Category Archives: Energy

Air Board Approves Carbon Caps for Electric Utilities

The Virginia Air Pollution Board unanimously approved today regulations to reduce carbon from electric utilities by 30% between 2020 and 2030. The rule also will link Virginia to the Regional Greenhouse Gas Initiative (RGGI), which will allow Virginia utilities to swap carbon allowances with power companies in other states.

The vote “will make this Commonwealth a leader in the global fight to cut carbon and promote clean energy technologies,” said Governor Terry McAuliffe in a prepared statement. “This will allow us to achieve carbon reductions in the most innovative and cost-effective way possible with minimal impact on customer bills.”

Virginia is uniquely vulnerable to the threat of climate change and many of our residents are already experiencing its impacts. We do not have the luxury of waiting for Washington to wake up to this threat – we must act now. I am proud that Virginia is joining states around the nation that are filling the void of leadership that President Trump has left on transforming the energy sector and protecting our environment. With these regulations, we will significantly cut carbon emissions, continue our state’s explosive growth in the clean energy sector, and set an example for leadership in Washington, other states, and the entire world.

The public comment period and on-going enactment process is expected to be lengthy, especially if lawsuits are filed challenging the legality of the regulations. McAuliffe’s statement was short on details on how the regional greenhouse initiative will work.

Here follow responses from various parties as they come in.

House of Delegates Republicans: “This is a clear attempt by Governor McAuliffe’s Administration to circumvent the appropriate legislative process to impose wide-ranging regulations that, simply put, will necessitate higher electricity prices and discourage businesses from investing in the Commonwealth,” said House Speaker-designee Kirk Cox.

“Democrats purport to be champions of the poor and working class, but this policy will lead to higher electric bills for families, small businesses, seniors, and the working poor,” said Majority Leader-designee Todd Gilbert. “It will directly hurt people already anxious about making ends meet and getting through a cold winter, but it sure will please Governor-elect Northam’s California billionaire donors.”

“The Air Pollution Control Board does not have the authority to promulgate regulations at the state level that exceed those at the federal level,” said Commerce & Labor Committee Chairman Terry Kilgore. “Today’s action is clearly inconsistent with Virginia law and a gross example of bureaucratic overreach.”

Dominion Energy Virginia. “We already are a low-carbon producer of energy, and have continued to work to lower emissions both in anticipation of future state or federal regulation and because it’s the right thing to do,” said Dominion spokesman David Botkins. “We have plans to build more than 5,200 megawatts of solar arrays in Virginia, extend the lifespan of our nuclear plants and have closed or converted coal-fired generation. While we haven’t yet had a chance to fully study the state’s draft proposal, we expect to fully meet whatever regulatory requirements that result. We’ll review today’s vote and participate in the public comment period in due course.”

Appalachian Power: “Appalachian Power is reviewing the proposed regulations. Given uncertainties in the ultimate Virginia carbon budget, allocations, and allowance pricing, we are unable to estimate the impact of the proposal on our customers at this time” said Apco spokesman John Shepelwich. “But the company will participate in the public notice and comment process to ensure any final rule, if/when/promulgated, will have the least impact possible on our customers.”

APCo has already reduced CO2 generation emissions in Virginia by 96% since the year 2005, he added.

Update: I normally get a slew of press releases from environmental groups, but nothing has arrived in my inbox on this. But in its story the Richmond Times-Dispatch quotes the Virginia Conservation Network as calling the draft regulation “a critical first step in addressing the threat of climate change and spurring investments in clean energy in Virginia.”

Climate change is one of the most pressing issues of our time, especially when it comes to its devastating impacts on Virginia’s most vulnerable communities. It is imperative that every level of government steps up to be a part of the solution.

Virginia Could Get Its Own Clean Power Plan

Would the Chesterfield Power Station get the axe under new state carbon emission rules? (Photo credit: Richmond Times-Dispatch)

Terry McAuliffe’s days as governor of Virginia are rapidly drawing to a close, but proposed carbon-dioxide regulations working through the administrative process could prove to be his most lasting legacy. If adopted, the rule would cap carbon emissions at large power plants in 2020 and then require 3% reductions annually for 10 years, reports the Richmond Times-Dispatch.

After convening a working group more than a year ago to develop recommendations on cutting power plant emissions, McAuliffe signed an executive order in May directing the Department of Environmental Quality to prepare the regulations. The State Air Pollution Control Board is expected to vote on the measure Thursday.

The regulations will be tied to the Regional Greenhouse Gas Initiative (RGGI), a cooperative including nine other states in the Mid-Atlantic and New England. The regional initiative will allow power companies to purchase carbon allowances from one another. The regional approach allows utilities in one state to purchase offsets from utilities in other states that might be able to reduce carbon output more cheaply.

DEQ models indicate that Virginia’s rule could increase the wholesale cost of electricity by about 7% by 2030, although the actual impact on consumers should be lower, say backers of the rule. In other states, expanded energy efficiency programs have offset the higher electricity rates with lower consumption with the result that electric bills are no higher.

While Attorney General Mark Herring has rendered the opinion that the state air board has the power to regulate carbon under its existing authority, others disagree. Air board regulations prevent it from enacting regulations more stringent than federal requirements, Jay Holloway, a partner with Williams Mullen, told the Times-Dispatch.

Republicans also have problems with the rule, arguing that it will weaken the Virginia economy. John Whitbeck, Republican Party chairman, accused McAuliffe of catering to liberal votes in Iowa and New Hampshire for his presidential bid.

Dominion Energy has remain notably silent as the carbon-cap proposal has wended its way through the system. “We already are a low-carbon producer of energy, and have continued to work to lower emissions both in anticipation of future state or federal regulation and because it’s the right thing to do,” said Dominion spokesman David Botkins.

The carbon-cap initiative ties back to the debate over the electricity rate freeze. Critics have lambasted Dominion for the freeze, which arose from fears of the impact of the Obama administration’s proposed Clean Power Plan. Dominion agreed to keep its base rates fixed, which has locked in excess profits for the first couple of years, in exchange for taking the risk of asset write-downs if the federal carbon regulations forced the utility to close one or more of its coal-fired power plants. The Trump administration is rolling back the Clean Power Plan, so Dominion critics say the freeze is no longer justified. But Dominion countered that the McAuliffe initiative still could compel a reduction in carbon emissions, and that the company still is at financial risk.

Bacon’s bottom line: The point that intrigues me is the argument that a 7% increase in electricity rates would not harm Virginia consumers because, by adopting energy efficiency measures, they would offset the higher rates with lower consumption. Voila! With this new alchemy, we can impose regulations that cost hundreds of millions of dollars to comply with, and miraculously, everybody wins and nobody loses! 

Pardon my skepticism. The carbon-reduction rule may be justified (if you buy into the more alarmist predictions of the global warming movement) but let’s not pretend there is no cost to consumers. Yes, it’s true, business and homeowner investments in energy efficiency can counter the higher rates. But someone has to pay for those investments!

Dominion Announces Intention to Renew North Anna Nukes

Dominion Energy Virginia has informed the Nuclear Regulatory Commission (NRC) of its intention to file for licenses to operate two nuclear units at its North Anna Power Station in Louisa County for another 20 years.

North Anna One began commercial service in 1978, North Anna Two in 1980.  Originally licensed to operate for 40 years, both had their licenses renewed for an additional 20 years. The pair provides 1,892 net megawatts of electricity, enough electricity to power 473,000 homes. As base-load plants, they operate around the clock, except when they are taken off-line for periodic maintenance.

“Renewing North Anna Power Station’s licenses for a second 20-year period is the right thing to do for our customers, the regional economy and the environment,” said Daniel G. Stoddard, chief nuclear officer for Dominion’s nuclear generation division. “The planned relicensing of North Anna and Surry ensures that the benefits of these clean energy sources will continue to provide affordable, reliable, carbon-free electricity to our customers through the middle of the century. Our nuclear power stations have proven to be among the most-efficient and most-reliable sources of electricity in our fleet.”

North Anna directly support more than 2,000 high-paying jobs in Virginia and pays millions of dollars yearly in state and local taxes, Stoddard said. Continued operation of the units will help Dominion meet state goals for lowering carbon dioxide emissions from its fleet of power plants.

Despite nuclear’s zero-carbon attribute, many environmental groups oppose the technology on the grounds that the disposal of nuclear fuel creates its own set of environmental hazards. If the company were thwarted in its effort to re-license the nukes, it would have to acquire base-load capacity from another source. Coal, which emits more CO2 than any other power source, is out. Natural gas is much cleaner than coal, but still emits CO2, and environmentalists say that it is no better than coal once the full “life cycle,” including gas drilling and collector pipelines, is taken into account. The problem is that the environmentalists’ preferred power sources, wind and solar, are intermittent, which means they often do not produce electricity when it is needed. Battery storage is seen as solution to the intermittentcy issue, but batteries add a big new layer of cost.

Dominion argues that re-licensing its existing nuclear units, which have operated efficiently for five to six decades, (a) is not coal and does not emit CO2, (b) provides a stable source of electricity, and (c) keeps economic activity, jobs, and taxes in Virginia.

The company, which says that it foresees “no significant barriers” to renewal of the North Anna nuclear units, estimates that re-licensing and refurbishing the North Anna and Surry power stations will cost a total of $4 billion. That is roughly comparable to the cost of building four state-of-the-art gas-fired power units that provide roughly the same amount of electricity. The difference is that the cost of nuclear fuel is cheaper and less volatile than the cost of natural gas.

Another Arcane Obstacle to Solar Power

Virginia Comptroller David Von Moll

Some of the barriers to solar energy in Virginia are tucked away in the bowels of state government and the byzantine rules by which it operates.

One obstacle, since resolved, was a state rule granting solar projects an 80% tax exemption from property taxes under the guise of pollution control equipment. One would think the tax break would improve the economics of solar projects, but through a circuitous set of linkages involving the calculation of the Composite Index used in distributing state education dollars (described here) local governments would lose tax revenue from solar deals, which discouraged them from granting the necessary zoning and permitting approvals.

Jim Pierobon, writing in Southeast Energy News, has identified another obscure regulation: “An accounting rule, as interpreted by the Virginia Comptroller, effectively prevents Virginia from using a financing option used by many local governments: contracting through long-term power-purchase agreements (PPAs) with third parties to buy electricity.”

In a solar PPA, a third party project developer owns the solar farm and contracts to sell electricity to buyers such as universities or state agencies that are unable to take advantage of solar tax credits. Without the credits, many solar projects do not pencil out, and will be never be built. Writes Pierobon:

The Comptroller currently interprets a PPA to be a lease of capital equipment, and thus a debt owed by the state. Under that scenario, solar developers don’t own the electricity that they supply. That means a developer cannot claim the existing 30% federal Investment Tax Credit.

Why the state Comptroller, David Von Moll, interprets PPAs to be capital leases is a unclear to many solar developers. Neither he nor his office responded to requests for comment.

The McAuliffe administration had planned to do 25% of the installed solar capacity in state facilities as third-party PPAs, but were told by the Department of Accounts that the state could not enter into long-term PPAs.

“We’ve been trying to educate [Von Moll and his staff] as much as possible. We’re just not there yet. It’s incredibly frustrating,” said Hayes Framme, Deputy Secretary of Commerce and Trade. “State governments work certain ways to make their decisions. It’s our job to try to convince them otherwise.”

To be fair to Von Moll, there is a thin and tenuous line between solar PPAs and solar leases. Here’s how Energy Sage describes the difference:

While the terms “solar lease” and “solar PPA” are used interchangeably on this page, and are very similar in practice, there is a key difference between the two. With a solar lease, you agree to pay a fixed monthly “rent” or lease payment, which is calculated using the estimated amount of electricity the system will produce, in exchange for the right to use the solar energy system. With a solar PPA, instead of paying to “rent” the solar panel system, you agree to purchase the power generated by the system at a set per-kWh price.

Von Moll, who has worked in various positions in the Department of Public Accounts for 22 years, oversees the state’s financial management and internal control policies. He may be part of the executive branch, but it appears that he doesn’t knuckle under to pressure from the governor’s office. Whether that’s a sign of rock-ribbed integrity or pure bull-headedness, I’ll let readers render judgment.

Here Comes the Energy Cloud

A quick data point… Navigant Research, a business intelligence firm, is hosting a  webinar on “Technology Trends at the Grid Edge.” The proposition of the webinar:

The transition to the Energy Cloud—where energy markets become more distributed, clean, and intelligent—is speeding up. Utilities must adapt to this transformation to capture the value in new distributed energy resources (DER) and transactive energy markets. Until recently, the smart grid conversation was focused on hardware: smart grid technologies, smart meters, and in-home Internet of Things (IoT) devices. The industry is now shifting toward the next level of maturity on the technology adoption cycle: utilities have deployed smart meters; networks are digital; and utilities are experimenting with smart home technologies. The next challenge is how to extract value from the data generated by IoT devices while protecting critical infrastructure.

Utilities will increasingly turn to platforms to manage increasing volumes of IoT devices—and these platforms will be delivered by ecosystems of technology vendors.

Two of the speakers work for Intel, the chip designer and manufacturer. Intel is pouring vast resources into building its Internet of Things (IoT) business, of which the electric grid is an important component. Advances in sensors, smart meters and algorithms will make it possible to re-invent the architecture of the electric distribution grid from one-way electricity flows to multiple-way flows, making it easier to integrate renewable energy sources. The distributed grid — or the energy cloud, if you like — is coming. Public policy leaders need to wake up and figure out what it portends for Virginia.

If I thought I could understand the content, I’d sign up. But I know the limits of my intelligence.

Rocky Forge Wind Project Stalled: No Buyer for Its Electricity

Simulated view of Rocky Forge wind project.

The developer of what could be Virginia’s first commercial wind farm has lined up all the regulatory permits it needs, but it hasn’t started site work yet because it can’t find a buyer for the electricity. Apex Energy will not start construction by the end of this year, as planned, on the Rocky Forge project in Botetourt County, reports the Roanoke Times.

“We’re working to find the right partner to commercialize Rocky Forge,” said Apex spokeswoman Brooke Beaver wrote. “We do not yet have a specific date for the start of construction, but are working steadfastly toward that goal.”

On the positive side, Beaver said a later start date would allow Apex to take advantage of “even newer technology that will make the project even more competitive.”

Project critic Steve Neas told the Roanoke Times that he believes the wind farm’s 75-megawatt capacity is not enough to make it attractive to either a power company shopping for renewable energy or investors willing to commit to the project. “My guess is that they’re having a hard time lining up people to buy their power.”

Continues the Roanoke Times:

Apex contended in its statement that with the latest delay, the company has “the opportunity to utilize newer turbine technology, making Rocky Forge even more competitive in the market and further decreasing the cost of the energy it can produce.”

“Virginia has experienced tremendous growth in solar energy in the past year, and we look forward to adding wind energy to the generation mix.”

This Ain’t Your Father’s Electric Grid

This chart shows the dramatic drop in Dominion’s solar energy output during the recent solar eclipse.

Is Thomas Edison’s electric grid ready for the future? In some ways yes, and in other ways not yet. So says Kevin Curtis, vice president-technical solutions for Dominion Energy Virginia.

The challenges of integrating renewable energy sources and protecting against cyber-threats have created the need for a smarter, modernized grid, Curtis said today in a Northern Virginia Technology Council forum on the topic of powering Northern Virginia’s high-tech economy.

“Grid modernization means a smarter grid, a self-healing grid, with fewer disruptions and fewer customers impacted,” Curtis said. The reliability and quality of electric service is especially critical to technology companies, which not only need to maintain uninterruptible service but keep voltage and electric frequency within a tight range.

In 2015 Dominion had only one megawatt of solar power on its system. Today the number is 744 megawatts online or under development, and the company expects to add 5,000 megawatts over the next couple of decades. The transmission grid of high-voltage electric lines is designed for electricity to flow bidirectionally, which means it can readily accommodate large utility-scale solar farms. But the distribution system of lower-voltage lines that deliver electricity to homes and businesses was designed for one-way electricity flow. Dominion has taken a go-slow approach to rooftop and other small-scale solar as it has learned more about their impact on the distribution system.

Rapid variations in solar output can create fluctuations in voltage and frequency that can damage customers’ machinery and equipment, said Curtis. “It’s not a deal breaker, but we have to be sure we understand the interactions.”

During the solar eclipse, output dropped to 10% of normal solar rating and then jumped back to normal, all within a few minutes. Power companies had to keep supply and load in balance on local circuits or risk adverse consequences. Said Curtis: “It’s an operational challenge.”

A modern grid provides more real-time information of what’s happening on the system, more intelligence about voltage and frequency, and the ability to predict problems before they occur. A smart grid also provides customers more information and control over their energy usage.

While Curtis spoke about the necessity of building a smarter grid, he did not say what upgrades Dominion has planned for its system or how much they might cost.

The other challenge is grid security, both physical and cyber. The “marquis moment” for Dominion came in April 2013 when unidentified saboteurs launched a coordinated attack on a Pacific Gas & Electric substation serving Silicon Valley, knocking it out of service and causing PG&E to reroute flows of electricity.

“The very next day, Dominion began to rethink our system,” said Curtis. Everyone from terrorists to hostile nation states are probing the grid. “We know it’s happening. It’s on the forefront of our minds. We have a team of people at Dominion specifically focused on these issues.”

There is no one approach to securing the grid. Dominion is assessing its vulnerabilities, hardening its facilities, and bolstering surveillance of the system, he said. “We recently completed a brand-new, state-of-the-art transmission center north of Richmond that is protected against electro-magnetic pulses and has armed protection,” he said.

State Secretary of Technology Karen Jackson said that the demand for reliable service is “at an all-time high” and is a growing concern in the state’s effort to recruit data centers. Two key infrastructure considerations for data centers are bandwidth and electricity. “We have to have the infrastructure that can keep pace, while also being respectful to the environment.”

Conversations like the one taking place between Dominion and the Northern Virginia technology community are vitally important, she said.

The Politicization of Energy Regulation in Virginia

Photo credit: Richmond Times-Dispatch

Earlier this week the Richmond Times-Dispatch published an in-depth series tracing the history of the relationship between Dominion Energy, the General Assembly and the State Corporation Commission over the past twenty years. Michael Martz and Robert Zullo conducted dozens of interviews and reconstructed the complex history of electric utility oversight during a tumultuous period that saw a shift from regulation to deregulation, then back again.

The main thesis of the first article is that the relationship between the regulated and the regulators fundamentally changed around 1995. Until that time, the Virginia Electric & Power Co. (known as VEPCO) had its own board of directors and operated with considerable independence. Parent company Dominion amounted to little more than a holding company for the utility, which comprised 90% of its assets. But in a titanic boardroom struggle, which the Times-Dispatch recounts in great detail, Dominion CEO Thomas Capps ousted VEPCO President James T. Rhodes Jr. In the years that followed, Dominion acquired the Consolidated Natural Gas Co. in a $8.3 billion deal, transforming Dominion into a multi-state energy giant, dissolved the VEPCO board, and stepped up its involvement in Virginia politics and policy through its lobbying efforts and campaign contributions.

The second article chronicles the shift from regulation to deregulation and then, when experiments with deregulation around the country appeared to be failing, back to regulation — under the guidance of Dominion each step of the way. The end result of 20 years of legislative tinkering, the Times-Dispatch argues, was weaker oversight by the SCC, which Dominion cannot influence politically, and greater involvement of the General Assembly, which Dominion can influence. The culmination of this decades-long process was 2015 legislation that froze electric rates in response to uncertainty created by the unveiling of the Environmental Protection Agency’s Clean Power Plan and the locking in of what one SCC judge estimates will be $1 billion in excess profits over seven years.

In the final piece, the Times-Dispatch suggests that Dominion’s grip on Virginia politics may be loosening. The 2015 rate freeze has come under heavy fire for its proposal to build the Atlantic Coast Pipeline, its construction of unpopular transmission lines, its plans for disposing of coal ash, and the pace with which it is adopting renewable energy sources. Not since the 1970s when the old VEPCO was experiencing massive cost overruns and rate increases has the utility found itself embroiled in so much controversy.

Regarding the big picture, the Times-Dispatch makes an important point: The General Assembly has become increasingly assertive in defining Virginia energy policy, and in so doing, it has whittled down SCC power. Whether this was Dominion’s doing or the General Assembly’s, however, is less clear. The series describes how SCC Judge Hullihen Moore alienated many lawmakers by appearing before a House of Delegates committee and lectured them in a tone that many found condescending. That action adversely affected relations with key legislators and staff for a number of years.

The Times-Dispatch overlooked opportunities to describe other examples of lawmaker assertiveness. Especially noteworthy were laws initiated by Southwest Virginia legislators to spur economic development by creating favorable regulatory treatment to Dominion for building its $1.8 billion Hybrid Energy Center in Wise County and, in an encore, for building a proposed $2 billion pumped-storage facility in the region. The hybrid-energy plant, which burns coal, coal waste and wood, has a generating capacity of 600 megawatts. By way of comparison, the recently constructed Brunswick Power Station, which cost $1 billion, has a capacity of 1,358 megawatts. The two projects are not directly comparable because the hybrid energy center burns coal waste, which reduces an environmental hazard. But the fact remains that on a cost-per-megawatt capacity basis, the Hybrid Energy Center was four times as expensive — economic development for the coalfields courtesy of Dominion rate payers in eastern Virginia.

Similarly, responding to incentives created by the General Assembly, Dominion is giving serious consideration to a $2 billion pumped-storage project in Tazewell County that would have a capacity of 850 megawatts. These two cases appear to be driven by old-fashioned pork barrel politics: Southwest Virginia legislators stacked the regulatory deck to induce Dominion to invest in their economically depressed region regardless of the cost to Dominion rate payers.

The 2015 rate freeze has a very different background. That legislation arose in response to the Obama administration’s Clean Power Plan. Several years previously, the Obama EPA had pushed through tough restrictions on mercury and other toxic emissions, which forced Dominion to shutter several coal-fired units, and lawmakers were concerned that the Clean Power Plan could have a comparable impact. In an early estimate, Dominion said that write-offs on four coal-fired power plants could reach $2.1 billion, while the SCC estimated that ratepayers could be stuck with $5.5 billion to $6 billion to replace the lost capacity with new electric generating facilities. Governor Terry McAuliffe was so worried that he personally lobbied EPA chief Gina McCarthy to modify Virginia’s CO2 emission targets.

Nobody knew the cost for sure because the Clean Power Plan gave states several options for curtailing their CO2 emissions, and the final cost would depend largely upon which option the McAuliffe administration selected. Adding to the uncertainty, the plan faced legal challenges on constitutional grounds, and there was always the possibility, seemingly remote at the time, that a Republican might be elected president in 2016 and reverse the plan. The potential cost of compliance was a moving target, ranging from nothing to multiple billions of dollars.

The Times-Dispatch series did a fine job of summing up the political controversy that arose after the long-shot election of President Trump. If Trump was determined to scrap the Clean Power Plan, some legislators argued, what justification was there for a rate freeze any more? But the articles did little to illuminate the context that faced lawmakers and the McAuliffe administration when they negotiated the freeze. As should surprise no one, a lot of sausage-making went into the 2015 deal.

The law froze the base rates for Virginia’s electric utilities. Base rates, which cover mainly operating expenses, account for about half the total retail cost of electricity. They do not cover adjustments for volatile fuel prices, nor do they include “riders,” which are rate adjustments to cover the cost of specific projects such as new generating plants, new transmission lines, or underground burial of distribution lines.

During negotiations over the rate freeze, Dominion agreed to several concessions of value to McAuliffe. The utility promised to spend an estimated $25 million over five years on weatherization programs for the poor. The law declared it in the public interest to build 500 megawatts of utility-scale solar power. And the utility agreed not to collect an $85 million fuel cost increases from 2014. The law also gave GOP legislators something they wanted: a requirement that Dominion could not close a coal-fired power plant without first obtaining SCC authorization.

The law froze base rates and exempted electric utilities from biennial rate reviews for seven years. While the company had a chance of accumulating substantial excess profits, it shouldered several major risks: not just the risk of some $2 billion write-downs if it was forced to close coal-fired units but eating the clean-up cost from hurricanes and other natural disasters, which strike on average every three or four years. Unrecognized at the time, the company also took on the risk of closing its coal ash ponds under an EPA ruling that would be issued a half year later. Dominion has had to eat some $400 million in coal-ash expense, only some of which it has been able to pass on to rate payers. That liability could skyrocket if state regulators make the company bury the coal-combustion residue in landfills rather than cap it in place.

In sum, when the law went into force in mid-2015, there were a wide range of potential incomes for Dominion. If everything went perfectly, the company could make out like a bandit. If it had to take big write-offs, it could lose big time. In either case, rate payers were insulated from the uncertainty and guaranteed stable base rates.

It is only in retrospect, with the election of President Trump and his decision to kill the Clean Power Plan, that some have concluded that Dominion robbed the bank. SCC staff has calculated that Dominion earned between $133 million and $176 million in excess profits in 2015 and 2016, which it would have had to return to rate payers were it not for the rate freeze. (The sum would have been far larger had Dominion not incurred $174 million in coal ash clean-up costs.) Dominion disputes the accounting behind those numbers, but concedes that the company is probably ahead thanks to the freeze… at this moment in time. But the freeze has several years to run, and the company is still exposed to significant risk. Even the prospect of coal plant write-downs has not entirely disappeared. The McAuliffe administration is working on its own CO2 regulatory plan, the impact of which at this time is unknown.

The Times-Dispatch series could have benefited from some of this context. Zullo’s article leaves a strong impression that Dominion’s campaign contributions and political clout won it a sweet deal with the rate-freeze law. The picture is more complicated than portrayed. While critics say Dominion could rake in an extra $1 billion thanks to the rate freeze, at the time the deal was struck the company was exposed to $2 billion in write-downs, potentially hundreds of millions more for weather disasters, and potentially hundreds of millions of more for coal-ash disposal, a risk it had not even identified at the time.

For purposes of argument, let’s assume that the state CO2 regulations will be toothless and that Dominion’s write-off risk evaporates. Does that justify undoing the freeze, as some legislators have proposed? In effect, Dominion’s critics want a heads-I-win, tails-you-lose proposition. If the deal had worked out badly for the utility, would anyone be clamoring to let it off the hook? Not very likely. The critics only want out now that it appears that Dominion might — not will, but might — come out ahead.

That said, Martz and Zullo highlight an important trend that has gone largely unnoticed in all the reportage and commentary about Virginia’s electric power industry. The General Assembly has asserted ever greater authority over the industry recent years. The SCC still is influential — electric utilities still must win SCC approval for major capital expenditures such as new power plants and transmission lines. But the General Assembly has hemmed in the SCC’s latitude for decision-making by declaring everything from hybrid energy centers and pump-storage facilities to solar power generation to be in the “public interest.”

As long as legislators view utility investments as economic-development plums, as long as environmentalists and their allies seek to re-engineer the electric grid around renewable energy, and as long as the federal government feels free to dictate energy policy to the states, the politicization of the energy sector in Virginia is probably inevitable. Between its lobbying team and campaign contributions, there is no denying that Dominion exercises immense clout in state politics. But it’s not the steamroller that critics say it is.

Dominion’s 3,000-Megawatt Battery

Bath County Pumped Storage Station: lower reservoir

The Bath County pumped-storage facility has worked out so well for Dominion that the utility wants to build a smaller version in Southwest Virginia.

Since its completion in 1985, the Bath County Pumped Storage Station has functioned like a giant battery, supplementing Dominion Energy Virginia’s base-load coal, nuclear and gas-fired plants with its variable output. When energy demand peaks in the early morning and evening, the Bath County facility drains water from an upper reservoir through tunnels to its hydroelectric turbines more than 1,000 feet below. Then in the evening, when demand is low, Dominion pumps water in the lower reservoir back up the mountain, in effect recharging its battery.

Bath County is capable of producing 3,000 megawatts of electricity for up to three hours at a time, making Dominion’s 60% ownership of the facility a critical component of the company’s total 19,900-megawatt generating fleet. That same flexibility will serve the company well as it integrates between 5,280 and 5,760 megawatts of intermittent solar power its system over the next two decades. Solar generates maximum power with the mid-day sun and none at night, scrambling the traditional supply-and-demand equation. Bath County will play a critical goal in keeping power output in concert with demand.

Indeed, Dominion is so enamored with its pump-storage facility that it wants another one. The utility is giving serious study to a site in Tazewell County that would be capable of generating up to 850 megawatts of electricity. Building a pumped-storage project there would cost roughly $2 billion.

Dominion is touting the Tazewell project as an economic boon for Southwest Virginia, a region whose economy is depressed from the long-term decline of the coal industry. A Tazewell pumped-storage facility would create more than 2,000 jobs during the construction phase, plus 50 permanent jobs, and would contribute $37 million to the regional economy, including $12 million in tax revenue.

With interest in the project high in Southwest Virginia, Dominion invited regional media to Bath County to see how pumped storage works. I tagged a long as the sole member of the Richmond media.

Bath County is a marvel. Most notably, the facility is the largest pumped-storage operation in the world. It produces more electricity than the Hoover dam. The earth-rock impoundment dam creating the upper reservoir reputedly is the eighth highest dam in the world. But the facility is so tucked away so deep in the mountains — it takes more than half an hour to get there from Hot Springs, location of another Bath County icon, the Homestead — that spa visitors have no idea it’s there.

The upper reservoir at the Bath County Pumped Storage Station.

The upper reservoir serves one function: to hold the water that pours through three gravity-fed tunnels at the rate of 2.2 million gallons per minute. Those tunnels split into six, and the water drives six 505-megawatt turbines. The depth of the upper reservoir, which sits at an elevation of roughly 3,000 feet, fluctuates dramatically throughout the day as the water level rises and drops.

This photo looks down at a sharp angle. The flat expanse is the rock-and-dirt impoundment dam, reputedly the world’s 8th highest dam.

Building the two reservoirs and three tunnels entailed excavation of 36.3 million cubic yards of material, quarrying 2.8 million cubic yards of rock, and pouring 1.1 million cubic yards of concrete. Dominion maintains an elaborate system of sensors and inspections to ensure that the the integrity of the structures is never compromised. Dominion staff walk the upper and lower dams weekly to look for seepage or other signs of failure. To keep the vegetation low, the company has contracted with a service to bring in goats. (Without question, the goats were the crowd-pleaser of the tour.)

The generating station, sitting at the base of the mountain, houses the turbines. The pressure created by thousand-foot columns of water with a lake above them is phenomenal.

Top-down view of the six turbines. The main structure of the unit is below ground. The component visible at the center of the photo is where the rotating brushes create magnetic fields.

The beauty of the Bath pumped-storage facility is that it can be dispatched quickly. The turbines can start generating electricity within six minutes. Within 15 minutes, they can begin pumping water back to the upper reservoir. That’s not the same flexibility provided by a real battery, which can dispatch electricity more or less instantaneously, but it is more nimble than any other conventional power source.

The hydroelectric technology is deemed low risk and high-efficiency — for five units of power consumed to pump water back up the mountain, the plant generates four units of power, making it 80% efficient. Pumped storage also has a long lifetime and low operating costs. Recent technological advances may make the Wise County facility even more responsive to fluctuations in demand than Bath. A July 2016 Department of Energy report, “Hydropower Vision: a New Chapter for America’s Renewable Electricity Source,” found that advanced pumped-storage capabilities such as adjustable-speed and closed-loop and modular designs can “further facilitate integration of variable generation, such as wind and solar, due to its ability to provide grid flexibility, reserve capacity and system inertia.”

The drawback of the Bath facility is that it can operate at full capacity, 3,000 megawatts, only three hours out of the day. When operating for extended periods, up to 11 hours, it can generate only 362 megawatts. And it can take up to 12 hours to restore the upper reservoir to its full capacity. Still, as long as Dominion has to balance supply and demand on its grid — a job that will get trickier as more intermittent solar production comes on line — and as long as there is a wide differential in the price of electricity at different times of the day, the Bath pumped-storage station will play a pivotal role in keeping the lights on in Virginia at a reasonable cost.

Whether the economics of the proposed Tazewell facility pencils out as nicely as at Bath remains to be seen. Tazewell would produce only a third of the power and construction would cost a bit more than Bath did three to four decades ago. Moreover, Dominion officials expect it will take a full decade to walk the project through the regulatory process and build the hydro plant. But unlike some infrastructure projects Dominion has been pushing recently, Tazewell would have three things going for it. One, it will have strong political support in Southwest Virginia. Second, compared to lengthy pipelines and transmission lines, the visual impact on neighbors will be negligible. And third, hydro power is not a fossil fuel, so it should win the blessing of environmentalists.

Pipelines Clear Another Regulatory Hurdle

Another regulatory barrier to the Atlantic Coast Pipeline and Mountain Valley Pipeline has fallen. The board of trustees of the Virginia Outdoors Foundation unanimously approved Monday applications for “conversion of open space” by the two natural gas pipeline developers that propose to cross 11 VOF conservation easements.

From the outset, VOF informed the pipeline companies that their incursions would be incompatible with the conservation values of the easements, therefore triggering a process in state law known as “conversion” of open space. (See the VOF announcement here.)

The two resolutions included several conditions, including restrictions on the footprint of the pipelines and access roads, the conveyance to VOF of more than 1,100 acres of substitute land in Highland, Nelson, and Roanoke counties, and the transfer of $4.075 million in stewardship funding for the properties’ long-term care and maintenance.

The VOF easements will remain in place on the properties with overlaying permanent rights-of-way for the pipeline developers.

Last week the Federal Energy Regulatory Commission (FERC) granted the ACP and MVP certifications of public convenience and necessity. The VOF vote eliminated one of the few remaining regulatory obstacles to the project. The pipelines still face one significant hurdle, however: meeting state regulatory standards for erosion and sediment control.