Bacon's Rebellion

How One Gas Plant Can Save Billions

Shown here: Dominion Virginia Power’s state-of-the-art, gas-fired generating plant in Brunswick County. The company’s Greensville facility will be even more cost efficient.

There’s more to the natural gas boom than fracking. Technology deployed at Dominion’s Greensville power plant will squeeze more electricity out of a BTU of gas than ever before. 

by James A. Bacon

Last month Dominion Virginia Power commenced construction of the $1.3 billion Greensville County Power Station. When it opens in late 2018, the facility could well be the most efficient gas-burning electrical power plant in the world. That one facility will save Dominion customers $2.1 billion over its 36-year lifetime, the company says, even as it emits less carbon dioxide per kilowatt hour than other gas power plants and only 40% of that of a coal-fired plant.

Even if stretched out over 36 years, $2 billion represents a significant savings from a single power station. The average savings of $59 million a year compares to $7 billion annually paid by Dominion’s Virginia and North Carolina rate payers.

Rate payers might wonder: How does Dominion calculate that $2 billion in savings. The station will save $2 billion compared to what? Those questions seem all the more germane in light of commonly heard arguments that investing in massive natural gas-fired power plants instead solar panels and wind turbines is a bad idea when the price of gas will only rise in the future and the cost of renewable energy will steadily decline.

“We see the potential for a lot of stranded costs to be put on consumers as emissions of carbon pollution and greenhouse gas emissions continue to be ratcheted down,” says Kate Addleson, director of the Sierra Club-Virginia chapter. Solar is not just non-polluting but in many parts of the country it’s the lowest-cost energy source. As solar technology improves and the cost per kilowatt hour continues to decline, solar could become the low-cost option in Virginia, too. While natural gas might look like an attractive option today, it may not be as gas reserves are depleted and prices rise. Says Addleson: “Dominion is pointing to the benefits of gas because that’s what they see as the best outcome for their profit margin.”

Dominion defends its commitment to natural gas as the best deal for rate payers. The Greensville County Power Station will save money two ways: (1) by extracting more energy value from each BTU of gas, and (2) by using its access to two pipelines to purchase cheaper gas.

Greensville will be the third “three on one” Combined Cycle plant in Dominion’s generating fleet, using waste heat from three gas-burning turbines to power a traditional steam generator. Incorporating the most advanced Mitsubishi Hitachi Power Systems turbines, Greensville will squeeze more electricity from 1,000 BTUs of natural gas than ever before.

Combustion at higher temperatures also releases less carbon-dioxide into the atmosphere. The Greensville plant will emit 780 pounds of CO2 per megawatt hour (MWh), an incremental improvement over the 790 pounds for the Brunswick plant and 2,100 pounds for a typical coal-burning plant. Mike Dowd, director of air quality for the Department of Environmental Quality (DEQ), noted that the air permit sets the limit at 813 pounds per MWh, the toughest ever set on a combined cycle, natural gas power station. Environmental groups claimed credit for the “stronger pollution protection” they lobbied for. But the real enabler of the stricter environmental standards was the same combustion technology that makes the facility so economical to run.

Glenn Kelly, director of Generation System Planning, walked me through Dominion’s methodology for calculating the cost savings. If Dominion did not build the Greensville plant, he said, the company would have to purchase the megawatts from wholesale electricity markets maintained by PJM, the regional transmission organization of which Dominion is a part. “PJM market is always an option. We can always buy energy and capacity there  – that’s our benchmark. ”

In the PJM wholesale market, utilities purchase capacity (the right to draw electricity, if needed) and energy (the actual electricity consumed) in day-before and same-day auctions. Prices vary by season, time of day, weather conditions, and other factors such as the volume of electricity being bought and sold at any given point of time and the ability of transmission lines to deliver the electricity to the consumer in different parts of the country. In all likelihood, Greensville’s replacement electric power would come from a mix of gas-fired, solar, wind, and other energy sources — whatever other utilities and merchant providers are willing to put on the market.

How does Dominion know what PJM will charge Dominion years in the future? It doesn’t. It relies upon its economic consulting company, ICF, to make realistic assumptions. ICF assumes that prices will fluctuate around the long-term cost (including a reasonable corporate profit) of generating the electricity, and that the cost of burning gas or building a solar panel can be estimated with some degree of reliability. “Gas prices are very volatile short-term,” says Kelly. Right now prices are depressed, running between $2 and $3 per million BTUs. ICF projects gas prices will likely climb to about $5.11 per million BTU by 2025. “We have it going up pretty fast.”

Many people are familiar with the fact that the cost per KWh of solar energy has gone down as solar panels get more efficient at converting sunlight into electricity, but few are aware how the cost of generating electricity from gas has gone down — and not just because of the fracking revolution that has flooded the market with gas. State-of-the-art power stations extract more electricity from the same amount of gas.

The G Class turbines installed in Dominion’s Brunswick County power station, which opened this year, are more efficient than the previous generation, says Bill Newsom, executive vice president-new generation systems with Mitsubishi Hitachi Power Systems Americas. They are about 59% efficient; that is, they extract about 59% of the energy value from the natural gas. The rest goes up the smokestack or is lost as waste heat.

Brunswick’s G Class turbines are an improvement from the old F Class machines, which are about 55% to 56%. But the Greensville power station, which will install Mitsubishi Hitachi’s new J Class turbines, should approach about 62% efficiency.

The key to achieving greater efficiency is burning the gas at ferocious temperatures, which now reach as high as 1,600° Centigrade. The company has been developing high-alloy materials, thermal coatings for the blades, and more sophisticated blade geometries that determine how injections of cooler air insulate the blades from the super-heated air. Mitsubishi Hitachi has set a goal of reaching 65% efficiency, a point beyond which it becomes counter-productive to raise the combustion temperatures because it starts creating higher levels of nitrogen oxide, a pollutant.

An old “one on one” gas plant could be built for a capital cost of about $1,000 to $1,200 per kilowatt hour of capacity. A “two on one” gets the cost down to $900 per kilowatt (kW). Greensville’s “three on one” with J Class turbines should drive down the cost to around $700 per kW, says Newsom. “Greensville will be the most cost-effective plant that Dominion has built in its history. That’s really exciting.”

For purposes of comparison, the up-front capital cost for solar and wind runs about $2,000 to $3,000 per kW, says Newsom. Of course, solar and wind save on fuel. But Dominion contends that the lower cost of capital for gas will outweigh the lower cost of fuel for wind and solar.

There is a bonus on the operating side as well. Newsom says the J Class turbines have the best reliability in the industry. Their EFOR (Equivalent Forced Outage Rate) is eight-tenths of one percent, meaning that the turbines run 99.2% of the time they’re supposed to. Curtailing down-time is crucial in power plant economics; negligible downtime enables gas plants to operate about 70% of the time, as compared to solar or wind, which operate only when the sun shines and the wind blows, about 30% of the time.

The Greensville power station will save money for rate payers in another way, which is not included in the $2.1 billion savings estimate. By drawing gas from two pipelines, Dominion will be able to exploit seasonal fluctuations in gas prices in northern and southern markets.

When Greensville opens, it will receive gas from the Transco pipeline, which draws mainly from the Gulf of Mexico region and limited access from Marcellus. Should the Atlantic Coast Pipeline (ACP) project receive federal approval, as Dominion expects it to, its route will run close to Greensville, giving the utility’s gas buyers a new array of purchasing options.

Dominion, like other utilities, obtains much of its gas supply through long-term contracts with gas producers. But the company maintains flexibility by putting 25% to 50% of its expected demand out for bids by issuing Requests for Proposals (RFPs). Virginia’s existing gas pipelines have little capacity to spare, so Dominion’s options are limited. When the ACP opens up access to the Marcellus/Utica shale fields for southeastern markets, Dominion can draw from a deeper pool of supply and competitors, says Kelly. Prices for gas originating in the Gulf of Mexico tend to peak in the hot, humid summer, when demand for air conditioning is highest, while prices in the north peak in the winter, when homes use it for heating. With two pipelines serving Greensville and its other gas plants, Dominion can purchase gas from areas where pricing is off-peak. Also, having multiple pipelines to serve its generating fleet also adds fuel reliability, minimizing exposure to disruption to a single pipeline for supply, as when Hurricane Katrina shut down the Gulf gas industry for several days.

The savings are potentially immense. Dominion currently spends about $1.8 billion annually on natural gas, which now comprises one of the biggest costs to rate payers.

There are currently no comments highlighted.