Dominion Virginia Power has just released a press release touting three numbers it wants the public to know:
- Customers have experienced on average a 10 percent improvement in electric power reliability since 2011.
- The company’s new Brunswick County Power Station will lower costs by $1.5 billion.
- Dominion has reduced the carbon-intensity rating of its generation fleet by 43% company-wide.
And, by the way, Forbes magazine named the company to its list of “Just 100” best corporate citizens in the United States in 2016.
As one would expect from a press release, these numbers portray the company in a favorable light. They suggest that Dominion is doing an commendable job of handling the complex and often-conflicting trade-offs between the cost, reliability and sustainability of delivering electric power to its customers. Needless to say, Dominion has critics who subject every claim to withering scrutiny. The job of an energy journalist is to weigh the conflicting assertions.
Here’s my quick-and-dirty analysis of Dominion’s claims:
- True. Customers have experienced an improvement in reliability.
- Mostly true. Brunswick Power Station will lower costs in the short run, but long-term savings are predicated on assumptions, which, though not unreasonable, are contested and impossible to verify.
- True. Dominion has reduced the carbon-intensity of its generating fleet. But this side-steps the charge that the real problem with natural gas combustion isn’t the combustion but the emissions of methane, a potent greenhouse gas, from drilling, processing and transporting associated with the combustion.
Let’s look at each of the three claims.
Electric reliability. The 10% improvement in reliability probably would stand up to close inspection, if anyone took exception to the number, which, as far as I know, no one has. Dominion’s corporate culture places tremendous emphasis on reliability, and the company has invested heavily to bury vulnerable distribution lines underground, upgrade its emergency response teams, and install smart-grid devices that give it better data on where the problems are.
To calculate the reliability number, Dominion tallies up the total number of outage-days across the system for a year. To gauge performance under routine operating conditions, the company exempts major storms, such as hurricane Matthew last year, which are episodic by nature, beyond the company’s control, and obscure underlying trends. The methodology for determining reliability is standard in the industry.
“Throughout 2016, we have continued to invest in modernizing and strengthening the energy grid to make our service more reliable,” said Robert M. Blue, chief executive officer and president of Dominion Virginia Power, in an annual letter to the company’s 2.5 million customers. “We aim to continually improve reliability because every minute our customers are without power matters.”
Lower costs. While I did not delve into the $1.5 billion claim for the Brunswick County Power Station, I did examine a similar claim that the new Greensville County Power Station, still under construction, would save $2.1 billion. The logic behind the two numbers is largely the same. You can read the detailed explanation here.
The key question is this: Greensville (and by extension Brunswick) will save $2.1 billion compared to what? If Dominion did not build Greensville, it would have to purchase the megawatts from PJM Interconnection, the regional transmission organization of which Dominion is a part. How does Dominion know what PJM will charge in the future? It doesn’t. It relies upon its economic consulting company, IFC, to make realistic assumptions, and ICF assumes that prices will fluctuate around the long-term cost (including corporate profit) of generating the electricity from a basket of sources. Dominion projects that gas prices will increase from their current lows in the years ahead, from $2 to $3 per million BTUs to $5.11 by 2025.
Dominion states in its press release that Brunswick’s high-efficiency design utilizing state-of-the-art gas turbines will provide an estimated $100 million in fuel savings in its first year in operation and between $954 million and $1.5 billion over the life of the station. If gas prices remain depressed, Brunswick will save even more money; if prices shoot higher than $5.11 per million BTUs, the power station will save less.
Complicating the picture, critics say that solar power is fast becoming economically competitive with natural gas. While gas is cheaper today, they argue, the cost trajectory of solar and battery-storage backup will make them a lower cost option by the next decade. Brunswick Power Station may save money up-front, but it will be more costly over most of its expected 40-year life. Continue reading