Bacon's Rebellion

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Dominion Responds to My Renewable Energy Post

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by

Peter Galuszka
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Dominion logoBy Peter GaluszkaIn recent days, there’s been a plenty of discussion about renewable energy.  After I wrote two posts,  Chester “Chet” Wade, a senior spokesman for Dominion Resources, called me to take issue with some of my ideas. I  offered him space to explain Dominion’s views. Here is his response:

Your follow-up column has the same shortcoming as the first one. They both ignore the facts that don’t support your conclusion.

We discussed a lot of issues on the phone. As I said, my point on contributions was that you were being selective in your reporting and unchallenging of the other side. We don’t mind being asked tough questions, but we think others should face the same level of scrutiny. That disparity seems to be present again.

Here are some of the other points you left out from our conversation, along with additional details:

Approximately half the electricity Dominion produced last year came from carbon-free nuclear and renewable sources. Our carbon intensity is among the best in the nation, according to the Natural Resources Defense Council. At the same time our electric rates in Virginia are 14.7 percent below the national average, and our reliability is at an all-time high. All are important points to those who depend on us for their energy.

Dominion values renewable energy as part of a diverse, clean mix of power generation to provide reliable, affordable energy.   For example, in Virginia, Dominion operates more renewable biomass than any other utility in the nation.  We’ve invested in biomass, because it is cost effective and can run around the clock.

We’ve also invested in solar energy with our innovative Solar Partnership Program, and we are a leader in developing offshore wind. The U.S. Department of Energy awarded a Dominion-led team $47 million to develop a Virginia pilot project aimed at making offshore wind more affordable.

Dominion did not “squelch” the solar project at Washington & Lee, as you reported. We reached an agreement that allowed the project to go forward.

The Sierra Club’s “analysis” of renewable energy standards you cited is specious, at best.  For example, it fails to mention that states with mandatory renewable portfolio standards also typically have significantly higher electricity prices.

And it does not mention that West Virginia has an alternative and renewable energy standard that counts natural gas, coal bed methane, waste coal, and pumped storage hydro. By that same standard, Dominion has more than 9,000 megawatts of alternative and renewable energy. And that total does not include wind or solar energy we have outside of Virginia.

Your column also touted West Virginia as a regional leader in wind production. What it missed is that we own 50 percent of West Virginia’s largest wind farm, paid for not by our utility customers but by our shareholders.  On the other hand, an onshore wind project we proposed for Virginia withered with virtually no support from the Sierra Club.

Producing affordable, reliable and clean energy requires a balance. That balance was sadly missing from your column.

 

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17 responses to “Dominion Responds to My Renewable Energy Post”

  1. TBill Avatar
    TBill

    I appreciate the Dominion response. The statement about relatively low carbon intensity is consistent with the EPA data I’ve been seeing for Virginia, showing VA recently at only 20% Coal with the rest nuclear, nat gas and some renewables. I do think VA imports more coal power, but within our boundaries, that’s all we got at the moment. Re: RPS renewable standards sounds like Dominion is saying WV adds some flexibility to use natural gas, which I would agree with, and I would add truly (advanced technology) clean coal to that list. Overall I am still a little confused why Dominion and Virginia get quite the carbon-bashing from the left, compared to MD which as far as I can see relies a lot more on coal than VA.

  2. DonR Avatar
    DonR

    Dominion is hostile to solar power for the simple reason that it will reduce the demand for Dominion’s electricity. That hostility is in evidence from Dominion’s 2011 insistence of up to $60 / month “standby fee” for solar power units in the 10 – 20 kW range. This generating capability is about twice the amount needed for a typical home. As usual, the state SCC granted Dominion its wish. This charge is enough to make these solar generating units uneconomical.

    The W & L situation was actually a matter between Secure Futures (a Virginia company from Staunton) and Dominion Power. Secure Futures proposed to build solar power generating units to power universities in Virginia. Dominion Resources sent a “cease and desist” letter to Secure Futures insisting that Dominion’s exclusive service territory not be infringed. More technically speaking the threatened court battle was over the Power Purchasing Agreement (PPA) mechanism for funding the project. Dominion’s goal was easy to see – make such projects as unaffordable as possible. Dominion’s exclusive service territory is provided by laws passed by the same General Assembly that Dominion so generously supports with campaign contributions and various other gifts.

    Park View Mennonite Church in Harrisonburg, VA was the next to feel Dominion throw around its weight in an effort to stifle solar power. The church entered into an agreement with a rooftop solar company to buy power. The solar company proposed a net metering agreement with the Harrisonburg Electric Commission (HEC). However, HEC had an agreement with Dominion that HEC would buy all of its electricity from Dominion so the rooftop solar company couldn’t sell solar power to HEC under a net metering agreement. Again, Dominion attacked the PPA in an effort to make the project less economical.

    In both cases, the project went forward albeit with worse economics than hoped since the PPA had been successfully challenged by Dominion. After the solar station began operation at W&L a representative of that university estimated that the solar power would reduce the amount of electricity that W&L would buy from Dominion by 3%.

    The public outcry that ensued from Dominion’s actions prompted the Virginia General Assembly to take half-assed action to preserve some semblance of independence. The GA passed a law allowing for up to 50 MW of third party electrical generation using PPAs in Dominion’s exclusive territory. Putting that amount in perspective, the State of New Jersey had 955 MW of solar generating power in place by the end of 2012.

    The net effect of all this has been to stifle solar power generation in Virginia when compared to neighbors like North Carolina and Maryland.

    On Oct 1, 2014 the McAuliffe Administration released its latest Virginia energy plan. The plan, which is updated every four years, proposes to raise the ceiling on Dominion’s cap on both residential (to 40 kW) and commercial (to 1 MW) net metered projects, with standby charges allowed only for projects over 20 kW (up from the current 10 kW for residential, but seemingly now to be applied to all systems).

    That plan is a recommendation. It does not carry the force of law. It can only be voted into law by the grateful recipients of Dominion’s largesse – the Virginia General Assembly. McAuliffe’s plan also utilities to build off-site solar facilities on behalf of subscribers and provide on-bill financing to pay for it.

    During the next General Assembly session we shall see what our political worthies decide to do with regard to the solar power aspects of McAuliffe’s plan. Assuming that votes are taken on loosening Dominion’s squelching of solar power in Virginia I will report the results of these votes on this blog. I will also provide an average Dominion contribution and gift total for politicians voting in favor of loosening the restrictions vs those voting against.

    1. TBill Avatar
      TBill

      OK good Thank You for some examples…now we are getting somewhere, apparent squelching of solar as the problem some have. Let me look into it…I would like to hear if possible Gov. McAuliffe’s take on these issues. In general I am very supportive of smaller distributed facilities. But if Dominion does not need or welcome the extra power right now, it’s harder to implement.

      1. DonR Avatar
        DonR

        My problem with Dominion is that they simultaneously enjoy a state guaranteed monopoly and pay out huge campaign contributions to those charged with regulating their monopoly operations. That seems like a huge conflict of interest to me.

        The counter-charge that the environmental groups also make campaign contributions is true. However, the Sierra Club enjoys no legislative monopoly over anything.

        1. TBill Avatar
          TBill

          It’s interesting…you alerted me to the NJ solar “miralce” which is so funny to me …when we lived there not too many years ago, NJ was pushing coal , and now NJ switched to pushing solar… I like the change. But VA is not NJ (yet), and it’s hard for me to comprehend that campaign contributions in VA are worse than NJ. Generically, there is the problematic state/utility partnership, which NJ certainly always saw as a business the state can control to build plants and create jobs.

    2. TooManyTaxes Avatar
      TooManyTaxes

      Standby charges are reasonable to prevent ordinary ratepayers from paying higher rates to cover the costs Dominion incurs to be ready to quickly provide backup electricity to a self-powering customer. Why should these people/businesses be subsidized?

      Whether $60 per month is a fair rate is beyond my knowledge. I’d need to see the cost studies and the pre-filed testimony from the various witnesses.

      1. DonR Avatar
        DonR

        It’s unfair for ratepayers to pay more for Dominion to provide backup electricity. I’m not sure why. Dominion provides me electricity and I can turn the power in my house off and on. They provide me variable amounts of electricity on demand. They don’t charge me extra for that service.

        Further, how is it fair for Dominion to stifle alternative energy thereby potentially running afoul of regulations which Obama has been promising to implement since his first presidential campaign? As the SCC claims, ratepayers will have to pay more for electricity when (not really if) that happens.

        Paying more for Dominion’s intransigence on alternative energy is fair but paying more for Dominion to provide free backup power is unfair.

        Interesting.

        1. TooManyTaxes Avatar
          TooManyTaxes

          Don, why should I bear the costs incurred by Dominion, which are real, so that my neighbor can have backup power? There are bona fide costs: the distribution plant must be constructed and maintained, account records created and maintained; equipment and/or employees to turn on and turn off the power in response to the customer’s need for backup power. These are real capital and ongoing costs. Who should pay them?

          Likewise, there also may be costs to generate peak energy – the most expensive. A standby customer may come on the system and force Dominion to obtain additional energy that is not normally generated. If we are considering pricing peak energy for regular customers at higher rates, shouldn’t we also consider similar charges for standby customers?

          And even if you don’t use any power for a month, you pay a distribution charge for access to power. Check your bill. Why should a backup-only customer be exempt from paying these costs? The rate should be set at the distribution charge, plus any other costs incurred to stand ready to provide power on demand.

          Acbar has it dead right. What we are really talking about is: How much additional should ordinary customers pay to subsidize users of alternative energy?

  3. Acbar Avatar
    Acbar

    Killing solar is not behind Dominion’s actions; opposing subsidies is the driver. When are subsidies too large – that is the question. We all recognise new technology may need a boost to demonstrate its initial viability, but beyond that, let’s be frank and admit the driver behind solar subsidies is a policy bias against carbon energy that a few believe passionately is worth the price, but most Dominion ratepayers aren’t ready to pay that much extra for.

  4. TooManyTaxes Avatar
    TooManyTaxes

    Some of what is missing in this discussion is: Whether, and to what extent, is the generation, transmission and distribution of electric power a “natural monopoly”? The Auburn University economics department offers the following definition.

    “A monopoly that does not arise from government intervention in the marketplace to protect a favored firm from competition but rather from special characteristics of the production process in the industry under the current state of technology. Theoretically, natural monopoly arises when there are very large “economies of scale” relative to the existing demand for the industry’s product, so that the larger the quantity of the good a single factory produces, the cheaper the average costs per unit get — right up to production at a level more than sufficient to supply the entire demand in the relevant market area. This might occur when production of the good requires extremely large initial capital investments to even enter the market in a modest way but then producing additional output requires only very modest additional outlays beyond the fixed initial investment. Under such circumstances, the firm that initially starts out with the largest share of the market is in a position to price its output at a level below its (higher cost) competitors’ costs of production and still make a profit while driving them out of the business — and the larger its market share gets, the lower its unit costs become, until a monopoly position is finally obtained. (It is often argued that local telephone service, natural gas supply, and electrical power distribution fall into this category because of the heavy initial investments in networks of telephone lines, electrical lines and gas lines that are involved.) ”

    A number of years ago, it was argued the generation of electricity was not a natural monopoly, but that transmission and distribution, especially the latter, were. If true, new suppliers should arise and offer reduced prices over the incumbent. Virginia tried competition at the generation level for retail customers, but this was a bust. Competitors did not offer lower commodity prices to Dominion’s customers, but only higher prices for green energy. That’s not competition. It’s guilt. Where are the market disruptors in the generation end of the business? No where.

    One can argue that decentralized generation, such as a single home or building or a community (say Reston or Tysons) is possible such that distribution and some transmission are not natural monopolies. Clearly, a single structure can generate and distribute internally its own power. But what about backup?

    I don’t think a larger community (say an office park or neighborhood) can afford to build its own distribution network, but rather, would seek access to the incumbent’s facilities. IMO, we are back at competition in the generation segment of the market. But where are the suppliers with lower costs and prices than Dominion? Until they arrive, competition in the electric market is a joke. Guilt and arrogance of the elites are the only drivers.

    1. DonR Avatar
      DonR

      Where are the market disruptors in the generation end of the business?

      Right here, TMT – http://bloom.bg/1vzyQgb

      Even with a significant reduction in the tax credit available for building solar generation by 2016 it will be cheaper to generate electricity with solar in Virginia than to buy electricity off the grid.

      Sorry but the science is against both you and Dominion.

      Half of America’s states have de-regulated electricity. The fact that Virginia tried and failed is emblematic of our hapless state legislature.

      Now, at the dawn of clean solar power being cheaper than buying from Dominion right here in Virginia – we have virtually no solar power. Maryland? Lots of solar power. North Carolina? Lots of solar power.

      Once again, the people of Virginia have been sailed down the river by the unholy alliance of our Richmond-based state legislature and a Richmond-based corporation with money to spend on that legislature.

      1. TooManyTaxes Avatar
        TooManyTaxes

        First of all, we have a tax credit. A supplier that relies on a tax credit is a company on corporate welfare. Let’s go head-to-head on commodity price. What about NOVEC or other power companies serving Virginia? It serves some of suburban Virginia. It would have a right under federal law to obtain wholesale solar power delivered. All it (they) need to do is purchase the power.

        I agree with you that, if Dominion wanted to buy or produce solar power, it could do so. But I’m looking for someone to offer the commodity to the public at 80% of Dominion’s commodity price. That’s market disruption. And if a disruptor could bring these savings to the market, Dominion would lose in the GA.

        I’ll buy and push to buy the cheapest electric power I can find. So far, no one has knocked on my door to sell me power cheaper than Dominion.

        1. DonR Avatar
          DonR

          I guess you must believe Dominion Resources is a company on corporate welfare …

          http://bit.ly/1rPCzUu

          That was just the first big tax break I found Dominion taking. I have a feeling that another 30 minutes of research would have turned up a lot more.

  5. DonR Avatar
    DonR

    A bit more detail here – http://phys.org/news/2014-10-solar-power-material-percent-captured.html

    Interesting also that if solar does make a significant dent in global warming it will be the STEM graduates who make this happen.

  6. DonR Avatar
    DonR

    For anybody who really believe that the “elites” are the environmentalists trying to cut back on CO2 emissions ….

    http://www.nytimes.com/2014/10/31/us/politics/pr-executives-western-energy-alliance-speech-taped.html

    1. TooManyTaxes Avatar
      TooManyTaxes

      On carbon emissions, please explain the higher temperatures that occurred in Medieval Times and the lower temperatures that followed without today’s carbon emissions? Back in the 1970s, climatologists, in near uniformity, warned of imminent global warming. They have now changed their minds. Why should the public believe them now when they claim their former position was wrong? And why couldn’t they be wrong again?

      I think it is possible that carbon emissions are affecting climate. But I am always skeptical when a person is a paid expert or has a financial stake in an outcome. Lawyers always probe an expert witness’ financial arrangement. I’ve testified as an expert witness and had my financial relationships and expertise probed. Why aren’t climate scientists subject to the same biases as other professionals?

      And as for businesses betting on climate change, have they found a way to monetize public interest in the topic? How many of us tried to make money off Y2K? My law firm did?

      Businesses follow the money? If I ran an insurance company or an engineering company that could make money off climate change, I’d try to do so irrespective of my personal beliefs.

      I don’t disbelieve in climate change or hold the position CO2 emissions are cannot cause harm. But just like I don’t trust Wall Street to act in my best interest, nor do I trust people seeking public funding for Climate Change. A little probing would be good.

  7. DonR Avatar
    DonR

    Please see page 17 for a “reality check” on Virginia:

    http://www.tva.com/abouttva/board/pdf/aug-22-2013_public_board.pdf

    NC – 259 MW of solar generation
    VA – less than 1 MW of solar generation

    Why?

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