Three 2016 Dominion Solar Plants Missed Targets

Dominion’s Scott Solar Facility in Powhatan Co.

Some of Dominion Energy Virginia’s recent solar installations, despite using technology designed to track the moving sun, have turned in disappointing energy results, fueling skepticism at the State Corporation Commission toward the utility’s claims for future solar energy success.

The three units were put in service in December 2016, with a nameplate capacity of 56 megawatts. Their operations were scrutinized in the pending annual update of the rate adjustment clause that pays for them, Rider US-2.  The criticism has spilled into the more important integrated resource plan case, also pending at the State Corporation Commission.

The utility persists in claiming a 25 percent capacity factory for its own solar plants, meaning they produce energy for the equivalent of one hour in four throughout the year.  These units are not getting there, not on a steady basis, with the financial consequences falling on customers. 

“In 2017, the actual capacity factors were 20.4%, 20.4%, and 16.7%, respectively, for the Whitehouse, Scott, and Woodland US-2 solar facilities,” stated the SCC’s Gregory Abbott in testimony in the IRP case. Abbott is deputy director of the SCC’s division of energy regulation.

“Even more troubling,” Abbott added, “is the recent non-performance of the Scott US-2 facility which has only been operational for [begin confidential [end confidential] over the September 1, 2018 through February 28, 2019 period. The Scott US-2 solar facility has been off-line for [begin confidential] [end confidential] days consecutively through February 28, 2019.”

Scott is a 17-megawatt installation in Powhatan County, Whitehouse a 20-megawatt facility in Louisa County and Woodland a 19-megawatt solar field in Isle of Wight County.  Many of the problems reported at these three plants relate to transmission disruptions, not their direct operations. They are the tip of the spear for a growing presence of solar in the state, and when that solar is utility-owned that utility’s ratepayers have a high stake in their success or failure.  As previously reported, in recent cases the SCC has sought to protect ratepayers from the risk if operating goals are not met.  

Dominion’s Woodland Solar Farm. Daily Press photo.

 

No such consumer protections have been built into the US-2 projects, however, which are not among the Dominion generation assets offered through the PJM Interconnection, LLC system.  The utility receives no capacity payments from PJM, and the SCC staff assumes that when they are not running as planned, Dominion is buying power from PJM instead.

In one test year discussed in the testimony on the US-2 case, they were projected to produce 125,000 megawatt hours of power but produced only 96,000, leaving a 29,000-megawatt hour deficit.  The price of replacing that power through PJM was put at $1 million.

Solar power is also intended to bring in revenue through the sale of renewable energy certificates, or RECs.  The total amount of REC revenue for these three projects is blacked out, redacted from the written testimony in the case.  They don’t want us to know.

Abbot’s IRP testimony alleges that the poor performance makes the power actually produced by the solar farms prohibitively expensive.

“Since the ratepayers must pay the full revenue requirement regardless of how much energy is produced, the poor performances of the US-2 solar facilities result in ratepayers paying an average of $119.38 per MWh. This is more than triple the average PJM energy price of $34.07 per MWh if the energy had instead been procured from the PJM energy market during the hours of the US-2 facilities’ energy production. This cost premium is even more stark for some rate classes because the Company allocates costs using the average and excess demand allocator. Residential customers pay $150.95 per MWh, which is more than quadruple the average PJM energy price of $34.07.”

That is based on the 2017 performance of the three plants. Abbott continues:

“…in 2018, the actual performance of the US-2 solar facilities continued to deteriorate. The actual capacity factors were 16.2%, 13.7%, and 19.1%, respectively, for the Whitehouse, Scott, and Woodland US-2 solar facilities. Thus, the cost per MWh for next year’s US-2 RAC filing will be even more prohibitively expensive.”

The world of small, dispersed generation sources which operate or not based on the sun and wind is very different than the traditional utility model of large and steady generation plants, often under the direct control of utility operators.  In a number of cases now, including this US-2 review, the SCC staff is pushing hard for a new way to allocate costs between various rate classes.  Supported by the Office of Attorney General’s consumer advocates, they argue the old method is unfair to residential ratepayers and beneficial to large customers when dealing with intermittent generation.

While the US-2 plants are not selling into PJM, they reduce Dominion’s purchases from PJM.  Those off-system purchases are paid for through the fuel factor, which is totally based on the amount of energy consumed.  If the fuel factor cost goes down, the largest users get the most benefit.  But the capital payments related to the three plants are that rate adjustment clause paid by everybody.  That’s where critics see a mismatch.

In that earlier US-3 case with the Facebook-related projects, described before on Bacon’s Rebellion, the Commission affirmed the old “average and excess demand” allocation method, but started a process likely to result in changes down the line.  The hearing officer in this US-2 case noted the staff’s concerns but also recommended study work before changing the allocation formula. (The ruling is here.)

He is recommending the full Commission approve a level of revenue for the US-2 operations for next year that will add about another eight cents per month, or dollar a year,  to the typical (mythical) 1,000 kWh monthly customer.

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43 responses to “Three 2016 Dominion Solar Plants Missed Targets

  1. I no more trust Dominion to do solar “right” than I trust them to do other things like coal ash remediation “right”.

    When they are in charge – the data is suspect whether it’s an analysis of coal ash cleanup options, or grid reliability and conservation or.. surprise, surprise – how solar “works”.

    None of these should be delegated to Dominion – ALL OF THEM – should be done by an independent private sector company.

    It’s downright amusing that we let a company that directly involves itself in lobbying, campaign money and actual legislation that dictates to the SCC – that we put any stock at all in their “analyses” which serve their interests.

    They “predicted” that “de-regulation” would “fail” – yep and it did.

    They said the coal ash cleanup was unwarranted and too expensive according to THEIR numbers.

    They “predicted” that since solar was not “dispatchable” and “unreliable” that it would not be cost-effective – even though it seems to be quite lucrative to other companies – but, nope, in their case it does not “work” and of course – that means we have to burn more gas.

    Sorry Charlie – I don’t trust their “data” and “analyses” unless and until I see some independent private sector analyses that replicate what they are claiming. They have obvious conflicts of interests and they brazenly exploit them!

    • Naturally, Larry’s first instinct is to blame Dominion. But there is a bigger context to this story. Dominion has been investing heavily in solar in response to intense political pressure. From the profit-generating perspective, Dominion doesn’t really care what it invests in — coal, nuclear, gas, solar, wind — as long as it can make the investment and generate a guaranteed rate of return. For many years, Dominion regarded natural gas as the energy source of the future because (a) it is cleaner than coal, (b) it is a reliable energy source, and (c) it is dispatchable, meaning Dominion can turn it on an off, dial it up and down, as needed. Dominion was pillored by environmentalists and in the media for being a laggard in adopting solar, and the environmentalists have done everything within their power to thwart the advance of natural gas (as seen most visibly in their opposition to the Mountain Valley Pipeline and Atlantic Coast Pipeline). So Dominion did a pivot a couple of years ago. Essentially, the company decided, you want wind and solar? We’ll give you wind and solar.

      Now we’re finding that the premises of solar economics are faulty — and not just by a little bit, according to Steve’s numbers.

      The question in my mind is whether we learn anything from this. Will we re-evaluate future solar projects on this basis of this data, or will the solar juggernaut continue rolling on regardless?

      This development may constitute an argument for deregulating the power generation part of the electricity market. Make solar power producers absorb the downside risk if power generation falls short of forecasts.

      • I have to side with Larry on this. First, any regulated utility that has observably bought the corrupt state legislature of any state is going to be suspect every time something unusual happens. Had the solar power come on line as expected the rationale for those natural gas pipelines Dominion craves would have been eroded.

        More importantly …

        “Scott is a 17-megawatt installation in Powhatan County, Whitehouse a 20-megawatt facility in Louisa County and Woodland a 19-megawatt solar field in Isle of Wight County. Many of the problems reported at these three plants relate to transmission disruptions, not their direct operations.”

        Transmission disruptions? So, the solar panels generate the juice but Dominion can’t get their power onto the grid? Because of “transmission disruptions”? Do North Carolina and Maryland have these same “transmission disruptions” with regard to their solar power initiatives?

        This smells like classic Dominion BS aided and abetted by our state government apparatus.

      • Geeze Bacon – for a self-proclaimed free-market Libertarian – you sure do defend this mess.

        it’s crystal clear what Dominion is doing. They do NOT want solar nor wind – they don’t want to do it and they don’t want competitors to do it so they’ve done their own solar to “prove” it “fails”. ipso facto.

        • Dominion wants to be in the natural gas pipeline business. They want to move the gas from the fracking fields to the sea. They claim the gas is needed in Hampton Roads and it may be needed there. However, they are building a whole lot of capacity and I believe much of that capacity will eventually be sold out-of-region or internationally. Solar and wind begin to create questions about the need for expanded natural gas based electrical generation. This corrodes one of the pillars they use to justify the use of eminent domain for those pipelines. So …. surprise, surprise …. Dominion “discovers” that their solar panel experiments are much less efficient than expected. Because of “transmission disruptions”.

  2. I have to think that the companies building solar at their own risk, as merchant generators, have better results than these. Perhaps not. Perhaps there are so many economic thumbs on the scale that the actual performance of these plants matters less than you’d think. I’m not at all hostile to solar, but it has to make economic sense.

    • Economic sense depends on a full capture of costs. If fossil fuel based power generation pollutes the air, causes acid rain, creates respiratory problems and contributes to global warming with rising sea levels and flooding … how are these external costs factored into the economic equation?

  3. The problem is relying on Dominion as a sole, exclusive, monopoly generator of power. They need to be a distributor via a Smart Grid of Distributed Generation, just like all the utilities in the US should be. There is 1,000 terawatt-hour (TWh) of unused potential rooftop capacity in the US. We should enable it to meet the power/electricity needs of the US. Dominion is in the way of distributed power and continues to resist this form of competition to their generation monopoly. That is the real story. https://www.forbes.com/sites/rrapier/2018/04/29/the-solar-power-potential-of-rooftops-in-the-u-s/#67ee5c045109

  4. Good article, Steve.

    It confirms what I have been saying all along, namely that solar and wind power generation for electricity, as pushed, sold, and described by the environmentalist’s lobby and other special interests (crony capitalists) is a world class fraud. Now these real life facts are emerging from all over the world as ever more newly built projects generate operating results that are far below power projections and at far higher costs than promised.

    Why are we constantly surprised by the gross failures of performance?

    Wind and solar as sold is a false religion. It is not real science. Nor is it functionally reliable and cost effective technology. It is blind faith. Simply put, as sold, it is a Rain Dance led by a Shaman, and just as unreliable. Despite what the Shaman preaches, he cannot predict the weather, not over a day, a month, a season, a year, and/or a decade, much less several decades. So its rolling dice. To bet our electric generation industry, its cost and reliability, on such obvious nonsense is irresponsible behavior of the highest order imaginable.

  5. It doesn’t take an engineering degree to figure out this tech would never scale properly and was doomed to failure. Unless a miracle happens and some new cost effective storage tech arises.

    A little light reading (H/t Junk Science.com): https://burnmorecoal.com/wp-content/uploads/2019/04/BFIEPIC_WP_201962_v3.pdf

    And for entrepreneurs out there I smell a business opportunity; what to do with all of those old panels when the array fields are decommissioned?

    • Consensus is strong – 97 percent of liberal activists agree that the University of Chicago is a hotbed of dangerous people. 🙂 Thanks for that link!

    • DLunsford is right on target. Very smart guy, obviously. One who is hooked into the growing number of truth tellers like EPIC telling us about the solar & wind electric power generation hoax.

  6. Jim Loving said it correctly. The problem is not with solar. It is the way we are implementing it in Virginia.

    Dominion has attempted to control nearly all of the solar developed in the state and obstruct what it cannot. This is to put as many new assets as possible in the rate base and provide its data center customers with renewable energy.

    Contrary to what Reed has reported, the development of solar in numerous states in the U.S. had led to lower customer costs. Much of this has been done as distributed resources not owned by the utility. This makes maximum benefit of solar’s value in increasing grid reliability and resiliency without added transmission costs.

    Even utility-scale solar facilities owned and operated by third-parties have delivered cost savings to customers because only PPAs that save money are accepted and the operators are on the hook for any shortfalls in performance and not the customers.

    The utilities are pursuing solar because under the current regulations they cannot afford to lose the chance to add to their asset base. There are many ways for them to prosper without needing to do this. The SCC is correct in protecting the customers’ interest.

    Until we setup a scheme that is good for both the utilities and the customers we will only see more occasions where our laws or regulations force a winner and a loser.

    Solar and many other new technologies have a contribution to make in our modern energy system. But the wires have to work properly to make it all happen as it should. That is the proper domain of our utilities and we should make it profitable for them to do that successfully without charging us for things that don’t serve our interest such as overcharging us for solar installations.

  7. I actually follow Robert Rapier who is a chem engineer much like myself, with somewhat similar energy outlook. In that article he seems to be talking about potential max % roof top solar coverage, without regards to economics. Talking technical feasibility. Roof top solar is known to be quite expensive compared to utility style dedicated solar arrays. But for the homeowner, sheltered from the full cost with subsidies like net-metering, solar can nonetheless be economic approach depending on subsidies (weak subsidy in Va.).

    Meanwhile Dominion is favoring non-roof-top, utility owned solar arrays, which should have the best economics and efficiency, but the efficency is coming into question apparently. Of course we here are all tired of playing Dominions profit games, since we are not elected officials and we do not need their money.

    • TBill is quite right. Residential roof top solar is by far the most expensive electric generation source around. It’s a luxury item primarily, one that imposes many shortcomings beyond even utility solar which also generates many additional external costs, such as high inefficiency that injects great additional cost and infrastructure needs, and high unreliability, into the grid.

  8. It is possible for a homeowner to install the same solar panel as those used in utility-scale arrays, so the theoretical efficiency (converting sunlight to electricity) can be the same.

    However, customer-sited solar is often constrained by which direction the roof points, its slope, nearby trees, neighboring buildings, etc. which are not issues that affect utility-scale facilities.

    Also the soft costs such as marketing expenses, site surveys, project mobilization, arranging financing, connection to the grid, etc. comprise a much higher percentage of the costs for smaller installations compared to large ones. This results in lower costs per kW for larger installations. However, the cost of the transmission connection for utility-scale solar is often considered separately from the cost of the solar facility giving them a larger apparent cost advantage over smaller installations.

    One-axis tracking devices are now less expensive and more reliable which allows more kWh to be produced per solar panel for larger arrays.

    The argument that net-metering is a subsidy has been mostly debunked by thorough value-of-solar studies. Solar added within the distribution system has been shown to reduce distribution and transmission congestion, the need for substation additions and other factors that would increase the cost to other ratepayers.

    If value-of-solar tariffs were properly developed, the true value of solar would be identified in a particular region, both the costs and the benefits, and applied accordingly. No subsidy would exist from other ratepayers.

    The fixed fees and other charges applied by utilities are more to discourage customer-sited solar from cannibalizing energy sales than a true reflection of the value or cost of customer-sited solar.

    To me, the sweet-spot for solar is in commercial and industrial brownfield installations within the distribution system. This provides the efficiencies of larger arrays but the advantages of being within the distribution system. Properly designed community-solar projects can also provide these benefits.

    Solar collectors incorporated within a building’s “skin” are under development that would avoid many of the current problems and costs associated with putting solar on buildings. But they are not quite ready for prime time.

    The great advantage of many of the new technologies is that they allow the reconfiguration of the grid into a distributed network of devices instead of the old, less reliable, central station, hub-and-spoke design of the past 100 years.

    Dominion, and other vertically integrated utilities, are wasting the potential of these new technologies by treating them as central station facilities for financial gain rather than optimum benefit to the grid.

  9. solar is simple if you use it when it is available and other generation when it is not.

    Every kilowatt of solar than you CAN use when available is a killowatt you don’t have to burn gas to get.

    Utility scale solar – again – use it when it is available so you don’t have to burn gas…. and it works on residential rooftops also – that’s exactly why Dominion opposes it.. they KNOW it will result in less use for those folks who use it when it is available and rely on the grid when it’s not.

    All Dominion is doing is setting up solar to fail the same way they’re doing with wind – the same way they “proved” that de-regulation “fails”.

    Their strategy is to protect their monopoly and the revenues it generates. If you follow their actions with that in mind – it becomes easy to understand their actions. It’s all about preserving the value of their monopoly and thus things like de-regulation or 3rd party providers or solar or wind are all existential threats to their monopoly and they will employ whatever strategy works to fend them off including money for lobbying and legislators who see things their way.

    And as long as we do not come up with an alternative model where DOminion still prospers and consumers are benefited also – as long as we do nothing – DOminion is going to do what they think they must do to preserve their business model.

  10. Once upon a time Bacon’s Rebellion was a blog centered on human settlement patterns. Denizens of the settlement pattern debate like Ed Risse provided voluminous and well considered commentary about “urban cores”, “core confusing words”, “clear edges”, “new urban areas” and other topics of importance. Peter Galuszka provided articles and commentary from the left while Jim Bacon provided a libertarian perspective.

    While few ideas achieved consensus agreement, one idea did reach that high plane of enlightenment – assignment of fully allocatable location variable costs. The basic idea was that different land use decisions create externalities in terms of costs to society overall. These externalities should be borne by those benefiting from the land use decisions. Cul de sacs were a frequent topic of discussion. People like cul de sacs because they limit the noise and congestion of through traffic on their roads, reduce traffic (making it safer for children to play) and (to some extent) reduce the potential of anonymous “evil doers” from entering the neighborhood. However, these same cul de sacs eliminated through traffic placing more congestion on bigger “feeder” roads. So, if homeowners wanted inefficient cul de sacs then they should be forced to pay extra in order to fund the inevitable expansion of larger roads that cul de sacs rely upon for interconnection to the overall road system. While I agreed with the point on costs I questioned whether $1m homes on cul de sacs were already paying for those costs through higher real estate (and other) taxes than $250,000 condos.

    Where has the logic of paying for the totality of assignable costs gone on this blog?

    Is there any real question that burning coal to generate electricity creates costs through the pollution it produces? Is there any real question that while natural gas is less environmentally destructive than coal it is far less “clean” than solar or wind? Where is the hue and cry to assign the external costs of pollution to the means of electricity generation? I read over and over again that solar and wind aren’t “economical”. Would that be true if we assigned the rise in FEMA payments for flooded areas to coal and natural gas based power generation? Or the cost of treating respiratory diseases of those living near coal plants to the electricity generated by the coal plants? Or the damage to water tables in fracking areas to the cost of natural gas generated power?

    Whatever happened to the libertarian belief that people who consume things should pay the fully allocated costs of those things? I guess that applies to Northern Virginia residents living on cul de sacs but not Richmond area residents using coal fired electricity to charge their Teslas.

    • Don is raising an interesting philosophical question here, and I welcome a discussion on this topic.

      I agree in theory that electric rates should incorporate the social costs of electricity generation. The insoluble problem is determining how big those costs are. While there is widespread agreement (not total agreement, but widespread) that CO2 is driving global temperatures higher, there is no unanimity at all on how high and how fast. The International Panel on Climate Change report deals in ranges and probabilities when it makes global warming forecasts. Then there is the question of how to calculate the economic costs from climate change. Some costs can be measured, others not. And benefits of a warmer a climate tend to be ignored altogether.

      I am skeptical that anyone can devise an objective, non-political methodology for calculating the social costs of CO2 emissions that can serve as the basis for creating a carbon tax. Any methodology will be attacked as serving the interests either of ideologues or fossil fuel interests. Gaining political buy-in is impossible.

      But, hey, maybe it’s worth a try. To have a prayer at making this work, someone would have to convene a working group committed to open discussion, the presentation of data and analysis, peer-review critique of that analysis and data, and a search for some sliver of common ground that everyone can agree upon.

      • When you can’t accurately compute something you should try to be “directionally correct”. For example, Virginia levies a 2 cent tariff on Dominion on per kWh of electricity sold from coal generation, one cent from nuclear, one half cent from gas and Dominion gets a two cent credit for wind and solar. They do not get to take this into account for their ROI guarantees. They do not get to change their rates. In other words, Dominion will become considerably less profitable until they make the switch – at which time they may become considerably more profitable.

        Are those the right numbers? I don’t know but they seem directionally correct. The goal isn’t to perfectly match social costs to generation approaches but to speed the process of conversion to clean energy.

        The biggest problem with just raising taxes on carbon output isn’t the methodology for the taxes. The biggest problem is that I don’t trust the federal, state or local government to do anything intelligent with the additional money. Given the amount of money in politics any additional taxes are likely to largely go to politicians themselves, rent seekers, crony capitalists and wastes of time from SJWs. The best answer would be to take all these additional monies and rebate them on a per capita basis to the citizenry. This would still be something of a wealth transfer since wealthier people consume more of things like ribeye steaks and electricity and they would only get a per capita distribution. However, wealthier people are also better able to pressure politicians to get on with the changes required to bring the planet back into balance.

      • Correct Jim, when it comes to natural gas and oil, what you see is is pretty much what you get. On the whole, there is not much pollution cost aside from carbon which is non-toxic. Coal is different story.

        Liberals want to say (and this is a little like the anti-VAXers logic) that although our air seems clean, there are hidden trace toxins from fossil fuels are killing many of us. And also they feel there are enormous hidden costs associated with natural gas/oil. But there are no hidden problems.

        The technique of hyping up perceived problems is very effective, because we as humans we are absolutuely terrified and outraged about risks we cannot see. But I repeat myself (re: Professor Harold Hill). We got trouble, or do we really?

        As fossil fuels are possibly in short supply and do cause some pollution, some reasonable carbon tax makes sense if it can be applied fairly to society. To me, a better way to look at it is all energy generation is costly and has impacts on society as far as land use etc. Instead we have the selective vilification of fossil fuels which may not be a good attitude for America’s future well-being.

  11. Dominion is building natural gas infrastructure because FERC guarantees them a 14% return on investment for 30 years when they make those investments. Such high return coupled with long term guarantee that it won’t decline is unavailable anywhere else. That interest rate has been set for years and has not been changed based upon the market. Further, FERC grants eminent domain authority and helps utilities meet their goals as it makes decisions, ignoring the impact on rate payers and landowners. This doesn’t happen so completely for other energy choices.

    Solar pays landowners annual income. The company takes care of liability and agrees to remove the infrastructure when it’s not used any more. Pipelines pay one time only. Landowner use of their own land is forever changed/limited but landowners continue to pay property tax year after year with no income to off-set it. Landowners are threatened if any damage to the pipeline infrastructure occurs and have no guarantees that liability to others will be paid or even that damages will be paid in case of leaks, explosion, water system problems, etc. Pipelines refuse to remove the infrastructure if they stop using it, dumping these costs on landowners. In addition to all of this, the daily personal safety risk of landowners is far less with solar than with natural gas.

    Dominion is determined to build the ACP so that it can lock in that guaranteed ROI. The company’s risks are almost zero while the guaranteed income for stockholders is unavailable in any other way. By switching from the long term contract with Transco to transport natural gas to their own pipeline, Dominion will saddle rate payers with unnecessary costs for the new pipeline and its profit and likely, higher natural gas prices as prices rise under global demand. Even Transco’s situation could be harmed although I suspect others will fill the capacity in the Transco system and export for gain.

    Clearly, the incentives can be manipulated by utilities to their advantage and clearly renewables have steeper climbs on every level from dealing with landowners to return on investment. I’ve left any environmental costs out of my discussion here, but we should be including environmental costs. If we’d done that always, coal communities would be in far better shape today in so many ways. Current the incentives for energy sources are unfairly and unreasonably distributed and too easy for utilities to manipulate. Changes are needed. They won’t happen until more than a few of us understand and speak up.

    • But the ROI and the eminent domain authority comes from the fundamental belief that the natural gas pipeline is necessary for the supply of energy in Virginia and the US. No? What happens if solar and / or wind in the US starts to mitigate the need for the natural gas in those pipelines after the pipelines are built? I assume the high ROI continues (but I don’t really know). Certainly, Dominion gets the authority to put the gas on LNG ships and sell it overseas. Of course, if Dominion admitted that was their plan – transporting gas to sell overseas – they would put their eminent domain in doubt. No? So, until the pipeline is a “done deal” the last thing Dominion wants to prove is that solar is working.

      • Yes, the ROI comes with FERC approval. It has not been changed in years. The company can count on it staying where it is for the duration of the project. Thus, we are over-incentivizing natural gas to the detriment of all other sources.

        After all that has occurred, we (landowners) will seek to change the current practice and allow landowners to share any earnings from exported natural gas. Eminent domain was not designed for private gain but for public benefit. If it turns out to be private gain, landowners should share since our rights were taken on false pretense.

        Since ACP has not done anything we’ve asked on our property (moving to the edges of our fields instead of the middle and so that our buildings are no longer in the middle of the incineration zone) even though they widely advertise that they compromise with landowners, if a drop of gas is exported, the campaign to change the law will begin. Our property will ultimately be sold if they put the pipe where they want as I will not live there. I will use the money to mount a campaign to return US practice to the standards of our founders, where land rights mean something and people once again have reason to build their American Dream. Today there are no property rights and no one has incentive to build anything because it can be taken from you very easily and your use of your land is ignored. Your value for your heritage is effectively laughed at, and your property is taken. Our system is so broken.

    • Quoted above….”Dominion is building natural gas infrastructure because FERC guarantees them a 14% return on investment for 30 years when they make those investments. ”

      Really? FERC is giving out billons to Dominion for building a pipleline? I’d like to learn more about that.

      • Yes, the ROI comes automatically with FERC approval for the project. Because the pipeline will be used to supply generation provided to ratepayers, they are counting on the SCC being required to pass the cost on to rate payers and accepting the change to the more expensive new pipeline for transmission instead of the existing and fully sufficient Transco line.

        FERC has allowed the ROI to stay unchanged for years. They have just opened a comment period about it. It will be interesting to see what comes, but the facts that this allows such inequity among energy sources, it is not influenced by the market for return, and it is set for decades, should be addressed.

        Here’s the announcement:
        FERC “Notice of Inquiry” that went out a few weeks ago in which they are seeking public comments on whether, and if so how, it should change how it determines returns on equity (ROE) for proposed interstate oil and gas pipelines. (FERC NOI, 3/21/19) The current assumed 14% ROE allows pipeline developers to over-recover on their investments, and thus creates an incentive to overbuild. Altering FERC’s ROE policy in such a way as to reduce the incentive to (over)build pipelines could reduce greenhouse gas emissions. Initial Comments are due June 26, 2019, and Reply Comments are due July 26, 2019.

  12. Solar cannot work alone. Not even close. Gas is mandatory if solar is to have any reasonable chance of working in any reasonable amount at all. Coal should go, and nuke should replace it. So Gas is key solution for foreseeable future. The rest is a fool’s errand.

    • I agree. But if solar works “well enough” to mitigate the need for new natural gas pipelines then Dominion has a problem with their pipeline plans. I am not arguing against natural gas based generation. I am only question whether Dominion has a clear conflict of interest in the reporting the results of the experimental solar program.

  13. Reed,

    It is important to remember that nuclear cannot work alone, coal-fired units cannot work alone, and solar and wind generation cannot work solely on its own. For several decades it was prohibited to use gas in new generating plants. It is unwise to use any single technology, at this time, as the only source of electricity. We will have all of these different types of generation in our energy mix for some time to come.

    What we are faced with is what do we choose to use next?

    DJR is right on the money to point out that for years (and still today) we ignored the externalities associated with different methods of generating electricity. Our tax code and other policies still most heavily subsidize nuclear and fossil generation. It is the exclusion of all of the facts of the matter that distorts our conversation about the future of our energy system.

    Jane points out that the high rates of return authorized for new pipelines (15% for the ACP and 15.77% for the MVP) distorts investment decisions when gas pipelines yield a 50% greater rate of return than other types of energy projects.

    The utilities themselves don’t make any profit from the pipeline but their parents companies make billions. Dominion’s customers will be asked to pay at least $4 billion for the 20-year contract with the ACP. This is an unfair burden because all of Dominion’s large gas-fired plants have long-term agreements with existing pipelines that can transport gas much more cheaply than the ACP. Dominion has announced that it plans to build no more of these types of units.

    The contract must be paid in full even if only some or none of the reserved capacity is used.

    LNG facilities and pipelines dedicated to serve them are governed by a different section of the Natural Gas Act that does not allow the use of eminent domain for facilities used for export.

    Wall Street needs exports to raise the price of gas. In aggregate, the top 60 oil and gas producers have lost an average of $9 billion per quarter over the past nine years. Investors have billions tied up in these enterprises and want to get their money out. The rest of us will pay the price.

    Gas and electric ratepayers are expected to be the ones to pay the price of the foolish strategy of shifting our reliance so heavily towards natural gas. A fuel that does little to reduce climate effects and puts us on a trajectory of higher energy costs.

    We will continue to rely on gas for much of our energy because we have built so many new gas-fired generating units in the past few years. In states like Virginia, we will have to pay in full for them over the next 35-40 years, regardless of how much they are used.

    If our energy planning included more of the total consequences of various ways of producing our energy, we would have an energy system that was more considerate of the health, environmental and economic effects of energy production on our citizens.

    Our energy policies are increasingly shaped to benefit the energy companies at the expense of their customers. It shouldn’t work this way. A balance can be achieved that is good for all parties.

  14. To DJR and TomH: I completely agree with TomH about needing to look at the full range of generation to make up a least cost generation curve to match the ever-changing load curve that is the “requirement” of the collective electric consumer. No one generation type provides the complete answer to Reed’s concern.

    DJR, however, really hits the issue that should bothers us all: “Where has the logic of paying for the totality of assignable costs gone on this blog?” Yes, I know DJR was talking first about land use planning, but the same economic principles apply to utility regulation, and in the case of the latter we actually get to have an expert regulatory commission apply those economic principles to its regulation of the utility rates under its jurisdiction. Over the years they came up with a cost allocation method which Steve refers to in passing: the “Commission affirmed the old “average and excess demand” allocation method, but started a process likely to result in changes down the line.” In the narrow and arcane field of utility regulation, tampering with the sacrosanct a&e allocation methodology is a big deal. Why? Because, for all its imperfections, a&e is better than the alternatives.

    How to assign costs is a big deal for utility regulators, because, in theory, they can do this precisely, as part of a numerical determination of rate base and net income and return on rate base in a given test year to a gnat’s eyelash of accuracy. But of course in the real world things are more complicated than that. DJR, you point directly to the biggest problem utility regulators face today — and they KNOW it — but they haven’t got a political clue where to go with it: “Where is the hue and cry to assign the external costs of pollution to the means of electricity generation?” There was a hope, once upon a time, that the feds — specifically the EPA — would dictate the terms of how we’d reflect the cost externalities of carbon emissions in utility rates through the CPP rulemaking they initiated, thereby taking all the State commissions off the hot seat. “Those nasty feds made us do it” would connveniently take the place of an honest public discussion about that looming externality called “global warming” — and all the political hazard that paying anything quantifiable now to deal with that unquantifiable (and still unbelievable, in some circles) future cost entails.

    Remarkably enough, considering what’s come out of the Trump administration so far, the Federal Energy Regulatory Commission has a fascinating rulemaking underway focused on precisely this dilemma. The FERC is charged with implementing fair wholesale rates for electricity, and back in the ’90s it came up with the idea for regional wholesale markets that would establish a price that was per se reasonable by virtue of being established in a marketplace so big, and run by an administrator so independent, with results so transparent, that no one could question the result as economically efficient, hence, regulatorially correct. And it implemented this vision, creating a network of independent system operators, or ISOs, of which PJM is our local example. It set this up demanding that the ISOs adhere strictly to cost-based “economic” dispatch in their regional energy markets based entirely on the daily bids submitted by generators — utility owned or independent, it did not matter — which from each generator’s point of view had to recover at least their marginal operating costs or they would run at a loss, and if they bid too high they wouldn’t run enough to make a profit and survive. No externalities would matter, only actual costs of operation.

    Ah, but the world is not so simple. A few utilities have announced in recent years that (due to a number of factors but primarily the increasing cost of processed uranium due to Chinese and other competition for it) the typical American nuclear generating plant is no longer profitable to run, vis-a-vis the competition from new, high-efficiency natural gas powered plants, Indeed nuclear plants were sometimes running at a marginal cost higher than the marginal cost of energy on the grid — meaning, the owner of the plant has to pay the grid to take his power rather than shut down (and of course, as everyone knows, nuclear plants cannot be shut down or “cycled off” for just a few hours at a time). So what did these nuke owners do? They went to their State utility commissions and their legislators and said, “you want our green, zero carbon, energy but we are going to shut down unless you pay us a subsidy to keep going” — which many States have done: Connecticut and Pennsylvania and Ohio and Illinois (as I recall) to name a few. Indeed the latest such recipient was Dominion, for its Millstone plant located in CT. But lo and behold, the independent (non-utility) owner of several of those natural gas plants filed a complaint at FERC alleging that the State “carbon free” subsidy allowed the nuclear owner to submit bids below its un-subsidized cost of operation and that was unfair competition; the only fair way to do it was to reflect the relative carbon emissions cost of every generating plant in an adjustment to its bid thus reflecting the carbon emissions externality fairly in the marketplace! The FERC granted this complaint and issued an order last July directing PJM to come up with a propose way or ways to deal with these State-mandated nuclear subsidies, along with other market distortions such as State-mandated renewable portfolio standards (State RPS requirements fix minimum amounts of renewable-sourced energy that retail electric utilities must buy for their customers, forcing them to pay above-non-renewables prices for the right to claim these renewable-energy-powered sources as theirs; this supplies an external or non-market economic subsidy to the renewable generation owner).

    I mention all this because the FERC is pondering right now what to do about how the ISOs dispatch the generators under their control. One solution would be to concoct a way to calculate the social cost of carbon emissions directly and have the ISO assign that cost externality as an adjustment to every generators’ bids in the dispatch of PJM generators in the daily energy market. In other words, PJM would be directed to impute a carbon tax. Another solution would be to have the states impose a proxy carbon tax (RGGI anyone?) and factor that cost into every generators’ cost based bids; therefore PJM wouldn’t have to do anything, the States would level the playing field instead. But unfortunately not all the PJM states participate in RGGI or anything like it. Another solution would be to punt, do nothing now, and hope that the Democrats would take over soon enough and the federal government would then quickly revisit the idea of a universal carbon tax, or at least a CPP, to translate that carbon emissions externality into a real cost of operation, levelling the playing field before too many un-subsidized generation owners went out of business. The FERC was well on the way to doing something dramatic here until, around last Christmas, the Chairman of the FERC died suddenly. That has left the five member Commission in something of a 2-2 tie on what to do, with no nominee yet from the administration.

    So, DJR, you see, regulatory consideration of externalities, psrticularly the one you point to, is tied into knots right now. You ask, “Where is the hue and cry to assign the external costs of pollution to the means of electricity generation?” It’s there — but I’m not holding my breath for a solution from these administrations — either at the federal or Virginia level.

    • Clear, thorough and on point. Thank you, Acbar. I’m sure that putting a cost on the externalities of fossil based electricity generation would be complex and highly controversial. But wasn’t that effectively the idea behind the RGGI?

      In my mind you either believe in anthropomorphic global warming or you don’t. After years as a sceptic followed by years as an agnostic I am now a believer. Am I convinced beyond the shadow of a doubt? No. I am more along the lines of a civil trial – convinced by the preponderance of the evidence.

      The next question is, of course, now what … ?

      It seems there has to be some financial recognition of the costs of anthropomorphic global warming. From beef consumption to gas guzzling automobiles to fossil fuel based electrical generation … there has to be recognition of the externalities. Perhaps that recognition starts with small recognitions of global warming costs followed by escalating recognitions over time. But, one way or another – we have to recognize that there are costs.

  15. New data point for the discussion: The past year has been the wettest in in recorded history for the Washington area, reports the Washington Post. Presumably, the same could be said for most or all of Virginia. (I can tell you that Richmond has been wet, wet, wet, too.)

    Where there’s rain, there are clouds. And where there are clouds, there is less output from solar facilities. Ergo, the reason the capacity of Dominion’s solar units fell so short of expectations likely was due to the weather.

    Was last year a fluke or a sign of fundamentally changing weather patterns? My guess (though, obviously, I’m no expert) is that the persistent rains were a fluke and that Virginia will see sunny days again. I don’t think the efficacy of solar should be judged by one year’s results. On the other hand, the flukish nature of the past year’s rains drives home the inherent intermittence of solar production.

    • Very good discussion above, all of it. My overwhelming problem is aligned with Jim’s. Most of our excellent discussion above must in fact be theoretical. Whether we like it or not, until we can bring the entire world into line, we confront a near impossibility trying to make anything other than a de minimis difference in time to solve the global warming problem without going bankrupt ourselves. Thus we will be doing ourselves great harm for no good practical reasons. Hence my use of the term “Fool’s Errand.”

      For example, under the external cost regime scenario, Virginians will be “taxed via de facto fictional pricing” into its own self created poorhouse, while the Chinese, Indians, and most everyone else in the world, eat our lunch. Even today, under our current policies, we lead the world in carbon reduction, while most everyone else pretends falsely to follow climate reduction policies while in fact doing the reverse. Remember, most everywhere in the world, laws are made to collect bribes, or gain private advantage, while America (in its self imposed hair-suit) eats itself alive.

    • “Ergo, the reason the capacity of Dominion’s solar units fell so short of expectations likely was due to the weather.”

      Except that your article said Dominion blamed “transmission disruptions” not “generation disruptions”.

      It was also rainy in Maryland and North Carolina. Did these states see worse than expected generation from their solar efforts?

      I don’t think the persistent rains were a fluke. I’ve been fishing the Chesapeake Bay since 1975. In some ways the Bay has changed for the better. In some ways for the worse. However, there was always a seasonal rhythm to the Chesapeake Bay that was due to temperature and salinity. Where I fish (in the Choptank and Little Choptank areas) you could predict the types of fish you’d catch by the month of the year. As the summer rolled on the bay got saltier and salt-water fish would appear in large schools – especially bluefish and mackerel. They can’t stand fresh water so they don’t appear until the salinity increases. Over the last ten to twenty years the vast schools of bluefish in particular have disappeared. There are bluefish but nothing like there used to be. If it were pollution the rockfish should have been down but many years (especially around 2010) were banner years for rockfish. Ditto menhaden. A lack of menhaden should have cut the rockfish catch. The bottom line is that the bay seems to be getting fresher and dramatically so as of late. Increased development and rainwater runoff could be part of the issue but why such a dramatic change?

      Is this scientific? Oh hell no. But when I combine what I am seeing with what I am reading from scientific journals I believe the preponderance of the evidence suggests that anthropomorphic global warming is happening.

      The bay may continue to get cleaner even as it gets less salty but any change deserves notice.

      Good news / bad news: The Spring trophy recreational rockfish season was canceled in Virginia. It was a bust in Maryland. Migratory rockfish stocks seems to be well down over the last few years. Probably time to consider cutbacks on commercial fishing. The good news is that the Maryland part of the bay seems to be lousy with blue crabs this year with the winter dredge survey indicating an increase of 60%! Get those crab traps and trot lines out.

    • DJR asks, “It was also rainy in Maryland and North Carolina. Did these states see worse than expected generation from their solar efforts?” Can’t tell by a quick glance, EIA statistics lag several months, but FWIW the total amount of 2018 solar gen. vs 2017 in NC is up by 36%, which suggests that atmospheric conditions lately are not dampening solar generation investment.

  16. solar is cheap enough and getting cheaper that it’s easy to build far more sites to compensate for “clouds’.

    Again – why the opposition to a viable source – now – when you did not oppose and do not oppose other sources and their shortcomings?

    it makes no sense – especially for someone who says they are libertarian and a supporter of free markets.

    in terms of variable location costs – the Way that we do electricity is very much socialist – we allocate ALL those location costs to everyone equally – if it costs 3 times as much to extend electricity to a subdivision than to an in-city apartment – those costs are all allocated to all who pay.

    and HERE is one of those variable location externalities that most city dwellers enjoy:

    this is where coal came from (and still does) for decades before solar but now we “worry” about the impacts and efficacy of solar… zowee!!

    ?itok=v56CbgpG

  17. FERC held a symposium with ISO’s and utilities to discuss how to deal with the distortions in its wholesale market. The state subsidies had just been announced and the nuclear operators in non-subsidized areas were really upset.

    FERC floated an idea about adding a carbon tax to its wholesale market, but no action yet.

    I have a problem with a carbon tax that is intended to address climate issues related to electric generation. It is easy to measure carbon, that’s why it is used. But it artificially favors gas use. The methane leaks associated with gas extraction, transportation and use are 86 times more potent than carbon dioxide as a greenhouse gas during the first 20 years of its release. This is within the period where the tipping point for climate effects is of the most concern.

    From a greenhouse gas perspective, gas is about the same as coal. If we look only at carbon, gas appears twice as good. This flaw in our policy-making has led us to shift from coal to gas as the dominant method of generation. Using gas does avoid some of the other issues related to coal. But Wall Street and the gas industry has successfully sold the idea of gas a “clean” or “bridge” fuel, when that is not accurate. But we know that perception, money and politics drive our policy more than facts do.

    The energy market throughout the U.S. is telling us that nuclear is not cost competitive without subsidies. Nuclear fuel is still selling well below cost, which could change any time with alterations in Russian price supports. Yet Dominion is going full speed ahead adding billions in costs to its nuclear facilities knowing that they will be fully subsidized by Virginia ratepayers, regardless of the economic competitiveness of the energy they generate.

    We need clear-headed evaluation of these alternatives, using all of the facts, not just the convenient ones.

    We have been hoping for a fairly accurate estimate of external costs for decades, but not much progress so far. We should also remember that not all important issues can be expressed in monetary terms.

    • “The methane leaks associated with gas extraction, transportation and use are 86 times more potent than carbon dioxide as a greenhouse gas during the first 20 years of its release. . . . From a greenhouse gas perspective, gas is about the same as coal. If we look only at carbon [emissions], gas appears twice as good.” A very important point. Methane leaks during extraction/fracking and transportation really ought to be included in the assessment of total climate impact when comparing gas-fired generation with nuclear or solar; merely measuring the CO2 emissions from the generating plant understates that impact substantially. For now however we don’t have a readily cycled, after-dark generation alternative to natural gas fired generation, except wind, and that only in small quantities. Cheap battery storage to time-shift solar output from the daytime is the dream, but years off.

      As for reducing those factors to dollars, your conclusion is pessimistic, but I think we have to try. Without reflecting carbon impacts as costs in the economic ranking of generation in the wholesale markets, we have to fall back on command-and-control methods that distort markets and could ultimately wreck them. That is what FERC is wrestling with in the Calpine complaint case and its spinoffs.

      • Part of our problem in Virginia is that all of our policies are centered on the utility and often ignore the perspective of the customers.

        For example, battery storage is cost-effective in a number of applications. PJM has been deploying them for years, as have utilities in other states. Although batteries are not yet “cheap” they can save money in time shifting applications. For example, about half of commercial and industrial energy bills are comprised of demand charges. This is based on the peak usage for the year. Batteries can be installed behind the meter and charged with solar or with standard grid energy during off-peak hours. They can be discharged during peak hours displacing energy acquired from the grid, reducing the demand charges and customer bills.

        Such installations can be provided by energy service companies and aggregated as a resource for PJM. Both PJM and FERC are considering establishing a market for storage.

        Because these are customer-sited resources they only have to cost less than the retail prices that they save. They can be economically adopted well before large-scale utility storage arrays are cost-effective in Virginia. Distributed resources make more sense anyway.

        Such a use makes sense for Virginia and its citizens, but under current schemes, not for the investor-owned utilities. That’s why they are avoided in the IRPs.

        When we alter the way the utilities are paid, we won’t have this disconnect. Customers don’t owe the utilities an unlimited stream of profits. Only a fair return for services that benefit them.

        The sooner we straighten this out, the better for everyone.

        • I’m supportive of storage, strongly so, but reluctant to see us commit to lithium battery technology on a large scale given the huge environmental cost of making them (esp. due to the cobalt component) and disposing of them and the risk of catastrophic explosion (however diminished by careful manufacturing quality control it cannot be eliminated). If one of those liquid electrolyte battery technologies using cheap materials finally makes it to commercial production, then WOW!

  18. All of the discussion continues to revolve around carbon. It’s not the only problem. Methane losses are not even measured but they cause far more problems in the comparative short run. Particulate releases and unknown chemicals used in fracking that escape are also largely ignored.

    As an affected landowner, I’ve been directly told several times that our air and water are so clean that we can “afford” the pollution. We are not compensated for taking on that pollution. Our increased health costs (and those of our exposed animals) are not compensated. Those whose water has been destroyed by fracking are not being compensated. The system is set up to sacrifice those in the paths of this infrastructure.

    • Don’t disagree with you. Compensation is supposed to cover the total impact on the status quo ante from a project, but our courts have chipped away at how the compensation from a condemnation is calculated conventionally — particularly when it comes to the impact on adjacent properties not actually “touched” by the taking. I would note that any discussion which “revolves around carbon” should include the impact of lost methane which is simply the same carbon in another molecular form.

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