Bacon's Rebellion

Democracy Thrives in Sunlight

Dominion Acquires Accomack Solar Plant

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by

James A. Bacon
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solar_panelsby James A. Bacon

Dominion Energy, an unregulated subsidiary of Dominion Resources, announced today that it will acquire a planned 80-megawatt solar facility on the Eastern Shore for an undisclosed price. The solar plant, the largest yet announced in Virginia, will supply Amazon Web Services data centers in Northern Virginia.

Dominion is purchasing the project from Community Energy, Inc., which had announced the project in conjunction with Amazon back in June. Community Energy had consolidated 44 properties into a 900-acre site near a Delmarva Power electric transmission line in Accomack County and inked the necessary agreements with Amazon, PJM Interconnection, Delmarva Power, Dominion and municipal authorities. Construction is expected to begin in 2015, and the plant is scheduled to enter service in fall 2016.

“We look forward to expanding our relationship with Amazon as it seeks to increase the mix of renewable energy on the electric grid powering its data centers,” said Thomas F. Farrell II, chairman, president and chief executive officer of Dominion. “This project also shows Dominion’s commitment to building additional clean, renewable solar facilities in Virginia.”

Through both its regulated and unregulated subsidiaries, Dominion has ramped up its commitment to solar power in the past year. Dominion Virginia Power has set a goal of building 400 megawatts of large-scale solar by 2020, and it filed with the State Corporation Commission (SCC) in October for approval of three separate projects in Powhatan, Louisa and Isle of Wight counties totaling 56 megawatts. Shortly thereafter, the SCC rejected a previously filed proposal to build a 20-megawatt solar facility near its Remington gas-fired power plant. The commission ruled that Dominion needed to seek third-party market alternatives before building its own facility.

Dominion also purchased in October a 25-megawatt facility under development in North Carolina by Invenergy, Inc., a Chicago company. That facility will supply electricity to the Naval Station of Norfolk, advancing the Department of Navy’s goal of bringing 1 gigawatts of solar electricity into procurement. Moving in a parallel track, Dominion has built a significant solar portfolio in six other states across the country.

Bacon’s bottom line: While Dominion may not be  moving quickly enough to satisfy some of its environmental critics, the company clearly is upping its commitment to solar energy. I expect the pace to pick up. As a regulated utility, Dominion Virginia Power in particular has a conservative corporate culture that puts the reliability of the electric system at the top of its list of priorities. The company is determined to move cautiously, adding solar in incremental steps and building experience not only in how to develop and operate solar facilities but in how to integrate the fluctuating energy production into the electric grid.

What I can’t get a handle on is the economics of solar. Yes, yes, as a broad generality, the cost of solar is declining steadily, and one day could be the most economical form of energy on the grid. But how economical is it in Virginia now? What are the trade-offs between high up-front capital costs and zero fuel costs? I just can’t get the numbers. Everyone seems bound by non-disclosure agreements, and no one is releasing the numbers. I’ll write more about that shortly.

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19 responses to “Dominion Acquires Accomack Solar Plant”

  1. LarrytheG Avatar
    LarrytheG

    what a waste! Imagine the PR KUDOS that Dominion would have received in it had signed the original agreement with Amazon!

    and hey – I though some folks were saying that Dominion couldn’t do solar on Accomack anyhow even if they wanted to .. what happened?

    but give them credit – don’t want to damn them if they do and damn them if they don’t!

  2. TomH Avatar
    TomH

    Numbers for solar vary depending on the deal, the financing costs, and how big the tax incentive is and who gets it. A solar facility in New Mexico which is the same size and cost as one in Virginia will generate electricity at a lower cost than the one in Virginia because it will produce more kilowatt-hours of electricity due to more sunshine. Utility scale solar in the southwest produces energy at 5 cents per kilowatt-hour (or less) for new units, which is less than the cost of energy from gas-fired combined cycle units. I have not seen published numbers for units in the southeast.

    Until December 31, 2016, there is a 30% tax credit. It reduces to 10% for utilities after that and no credit for residents or businesses. So a solar unit built in 2016 might be cheaper than one built in 2017, even if the costs keep going down.

    I have read that Dominion Energy has sold most of its portfolio of solar projects in other states in order to concentrate on projects in Virginia. This is hopeful for the development of more renewable energy in Virginia, but it appears that Dominion is trying to keep the market mostly to themselves.

    The same thing seems to be happening in North Carolina. Duke Energy has simultaneously proposed large-scale solar investments while trying to suppress competition from smaller producers. The utility has proposed owning or purchasing power from over 500 MW of solar power plants – earning a 10% rate of return on the plants it owns – while trying to reduce eligibility for third-party solar projects. Shawn LeMond, a former Republican North Carolina legislator says it’s an anti‐competitive move. “Duke is putting $500 million into solar,” LeMond said. “But what they are doing at the utility commission is stopping independent [developers] from building five times that. The market would build a lot more solar, but Duke is fighting it.”

    Our economy and our energy system will be best served if there is an open market for distributed energy in Virginia. Dominion has tight control over the legislature and the SCC, so it might not go in that direction. The SCC would need to develop a modified rate structure to allow Dominion to prosper in a more competitive environment, but we would all be better off if that came to pass.

    1. Rowinguy Avatar
      Rowinguy

      One other point I might add to Tom’s excellent comment, is that utility sized solar requires considerable real estate, and I would expect lots more low cost open space for installations in New Mexico than in Virginia.

      The Community Solar project being discussed in this article occupies about 90 acres to produce 80 MW. 90 acres is sufficient to place a 1300 MW combined cycle gas fired plant.

      1. LarrytheG Avatar
        LarrytheG

        re: “solar requires considerable real estate”

        I don’t know if you guys every drive Virginia much especially on back roads.

        there are millions of acres of vacant/unused/unproductive land in Va.

        just the geography from Lynchburg to the North Carolina Border is millions of acres of land.

        we also have millions of acres of rights-of-ways for roads, powerlines, stranded interchange lands, etc.

        Finally if you build a gas-fired plant – what is the reason for not buying extra land around it and festooning it with solar?

        it seems like a natural configuration… you can “tune” the output of the gas plant to vary in real-time with what the solar is producing.

        1. TomH Avatar
          TomH

          Dominion is planning to use land at existing gas-fired plants and perhaps land at decommissioned coal plants to build large solar facilities to use the substation and transmission facilities. This makes sense to use land that can’t be used for anything else and not to create unnecessary expenses for additional transmission lines. Nuclear plants have huge exclusion zones required by their license for safety reasons, so there is unused utility owned land at those sites too.

          Combined cycle plants can only vary their output at about 1/10th the speed that simple cycle turbines (peakers) can so they are not especially effective at responding to the rapid load variations from solar facilities.

          This also goes to the faulty notion that the large utility scale (let’s say 10 MW+) solar facilities are the most cost effective. Most studies that show they are the cheapest per unit of output are utility funded and ignore many issues. The cost of transmission is not included in the published cost of utility scale solar. Since new transmission is usually only required for large solar arrays – ignoring transmission as part of the project cost distorts the true costs of the larger projects.

          The sweet spot for solar seems to be in the .5 – 1 MW range, mounted on commercial and industrial (or gov’t) rooftops. This occupies no land, provides a host of distributed energy benefits such as reduced line losses, reduced grid congestion, greater resiliency and reliability, the possibility of islanding (using microgrids) so power stays on for crucial functions during grid outages, etc. Geographically dispersing the panels also evens out the variations in output compared to a few very large installations. Utilities can’t seem to shake the “we must own it all” central station concept. It makes so much sense to locate generation closer to the load and it keeps land free for other purposes.

          I wondered too about all of our highway medians. We pay a huge cost for maintaining those small strips of land. You could erect solar arrays and underplant them with grasses that only grow to a certain height or with shade tolerant wild flowers so you do not need to mow. I wonder if guardrails or other roadside barriers would be needed so they weren’t considered a safety hazard for vehicles going off the road.

  3. Acbar Avatar
    Acbar

    I believe it’s correct that Dominion, as an electric utility with retail rates regulated in Virginia under the Byzantine provisions of Code sec. 56-585.1, will have to get a certificate of public necessity (COPN) from the Virginia Commission in order to build the Accomack plant, whereas Community Energy would not have to get a COPN because its proposed 80 MW solar plant was less than 100 MW.

    In most states the criterion for a COPN for a new generation facility is tied to whether the electric utility building it wants to reflect the cost in the utility’s retail rates; but Virginia requires a COPN regardless. Much, if not most, generation these days is built by independent generator developers to sell into the competitive wholesale energy markets like those run by PJM, not built by a vertically integrated utility like Dominion to sell to itself. Usually, separate laws govern siting, zoning, environmental conditions, etc. Dominion’s proposed Accomack solar plant won’t be anywhere near its service territory or connected to a Dominion transmission line, yet requires a COPN, which as we’ve discussed here in the context of medical facilities is a thorough waste of regulatory resources that lends itself more to politics and reducing competition than to protecting the public (in Virginia, the COPN process also covers environmental and siting). In short, the Virginia circumstances of this deal make it a very different regulatory framework than it might have been elsewhere; and we should be asking why, and who if anyone benefits as a result.

    Because the same COPN requirement applies to this plant that applied to Dominion’s own proposed Remington solar plant, I can’t see what has changed, or why the result of the SCC’s analysis will be any different. The SCC rejected Remington because Dominion had not shown that it had looked at the cost of alternatives. The only reason Dominion might not have to show that it has looked at alternatives is if it does NOT intend to reflect the capital cost of this plant in its retail rates, but intends to sell the plant’s output directly under contract to a customer (e.g. Amazon) or to the energy market (e.g. PJM). I’m speculating this is the case. Dominion also has applied to build other solar generation (you mentioned them) and I haven’t looked at those applications, but they are publicly available.

    All of this is to say, if you want to know what Dominion thinks solar power should sell for, and what its Accomack power will sell for, and if it’s for retail customers, what the alternative sources would cost, that information OUGHT to be in Dominion’s applications for COPNs for each of these proposed units. Or else, the SCC likely will be asking for it.

    1. TomH Avatar
      TomH

      You are far more familiar with Virgina SCC rules than I am, but I believe that in this case, since it is Dominion’s unregulated subsidiary (Dominion Energy – not Dominion Virginia Power) that is responsible for the project, they will be treated like any other third party provider. But I could be wrong.

      1. Rowinguy Avatar
        Rowinguy

        Yes, Dominion Virginia Power the regulated utility is not acquiring this facility. An unregulated affiliate, Dominion Energy is the acquiring party. What I don’t know about the process is whether the permit that Community Solar acquired from DEQ to build the plant is transferable.

      2. Acbar Avatar
        Acbar

        Well that would change the applicable law. Dominion Energy is not a “public utility” with retail electric customers and so the cost of the Accomack plant will not be reflected in DVP’s retail customers’ rate base. So the SCC cannot ask Dominion Energy to explain why buying the Accomack plant is in the interest of its customers. My hope, Jim, was that you might have a window here into DVP’s view of the world of large scale solar power, but that appears not to be the result here.

  4. LarrytheG Avatar
    LarrytheG

    Didn’t Community originally go outside of Va to build that plant?

    doesn’t it STILL connect to Delmava Electric?

    did that change the COPN issue since it was outside of Va?

    Is _any_ of this arrangement under the purview of the SCC since the company is not the Dominion regulated in Va as a utility?

    am I screwed up here ?

  5. Rowinguy Avatar
    Rowinguy

    A little screwed up. Community assembled the properties and acquired the permit from DEQ. As far as I am aware, there was never a proposal to build THIS facility anywhere outside Virginia. That’s not to say Community Solar may not have other projects elsewhere.

    The solar facility will interconnect to PJM through a Delmarva transmission line. Delmarva used to be the utility in that part of the eastern shore, but about 8 years ago sold its distribution territory to A&N Electric Cooperative. Delmarva retains some transmission facilities on the eastern shore, but otherwise no longer operates in Virginia.

    If a regulated utility wishes to build solar or wind, it must acquire a certificate of public convenience and necessity (as it is called in the Virginia Code), or CPCN, from the SCC. An unregulated builder can obtain a permit from DEQ for any such facility under 100 MW and does not need to come to the Commission.

    The Commission may have some jurisdiction under the Affiliates Act, depending on how the power from the solar facility owned by Dominion Energy reaches a customer otherwise served by Dominion Virginia Power, since those two entities are affiliated with each other. It’s a complicated commercial transaction.

  6. LarrytheG Avatar
    LarrytheG

    re: ” An unregulated builder can obtain a permit from DEQ for any such facility under 100 MW and does not need to come to the Commission.”

    could the non-regulated Dominion subsidiary have built this facility without SCC approval just DEQ approval?

  7. TBill Avatar
    TBill

    Don’t forget Dominion made a promise to Gov McAuliffe to pursue solar (I think 500 MW total) in return for the favor of SB 1349 suspension of SCC rate reviews. I am not so enamored of utility-scale solar here ever since I read some nuclear-based utilities prefer solar (over wind) because the more intermittent nature of solar makes less of a negative impact on the economics nuclear base load plants. Give me more wind power, as I want to reduce dependence on nuclear.

    1. TomH Avatar
      TomH

      It is not the intermittancy of solar so much, because widely dispersed arrays can even out the variation. But solar is obviously a daytime source of generation. Nuclear plants, at least the existing ones, are often the lowest cost source of night time baseload generation. Wind power, which is higher at night, is typically cheaper than even the old nuclear plants so that wind energy is used first. In the spring and fall when night time loads are the lowest, there might not be enough demand for both wind and the nukes to fulfill. Thus the nuclear units would have to reduce their output which is not easy or economic for them. The utilities that lose revenues because they are not running the nuclear units at full capacity are not enamored with wind.

      New nuclear is so expensive (at least 4-5 times the cost of other alternatives) that it is unlikely to be competitive in Virginia. The greater question is the 20 year (or 40 year) license extensions that Dominion is pursuing for Surry and North Anna. Radiation is destructive of crucial power generating components, especially steam generators, in pressurized water reactors such as the Dominion plants. The Nuclear Regulatory Commission (NRC) must evaluate the current condition of the plant and the need for safety upgrades before they approve the 20-year license extensions for existing plants. About a half dozen existing nuclear facilities have not sought to renew their license because they could no longer generate power at competitive rates.

  8. LarrytheG Avatar
    LarrytheG

    My understanding is that Nukes are base load and cannot vary quickly enough to synch with wind/solar.

    aren’t wind and solar basically incompatible with base load – coal or nuke?

    1. TomH Avatar
      TomH

      Yes, nuclear is not easy to regulate – other than to turn it down to a lower power level and leave it there for a considerable time. That was the point made above. Since wind is cheaper than nuclear, if the night time load was low enough so that wind provided enough power so that all of the potential nuclear capacity was not needed, some nuclear plant would have to be run at a lower power level. Utilities prefer to have their nukes operate as much as possible, since that is the best way to pay for them. Capacity factors for nukes is usually in the high 80’s or low 90’s percent. Although they can be offline for prolonged periods for refueling or repairs.

      It’s not that wind is incompatible with baseload power (the minimum amount of power that is needed 24 hours a day). Quite often the large wind farms in the Great Plains are providing generation to meet the baseload demand for the West and Midwest regions, because the winds are consistent and this power is combined with many other sources so that any variations in wind are averaged out.

      Being a daytime source, solar is more of an intermediate and peak load generation source. Although, when coupled with storage (such as on Kauai) it can also serve a baseload function.

      One of the reasons renewable sources are disruptive to the existing system is that they are becoming much cheaper than dispatchable sources and push conventional sources down the list of the next most economic source. Although PJM runs a separate market for renewables (as I understand it) variations in power output (and the need for voltage regulation services with wind) make managing the grid a bit more complicated with solar and wind.

      Installing solar in large central station arrays (rather than small distributed applications) makes the variations in solar output magnified, which is why I was supporting more small, third-party installations rather than having everything owned by Dominion.

      1. TBill Avatar
        TBill

        I realize we do not have good wind resources here, but I am confused the extent to which the EPA CPP allows states to import wind energy. Seems to me if there is a major build out of wind in the windy areas of America (say due to federal subsidies to help states meet the CPP goals), this is a risk to nuclear plant economics.

        1. TomH Avatar
          TomH

          TBill,

          I am working on a number of different projects and have not had the time to fully investigate all of the details of the CPP. I know that renewables and energy efficiency gains can be used as CPP credits. However, I don’t know about how imported renewable energy is handled. It could make a difference if there is a multi-state approach to the CPP rather than the individual state path that Virginia seems to be on.

          Long-distance export of wind energy is running into some obstacles, however. Areas in Wisconsin are opposing the import of wind energy from the Dakotas, even though it is slightly cheaper than local wind resources. People in Wisconsin want to keep the jobs and lease revenues from wind farms benefiting the local economy rather than transferring those advantages outside the state for a marginal savings in energy costs.

          The southeast is too far away from major wind resource areas for that to be an issue here, I think. Unless there is a major breakthrough in lowering the costs of offshore wind production. If that could be done at a competitive price, continued generation from Virginia’s existing nuclear plants might be uneconomical.

          Excelon is the utility with the largest nuclear fleet. They are mostly in the Midwest, I believe, and are definitely threatened by the lower cost of wind energy. I don’t think this was caused by the CPP, but development of more wind energy could be encouraged by the CPP. Especially in those areas that are heavily dependent on coal.

    2. Acbar Avatar
      Acbar

      Good answer TomH. I would add, this underscores how wind power is a good investment in some locations, not in others. Weather Bureau statistics going back centuries give investors a pretty good picture of where weather and topography say to put a wind generator and it’s in places like the far Midwest plains and south into Texas. If you’re limited to the East, then at least find a ridge-top, and even a ridge-top location in Virginia may not be windy enough to make a good investment. Off the coast has some good locations but then you have the extra costs of being out there over the water.

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