Dominion Solar Plant — a Sop to Environmentalists

Jan 21, 2015

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in Business and Economy, Energy, Environment

Remington power station. Photo credit: Dominion Virginia Power

by James A. Bacon

This should make PeterG happy: Dominion Virginia Power has announced its intention to build the first commercial solar energy plant in Virginia. The $47 million project, to be built in Northern Virginia, will generate 20 megawatts of electricity, enough to power about 5,000 homes.

The project will increase the average residential customer’s bill, based on average monthly consumption, by about four cents per month during construction and two cents per month once the facility goes into service.

According to the Richmond Times-Dispatch, Virginia environmentalists applauded Dominion’s move, although some wish that the company would be more aggressive.

I wondered, what if Dominion were more aggressive? How much would electric rates rise? Dominion Virginia Power has 2.1 million accounts. Assuming that the utility could provide solar electricity as economically for all 2.1 million as for the 5,000 homes served by the proposed Remington solar facility, it would take approximately 2,000 more Remington-scale facilities to provide electricity system-wide. That would translate into increased electric bills of $40 a month, or $480 per year.

Of course, nobody is saying that Dominion should go 100% solar. But that simple exercise gives you an idea of how incredibly expensive solar electric power is in Virginia. And my calculations probably under-state the cost of large-scale conversion to renewables. First, Dominion is saving money in Remington by building on land that it already owns. Second, it’s building adjacent to an existing power-generating station, which means it is spending less on transmission infrastructure. Third, the solar capacity will be coupled with an existing natural gas-powered generating plant, which will allow Dominion to easily ramp up production or scale in back, depending upon the variable production coming from the solar unit. That obviates the need to build expensive back-up surge capacity to compensate for when the sun’s not shining.

Bacon’s bottom line: I interpret the Remington solar plant as a P.R. stunt that throws a sop to environmentalists who have criticized the company for adding so little to its renewable energy portfolio. At the same time, the small scale of the project limits the damage to the rate base. Two cents more per month per household doesn’t sound like much. Nobody will care.

I’m not a big fan of Dominion’s approach to generating and transmitting electric power, but I’m glad to see that it’s not rushing pall mall into uneconomical renewable power sources. Sooner or later, those power sources will become competitive with fossil fuels. At that point in time, I have every confidence that Dominion will make the shift on a much larger scale. In the meantime, electric rate payers will appreciate the utility’s priority of keeping rates low.

James A. Bacon

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38 responses to “Dominion Solar Plant — a Sop to Environmentalists”

DonR

January 21, 2015

If people had to pay the full costs of the damage coal fired electricity did to the environment solar would be cheap. Once again, Jim Bacon rails against hidden subsidies for suburban communities but ignores the hidden subsidies for dirty power generation.

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Tysons Engineer

January 21, 2015

Holy moly your oversimplification is WAY off base.

As a person who has worked on solar projects for commercial buildings, there is an economy of scale that is MASSIVE for return in solar. The more you put into a single centralized location the cheaper and quicker the payback period is.

Additionally, unlike combustibles, there is a reason why solar is called renewable. Current average paybacks on capital costs are less than 8 years. Why Dominion is stating that they must raise prices 2 cents indefinitely is beyond me. Eventually solar simply stops costing money when the return is achieved. Geeeeee. I wonder if any other for profit companies have ever tried to create an excuse as to why to charge more.

You fell for it, to one of the most corrupt companies in the world none the less.

If Dominion truly feels that Solar is too costly, why do they so ardently fight third parties from creating power from it? They argue HEY THAT’S OUR INFRASTRUCTURE CARRYING THE POWER!…. ok well it’s our public right of ways that were essentially traded for free to carry that… so unless they want to pay easement fees they should keep their mouths shut, and allow power generation from third parties

Or… they could just build the solar themselves and stop whining.

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1. TooManyTaxes
  
  January 21, 2015
  
  TE, I agree something smells quite fishy here. It seems quite outrageous that adding a $47 M capital project should cause everyone’s electric bill to go up by two cents per kWh.
  
  While I oppose mandatory fiats that make electric power more expensive for the ratepayers, this looks more like the kid who wants to take his ball home because he didn’t get first pick of the players.
  
  Dominion’s management should be looking for ways to provide reliable and cheap power to avoid loss of customers from the grid. The larger the customer base, the lower the per-customer fixed costs and the less likely customers will leave to avoid paying high fixed costs. It looks to me as if Dominion’s management is trying to milk its monopoly assets, rather than position itself for the long-term.
  
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  1. Tysons Engineer
    
    January 21, 2015
    
    To be fair, its 2 cents per month I believe, not 2 cents per kwh (that would be a 20% increase almost if it were that). As it is, 2 cents per month would be largely ignored, its approximately a 0.01% increase on rates.
    
    This also demonstrates a black and white opinion from Jim. There is a grey zone you know. Solar works best to DEPEAK. Instead of saying, lets replace all homes with solar from dominion. Why is it so wrong to reduce our dependency so that 10% of the energy comes from solar? Would that be so terrible? Would that $4 per month more really hurt the pockets (other than coal executives)?
    
    Everything seems like a terrible ordeal when you extend it as absolutes.
    
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    1. larryg
      
      January 21, 2015
      
      Dominion has a Model T grid in the 21st century.
      
      they argue (along with those opposed to renewables) that solar (and wind) are not available 24/7 and that the grid is not capable of dynamic load balancing of thousands of diverse smaller generation sources.
      
      But, the thing is that – people can make choices also and can choose solar and dynamically load balance it at point of use with grid power – reducing their use of grid power – and over time if solar expands – will result in Dominions capitalized base load facilities becoming underfunded.
      
      that will send Dominion to the GA to seek rate remedy from the ratepayers but in a way that it does not increase rates.. directly. In other words – people will not be able to cut their use of power to avoid the added charges.
      
      So you’re going to see a built-in charge on the bills that you have to pay no matter how much you cut your use. It will have a name something like “availability fee” that you get charged for – for having the power “available” to you when you need it – a separate charge from the rate for use.
      
      This may have already happened or it might be quietly making it’s way through the GA right now.
      
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    2. TooManyTaxes
      
      January 21, 2015
      
      My biggest complaint about supporters of alternative energy is that they lack the drive to become disrupters. Oh, some have come up with ways individuals can install solar panels and reduce reliance on the monopoly producer. But where are the people who will undercut Dominion’s coal plants with less expensive, renewable power?
      
      Where would be today had Tesla not challenged Edison on AC versus DC?
      
      When I started in telecom, Western Union was still involved in Telax. Telcos still operated step-by-step and cross-bar switches. Western Electric and Automatic Electric manufactured most of the telecom equipment in the United States.
      
      The alternative energy industry needs to be able to say “not only can you move away from fossil fuels, but you can also save 20% from Dominion’s rates.” Renewable power ought to be dollars and cents, rather than a lecture about climate change. But I continue to have hope that, somewhere, sometime, some creative group of people will become energy disrupters. I just wish I knew who they are so I can invest now! LoL
      
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      1. Tysons Engineer
        
        January 21, 2015
        
        Its impossible to disrupt a monopoly when that monopoly is forged on public agreements for the infrastructure that all competitors would also need to use, ie power grid itself.
        
        If that power grid were open to the public, as it should be considering the nature of the infrastructure relying near solely on public easements or public agreements to provide said easement negotiated by local jurisdictions on behalf of the power company, alternative energy sources would be market sustainable. It’s the reality of it.
        
        Otherwise you are stuck with decentralized systems only… which can work, but are not free market capable because you have to provide steady power. Its doable, but you have to have multiple sources, not just solar, a combination of solar, wind, and geothermal as well as extensive battery systems and backup power… the combination of which will never be cheaper than burning coal or other combustibles regardless of how cheap the alternative energy materials get.
        
        Caveat, you may see planned communities that are off the grid, and therefore can share the cost of centralized regulator/grid. There is a town in japan that was created this way.
      2. larryg
        
        January 21, 2015
        
        I was thinking the same thing. How do you disrupt an entrenched govt-supported (pollution allowed, guaranteed profit) monopoly ?
        
        it’s not impossible as companies like Uber prove but it’s a high bar.
      3. Tysons Engineer
        
        January 21, 2015
        
        For those interested
        
        http://www.spiegel.de/international/germany/a-power-grid-of-their-own-german-village-becomes-model-for-renewable-energy-a-820369.html
        
        http://www.energyandcapital.com/articles/panasonics-japanese-smart-town/3485
        
        I can’t find the town that is fully populated on google now, but interesting story happened after the deadly earthquake, psunami, and nuclear disaster. That town was one of the few in Japan that had steady power despite all that had happened.
        
        These things are of course only possible in new built areas that don’t have the infrastructure and sunk costs in place, and can plan for 21st century technology. Considering the US is still growing (see the southwest) and those areas of growth are actually in prime renewable territories, it wouldn’t be very hard to actually make this model work for planned towns of the future.
        
        Those that are in existing areas of course could benefit from a reduction via other means that Japan and Germany have instituted, including requiring power companies in those areas to show a higher mix of renewables also. They don’t have to be off the combustibles completely to make a huge difference just by addressing future growth and decommissioning of existing outdated plants to be replaced with renewables.
        
        Some additional reading
        
        http://inhabitat.com/german-village-produces-321-more-energy-than-it-needs/wildpoldsried/
      4. James A. Bacon
        
        January 21, 2015
        
        The fundamental change we need to make is to open up the power grid. We need a smart grid that allows for much more flexible, decentralized generation of power, while at the same time recognizing that Dominion, and only Dominion, has the responsible for ensuring that everyone has a reliable supply of power. That’s the conversation we need to be having. Once we can figure that out, we can move on to the issue of renewable energy.
      5. larryg
        
        January 21, 2015
        
        I agree with Jim’s statement. We’re whistling in the breeze until the Grid has the ability to dynamically adapt to changing generation and usage conditions.
        
        and if you think about it – that’s actually counter to Dominions interests which are to preserve and protect their base load generation.
      6. TooManyTaxes
        
        January 21, 2015
        
        TE, I think we are on the same page or, at least, close. In practical terms, Dominion monopolizes all aspects of power generation and delivery for most customers. The distribution of electricity seems to me to be a natural monopoly with massive economies of scale within its franchised territory. No one else is going to spend the billions to interconnect homes and businesses with generating stations and the regional grid.
        
        I think the difference between electricity and telecommunications is that the former can deliver a single commodity, while the latter’s ones and zeros can be turned into countless services. Also, I understand that the metallic cables and wireless of a power company have a more or less fixed capacity, while fiber optics and digitized radio waves have more or less infinite capacity. So I’m with you. I don’t see anyone willing to replicate all or a major part of Dominion’s network. I also agree that decentralized networks, while sounding good, are really limited when their generation source goes down.
        
        From what I understand, competition at the wholesale level is more robust, but it doesn’t provide discounts sufficient to attract consumers. The Virginia retail electric competition was a joke. Instead of offering lower prices, every competitor wanted people to pay more or pay a fixed rate that may or may not be higher than the retail price with fuel adjustments.
        
        Today, telecom companies convert electrical signals to light and back again for voice and data services. Perhaps some brilliant person will figure out how to convert “retail electric power” into light and back again. Add alternative sources of generation and, maybe, Dominion is toast – or maybe not. Or maybe the source of competition is sending power over the electromagnetic spectrum.
      7. larryg
        
        January 21, 2015
        
        TMT – I don’t know about your electric bill but mine has two line items – one for “delivery service” and the other for electricity.
        
        how about yours?
larryg

January 21, 2015

Well.. not so much NoVa – it’s the headwaters of the Rappahannock River.

I’m not sure it’s PR. I think Dominion is actually going to dip their toes into the solar world to generate some real data from a real system and to start building a knowledge base for the future.

I keep reading that SOLAR has plummeted and that people can put solar on their roofs with a payback of less than 5 years and add a stand-by generator to get them off the grid all together. I’m not sure I buy that. We have a backup generator and it can cost $20 and up per day to run it.. it’s not a viable longer-term power generator. If you tried to run it at night -you’d end up with a $500 a month or higher electric bill – although there is a big cost difference between running it on natural gas as opposed to propane as we have.

If nat gas plummets in price like it has been – who knows.

the real question is – between solar roofs and the adoption of LEDs, on-demand water heaters and other electricity-saving strategies – will people reduce their use of grid power?

If that happens – it’s going to affect Dominions investment in it’s existing power generation facilities which could well be “stranded”.

In such a scenario – Dominion will go to the GA to up the rates to recover their costs – and that will, in turn, push even more people to solar/nat gas/conservation.

I think this solar plant has a purpose and is more than PR.

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James A. Bacon

January 21, 2015

Good question: If solar is so economical, why doesn’t Dominion build solar itself? Please explain to me how Dominion benefits from *not* building solar if it is guaranteed a return on its investment and if building solar would actually lower rates for rate payers.

I noted in my post that I’m not a big fan of Dominion’s approach to building and transmitting power. One reason I say that is that Dominion has discouraged independent power producers from competing in its territory. That’s one thing you and I agree upon. That needs to change. I also think we need to move more aggressively to a decentralized smart power grid. One day, renewables will be economical. We could take full advantage of them if we had a smart power grid.

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Peter Galuszka

January 21, 2015

The TD reports that Dominion has a plan to make it easier for third parties to sell to it. Like this rather small solar plant, I wonder what took them so long.

Also, D the R is absolutely right. The base load ways of generating — coal and nuclear– have always been stuffed with subsidies. The coal industry has gotten very sweet tax and severance deals in Virginia although Terry McAuliffe is trying to change that. Conservatives never admit that Big Coal left behind a ruined population and environment that is unfair and costly.

As far as subsidies for nukes, OMG!

WHat gets me is how conservatives always trot out their assumptions on extra cost when it comes to renewables. They completely ignore that if Dominion wants a third nuke at North Anna, what’s that going to be? $10 billion? $15 billion? $20 billion? Dominion and its shareholders won’t be paying for that — you and I will be.

No one bothers to break down those costs on a piddling extra few cents per bill rate.

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1. James A. Bacon
  
  January 21, 2015
  
  You won’t find me defending subsidies for nukes. And I’m fine with eliminating subsidies for fossil fuels. Every energy source should compete on a level playing field.
  
  The tricky part, I’ll concede, is factoring in the cost of pollution for fossil fuels, most notably coal. It’s hard to know how much that pollution is costing society. I’d go along with a carbon tax — although determining how high that tax should be in order to offset the externalities associated with fossil fuels would be difficult to determine. I think we all agree that natural gas is a much more benign fossil fuel than coal.
  
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  1. larryg
    
    January 21, 2015
    
    cut the subsidies to DOminion and give it to SW Virginia factories to make solar panels.
    
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  2. Acbar
    
    January 21, 2015
    
    Jim, you are absolutely right with your Bottom Line. But I agree with the need for a carbon tax as a necessary way to factor in the externalities from using fossil fuels. As DonR says, solar’s value isn’t obvious without some way to reflect that in the price of the product. Not so sure about natural gas being so benign, either — relative to coal yes, but carbohydrates are what they are. The realistic option is nuclear: but then there’s Peter’s principle: “As far as subsidies for nukes, OMG!” Of course we pay for it, Peter.
    
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    1. larryg
      
      January 21, 2015
      
      it’s bad news on methane:
      
      If methane is allowed to leak into the air before being used—from a leaky pipe, for instance—it absorbs the sun’s heat, warming the atmosphere. For this reason, it’s considered a greenhouse gas, like carbon dioxide.
      
      Is it as important to address as carbon emissions?
      While methane doesn’t linger as long in the atmosphere as carbon dioxide, it is initially far more devastating to the climate because of how effectively it absorbs heat. In the first two decades after its release, methane is 84 times more potent than carbon dioxide. Both types of emissions must be addressed if we want to effectively reduce the impact of climate change.
      
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TBill

January 21, 2015

I like the idea of giving green energy advocates the option to pay extra for wind and solar. I favor wind solar over old coal burning technology and probably nukes, but natural gas is the base case in my view.

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1. larryg
  
  January 21, 2015
  
  I’m unclear on the longevity of “tight” oil and gas.
  
  Do you know Tbill?
  
  is it 5, 10 or 50 years?
  
  My view is that when solar hits a price point – new houses will be built “energy efficient” and retrofits will become a highly profitable business and we’re already seeing people who are willing to pay “more” for Solar before the prices started dropping.
  
  I think you might underestimate how people feel about our reliance on coal and nukes.. and their willingness to reduce their energy consumption.
  
  I don’t know how good Dominion is at looking downstream but sometimes I get the impression – they’re not .. at all.. they show little even in their words about where we should be pointed in the future.
  
  Even Duke Power, and Southern seem to have a wider vision.
  
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  1. TBill
    
    January 22, 2015
    
    No I am not exactly sure …but you probably know I was a nat gas advocate before fracking, feeling we should import via CNG. I see CNG as whole new energy source, available to use if the infrastructure is available. I see natural gas as a desirable but hard energy source to use, because it requires pipelines, terminals, etc. So if a country has the ability to use natural gas, I assume it will be available on the global market just due to the fact some countries cannot use it due to lack of infrastructure…
    
    Of course, let the better energy source win as far as economics. I am not saying I would stop solar if solar is the cost-effective solution. Roof top solar seems to make perfect sense to me. I always favor less centralized solutions.
    
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    1. larryg
      
      January 22, 2015
      
      nat gas for electricity generation ? or other?
      
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Hill City Jim

January 21, 2015

I am having difficulty with the math.
$47,000,000 for 5,000 homes is $9,400 per home. And you expect the ROI to be pennies? Not with the power company I use!

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1. Tysons Engineer
  
  January 21, 2015
  
  If the power company were to rely on only those 5000 homes to pay for pure solar power (not how any of this works btw) then it would be $26 more per month, based on a 30 year life cycle of solar. Really its the equivalent of 5000 homes worth of energy, split among the 8million+ users (plus commercial of course) which creates the 2 cent per month increase.
  
  Expanding that as Jim did would mean if they were to do 1,000,000 homes equivalent, they would spend $9.4billion, again for a per home cost of $26 more per month. If the cost is disbursed to all users (again it doesnt actually go to 1M homes, it is 1 power grid) then it would be $4 additional cost per month on everyone’s power bill.
  
  But, my main point is, when you centralize you gain a lot of economy of scale benefit, so the reality is if they were to do this for 1 million homes, the cost would be more like $2.50 to 3 per month more on everyone’s Power bill. That would change the share of alternatives to be above 10% in the commonwealth. $3 per month to see that happen is something that plenty of people would be on board for if it means healthier fisheries, less coal pollution, and less strip mining.
  
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  1. Tysons Engineer
    
    January 21, 2015
    
    Should note, population might be 8+ million, but total households + commercial properties is likely less than that. Not sure exactly how many household equivalents are in the commonwealth.
    
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    1. larryg
      
      January 21, 2015
      
      census – households – 3,022,739 2.6 per unit average.
      
      but I do have another question for TE.
      
      you say centralize – but would that be?
      
      I know nat gas turbines are distributed to regional and sub-regional locales…
      
      is the one in Remington perhaps sized by some kind of thinking relative to service area?
      
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      1. Tysons Engineer
        
        January 21, 2015
        
        In short, shared common infrastructure. Its the same reason why giant factories are more efficient than lots of smaller factories. The one negative of colocating is more susceptible to local weather patterns, so its a pro-con.
        
        Massive solar projects also can use more advanced concepts like Heliostatic power plants which are one part solar one part thermal
        http://en.wikipedia.org/wiki/Heliostat
        
        That is not possible on smaller scale municipal systems in the 10-50MW range. Well, it’s possible, but the benefits are muted would be a better way to put it.
        
        I would say that the best program in terms of efficiency and value is actually purely decentralized systems, ie roof top per user solar but this MUST occur with pure netmetering to make them more efficient. IE to get the marketability to work out, you need to be able to sell back to the grid excess. But in terms of efficiency of actual power production nothing can beat it because 70-80% of the power goes directly to the user without transmission. Transmission losses can be 1/3+ of energy production depending on distance from plants.
        
        That is why, I am all for Dominion building their own, thats the only way they are willing to play political ball evidently because they are a for profit of course. But in terms of energy production the most efficient would be purely decentralized individual power production. Therefore centralize massive plants are the most efficient, while at the same time, politically palatable solution for Dominion. Otherwise they lose money.
        
        I’d assume the Remington project size is a function of either the available land they already own, or a set cost they are willing to spend.
      2. larryg
        
        January 21, 2015
        
        can any of the decentralized – even the Remington project actually work connected to a conventional grid that cannot load balance in real time?
        
        what I get in reading sometimes is that it’s not only that solar goes away at night but that it can vary quite a bit during the day – AND out of synch with demand.. i.e. lots of solar power generated at a time when demand is low or he reverse a lot of demand and weak, fluctuating solar.
        
        so that might be one of the thing that Dominion is doing – getting data ..
      3. Tysons Engineer
        
        January 21, 2015
        
        I don’t disagree with the approach. You don’t want to create a massive solar farm as your first project if you are Dominion, there’s a lot of learning and as you said implementation to your specific infrastructure. I was just pointing out that Jim’s back of napkin analysis would likely see better than linear interpolation if scaled up after, of course, implementing this first plant or future additional smallish scale plants.
larryg

January 21, 2015

sorry – is the SOLAR in Remington – a size perhaps contemplated or just a small pilot or nothing to do with size?

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larryg

January 21, 2015

@TMT – this is my bill:

Distribution Delivery $58.00
Electricity Supply Service
Power cost Adjustment
Virginia Consumption Tax
County Tax

the $58.00 is the same each month.

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larryg

January 21, 2015

oops, I got that wrong – the distribution delivery changes per month. my bad.

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Reed Fawell 3rd

January 22, 2015

This is one of the most informed and useful expositions on the practical applications of solar power, and current state of the art and market today, that I have read to date. My thanks to all concerned.

I wonder if more even detail might be provided as to how to best mix the various energy technologies together for maximum cumulative advantage for all consumers, whether they be commercial, industrial or residential?

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Richard

January 23, 2015

I think we’re looking at this all wrong.

You have to look on this as an experiment, or perhaps as practice, for designing a solar energy alternative. No technology starts out fully developed and cost-competitive when it begins. The first nuclear plants weren’t the massive complexes that we are used to now. I daresay that when coal-fired electric plants were first constructed that they are were not as efficient as they are now.

Electric utilities are public franchises paid on the basis of how much electricity they sell and how much it costs them. The have no real competition and no real incentive to lower the cost of generating electricity or to minimize environmental impact, except the incentives that come from avoiding the wrath of regulators and state legislators. If we want the utilities to work on alternatives to traditional power generation, government has to encourage them to do so.

The conservative approach to power generation is to diversify. It give us alternatives when there is a problem with coal or natural gas. Solar is more expensive now, but it gets cheaper as the industry develops, and could eventually result in cheaper and more environmentally friendly power generation. If the industry is going to develop within the current industry structure (government franchises) , it can happen only with government encouragement.

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1. larryg
  
  January 23, 2015
  
  good comments which made me think a little further and to ask the question:
  
  is there a conflict to a public service monopoly selling stock and having stockholders?
  
  who is the company responsible to – the investors or rate payers?
  
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2. James A. Bacon
  
  January 23, 2015
  
  Fair enough. While Dominion may operate solar plants elsewhere, Dominion Virginia Power does not. The utility will get experience operating a solar facility and dealing with problems entailed with integrating it into its electric grid — a necessary precursor to using solar power on a more widespread scale when it does become economically competitive. As a small-scale experiment, it probably makes sense. I was unfair to label it a PR stunt.
  
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