Bacon's Rebellion

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Dominion Closes Nine Obsolete Generating Units

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by

James A. Bacon
in

The Bremo Power Station on the James River opened as a coal-fired power plant in 1931. Units 3 and 4 were converted to gas in 2003. Now they will revert to cold reserve storage.

As Dominion Energy Virginia continues to adapt its generating fleet to the realities of cheaper solar and abundant natural gas, the utility has decided to mothball nine of its older, less efficient power-generating units — all but one of them either coal-fired or converted from coal to gas. Because the units rarely run, they provide only one percent of the company’s current generation, reports the Associated Press.

As part of a month-long review of its power generation group initiated to increase its competitive position in the energy market, Dominion also decided to eliminate about 390 positions, including about 100 from its nuclear operations. The company expects many employees will be reassigned to other operations.

“When we look at the time, the materials, the people, when we look at the thermal inefficiency of these plants, and we look at the advancement of renewables, we look at continued gas-fired build, we just think this is a progressive step we can take to ensure that our fleet remain competitive,” said Paul Koonce, president and CEO of the power generation division.

In technical language, Dominion is putting the nine units in “cold reserve storage,” in which they are drained of oil and water, provided minimal staffing to ensure that they remain safe, and are capable of being restarted in about six months if market conditions warrant. Dominion will maintain all environmental permits and continue to pay local taxes.

Most of the units — those at the Bremo, Chesterfield, and Possum Point power stations — were commissioned in the 1950s and early 1960s. One, a combined-cycle gas unit at the Bellemeade power station was constructed in 1990. All told, they were capable of producing 1,200 megawatts of electricity, roughly comparable to a new, state-of-the-art gas-fired power plant.

In a handout, Dominion said the shutdowns reflected the changing economics of electric power industry:

  • Economics. Natural gas prices remain historically low, and forecasts call for supplies to remain plentiful. Gas and renewables have displaced coal and older, smaller gas units. And the cost to build large-scale solar has dropped 90% in the past six years.
  • Public policy. Virginia is considering policies that would mandate a 3% annual reduction in carbon-dioxide emissions over ten years, which would rule out running the older, inefficient power units even as a backup.
  • Technology. Energy efficiencies such as LEDs, EnergyStar appliances, and LEED certification are impacting demand across PJM Interconnection, which administers wholesale energy markets for a multi-state region. New round-the-clock generation technologies, such as those in the new Greensville County power station, are significantly more efficient than older-generation gas units.

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9 responses to “Dominion Closes Nine Obsolete Generating Units”

  1. Acbar Avatar
    Acbar

    Of course, this is what they should be doing. Retire the old stuff or put it into deep cold storage, and save the labor costs.

    A six months lead time to reinstate any one of these units means they cannot be counted as “plant in service” available for PJM dispatch or installed-capacity-credit purposes. They might as well be retired, except, this way the decision is, theoretically, reversible.

    As a ratemaking matter, these units are nearly all old enough that the investment in them has been fully amortized (depreciated) and so they no longer impact the regulated rate base. That may not be true of units less than say 40 years old.

  2. LarrytheG Avatar
    LarrytheG

    The biggie is Chesterfield.. 1850 MW… coal

    and the two new replacement plants.. Greenville and Brunswick that essentially pre-ordained the “obsolescence’ of the planned closings.

    Brunswick PRO Brunswick County 1300 MW – Natural Gas
    Greensville PRO Greensville Count 1600 MW – Natural Gas.

    But never have understood why they were located where they are – if they could have been located other places – if it did not matter from a generation point of view where they were located.

    You’d think perhaps in Southside – they would have been welcomed for the jobs and probably low property taxes..

    but they probably could have done the same if located.. say in Nelson county or Western Va…

    Also amazing that these already long paid for plants.. still cannot sell power to PJM cheaper than solar

    1. Acbar Avatar
      Acbar

      Not cheaper than solar because, even though they are already built and paid for, the operating cost (fuel, maintenance and operating staff) is so high. Plus there’s the back end cost: ash disposal. This used to be simply the incremental cost of trucking the ash to the landfill as ash was created. Now there’s the whole issue of retroactive containment and perhaps relocation of disposal sites. Those costs — which never were included in the rate base because they were unforeseen at the time of construction — are now a huge liability for Dominion; but they don’t affect continued operation of these plants except insofar as they add to the cost per MWh to run these plants going forward if they are ever brought back on line.

    2. Acbar Avatar
      Acbar

      Re location of these plants: they were wisely located for their day, taking into account that there wasn’t nearly as much of a transmission grid in the 1950s (so, being near Richmond and Hampton Roads was a plus), and, they are reachable by rail and (in the case of Chesterfield) by river barge, the two principal ways of delivering coal and oil.

      Yes, Chesterfield is a biggie. I toured the plant as a school kid in the 1950s when it was the latest and greatest. Not today.

      1. LarrytheG Avatar
        LarrytheG

        but how about the NEW gas plants in Greensville and Brunswick – why there instead of more west where the gas is?

  3. Steve Haner Avatar
    Steve Haner

    The operational costs of all of these units, plus any capital costs that remain, are paid for through the base rates. These steps eliminate major operating costs, but of course the regulatory holiday prevents any downward adjustment in base rates. These savings become 100 percent profit to the stockholders and provide zero financial benefit to the ratepayers.

    And you chumps just keep paying it, and keep voting for politicians who let them get away with it. This is a perfect example of how the rate “freeze” is really a ratepayer rape.

    1. Rowinguy1 Avatar
      Rowinguy1

      You are indeed correct about this, Steve. All the employment costs, salaries benefits, etc., for those 390 laid off employees remain in base rates as well.

  4. LarrytheG Avatar
    LarrytheG

    well.. they got the cost of the two new plants, right?

    besides they gotta scrounge up more moola for that SC nuke!

  5. TomH Avatar
    TomH

    Brunswick and Greensville were paid for by RACs. Dominion kept the profits from the rate freeze and increased rates through RACs for the new plants. Heads I win, tails you lose. All new plants are intended to be paid for with RACs according to Dominion’s testimony to the SCC.

    These two plants were located near a high-voltage transmission corridor (500 kv, I think) and they tapped the abundant supplies in the Transco line via a 100-mile pipeline that traveled over an existing right-of-way, which they got the Tobacco Commission to chip in $23 million for.

    I think PJM also tightened up the requirements to participate in the capacity auction which, along with the other factors that Acbar mentioned, did not make the continued operation of these units profitable. They contribute only 1% of generation anyway and the payroll and other costs just didn’t make them worthwhile to maintain in operational condition.

    It’s telling that a combined cycle plant from the 1990s can’t make it anymore. Just wait until gas prices go up several times and see what happens.

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