Category Archives: Energy

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.

FERC Approves Atlantic Coast, Mountain Valley Pipelines

map credit: Marcellusdrilling.com

The Federal Energy Regulatory Commission (FERC) approved the Atlantic Coast Pipeline (ACP) and Mountain Valley Pipeline (MVP) in rulings issued Friday.

The three-person commission was divided on the issue of granting the pipelines a Certificate of Public Convenience and Necessity, with two commission members appointed by President Trump ruling in favor while an Obama administration holdover issued a dissenting opinion.

While FERC approval was required for the two natural gas pipeline projects to advance, the battle is not over. Environmentalists and landowners remain adamantly opposed to the projects, and they have vowed to continue resisting. Major sticking points are reviews by West Virginia, Virginia and North Carolina environmental agencies of pipeline impacts on water quality.

Naturally, Dominion Energy, which is the managing partner of the ACP, is delighted at news. Said Leslie Hartz, Dominion vice president of engineering & construction:

We are very pleased to receive FERC approval for this vitally important project. This is the most significant milestone yet for a project that will bring jobs, economic growth and cleaner energy to our region. In the coming days we will fully review the Certificate and finalize our plans for complying with its conditions. We will also continue working with the other state and federal agencies to complete the environmental review process and make this critically important project a reality.

All three commissioners acknowledge the need for more natural gas infrastructure to serve consumers in Virginia and North Carolina. In her dissent, Commissioner LaFleur noted that more than 90 percent of the ACP’s capacity is subscribed by public utility customers in the two states. The end use of this gas is well established on the public record and is a matter of urgent public necessity.

The FERC ruling also garnered kudos from Dominion’s business allies. This joint statement comes from Barry Duval, president of the Virginia Chamber of Commerce, and Matt Yonka, president of the Virginia Building & Construction Trades Council:

This is great news for our economy, our working men and women and energy consumers all across our region. This project will serve as a catalyst for economic growth, job creation and greater energy security in our region for years to come. The hardworking men and women who built our nation are ready to get to work rebuilding our region’s infrastructure. We’re eager to see the thousands of new jobs and billions of dollars in new income this project will bring to the region.

By lowering energy costs in Virginia and North Carolina by more than $370 million a year, this pipeline will allow businesses to grow and families to save. The pipeline will also mean lower emissions and cleaner air in all of our communities as electric utilities continue making the transition from coal to cleaner-burning natural gas.

Equally predictably, pipeline foes were appalled by the ruling. This from the Allegheny-Blue Ridge Alliance, a coalition of 52 organizations in Virginia and West Virginia:

The Commission’s judgment has been made in advance of necessary and required decisions by the U.S. Forest Service, the U.S. Army Corp of Engineers and the state environmental authorities in the affected states of Virginia, West Virginia and North Carolina on critical environmental issues. We concur with the thoughtful dissent of Commissioner LeFleur’s, who has served on the Commission for 7 years, raising serious questions about the basis of need for both the ACP and the Mountain Valley Pipeline and expressing concerns about environmental impacts that both projects present. The majority decision does not reflect an understanding of the issues at hand and is clearly not in the public interest. It calls into serious question the agency’s regulatory credibility.

Greg Buppert, a senior attorney with the Southern Environmental Law Center, said this: Continue reading

Inside the Facebook Solar Deal

As part of the $1 billion Facebook data-center deal, Dominion Energy Virginia will file a request with the State Corporation Commission to create a new kind of solar tariff called Schedule RF. (The RF stands for Renewable Facility.) The tariff, if approved, could be used by other big customers seeking renewable energy.

“We came together with Dominion Energy Virginia to create a new tariff that ensures renewable energy solutions are accessible not just to Facebook, but other companies as well,” said Bobby Hollis, director of Global Energy at Facebook in a press release issued last week. The tariff “opens the door to attracting more businesses and more jobs for the communities we serve,” said Robert M. Blue, president of Dominion’s Power Delivery Group.

Virginia is well positioned to win more data-center projects and, as major players in cloud services are committed to reducing their carbon footprints, there likely will be more Facebook-like deals in the future. Given the magnitude of data-center energy consumption — the Facebook facility is expected to consume as much electricity as 32,500 homes and the solar investment will run roughly $250 million — these deals could well influence Virginia’s energy mix and cost of electricity. Curious to know more about how the project is structured, I talked to Dianne Corsello, director of Dominion’s business development group.

At full build-out, Facebook will require 130 megawatts of electricity. Power consumption at data centers is fairly constant, but the output of solar farms varies with weather and time of day. Assuming the panels are equipped with trackers, which rotate to follow the sun and generate more power, the solar farms will generate electricity only 25% of the time. Consequently, Dominion will need to build about 300 megawatts total solar capacity. (By way of comparison, the utility’s state-of-the-art gas-fired power station in Greensville is rated at 1,588 megawatts capacity and generates electricity approximately 85% of the time.)

Dominion soon will issue an RFP to solar developers with the expectation of bringing the solar capacity online in 2019 and 2020, Corsello says. The utility will draw from multiple facilities, none larger than 150 megawatts in size.

The SCC must approve the Schedule RF tariff, just as it will have to approve the rates charged by each proposed solar facilities using Schedule RF. Facebook will pay the full retail rate plus an add-on for the purchase of renewable. Under the tariff Facebook will receive Renewable Energy Certificates certifying that the company has paid for renewable energy equal to the volume of electricity it consumed. Facebook’s payments for these certificates will help offset the higher cost of solar power paid by all Dominion ratepayers.

The 300 megawatts of solar capacity arising from the Facebook project will be over and above Dominion’s commitment to derive 15% of its electricity from renewable power sources by 2025.

Trump Nixes Clean Power Plan, Gas and Solar Still Rule

Natural gas turbine at Dominion’s Greensville power plant. President Trump might have ended the regulatory “war on coal,” but he can’t change fundamental economics, which still favor gas and solar.

President Trump has never hidden his dislike of his predecessor’s Clean Power Plan, which would have required the 50 states to order their electric utilities to curtail carbon dioxide emissions in the cause of combating global warming. Nine months into the Trump administration, Environmental Protection Agency (EPA) chief Scott Pruitt finally has announced formal steps to repeal the plan. Reports the New York Times:

“The War on coal is over,” Mr. Pruitt said. “Tomorrow in Washington, D.C. I will be signing a proposed rule to roll back the Clean Power Plan.” …

Mr. Pruitt’s proposal for repeal will now have to go through a formal public-comment period before being finalized, a process that could take months. Mr. Pruitt will also ask the public for comment on what a replacement rule would look like, but the E.P.A. has not offered a timeline.

Admittedly, the regulatory battle is far from over. “Environmental groups and Democratic-controlled states are expected to challenge these rules on multiple fronts,” says the Times. Moreover, there is nothing to stop individual states from implementing tough CO2 standards on their own initiative. Indeed, here in Virginia, the McAuliffe administration has vowed to boost Virginia’s commitment to renewable energy.

But a rollback of the Clean Power Plan won’t change market fundamentals. Just as the natural gas fracking revolution led to natural gas displacing coal over the past decade, market forces will dictate that renewable energy assume an increasing role in the decade ahead — regardless of whether states set CO2 emission caps or not.

In its 2017 Integrated Resource Plan (IRP), Dominion Virginia Energy has laid out its vision for the energy future that calls for increased natural gas and renewable energy. Under its least-cost regulatory scenario, which looks increasingly likely, Dominion won’t build any new coal- or nuclear-powered plants. It will renew licenses for its existing nuclear units but will not build a third unit at its North Anna Power Station, which by some estimates would cost $18 billion or more. The utility will build new gas-powered plants to provide base-load capacity, supplemented by a mix of solar (up to 5,200 megawatts capacity) and gas-fired combustion turbines that can quickly ramp up and down in response to volatile solar output. (Since publication of the IRP, Dominion has demonstrated a keen interest in building a pumped storage facility in Southwest Virginia, which could eliminate the need for some natural gas combustion-turbine units, but the economics of such a scheme have not been fully explored.)

Meanwhile, environmental groups have been pushing aggressively for a future electric grid dominated by renewable electricity, using energy efficiency to reduce demand and battery storage to even out fluctuations in solar output. The greens are opposed not only to building a third nuclear unit at North Anna but to re-licensing the existing units, creating a void that would have to be filled by some power source other than coal. The greens also oppose construction of the Atlantic Coast Pipeline, which Dominion co-owns and is counting on to supply its growing fleet of natural gas base-load and combustion-turbine plants. The environmentalists are lobbying for essentially the same power mix advocated by their Green Party counterparts in Europe.

German energy policy: not working out as planned.

Interestingly, the New York Times published an article two days ago highlighting how Germany’s shift to green power has stalled. Since 2000 Germany has spent an estimated 189 billion euros, or about $222 billion, on renewable energy subsidies with the goal of cutting carbon dioxide emissions. Ironically, CO2 emissions have remained stuck at 2009 levels, even as the shift to natural gas has allowed the U.S. to reduce its CO2 output. As the retail cost of electric power has doubled since 2000 with little progress on the CO2 front to show for it, large blocs of the German electorate are getting fed up.

“Julian Hermneuwöhner is one such voter,” the Times reports. “Mr. Hermneuwöhner, a 27-year-old computer science student, said his family paid an additional €800 a year because of Energiewende.”

Germany obtains about one-third of its electricity from wind and solar, about double the rate for the U.S. But a decision after the 2011 Fukushima nuclear disaster in Japan prompted the Germans to accelerate the phase-out of nuclear power. The only other energy source available: coal. A doubling of electricity rates and no reduction in CO2 is not a winning electoral combination.

Chancellor Angela Merkel’s Christian Democratic Union still supports Energiewende, the shift to renewables, but two important parties, the pro-business Free Liberals and the anti-immigrant Alternative for Germany party, do not.

Bacon’s bottom line: If I were a betting man, I would wager that Virginia’s mid-term energy future will be dominated by gas and solar. Wind power will remain a niche contributor unless off-shore wind comes into play a decade or more from now. The North Anna 3 nuclear unit will never be built, although Dominion will succeed over furious opposition in re-licensing its existing Surry and North Anna units. The utility will keep its existing coal-fired units in operation through their design life-times. But all the expansion in capacity will come from gas and solar.

And, yes, Dominion will need to expand capacity, even as energy efficiency dampens electricity demand nationally. The recent announcement of the new Facebook data center in Henrico County demonstrates another side of Virginia’s energy future. That single server farm will consume as much electricity as 32,500 homes. Virginia is highly competitive in the data-center industry, and it could add dozens or more data centers in the next two decades. Other states might experience declining demand for electricity, but as long as data centers represent one of Virginia’s great hopes for economic development, electricity demand will continue to grow.

Crunching Numbers on the Facebook Deal

Visualization of Facebook’s Henrico data center. Says CEO Mark Zuckerberg on Facebook: “We’re building out 11th data center in Henrico, Virginia. Like all our new data centers, it will be powered by 100% clean and renewable energy and will create thousands of jobs over the next few years. Our community is growing quickly and we’ll need this infrastructure to serve people all around the world.”

Facebook’s $1 billion announcement is a big deal for Henrico County and for Virginia. The social media giant will invest $750 million to build a data center complex in Henrico’s White Oak Technology Park, and Dominion Virginia Energy Virginia will spend roughly $250 million to supply the facility with “100 percent renewable energy.” It is not yet known precisely where the solar facilities will be located, but they will be in Virginia.

This is one of the biggest economic development deals in the state this year — a massive one by RoVa (Rest of Virginia) standards. As with all mega-projects, the big question is this: Did we give away the store? At first blush, it appears that state tax payer and rate payers will do fine. The impact on Henrico County citizens is murkier.

Drawing upon a U.S. Chamber of Commerce data center study, the McAuliffe administration estimates that construction of the 970,000-square-foot data center will employ up to 1,688 local workers, provide up to $77.7 million in wages for those workers, and produce $234.5 million output along the local economy’s supply chain during construction. Once in operation, the data center will inject $32.5 million annually into the economy.

You can read the congratulatory comments from various politicians and poobahs in the press release from the Governor’s Office. Remarkably, state and local officials managed to close the deal without any direct subsidies or tax breaks from the commonwealth, which is almost unprecedented in a project of this magnitude. Moreover, Facebook and Dominion Virginia Energy have crafted a special tariff to cover the cost of solar power which appears to protect rate payers. However, Henrico County made two major concessions, the justification for which are impossible to evaluate based on information made public so far.

The Facebook plant will consume an estimated 130 megawatts of electric power at full build-out, the equivalent of about 32,500 homes, and will require close to 3.5 million gallons per day for its cooling systems.

Henrico, which competed with Loudoun County and Prince William County, for the deal, had invested $40 million in infrastructure improvements at the White Oak Technology Park. The park offers high-seed fiber-optic cable from multiple providers, it can accommodate a high-capacity electric customer, and it can deliver up to 10 million gallons a day of water.

To sweeten the pot, Henrico County enacted a major tax break and gave Facebook an $850,000 sewer-connection credit on a fee that otherwise would have cost the company more than $2 million.

In April, the Board of Supervisors approved a cut in the business property tax rate on computer and related equipment for data centers from $3.50 per $100 of assessed value to $0.40 — an 88.6% reduction. It’s not clear how much that tax break is worth. The county has released no detailed numbers. But if one assumes that half of Facebook’s capital investment consists of computers and related equipment, about $500 million, then tax revenues would drop from $17.5 million to $2 million per year, making the tax break worth about $15 million a year. And that doesn’t include the loss in revenue from the roughly 20 other data centers located in the county that would benefit from the tax cut.

Whether the reduced tax rate is reasonable or not also depends on how the county financed those $40 million in improvements. Will the revenue stream from Facebook taxes cover the cost of paying down bonds or other financing mechanisms used to pay for the improvements? That data was not available from press reports or press releases.

Another big question mark involves how the special electricity tariff will be structured. To meet Facebook’s commitment to consume clean, renewable energy, Dominion plans to build solar facilities with a total capacity of 300 megawatts.

The proposed RF (Renewable Facility) tariff, which must be approved by the State Corporation Commission, will be structured so that only Facebook will pay the cost of solar generation, said Robert M. Blue, president and CEO of Dominion’s power delivery group. At present, solar is more expensive than other power sources. The rate structure, said Blue, “is designed to be neutral to our other customers.”

In summary, a quickie analysis suggests that the Facebook project is probably a good deal for Virginians — neither state taxpayers nor Dominion rate payers will be subsidizing the project. It’s less clear whether the project is a good deal for Henrico residents. It may be, but it may not be. The data needed to draw a conclusion has not been made public.

Update: The $40 million investment in the White Oak Technology Park dates back years to when the country geared up to serve the Infineon semiconductor plant (now closed). That investment was paid off within six or seven years, and the financing of the infrastructure was not an issue in the Facebook deal. I’ll have more to say in the next post.

Electric Coops Vet Community Solar Plan

Subscribers to a community solar program in the works by five Virginia electrical cooperatives would pay a rate premium of 42% to 45% to use clean, renewable energy, according to data released by the electric coops.

The five rural cooperatives, who may be joined by others in a State Corporation Commission (SCC) filing late October or November, have developed the plan for customers unable to install their own solar capacity to purchase solar through the coops. The rates primarily reflect the cost of building the solar capacity. They do not include any cost for administering the program, but they do cover transmission and line losses to the cooperatives.

The five electric coops include A&N Electric Cooperative, Central Virginia Electric Cooperative, Mecklenburg Electric Cooperative, Northern Neck Electric Cooperative, and Rappahannock Electric Cooperative.

Unlike like investor-owned utilities, such as Dominion Energy and Appalachian Power, Virginia’s electrical cooperatives are owned by their customers. Because they pay no dividends to shareholders and don’t answer to Wall Street analysts, they have more flexibility in the programs they offer, said Sam Brumberg, association counsel for the Virginia, Maryland & Delaware Association of Electric Cooperatives, in a conference call Thursday to solicit feedback from solar developers and other stakeholders.

Legislation enacted in the 2017 General Assembly session allows electric companies to create “community solar” programs in which power companies market and re-sell solar power built by independent solar developers. The programs must be approved by the SCC.

Numerous electric coop customers have expressed an interest in purchasing solar energy through the cooperatives, said Brumberg, and the community solar program will provide them with a choice they don’t have now. The voluntary program will provide customers “easy on, easy off,” one-year subscriptions, which will allow them to avoid the long-term financial commitment of installing their own solar.  However, the voluntary program is designed to recover its costs from its subscribers.

The program will guaranteed flat rates for at least three years. While the solar portion of the rate will remain fixed for longer periods, the distribution charge may rise. 

A major sticking point addressed in the conference call was affordability of the program for low- and middle-income (LMI) customers. Brumberg discussed the potential for subsidizing the rates for certain customers, perhaps through government grants, foundation grants, or involvement of a large commercial “anchor tenant” who could absorb a disproportionate share of the cost.

Bacon’s bottom line: These are the first figures I’ve found that indicate the  cost of community solar in the current economic environment. The 40% to 45% premium represents a significant hurdle to widespread market penetration. In effect, community solar represents a luxury good in the energy marketplace, a fact that the electric cooperatives indirectly acknowledge by their concern that LMI customers may be difficult to recruit.

Admittedly, the economics of solar are changing. The per-kW cost of solar is steadily declining. So is the cost of battery storage, which makes it feasible to store surplus solar-generated electricity and release it when needed. Moreover, the “fuel” cost of solar — essentially zero — will not increase, while the cost of fossil fuel alternatives, especially natural gas, most likely will rise over time. But as long as programs are voluntary, and as long as most customers value money in their hand today more than savings years from now, it will be a challenge to persuade them to pay the premium.