Dominion Fulfills 400-Megawatt Solar Commitment

Dominion solar farm

Dominion solar farm. Photo credit: Dominion.

Dominion is investing more than $800 million in solar projects in Virginia totaling 398 megawatts of generation either completed or under development. The projects bring the company within an eyelash of fulfilling a 2015 promise to bring 400 megawatts of large-scale solar generation facilities into service by 2020.

Furthermore, said Dominion in a press release issued today, 80% of that capacity is being covered by large business and government customers ranging from Amazon Web Services to the Commonwealth of Virginia and the University of Virginia. Most of the development and construction cost of the projects will be borne by customers under contract, not passed on to rate payers.

Legislation enacted in 2015 declared that development in Virginia of up to 50 megawatts of solar projects in the state was “in the public interest.”

“We are well ahead of schedule on the solar expansion and what we have added so far will have a very minimal impact on the price of electricity for the 2.5 million regulated customers we serve in Virginia,” said Paul Koonce, CEO of Power Generation at Dominion Energy. “Our goal is to have a balanced generating portfolio that is highly reliable, cost effective and environmentally responsible. The cost of energy powered by the sun is coming down and we are working hard to develop projects in new and economical ways for our customers.”

Bacon’s bottom line: Most of this information has appeared in previous announcements, which raises the question of why Dominion issued this press release at this particular time. The backdrop is the increasing pushback the utility is experiencing by gubernatorial candidates and lawmakers on a variety of fronts. Most significantly, the 2015 deal that froze the base rates of Dominion and Appalachian Power for six years has been re-opened for scrutiny.

With this press release, Dominion is reminding the public that there was more to that 2015 legislative compromise, crafted in response to the Obama administration’s Clean Power Plan, than the rate freeze. The company also committed $57 million over five years to energy assistance to low-income customers and made the 400-megawatt commitment to solar. Reading between the lines, the press release says, “Hey, guys, we made good on the solar promise.”

Bacon’s other bottom line: It’s also apparent — again, reading between the lines — that Dominion management is not persuaded that solar makes economic sense… yet. In other words, its commitment to solar at this point in time is driven by political considerations.

Why do I say that? Because Koonce stresses that the company’s solar investment to date “will have a very minimal impact on the price of electricity.” The implication is that solar would increase the price were it not for the fact that Dominion is building its utility-scale projects by means of long-term contracts with entities willing to pay a premium price for green energy.

The crux of the matter is that solar power is not “dispatchable” — Dominion does not control when it generates solar electricity. It produces electricity only when the sun shines, which does not coincide with periods of peak consumption, and, further, is subject to weather-related interruptions, meaning that electric companies must maintain expensive back-up capacity to fill in.

The vast majority of Dominion’s investment has been in large, utility-scale projects, which are easier to integrate into the high-voltage transmission grid. PJM Interconnection, the regional transmission organization of which Virginia is a part, has said that the region grid could accommodate up to 30% intermittent wind and solar power by redirecting energy flows across a 13-state region.

The dynamics of on-again, off-again production play out differently on the local distribution grid, which lacks the flexibility of the interstate transmission grid. That’s why Dominion has installed 10 experimental, rooftop and other small-scale solar sites around the state: to learn more about how local electric circuits respond to fluctuations in energy output.

Dominion is under tremendous political pressure to accommodate more “distributed generation.” But the economics are very different from utility-scale generation that ties into the transmission grid. Published reports say that the cost of solar could fall to as little as 4 cents per kilowatt hour by 2040. That compares to roughly 11 cents charged by Dominion Virginia Power today. But that still leaves the intermittency issue. While battery storage has been touted as a remedy, battery manufacturers like Tesla are hoping to get the cost down to $100 per kilowatt hour by 2022. There’s still a long way to go before large-scale rooftop deployment is feasible.

Yet in the press release Koonce acknowledged that “the cost of energy powered by the sun is coming down.” So, who knows what the future might bring?

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8 responses to “Dominion Fulfills 400-Megawatt Solar Commitment

  1. It is interesting to me that the power from the big new wind farm in North Carolina is being purchased by Amazon-Virginia.

  2. how do you define “dispatchable”?

    Do you think the Nuke Plants or Coal Plants are “dispatchable”?

  3. According to Bloomberg, renewable energy became the new normal in 2016. Yet, here we go again with the old saw about intermittancy.

    As the post says … PJM can integrate 30% of total generation without major reliability issues… And PJM is leading the way to define the attributes of storage, which can help with the grid smoothing as well as hold excess solar for generation when the sun goes down.

    Storage … At the state level CA leads the way with 1.229MWs of commissioned and installed storage projects. New York is second with 90. Only Kansas has less storage connected or commissioned than Virginia, where we have .2MW.

    Finally, on the latest score card from ACEEE Virginia has a score of 13. The states leading the way, California and Massachusetts, score 48, certainly indicating a lack of commitment to developing efficient buildings, the primary consumers of our generated electricity.

    These numbers come from Bloomberg’s 2017 Sustainable Energy Factbook. It tells us the US is using 10% less energy to power each unit of growth. Demand is contracting.

    The most interesting fact is costs … While Renewable energy has become the new normal costs have gone down, not up as we were led to believe they would. Average retail electricity prices are down 4% in real terms and in NY, TX and FL prices are down 10%.

    Dominion’s solar will have a minimal impact on price for the simple reason there isn’t much solar in VA.

  4. I just wanted to offer a different perspective on this since it is misleading information that utilities have used to deflect questions about why they are not investing more in solar. There are valid business reasons that utilities in Virginia have avoided investments in solar but much of what is described here are not those reasons.

    Dominion and the Governor are patting themselves on the back for this 400 MW of solar. It is good that we are finally installing some solar in Virginia but our meager amount pales in comparison with other states. The state most like us, North Carolina, has 2,436 MW of solar capacity; 1,140 MW of which was installed in 2015 and 3,656 MW more is planned over the next five years. North Carolina did have a Renewable Portfolio Standard (RPS) and a state investment tax credit (ITC) that has now expired, in addition to the federal one. North Carolina now has 450 solar companies that provide 4,300 new long-term jobs. North Carolina is now second in the nation in installed solar capacity, edging out Arizona, but still well behind California with 13,241 MW of solar.

    Nine states have used solar for 100% of their new electric generating capacity additions in 2015, the 10th state, Vermont, had 99% of new capacity from solar.

    “$57 million over five years to energy assistance to low-income customers”

    Programs like this save everyone money. Substandard housing contributes disproportionately to winter and summer peaks. Improving the energy efficiency of these dwellings saves everyone money by lowering the peaks. For some reason, the SCC sees this as a program that saves some people money at other people’s expense. I don’t fully understand that point of view.

    “Dominion management is not persuaded that solar makes economic sense”

    It doesn’t make economic sense for Dominion unless they own the solar. Even so, solar complicates their business model. For a customer, solar makes sense as long as the price of power produced by the solar panels is less than their retail cost of electricity (grid parity). This has been true for several years for residential and business customers in Virginia in the right location. Dominion loses revenues when this happens. That is why they have put caps on net metering and prohibitions on direct-to-customer PPAs within their territory.

    “The vast majority of Dominion’s investment has been in large, utility-scale projects, which are easier to integrate into the high-voltage transmission grid”

    Utility-scale solar is not easier to integrate into the grid. Large solar developments require new transmission lines and substations to connect them to the grid. Dominion makes a guaranteed rate of return from these grid improvements but they are not included in the cost of the utility-scale solar projects.

    Residential, commercial and utility-scale projects pay roughly the same price for the solar modules themselves. The soft costs for land acquisition, project design, permitting, marketing costs, etc. are lower on a cost per kW basis for large projects than for smaller ones. But the smaller distributed units typically do not need much extra expense to connect them to the local distribution system. But this not considered in cost comparisons.

    It is true that a two-way flow of energy and information is not well supported in our current grid. As digital controls and other innovations are used to improve the grid, the presence of small local generators will improve the reliability and resiliency of the grid. The same cannot be said for large central-station generation such as utility-scale solar.

    “The implication is that solar would increase the price were it not for the fact that Dominion is building its utility-scale projects by means of long-term contracts with entities willing to pay a premium price for green energy.”

    This is just a rationalization for charging higher prices for a green energy tariff. Solar prices are below grid parity in most applications now, saving customers money. The wholesale price of energy from solar is about equal to new combined cycle gas plants, even according Dominion’s planning documents. Within a few years, the costs will be considerably cheaper than any conventional unit on a wholesale basis.

    “Dominion is under tremendous political pressure to accommodate more “distributed generation.” But the economics are very different from utility-scale generation that ties into the transmission grid. Published reports say that the cost of solar could fall to as little as 4 cents per kilowatt hour by 2040”

    I don’t know how old this data is, but it is way out of date. Utility Dive says that solar may now be a better choice to protect utility ratepayers from price hikes than natural gas because the prices in solar contracts are generally fixed.

    NV Energy just signed a PPA for $0.0387 /kWh. Austin Energy received bids below $0.04 in 2015. Prices are declining by about 16% per year, so prices would be lower today. These are for sunnier locations than Virginia so our prices would be a bit higher.

    Units in the Southwest were reporting a 35% capacity factor ( it would be perhaps 8% lower in Virginia).

    Battery cost declines are on the same 50% price decrease in 4-5 years trajectory as is solar.

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    It is a mistake to assume that storage is required to make solar useful today. Solar has value to the grid whenever it is available. The first units displaced by solar generation are peaking units. Those same units are still available to meet variations in solar output. Soon batteries will be cheap enough to also displace peakers and they will supply an added economic advantage from voltage and frequency control.

    Besides, the excess capacity in PJM has been growing year after year. The surplus will grow even faster if utilities continue on the path of building new gas-fired power plants that are not required by a growth in demand. Everybody is planning on overbuilding and selling the excess into PJM.

    This is folly. As the cost of renewables and storage continues to decline, the gas-fired plants will not be dispatched as often and will not earn enough to pay their way. This will happen in California this year.

    Low-cost solar lowers the PJM auction price during some of the highest cost periods of the day. The price earned by peaking units, cycling units, and perhaps even baseload units will be much less than they have historically earned during these peak periods. This reduces utility revenues and exposes them to stranded costs.

    With declining dispatch of gas-fired units, less natural gas will be needed. According to former FERC Chairman Jon Wellinghoff, this could cause other complications as well. About a dozen utility holding companies have gotten into the pipeline building business because FERC’s rates of return are about 50% higher than other utility projects. Wellinghoff warns that “These utilities are taking a risk that these will be stranded assets that ultimately their shareholders will have to pay off.”

    Rather than allowing Dominion to blame and hold back the development of new technologies in Virginia, we should find a way for them to prosper by building a modern grid that easily accommodates these innovations in a way that reduces our energy costs.

    • Utility-scale solar is not easier to integrate into the grid. Large solar developments require new transmission lines and substations to connect them to the grid.

      Are you sure about this? My sense is that every utility-scale solar project in Virginia is being constructed near an existing transmission line, thus minimizing the need to make any grid improvements.

      • Jim,

        You have more of the details on the recent utility-scale additions than I do. But even if the new projects are located near existing transmission (which makes sense) usually a high-voltage transformer and perhaps at least a few miles of transmission would be required. These are not included in the cost of the solar facility. The Amazon project required some transmission, as I recall. Utility-scale solar developed at brownfield sites such as old power plants could probably use the existing substation’s equipment and transmission lines.

        I was just trying to make the point that the price comparison between utility-scale and distributed solar is not an “apples-to-apples” one. The costs to connect to high voltage systems is higher than distribution voltage systems. Lower soft costs per kW for utility-scale systems will still result in lower costs for larger installations.

        I believe we need a mix of residential, commercial and utility-scale (third-party or utility owned) systems. The distributed nature of the smaller systems provides value to the grid in greater resiliency and reliability that is also not recognized in the cost comparisons. Modern energy systems will become more network-like and less hub and spoke “mainframe” like. Also, the greatest job growth and deployment of solar in Virginia will occur if third-parties can respond to market demand without being constrained by the utilities. The utilities should develop their solar facilities through their unregulated subsidiaries. Most of the work is being done by third-parties now. Dominion just buys the project and adds their acquisition costs and guaranteed profit on top which unnecessarily raises the cost of energy.

        We need to develop a profitable way for Virginia utilities to enter the 21st century. The requirement to build more to earn more is resulting in an unwarranted buildout of natural gas infrastructure. I was speaking with an energy expert in Ontario this morning. He said because of their overreliance on nuclear and greater use of energy efficiency and renewables, their new gas combined cycle units are running at a 10% capacity factor. He calculates they must run at least 60% of the time to break even. These plants were built with 20-year take-or-pay contracts, so ratepayers are paying exorbitant amounts for power plants they gain little value from. In Virginia, putting a new gas-fired plant in the rate-base puts ratepayers on the hook for the 36-40-year financial life of the facility.

        I spoke with him because I wanted real-world confirmation of the scenario that I see unfolding in Virginia and elsewhere. He said that growth in electricity demand is flat in every developed country in the world. Overbuilding gas plants has exposed them to enormously higher rates.

        Solar is nice because it has a fixed price for energy over 30-35 years and no emissions. But I am recommending that we put more emphasis there because it is the path to greater employment and lower energy costs. The current path with natural gas does not provide those same advantages.

        A bi-partisan group of governors (12 Dems, 8 Republicans) sent President Trump a letter yesterday asking him to strengthen America’s energy future by modernizing the grid and supporting renewables. They pointed to the hundreds of thousands of jobs created in their states across the country — from Arkansas to Kansas to California — as evidence that renewables are providing a direct economic boost. The message from state officials to Trump is clear: If you want to live up to your promise of keeping industry in America, you can’t ignore domestic renewables. According to government figures, the solar industry now represents 43 percent of all jobs in the American electric power sector. And shortly after Trump was elected, a group of hundreds of companies — many of the biggest corporations in the world — sent a strongly worded letter urging the then-president-elect not to ignore the clean energy transition.

  5. I just want to point out – that it takes hours for a coal plant to come up online and days for a nuke – hardly “dispatchable”.

    and as CA&W points out – PJM changes this whole dynamic and the irony is that Dominion will likely end up buying solar power from non-Virginia providers for LESS than what it will cost them to generate from coal or nukes.

  6. Comparisons to other states are often problematic. Vermont I believe has shut down all power plants and imports from Canada others and has higher costs than we do. North Carolina 50-years ago adopted regulations favorable/subsidizing diversity of power sources, which at the time was not specifically intended to encourage solar and wind, which came along more recently. Each state goes it own way based on state politics and past history. I am happier with VA/Dominion (so far) than I was in New Jersey which was pro-coal when I lived there – now NJ is more pro-solar but it’s all politics up there, with legislators looking at utilities as a business the state can manage to create jobs.

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