U.S. Electricity Demand Falls Again

Source: Oilprice.com

U.S. electricity consumption fell 2.1% in 2017, according to Oilprice.com. As energy-efficiency measures have taken hold, electricity sales have declined seven in the past 10 years. Such numbers do not bode well for electric utilities banking on increased demand growth to justify construction of new power plants. A big question is the extent to which national trends apply to Virginia.

Virginia’s economy differs from the national economy in one important way: The Old Dominion has become a dominant player in the data-center business. Indeed, one could argue that data centers are the biggest economic-development success story in Virginia of the past 10 to 20 years. Data centers consume vast amounts of electricity. And if we want more data centers, which provide a handful of highly paid jobs and loads of tax revenue, we will need to ensure a reliable supply of electricity, preferably renewable.

Dominion Energy Virginia has based the long-range planning in its Integrated Resource Plan (IRP) on an anticipated 1.5% annual growth rate in electricity demand — considerably stronger than demand growth nationally. PJM Interconnection has suggested that Virginia’s growth rate will be slower, but Dominion defends the forecast based on a more aggressive projection in the number of data centers.

The public interest calls for sufficient electricity supplies to accommodate the growing data-center industry and, down the road, a surge in demand from electric vehicles — but not so much as to burden rate payers with excess capacity.  Clearly, the trend in electricity demand bears close watching.

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13 responses to “U.S. Electricity Demand Falls Again

  1. The data centers are going for 3rd party solar, no? Surely Dominion analysis is better than that, no?

  2. PJM says electricity usage will be flat in Virginia even with new data centers. Dominion says new load growth, almost entirely from data centers, will require 3500MW of new generation. Data centers want to be served by renewable generation.

    What to do?

    Certainly not the same thing we have been doing for the last 100 years. That worked well, but conditions have changed.

    Yet, in their infinite wisdom, the General Assembly has pushed state regulatory oversight to the side, and continued our 20th century regulatory scheme through 2028.

    Instead of beginning the serious business of designing an energy system and regulatory scheme appropriate for the times, Virginia has handed the keys to the public’s purse to Dominion and failed to create a prosperous future path for our regulated utilities other than to allow them to continue overcharging ratepayers.

    I am baffled that business and political leaders think think that this is a responsible solution for the citizens of Virginia or for our utilities. Customers have a way of escaping from abuse. Not even Dominion or the GA can close off all of the customer options for using or producing energy. It would be extremely harmful to the Virginia economy if they did.

    Why not recognize that things are changing and design a better system that gives customers more choices and lower energy costs; creates an environment that encourages innovation, more jobs and economic development; and carves out a new role for utilities that gives them a healthy financial future with incentives to earn more when they serve us better.

    Other states are already on this path. Virginia is well behind and will fall farther behind if we remain on the trajectory identified in the new energy bill.

    Supporting a growing population that produces more goods and services while using less energy is an encouraging prospect. Except for utilities that are paid more only when they build more. Rather than increase our energy costs building unnecessary projects or asking utilities to make money doing things they are not particularly good at (energy efficiency and solar), we need to revise the role of our utilities and the way they are paid. Stable or declining load growth is our future path, and we need to create ways for Virginia businesses to thrive under those conditions.

    Let’s get on with it!

    • What is the likely impact of a significant shift to electric-powered vehicles and also a huge number of small cell radio equipment from widescale deployment of 5G technology? I don’t know how fast the former will occur, but the latter will start slow and then skyrocket as we begin to live in the world of an Internet of Things.

  3. Throw a lot of blame to the various chambers of commerce. They will back any business group that provided funding irrespective of the impact of the issue at hand on business. (I was recording secretary for a local chamber in Fairfax County for two years.) I imagine Dominion tosses money around, and the chambers jump.

  4. Dominion has made some questionable assumptions in their estimates for new demand caused by data centers. The primary one is that energy use by computers will be the same 5, 10, or 15 years from now as it is today. The leading corporations will rapidly replace devices with the latest technology.

    I have worked in the computer industry and have seen firsthand the huge strides new technology makes in just a few years. We have seen dramatic reductions in power consumption while computer power continues to increase.

    The benefit of the data centers is primarily to local tax authorities. Employment is low and if the Haymarket transmission line is any indication, the GA and Dominion want to provide something free to Amazon that will cost ratepayers in the rest of the state millions of dollars. Not exactly a boost to the state economy.

    We seem to keep pushing the boundaries of lithography and squeezing more circuits into smaller spaces. But physics and friction continue to produce heat from our latest designs. While still on the drawing boards, concepts such as photonic and quantum computing offer orders of magnitude greater computing power with much less electricity required and less heat.

    We should be cautious about making 40 year investments for loads that could considerably decline in a decade or so.

    • TomH, we agree, there are some questionable assumptions by Dominion here in support of continued demand growth. Data center growth cannot be extrapolated for 20 or 40 years from current increases. There will be more electricity used as a percentage of total demand for transportation, but much of that will be time-shifted (i.e., batteries charged at night). New battery technology will augment the time shifting of demand on the grid. Distributed customer-owned generation will make an impact soon, some say a huge impact. And around Virginia, we’ve hardly scratched the surface for greater customer energy efficiency and greater building code and land use reforms to promote energy efficiency. Even PJM sees less growth ahead.

      More generally, what concerns me, as mentioned below, is to see Dominion’s ratepayers on the hook for the risks of falling demand, even as Dominion pockets the benefit of any demand growth (like those data centers) that occurs for as long as it lasts.

  5. I am coming to the conclusion that Dominion has a “Kodak”-like problem. They do not want to give up their 20th century business model – but it’s not up to them – even with their sway over the SCC and GA…and their ability to get what they THINK they want but what they cannot do is stop the advance of technological changes – and competitors in the regulatory “seams” that allows other competitors through “cracks” in the regulatory “wall”.

    Getting the GA to neuter the SCC won’t fix that – and in the end – Dominion has to face the realities that their much-loved business model is a dinosaur and if they don’t actually deal with the changes that are happening… they will suffer the consequences
    – and so will ratepayers.

  6. I just want to say this again. And again, and again. And again. The adequacy of generation in the mid-Atlantic region for purposes of supplying retail electric service, in Virginia and in the other 12 States in the region, is now the responsibility of the regional System Operator, PJM. Dominion has to satisfy PJM annually that it owns or has bought (under contract, long or short term) enough generation to satisfy its forecast peak load plus reserves. That is all.

    Dominion’s insistence to the GA and the SCC, that it has to build more and more generation to assure the reliability of its customers, fundamentally IS NOT TRUE. There are plenty of independent generation owners out there in PJM who will build generation on a few years notice for any load-serving electric utility that will buy it. In fact there is generation already built out there in PJM that was built on spec. and is looking for a buyer right now. There is a fiercely competitive wholesale market out there in the mid-Atlantic region for cheap energy and annual capacity that will supply Dominion’s customers’ needs. Concurrently, Dominion could make and keep a lot of money for its shareholders by selling the output of low cost generation into that wholesale market cheaper than the competition. But Dominion won’t do either if it can avoid it. Dominion simply pretends the PJM market isn’t there because (a) there’s so much more money to be made building generation at the expense of captive ratepayers at a fixed ROR, than from building on Dominion’s shareholders’ risk to compete successfully (or not) in the wholesale marketplace, and (b) Dominion’s effective regulator these days, the GA, is a sucker for this, and has even killed off most customers’ access to other retail suppliers in Virginia so they can’t seek out an alternative. With rate-based generation, Dominion doesn’t even have to compete successfully at wholesale in order for its generation subsidiary to make a tidy profit; indeed this could become a corporate life-saver if, in fact, Dominion ends up with a bunch of utility-scale generation that can’t compete successfully on the grid of the future.

    To use LG’s analogy, this is a Kodak-like problem due to a regulator that guarantees Kodak’s shareholders that they will earn a fixed return on all their film-making and film-processing investment (say from a tax on every consumer’s camera-click) even if it just sits there, inefficient and unused, in this digital age.

  7. Well.. there has been and continues a dichotomy between what Acbar is saying and the blog posts coming from Jim – with Dominion’s perspective.

    I think there is no question that what Acbar has been saying – is the reality.

    I don’t know how or when PJM assume the role it has but even if there had been no technological advances at all.. and no new natural gas – just that one aspect of a regional coordinator of electric energy generation would have and has changed the paradigm to one where demand arguments by individual utilities to justify more plants in their state are inherently disingenuous.

    And judging from the actions of the General Assembly – that body does not understand what PJM is and how it functions and Dominion is not about to tell them so they just go along with Dominion’s wants.

    It also calls into question the current SCC role in essentially their determination of what Dominion says is “needed” to serve Virginia when independent operators can and are participating in the electric energy market.

    Appalachian is in a slightly different position since only part of it’s service area is in the PJM territory (I think).

    There are maybe 8 or 9 other electric utilities in Virginia – the rural electric co-ops that mostly buy power rather than generate it – that are also part of the PJM grid.

    If we look at Dominions Nukes and their Gas Plants – if they are excess to Virginia demand – but Dominion can make money selling that power to other PJM participants – profitably – is that something that the SCC should be looking at beyond just the demand in Virginia?

    This has been and remains f fascinating ongoing discussion with Acbar, Tom and others who know so much more than most readers here and we all benefit from it.

  8. Just by coincidence this month’s bill is on my desk, and there is a summary report at the bottom indicating that Dominion purchased 14.1 percent of the 77.7 million megawatt hours it provided in 2017. What is not reported is the other side of the equation, off system sales. On any given day the utility might be selling or buying on PJM, and probably does a bit of both.

    The various discussions over recent months here have me persuaded that Virginia needs a new regulatory model, and it makes sense to further discuss the possibility of splitting off the distribution and generation companies. This morning’s Richmond TD also reports that Dominion is immediately starting up it efforts to expand its program to place distribution lines underground, a fat capital investment which will produce substantial profits with little consumer benefit. I have interpreted that effort as a pretty good sign that Dominion agrees with those of you who believe more and more generation is not sustainable and it needs to profit in other ways.

    http://www.richmond.com/ap/state/dominion-seeks-rate-increase-to-pay-for-burying-power-lines/article_3b0dfeea-3455-5032-b366-8e1c0e712578.html

    What really worried me about the legislation just passed is that it created massive financial incentives for the company to retire early quite a bit of generation capacity which is still quite viable, and replace perfectly good plants with new renewable generation. This satisfies political pressures but also fattens the rate base, replacing assets that are almost paid off with new assets which will produce 20+ years of new profit.

    I’m with TomH now, the model is outdated but the General Assembly’s ancient and venerable model of “give me money and I vote for your bill” remains viable.

    • Virginia normally shows up as importing 30-40% of our state power. However, I am not familiar with the Dominion-only slice-of-the-electricity pie, and how balanced that has been.

      If there is a major trend showing less importing by Virginia, that would be interesting to see.

      The electricity generation balance is hard to grasp because many Northeast states are happy to import much of their power, and some (PA, WV, Canada) are happy to generate extra for exports to importing states.

      As far as I am concerned, the RGGI (Regional Greenhouse Gas Initiative) is a club a of states vowing to never build anymore fossil fuel power plants. But the only reason that makes sense is because imports are available to supply them. I see no reason to join that club.

  9. I am glad to hear, Steve, that your point of view about VA’s utility model has now changed. My question is … since the General Assembly’s view is about money and not model’s, how do we facilitate changing the utility model? As a former school board Chair when we had to ask for money to change our curriculum … build more science labs before we could increase the science requirements … it took a lot of community education.

    So you long time Virginians … how do we reach our new Governor, the legislature and most of all, the ratepayers? What argument will carry weight in which community? This change really is not a right or left choice.

  10. Larry says it succinctly and accurately: ‘demand arguments by individual utilities to justify more plants in their state are inherently disingenuous.’

    That said, I do NOT mean to disparage Dominion’s concern about reliability of electric supply for its customers. What has changed is that, that supply no longer needs to be located in Virginia. And it no longer needs to be owned by Dominion.

    In fact, every megawatthour generated by Dominion is delivered to the PJM grid. And every megawatthour supplied from the grid to a Dominion customer is delivered from the PJM grid. As a seller, Dominion Energy runs only the low-cost generation that PJM tells it to run; and as a buyer, the Dominion LSE distributes and re-sells only the power the PJM grid supplies at Dominion’s delivery points. The PJM energy market is the exchange.

    Steve Haner, when you read that “Dominion purchased 14.1 percent of the 77.7 million megawatt hours it provided in 2017,” the fact is that 14.1% is a net number. Dominion bought 100% from PJM but over the same time period generated and sold to PJM an amount equal to 85.9%, which it reported as an offset. Nowhere on the PJM grid does a utility sell its own power directly to itself without going through the energy exchange. It’s not allowed to! The deal struck in the 1990s with the independent generation community and implemented by FERC was: (1) separate (“unbundle”) the generation, transmission, distribution and LSE functions of integrated utilities for ratemaking and arms-length-contracting purposes; (2) turn over system operations and grid planning to an independent entity with no bias in favor of its own generating units; (3) require transmission (and encourage the States to require distribution) to operate as a common carrier, delivering anyone’s electricity to any customer, and (4) run an exchange for energy (a realtime wholesale market), and a separate exchange for capacity rights, with all generators as sellers and all LSEs as buyers on equal footing. Virginia implemented this fully, then, as discussed here before, rescinded most (but not all) of its “common carrier” requirement for distribution.

    IMHO Dominion obscures PJM’s role as a middleman because Dominion is deeply invested in sustaining its customers’ perception (and the GA’s perception) that Dominion needs to build new generation to maintain electricity reliability in Virginia. In truth, Dominion could spin off all its generation tomorrow and satisfy 100% of its LSE obligation through bilateral contracts and the PJM markets. Many load-serving utilities have done just that. Indeed, Dominion itself owns generation in other parts of the country that it operates as an independent seller of electricity to the local grid. Dominion understands the generation markets fully! This notion that more generation is needed specifically in Virginia and only Dominion can build it is bull manure.

    One big caveat: where there is a transmission constraint, either generation within that constrained area must be run or new transmission built. That was the situation on the Peninsula, at Yorktown. Otherwise, new generation can be located anywhere in PJM, and built by anyone with the expertise to do so, regaardless of who the local retail electricity provider is.

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