localized, weather-driven flux in green power by drawing upon wind and solar plants across its 240,000-square-mile region.

Appalachian Power joined PJM in 2004 and Dominion joined in 2005, yet in Virginia hardly anyone outside the electric power industry has heard of the company, knows what it does or comprehends how it shapes the choices available to politicians and regulators as they juggle the competing imperatives of price, reliability and environment.

To understand the larger context in which Virginia energy issues are debated, I traveled earlier this month to Audubon, Pa., to see PJM operations first-hand. The company rolled out the red carpet, making available the managers who oversee the region’s wholesale energy markets and electric grid to answer my questions. The following report details what I learned.

Day-Ahead Markets

Trading stocks and cattle futures is child’s play compared to buying and selling electricity on the wholesale market.

Every day at noon, PJM holds a next-day electricity auction. Buyers submit how much electric load they want to purchase at a particular node in the PJM system, at what time they want the electricity, and how much they are willing to pay. Power companies and merchant generators with power to sell enter bids for how much power they will commit to providing, during which hours of the day, and at what price. PJM cranks all this data into a model that runs through successive iterations of analysis and spits out a ranking, from low price to high, of which power facilities will be called upon to supply each additional increment of demand for each customer.

“Our job is to make things as consistent between day-ahead and real time as possible,” says Michael Ward, manager of day-ahead market operations. “We get all the loads coming in. We get all the generation bidding in. And we match them, making sure the transaction physically can happen.”

That’s the simple version.

Adding complexity is the reality that nobody knows with any precision how much electricity will be supplied or demanded the next day. PJM projects day-ahead demand adjusting for season of the year, day of the week, holidays, weather forecasts, and other major influences, but surprises can occur. Likewise, the company projects supply based on historical patterns, taking into account planned maintenance & repair outages, but random supply interruptions cannot be predicted.

Another challenge is accounting for “congestion” in the electric grid. Just as highways get overloaded during periods of peak demand, so do electric transmission lines. Thus, when matching up buyers and sellers, PJM’s algorithms take into account not only the suppliers’ bid prices but congestion charges and other transmission costs that must be added to it.

One more complication: Financial enterprises engage in “virtual bidding,” speculating on the price of day-ahead markets. They buy virtual energy in the day-ahead market and sell it real-time the next day, usually playing off some quirk in the grid that increases congestion and skews the optimum distribution of electric power.

These speculators can actually “put electricity flow on the lines in the day-ahead market,” says Ward. It’s an open question whether they add value to the marketplace or just create another layer of complexity and overhead, but Ward is inclined to say they play a positive role overall. “Their bidding gives us insight into what’s going on with our day-ahead model,” he said. “They keep us on our toes.”

Even with the most advanced algorithms in the world — and PJM talks every day with Alstom, its Seattle-based programmers — the process of clearing the markets takes four hours. Under pressure from stakeholders, PJM will step up its game next year. Purchasing more computer processing power and using more powerful algorithms, the company plans to reduce its turn-around time to three hours beginning April 1.

Quicker feedback will allow bidders to redeploy resources more efficiently. Says Ward: “They say it’s worth a fortune to them.”

Real-Time Markets 

The North American electric grid operates on a 60 Hz electrical frequency. All power producers deliver electricity into the grid at that frequency, and all consumers — manufacturing operations, HVAC systems, lights, home appliances — are designed to operate at that frequency. If too much power flows into the electric grid, the frequency increases; if the system has too little juice, the frequency declines. Tiny deviations from the 60 Hz norm — within 0.1 Hz either way — pose no problem. But larger departures can damage generating equipment, create instabilities and cause blackouts.  The goal of every grid operator is to maintain the frequency as close to 60.0 Hz as possible.

PJM’s day-ahead markets do a reasonably good job of matching electrical generation with demand, but even the best predictions can’t anticipate the numerous short-term fluctuations that take place during the day. PJM’s real-time market operations forecast demand two hours ahead, based on the latest data, to see if additional commitments are needed to meet that demand.

Typically, resources for this “intermediate” forecast come from “quick start” sources that can dial output up and down with great flexibility, as opposed to base-load sources such as coal- and nuclear-fueled generators, which take hours to adjust output, or wind and gas, which run flat-out because the “fuel” is free. Examples of quick-start sources include gas-fired combustion turbines, pump storage hydro-electric dams, and stored power sources like electric batteries, which can inject power into the system within a second.

PJM also conducts 15-minute forecasts and buys electric power in five-minute increments from as many as 1,000 different generation points. This power comes from resources that are already online, either baseload units committed in the day-ahead market or the quick-source resources called up to meet intermediate demand. Battery storage, which can respond within a second, is especially well-suited for fine-tuning the frequency for short periods. The drawback is that batteries drain quickly and cannot supply power for sustained lengths of time.

The existence of day-ahead and real-time electricity markets creates some tricky decisions for power companies. As a rule, electricity consumers don’t want to purchase more electricity in the day-ahead market than they expect to use, so they usually purchase less than they think they’ll need and make up for the difference in the real-time market. But they don’t want to rely too much upon the real-time market because the price is volatile and can be extremely expensive.

While not perfect, the multi-layered markets have worked well so far. “We’re looking to meet the energy needs at a given point of time at the lowest costs with respect to transmission security,” sums up Lisa Morelli, manager of real-time market operations. “We’re finding the cheapest megawatts possible without creating reliability issues.”

The PJM system broken down by utility service territories.

Managing the Transmission Grid

PJM oversees the electric transmission grid — mostly high-voltage transmission lines of 500 kV or 765 kV, but some above 115 kV — in all or part of 13 states and Washington, D.C. Here in Virginia, Dominion and Appalachian Power own the transmission lines, but PJM has final say over how they operate. (Dominion, Appalachian Power and other power companies own and operate lower voltage lines, referred to as distribution lines, without interference.)

PJM’s number-one priority is maintaining the reliability of the grid — avoiding blackouts and brownouts. Looming over the company is the memory of the infamous 2003 blackout, which knocked out power to 50 million people in the northeast and Midwest and took two days or more to restore in some areas. With talk of terrorist sabotage and cyber-attacks becoming part of the national conversation, PJM’s obsession with grid reliability and resiliency has not diminished in the least.

The stakes are so high that PJM operates two control centers, one in Audubon, and one in Milford, Pa., about 40 miles away. The control rooms have the same layouts, the same displays, the same computers, the same software, and both are fully staffed. If a computer in Audubon malfunctioned for some reason, its twin computer in Milford would take over. If a transmission coordinator in Audubon keeled over with a heart attack, his counterpart in Milford would step in.

In a worst-case scenario, if Audubon became “a smoking hole in the ground,” says Chris Pilong, manager of dispatch, Milford would assume control over the grid. “Redundancy and resiliency is built into everything we do.”

The operations center in Audubon is a massive room with giant wall-mounted, digital maps and statistical displays providing vast arrays of real-time data. On the morning I visited, a temperate December day, the load was around 93,000 megawatts and climbing. Graphs tracked the electric load over 24 hours, comparing projections with actual performance. Other read-outs monitored minute deviations of the electrical frequency on the system.

For a facility of such strategic importance to the economy, the operations center requires remarkably few people to run — fewer than 10 in a shift, including the supervisor. Main functions include:

Coordination and forecasting. One member of the staff is designated a master coordinator. This person has two main roles: to coordinate the interchange of electricity between PJM and neighboring regional transmission organizations, and to oversee the 24-hour load forecast for the PJM region and sub-regions. For assistance, he (or she) can draw upon the expertise of an in-house meteorologist and weather data from outside sources.

Generation dispatch. A two-person desk is in charge of “generation dispatch” (the dispatch of energy from different power sources). The job of this desk is to balance generation and load across the grid and to keep frequency at 60 Hz. As closely as PJM matches supply and demand with its day-ahead, intermediate and five-minute markets, demand spikes occur in between the five-minute intervals. In response PJM signals power companies or energy-storage companies when to dial up or dial down their output. Normally, compliance is market driven: power companies receive a sweetener when they go along and a “deviation charge” when they don’t. However, if there is a major reliability issue — a situation that could trigger cascading blackouts, for instance — PJM can issue commands that power companies are legally obliged to obey.

Transmission dispatch. Four employees staff the desk that monitors congestion on the transmission lines. Developing plans on how to route power during scheduled repair/maintenance outages on sections of the grid, they work closely with power companies to track changes in transmission capability. Maintenance typically is scheduled for spring and fall months when electric loads are low. On a busy day, the PJM system might have as many as 30 “constraints” that alter electricity flow and create new congestion bottlenecks.

“If demand is picking up in New Jersey and the cheapest unit is in Illinois,” says Pilong, “they’ll dispatch from Illinois” — unless there is congestion on the grid. When the congestion cost goes up, the system looks for the next lowest-cost source on the grid. “They’re balancing power for the whole system.”


PJM is agnostic on the desirability of renewable energy. That’s a matter for lawmakers, power companies and other stakeholders to decide. But the company is moving to accommodate the solar and wind power that will comprise an ever-larger percentage of electric output. States are enacting Renewable Portfolio Standards, and the federal Clean Power Plan will compel states to substitute renewable sources for coal. Like it or not, here it comes, and PJM wants to ensure that the new power sources can plug into the grid.

The problem with wind and solar is that power production cannot be turned on and off whenever desired. When the wind is blowing and the sun is shining, wind and solar units produce all the electricity they can.  To maintain that magic 60.0 Hz grid frequency, regional transmission organizations must find some other power source that can ramp up quickly and adjust rapidly in response to varying weather conditions. By properly managing the grid, PJM has concluded, renewable energy sources could generate up to 30% of the electricity without compromising system integrity.

Electricity on the PJM grid normally flows from west to east. The major centers for electricity demand are the big metropolises along the Eastern Seaboard, at the eastern edge of the PJM system. There aren’t any power plants located in the Atlantic Ocean, therefore power that isn’t generated locally has to come from the west. As it happens, PJM’s western states have abundant, low-cost wind power — at night-time, wind power is so plentiful compared to demand that the price essentially falls to zero. The main factor limiting East Coast access to that cheap wind is the limited capacity of the transmission grid to carry it.

The key to integrating renewables — including rooftop solar, there are 70,000 renewable producers in the regional system — is upgrading the transmission grid. In mid-December, the PJM Interconnection Board authorized $490 million of new transmission line projects, bringing the total number of additions and upgrades to $28 billion since 2000. Under PJM agreements, transmission owners are obligated to build transmission projects that are needed to maintain reliability standards and that are approved by the board.

As the Clean Power Plan puts the electricity industry under unprecedented strain, committing power companies to shut down dozens of coal plants and invest billions of dollars in new, intermittent energy sources, Virginia’s utilities will become increasingly dependent upon a robust electric grid and the exchange of electricity with out-of-state power producers to balance fluctuating supplies of solar and wind power. In such an economic climate, PJM will be a key player in determining the reliability of Virginia’s electric power and how much it costs.

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26 responses to “The Throne behind the Power”

  1. Very informative. Thank you.

  2. LarrytheG Avatar

    quite an excellent article – that I know took a lot of time and effort and much credit to Jim … his readers are beneficiaries of his commitment to quality work!

    I had a few random thoughts.

    even with two back-up centers – they still constitute a worrisome point of failure…. and I wonder if there is a plan B for if PJM goes down?

    gas plants beat coal hands down except for sunk costs in coal plants.

    As long as gas is cheap – producing electricity from gas gives much qucker response times for plants to come up and go down compared to coal.

    pump-storage uses more power than it generates… it basically shifts the generation from low demand periods to high demand periods..minus what you use to pump it back. You’d not run pump-storage – for instance at night… additional pump-storage sites are few and far between – it’s a nice thing where you have it but there is very little potential for more of it as one of the future options. It’s more of an anomaly than in the mix of choices.

    finally – coal plants can and are run in “hot’ ready mode where the coal is burning but the turbines are not – because there is no demand for the power but will be later. Those planets, if older and dirtier will go away and gas plants will replace them not solely because of greenhouse gases but because coal is much dirtier and spews mercury and gas is much cleaner and cheaper. The CPP shows lives being saved because of less pollution and yet that part of it is routinely ignored by those who want to affix blame.

    1. Re: “I wonder if there is a plan B for if PJM goes down?” Integrated utilities like DVP (and coops like NOVEC) operate their own facilities in order to balance generation and load through their own control centers. They have been doing this as long as they have been around. Those local control centers still exist; in fact what PJM does is give instructions to the local control centers, who carry out those instructions, causing power to flow from areas with more power than load to areas with less. If “PJM goes down” then those local control centers would continue to operate separately on their own. That said, it could be a chaotic transition, and control centers without enough local generation on-line would have to dump load until they could get more power up and running locally.

  3. CrazyJD Avatar

    Really good article. PJM sounds like the closest private industry comes to the Fed Open Market in New York.

  4. Terrific description of the situation, Jim.

    Only one comment: regarding your headline, “Who runs Virginia’s electric power industry,” I think it bears underscoring, the reason why PJM and the other ISOs were deemed necessary, and mandated by the federal regulator (FERC), is the advent of INDEPENDENT power generators — generators owned by companies other than the local transmission utility. Not to put too fine a point on it, but the independents didn’t trust the local utility not to favor its own generators in running the local grid. In other words, in order to have a competitive market for generators, we first had to have an independent grid operator and planner.

    PJM doesn’t own any transmission; but if a transmission owner wants to build a new facility or take an old one out of service, PJM has a veto over that change, and coordinates it with everything else happening on the grid to minimize the cost impact. Anyone can call for a new transmission facility; but PJM will evaluate the proposal and will recommend among competing solutions and will defend that solution before the affected State Commissions and FERC. PJM doesn’t own any generation; but PJM runs the energy market. Of course a generator doesn’t make money unless it operates so the owners bid to operate in the market as much as they can and PJM selects from among the bidders on a least-cost-to-operate-the-grid basis, using those computer algorithms Jim mentioned. If for any reason not enough generation volunteers to run as needed, PJM has backup reliability authority: every “LSE” (load serving entity) in PJM must contract with, or own, enough generation to match its forecast peak load plus reserves and must assign to PJM annually the right to “dispatch” that much generation, and PJM calls upon those additional resources if/as needed.

    So, who runs Virginia’s electric power industry? If by “run” you mean plan, and direct day-to-day grid operations, PJM has a large role. But the facility owners, the investors, those who decide whether to invest in solution A or B, how it should be designed and exactly where it should be located, how to deliver the power to retail customers, are the utilities and their shareholders — subject, of course, to State regulation of each utility’s IRP and its financial obligations and its facility siting and retail prices. PJM can try to steer that investment but can’t compel it. It’s quite a dance. If push comes to shove, the FERC and State Commissions are the only ones with that authority.

  5. LarrytheG Avatar

    excellent commentary from Acbar also!

    Makes me wonder what role PJM might play in a 3rd Nuke at North Anna!!!

    1. Re the potential for NA3:
      – PJM runs the marketplace in which NA3 would have to compete, or in which DVP could buy from alternative sources; but,
      – PJM has nothing to do with who chooses to build what to compete in the marketplace; and,
      – in the long run, Dominion’s decision to built NA3 would significantly impact PJM’s planning for the transmission grid.

  6. Peter Galuszka Avatar
    Peter Galuszka

    Good piece, but Alstom is a French company and it is being bought by GE. It isn’t accurate to say that Alstom is based in Seattle.

    Also, Dominion was one of several large utilities to join PJM outside of the Pa. N.J. area back in the early 2000s.

    Back in the day, Tom Capps had big plans for deregulated Dominion to be a “Saudi Arabia of electrons” since he saw Dominion supplying lots of wholesale power to PJM. Of course, Dominion got its (paid for) General Assembly to reregulate later, but I still don’t understand why or how.

    1. For what it’s worth… Alstom’s software operations are located in Seattle — or at least the people that PJM deals with.

    2. TooManyTaxes Avatar

      Peter, while one can always question DPV’s motives, retail electric competition was a joke. The only “offers” I received was to pay more for “green electricity.” None of alternative power generators seemed to believe they could undercut Dominion’s generation costs.

      If there’s no effective competition for retail electricity, there needs to be price regulation of one type or another. And a duty to serve all within the service territory. And with that comes a retail monopoly. You can have price regulation without either a monopoly or a duty to serve. But you cannot expect a utility to serve all comers and also allow cream skimming.

      Glad to see you back posting comments.

      1. Agree with you, TMT. Even with retail competition you have to have a “default provider” (usually it’s the local distribution utility), and it is awkward for regulators to fix the price for that default retail supply while simultaneously allowing cream-skimming. If the default provider is a low-cost supplier like DVP there is no room for competition on price, only on source (e.g., renewables). A high-cost default supplier (like some utilities in New England) is of course vulnerable to retail competition (that’s the point), but when many customers leave the default supplier the cost to supply those left behind climbs even higher. Price regulation has to be responsive in that situation.

  7. Reed Fawell 3rd Avatar
    Reed Fawell 3rd

    Great discussion, very informative. And its impressive what’s happening out there daily in real world of the grid operations despite inherent vulnerabilities of technologies and systems running and managing them. But is sufficient weight being being given to those vulnerability factors on all sorts of fronts, including managing change to more sustainable but now more variable sources. I hope more is happening on those fronts than is publicly known. And wonder if anyone entity or boss is in charge of (responsible for) results achieved in these efforts? I haven’t seen an answer to that question.

  8. LarrytheG Avatar

    re: retail competition and PJM

    going back and reading ….

    if PJM allows independent operators – and they can compete on price with DVP – then does that mean anywhere in PJM territory that any independent operator can sell to any retail customer in the PJM service area?

    say – someone puts a gas plant right smack in the middle of the shale gas area and has no costs for pipeline transmission…. can I buy electricity from him?

    1. You’re mixing wholesale and retail. PJM allows (encourages!) independent generators to sell into PJM’s wholesale electricity market. PJM has nothing to do with retail customers; those are served by a retail supplier (DVP, NOVEC, etc.) according to service territories divvied up by the SCC. If you are buying at retail and located in DVP’s service territory, you MUST buy from DVP or, if DVP has a “retail access” tariff filed with the SCC, then from a qualified supplier under that tariff. Presumably, if VA allowed retail competition, and that independent generator in the PA gas fields had formed a retail sales affiliate (an LSE) to do business in VA and met all the requirements of the DVP retail access tariff (currently not allowed under VA law), you could buy from it. It presumably would charge you an averaged price for its power FOB PA plus a transmission charge (the LSE pays PJM for transmission) plus (hopefully) enough profit to stay in business.

      1. Rowinguy Avatar

        Thanks, Acbar, for raising the distinction between the wholesale market, overseen by the feds (FERC) and the retail market overseen by the states (SCC here in Va.).

        Couple of quibbles, though. It is not PJM that “allows” independent generators, it is federal law (PURPA) and the FERC regulations that opened access to the interstate transmission grid by requiring all utilities to file tariffs that provide the same terms and conditions of access to the grid to the independents as they afford to themselves. But, as you say, PJM does encourage these developments through its interconnection processes.

        One other point to keep in mind, members of PJM have a capacity obligation to build or procure generation to serve their loads and all members have an obligation to bid their power into the market every day. No strategic withholding is permitted. This obligation to participate is what enables the market to be designated as “competitive.” But, unlike true competition, every winning supplier is paid the same price for capacity, which is the price paid for the last MW needed to clear the market. So, sellers with very low costs (renewable and deeply depreciated non-fossil units) can bid at or near zero and still get paid because someone making a positive bid will clear the market.

  9. I like the group of states in the PJM. In other words, NY and New England are in their own unique world view with access to electric imports from Canada (and PJM I presume). But PA, NJ, MD, WV, OH, VA are more similar states.

    It is interesting to hear we have lots of wind power to the west in PJM. With more transmission lines, that could jeopardize economics of power plants here (eg; proposed NA3). I am curious if the Clean Power Plan allows VA to build wind out-of-state and bring it in.

    1. Rowinguy Avatar

      TBill you might be a little surprised at the variance among the PJM states. Maryland, New Jersey, DC, Illinois, Ohio and PA are deregulated to differing degrees, while Va, NC, Indiana, West Va, Kentucky are vertically integrated states. Then, while there is wind in Illinois, there’s also the biggest collection of nukes in America. Indiana has wind, but also lots and lots of coal, as does Ky and WVa obviously.

      I’ve been reading some lately about the difficulties that transmission developers are having getting permission to build big lines out of the Plains through places like Arkansas and Missouri to bring that wind power eastward. Just Google “Grain Belt Line” for an example. So, I think the jury is still out on importing wind as a CPP compliance strategy. Local solar will probably enjoy more support. No big TX lines needed

  10. LarrytheG Avatar

    the impression I get is that DVP “owns” it’s territory – and decides how to serve it – with a combination of it’s own plants and purchases via PJM where it doesn’t care what generated the power it buys – just that it is the low bid.

    And on the other hand – DVP sees itself a a merchant seller of power where it makes sense to their business – investors – as well as a way to modulate/regulate the trade-offs between it’s need for peak power and whether it should buy it or have it’s own peaker plants.

    Having the right number of peaker plants save money for buying peak power via PJM – and at the same time – the ability to sell power via PJM – if those plants can generate competitively-priced power.

    older coal plants can do cheap power but they are not “ready” generators. You can’t ramp them up in demand to peak demand – but you could run them “hot” without turbines turning – “ready” to supply but then they’d be less cost-effective – and would pollute even more – so the coal plants no longer “fit” even if the govt was not trying to shut them down as polluters.

    In terms of gas plants – I don’t see DVP any more able to build and generate lower-priced electricity – than any other provider including non-utility merchant/entrepreneurs that DVP cannot hinder when built outside their territory so in the end – what would DVP gain by building gas plants rather than buying power from others?

    probably it makes sense deep within their own territories – IF they have the gas. In other words, is it cheaper to buy power from afar and pay the transmission costs or is it better to build pipelines and move the gas to power it’s own plants – not only now – but in the next 20-40 years?

    CPP – by shutting down coal plants is thrusting those in the electricity business into a more competitive PJM environment where utilities like DVP cannot control who the other providers are -outside of their own territory – and the bar for entry is lowered because gas plants and wind/solar are easily built and can sell power to any buyer.

    wind/solar are going to be “cheap” – when they are available – but whoever buys it needs “backup” power when wind/solar are not available.

    that goes back to the gas plants… and where – I think – entrepreneurs will start to pair gas plants with wind/solar so they can guarantee continuous, reliable power – for less money than if they were just running a gas plant 24/7. In other words, they’ll “harvest” the wind/solar opportunistically rather than use it in a way that it is inherently unreliable.

    Jim Bacon – sees wind/solar as never being reliable. That presumes there is no opportunity or strategy to combine it with gas in which those who are using the power – don’t care how it is provided – wind/solar or gas… as long as they got the power.

    If a gas plant can ramp up or down within seconds – all it takes is a computer controller to “mix” gas with wind/solar and feed the gas in real-time to complement the wind solar. Think of them like you would a hybrid car that coordinates when it runs off battery then gasoline. Think of wind/solar as a “battery” with limited capacity – and natural gas as gasoline that runs when the battery is low.

    this is not the world that DVP has operated in when coal plants ruled the roost… it’s a different world where innovation and nimble business models will challenge those that we used to running coal or nukes 24/7.

    1. What does Dominion gain by building power plants, vs. importing power like we do now? Today Virginia is in truth a coal state, it’s just that our carbon footprint extends to WV and PA and the other places in the region we import ~30% of our power from. I am not sure those coal-based electrons will be available in the future to import, at least at reasonable cost (Obama says we can still use coal, but he aims to bankrupt anybody who does). Seems to me, as much as people have in the past criticized Dominion for being too carbon intensive, Dominion is positioned very well with its overall strategy to reduce dependence on imports.

      1. The argument for waiting: the right generation choice will become clearer. The argument for getting on with it: the right choice will also become clearer to everyone else, and those who build the right-choice generator first will make the most profit from it. Now, the second argument is questionable for a regulated utility building a rate-based generator as its rate of return on investment and its profit margin on operations is strictly limited — unless the utility has a good regulatory profit baked-in (and maybe is counting on regulatory lag before excess profit is reduced), or, unless the utility isn’t planning to build a rate-based but a ‘merchant’ generator (entirely for its own bottom line).

  11. LarrytheG Avatar

    If we did not have a bounty of gas – closing coal plants and trying to replace that power with wind/solar would be an economic and reliability disaster.

    So gas is not only a bridge fuel – it’s a keystone fuel.

    no strategy “works” if there is no gas or gas becomes twice or three times as expensive as coal.

    and closing coal plants will accelerate the draw down of gas… so that if gas does become scarce – and does go up in price – once coal is long gone – costs are going to go up.

    wind/solar also fail without gas – or with super expensive gas.

    so we are committed to gas – as a “bridge” fuel but we really have no idea what will replace it – at this point and yet right now – we are building base-load gas plants – in addition to peaker gas plants.

    despite the voluminous words on this subject here in BR – I don’t think I’ve ever heard, DVP or PJM or the SCC or anyone for that matter – map out future scenarios of gas availability and costs – 10, 20, 40 years from now.

    and I do not think battery technology is a “replacement” per se – because you have to charge those batteries… and they have to be big enough to store enough power to last a week or more of “skinny” wind or solar… will the folks who currently won’t build on-site solar be any more ameable to building both on-site solar AND 15K worth of backup battery?

    if we KNOW we likely to run out of gas – in 20-30 years – would we hedge our bets right now to build nukes so that limited/finite supplies of gas are used ONLY sparingly for peak use not base load?

    I find it a fascinating subject and much appreciate the work that Jim is doing to develop info – and the other participants who bring expertise and knowledge to the discussions.. and tolerate my neverending views..


    1. “No strategy “works” if there is no gas or gas becomes twice or three times as expensive as coal.” Yes, I agree with you, it would be difficult without cheap fossil fuel. Coal gasification was once seen as an answer to the exhaustion of natural gas stocks, but coal extraction and coal ash disposal is a dirty, messy, and unhealthy process. I believe we are placing too many marbles in the shale-gas basket and shutting our eyes to the future. But, how can you justify building something else based on your assessment of the future, when that future is further out than the projected life of the generation you are building today? Based on today’s natural gas forecasts, we should be building, say, up to 20% solar plus a little wind and hydro, 30-40% gas cycling units, and for baseload, some gas units and keep or expand the nuclear capability we now have.

  12. LarrytheG Avatar

    perhaps the CPP should be renamed – ‘Figure out how you’re gonna provide baseload” in a depleted natural gas and wind/solar world”.?

    or “What will you do for baseload in a post-coal world, when natural gas is depleted”?

    but I think using 50-year old meltdown technology on an earthquake fault in a drone/terrorist world is a loser of a plan.

    We need Nuke plants that don’t melt down and are far less vulnerable to natural or manmade disasters or terrorism and I wonder if such Nukes will end up being as important as battery storage technology – once natural gas is depleted.

    1. Solar plus storage even at today’s prices (which are expected to fall by 50% in 5-6 years) are probably a less expensive source of baseload capacity than the $20+ billion for North Anna 3, which will only continue to increase.

      The best bet for additional baseload capacity is energy efficiency at $0.02-.03 per kWh. Cheaper than any other option, only Great Plains wind comes close and that is without the transmission costs. This “generation” option is not only the cheapest it also saves on transmission and distribution that does not have to be built.

      We must help Dominion see a way to make money without always having to build more generation. We all need to readjust our mindset to envision other possibilities.

  13. Below is a good update on the Clean Power Plan…says PJM states will get together soon to discuss approach. Apparently, in order to trade power under the plan, the state’s must have “trade-ready” plans. “Trade ready” means you have to trade with a partner who has picked same approach (rate based vs. mass based). So there is currently a dance among the states to pick an approach. Pennsylvania Gov Wolfe wants to lead if he can but I am not sure he has support from his legislature. PA is important as a major power exporter. I have trouble seeing PA finalizing their plan by Sept due to they are one of the biggest power (CO2) sources they simply have a big job to figure it out. Dominion certainly seems to have Va. on the path to self-sufficiency so we should not have to let anybody push us around.


  14. JOHN BR Avatar

    Great article. But they should have used ALL CAPS when describing the problems caused by the Obama clean regulations.
    Read between the lines—the Obama requirements are going to cause the grid to crash over and over, unless ratepayers pay huge sums so the grid can provide backup power to keep it alive.
    The politicians (especially in the White House) have no idea (and don’t care) how complex and difficult it is to keep it all working. They will be taken care of while the masses suffer.

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