Bacon's Rebellion

Democracy Thrives in Sunlight

Electric Plant Construction Costs Getting Cheaper

—

by

James A. Bacon
in

Graphic credit: Ars Technica

As everyone knows, the cost of renewable energy is getting cheaper all the time. But so are the costs of competing energy sources such as natural gas and nuclear.

Integral Molten Salt Reactor (IMSR) nuclear power technology, which uses molten salt as a cost-effective means to dissipate heat, is making its way through the regulatory hoops in Canada, according to The Next Big Future. Proponents claim that IMSR plants will be so much simpler and less expensive to build than conventional nuclear plants that they can be financed by conventional means. Construction time will be four years instead of eight; construction costs less than $1 billion compared to $6 billion. The levelized cost of electricity (which includes construction, financing, and fuel costs), advocates say, will be less that of super-efficient combined-cycle natural gas plants.

I know nothing about this technology or the claims made on its behalf, so I cannot say if they are credible or not. The larger point is that the nuclear industry is not static, and that new nuclear technologies have the potential to be game changers.

Meanwhile, says Ars Technica, the cost of building natural gas generators dropped 28 percent between 2013 and 2015, as super-efficient combined cycle plants came on line. Lower construction costs combined with technologies that capture more heat from a BTU of gas as well as vast and inexpensive supplies of of the fuel from the Marcellus and Utica shale basins have made natural gas more competitive economically than anyone expected only a few years ago.

Bacon’s bottom line: The energy industry is highly competitive and highly innovative. Refining and processing technologies under development could even revitalize the fortunes of the coal industry. The dynamism of the energy sector makes it difficult to make long-term predictions about the comparative economics of gas, coal, nuclear, wind, solar, and hydro with any degree of confidence. When we ponder the regulatory future of Virginia’s electricity industry, we should design a system that is nimble, adaptable, and does not lock the state into a particular energy path.

Share this article

ADVERTISEMENT

(comments below)

ADVERTISEMENT

(comments below)

Comments

56 responses to “Electric Plant Construction Costs Getting Cheaper”

  1. LarrytheG Avatar
    LarrytheG

    I have no doubt that they will eventually crack the nuclear nut conundrum but unless the replacement technology can ramp up and down quickly – it too will be just as incompatible with renewables which have to have a complementary generation source that can coordinate and take over when renewables decline in output.

    It might be interesting if we actually develop truly CHEAP nuclear so that it actually would obsolete renewables! I’m sure Reed would like that!

  2. TomH Avatar
    TomH

    The chart of capital costs is interesting, but not fully informative. The period shown was a time of historically low interest rates, which would drive down the capital costs of a whole range of projects. Considering only capital costs does not inform choices for future generation. Costs such as solar and wind are almost entirely capital costs, but no fuel costs, which keeps their cost of energy stable for 35+ years. Coal, gas, and nuclear units all have fuel costs that are on an increasing cost trajectory. That is why levelized costs of energy (LCOE) which include both capital, O&M, and fuel costs are used to select future generating units.

    Hydro is a puzzle. I don’t know of any large new hydroelectric facilities in the U.S. This could be from new pumped storage projects in Scandinavia built to store excess wind energy from Denmark. Or it could be small run-of-river projects or just turbine replacements for existing facilities.

    Larry is right. Nuclear is a bad fit for an increasingly dynamic modern grid. Molten salt technology has been around for decades with little significant commercial potential. We heard that new reactor designs would solve the cost issue for nukes, but all of the projects using the new designs have melted down in South Carolina and Georgia. Nuclear units will never be able to be conventionally financed without the federal government’s loan guarantees, they are too risky. Taxpayers will take a multi-billion beating from the recently failed nuclear projects. Every nuclear project in the world right now is pointing to increasing nuclear costs and substantial schedule delays. Nuclear fuel is also headed for a prolonged price increase.

    Biomass takes us in the wrong direction for CO2 emissions and there is limited fuel production potential.

    Natural gas-fired power plant efficiencies have improved but they are overwhelmed by the projected increases in fuel costs (up 3-4 times over the next 10-15 years, according to Dominion). The attractive economies of natural gas-fired units have come from the surplus in natural gas production that has driven prices down, because producers were unable (because they would go bankrupt) to adjust their production to meet lower market demand. The rush to export natural gas will increase domestic prices and make natural gas an increasing price technology.

    The only technologies that offer stable or decreasing energy prices are solar, wind and energy efficiency.

    We will have an increasingly diverse mix of generation over the next few decades. The important issue is what should we build more of – if anything?

  3. CleanAir&Water Avatar
    CleanAir&Water

    Falling construction costs may not be enough to save monopoly generation. A recent poll of utilities asked … “What type of gas-fired power generation do you plan to install over the next three to five years?” Only 18.3% said Combined Cycle plants larger than 400 MWs. 45% of utilities said they had no plans to build more gas plants in the next 3-5 years.

    NERC’s new long-term review reported that the growth of electricity demand in North America is at the lowest level ever. “As we see the resource mix change, we are really making a call to action to industry and regulators to increase the robustness of planning approaches” to equip gas and renewable generation to fulfill reliability missions” .. the old rationale for baseload.

    The role of gas is changing … “With reliability and responsiveness driving investment, cost-effective natural gas assets will continue to have a place in balancing the modern electric system. Distributed generation (DG) tends to rely heavily on renewables — especially on the larger scale, where solar and wind power easily can be applied. But these power sources are notoriously intermittent; until energy storage becomes more robust and cost-effective, natural gas will be critical for filling the gaps.” As Larry says that does not leave room for new inflexible nuclear.

    AND investors are rethinking where they put their funds, seeing policy changes like the one in France where The French parliament passed a law that bans exploration and production of all oil and natural gas by 2040 within mainland France and all overseas territories.

    Finally, “The sustainability nonprofit organization Ceres joined forces with investors and partner organizations worldwide today to help launch a new five-year global initiative led by investors to engage with the largest corporate greenhouse gas emitters in North America and around the world to act on climate change. The effort is backed by more than 225 global investors, including nearly 70 North American investors, with USD $26.3 trillion in assets under management at the time of launch.”

    Change is here.

  4. LarrytheG Avatar
    LarrytheG

    Makes me wonder if solar could be used to create hydrogen fuel.. .which then would essentially act like a “battery” to generate when solar is not available.

    Solar CAN break water apart into hydrogen and oxygen… but I think it’s not cheaper than gas – at this point.

    https://phys.org/news/2017-10-hydrogen-fuel-sunlight.html

    the other thing – if enough people actually do believe the threat of global warming.. this could become an imperative.. for both govt and the private sector… to completely rid ourselves of having to burn fossil fuels.. and that includes electrifying transportation.

    Most folks inherently realize that burning fuels is pollution and it actually is harmful.. the disagreement comes with whether or not it is a threat to the earth or just to humans… (which sounds a little dumb to say it that way).

  5. TomH Avatar
    TomH

    To meet global climate goals, all fossil fueled sources of electrical generation (coal, oil and gas) must be removed for our worldwide electrical system by 2040. It does not make sense to build a new combined cycle unit in 2025 that takes 36-40 years to pay off, if it must be retired by 2040.

    Utilities have traditionally been good long-term planners (but usually erring on the side of overbuilding). This information should be factored into our long-term plans. Dominion is projecting to add gas-fired units to its generating fleet through 2042, considerably increasing CO2 emissions in Virginia.

    For those of you who choose to ignore CO2 and climate related issues. Just think of this in terms of controlling energy costs. Every time a new gas-fired unit is built, your rates go up. After the unit is built, your rates will continue to go up as a result of increases in gas prices.

    Stable or decreasing energy prices can be provided by new technologies that have no fuel cost and are decreasing in price by 50% every 4-5 years. And from greater energy efficiency that offsets the need for new generation 24-hours a day, all year long. More reliable than the best conventional source of generation.

  6. Bob Wallace Avatar
    Bob Wallace

    A couple of points:

    1) The installed cost for PV solar is badly out of date. Prices have been falling very rapidly. Earlier this year utility fixed mount PV solar was $990 per kW. Single axis tracking prices had fallen to $1,080 per kWh.

    Not only has the price greatly decreased but by moving to single-axis tracking the capacity factor has risen to around 30%. With tracking the solar day is greatly lengthened. And we’re starting to see installed solar for under $0.04/kWh.

    2) The cost of electricity generated by wind and solar have fallen so much that, unsubsidized, they are now the two least expensive ways to generate electricity.

    ” Proponents claim that IMSR plants will be so much simpler and less expensive to build than conventional nuclear plants”

    As someone who has watched the progression of nuclear for over 50 years I’ve seen so many promises of “Next time it will be affordable” and deliveries of “Oops, wasn’t affordable”. New nuclear (Vogtle and Hinkley Point) are expected to deliver electricity for more than $0.12/kWh, higher than US retail costs. To make nuclear competitive someone would have to cut the cost of a mature technology by more than 50%. That is not something that would be easy to achieve.

  7. Bob Wallace Avatar
    Bob Wallace

    “Biomass takes us in the wrong direction for CO2 emissions and there is limited fuel production potential.”

    Biomass from timber and ag waste could serve as ‘deep backup’ for extended periods of low wind and solar. The carbon emitted by the plants would be carbon that was already above ground. If biomass can help us prevent extracting more fossil fuels that’s a positive.

    “The only technologies that offer stable or decreasing energy prices are solar, wind and energy efficiency.”

    Storage prices are also falling rapidly.

  8. Bob Wallace Avatar
    Bob Wallace

    ” It does not make sense to build a new combined cycle unit in 2025 that takes 36-40 years to pay off, if it must be retired by 2040.”

    It might. CCNG plants can be run on methane from sewage, compost and landfills. Also with hydrogen generated with electrolysis.

    Right now we have only limited ways to cover the few times each year when wind and solar inputs are low for several days in a row. Batteries are getting cheaper but storing for more than three days seems to be too expensive.

    Our options are pump-up hydro with large upper reservoirs, flow batteries with large storage tanks, and burning something. If the something is naturally occurring methane or clean hydrogen we can live with that. No new carbon is added to the above surface cycle.

    Additionally, coal has a very high external cost. We pay a lot of money to cover the health damage created by coal pollution. If we include the health and lost labor savings value of a gas plant the real payoff may not take all that long.

    1. TomH Avatar
      TomH

      “It might. CCNG plants can be run on methane from sewage, compost and landfills. Also with hydrogen generated with electrolysis.”

      These options release more greenhouse gases to the atmosphere. They are man-made disruptions to the natural carbon cycle that releases carbon to the atmosphere rather than sequestering it in the earth. There is a great deal of new carbon (or carbon equivalents) that are released from these sources of energy to the “above surface cycle”.

      Hydrogen is not a naturally occurring fuel. It must be created from a hydrogen rich source such as ammonia or methane. Hydrogen created by electrolysis is very energy intensive. The hydrogen-oxygen bond is very strong and takes lots of energy to break. That energy has to come from somewhere – from electricity generated by renewables or conventional power plants. It would be cheaper to store this energy using the new solid-state batteries that are under development, or for longer-term use, compressed-air storage (although the most promising possibilities for this have suffered a recent set-back), or other technologies that are coming.

      I am not sure how you are calculating health or labor savings benefits from gas plants. If you study the health effects from fracking, and the overall greenhouse gas releases from the natural gas supply chain you get health and climate effects not too different from coal plants.

      For those rare occurrences of prolonged low or no output from renewables, our existing power plants can fill the need over those time periods. These units will be used less and less as cheaper energy efficiency and renewables and battery storage displace them. In Virginia, these units will still be in the rate base and paid for by ratepayers whether they are used or not. It makes sense to keep them as a ready reserve and allow the owners of these units to earn money for them in the capacity auction. The higher our percentage of variable generation becomes the more valuable the dispatchable character of the gas-fired peakers, etc. becomes and the capacity auction prices will increase.

      Our energy system will evolve in a steady, reliable fashion if we have the right strategies and regulatory schemes in place.

  9. LarrytheG Avatar
    LarrytheG

    Hopefully by 2040, we will have some source of power that will be available when solar is not generating ….

    To me that’s the critical issue that has to be resolved if we are really serious about not burning fossil fuels… otherwise.. it’s going to be a tough slog.

    As I’ve said before – when I see islands that currently import diesel fuel to burn to produce electricity stop importing that fuel oil and become self-reliant – I’ll be more confident that we actually have reached a solution.

    1. CleanAir&Water Avatar
      CleanAir&Water

      Larry, here are some comments on the state of storage. It is still under development for longer term but microgrid type sharing is one alternative to fill the void, and researchers believe we are on the way to make 100% renewable doable by mid-century.
      https://www.ecowatch.com/100-renewable-energy-by-2050-2519335518.html

      Research, compiled by Finland’s Lappeenranta University of Technology (LUT) and the Berlin-based nonprofit Energy Watch Group (EWG) says that the existing renewable energy potential and technologies coupled with storage can generate enough energy to meet the global electricity demand by 2050. “A full decarbonization of the electricity system by 2050 is possible for lower system cost than today based on available technology. … The researchers estimated that the switch will bring the total levelized cost of electricity on a global average down to €52 ($61) per megawatt-hour (including curtailment, storage and some grid costs) compared to €70 (82) megawatt-hour in 2015.”

      AND in CA, where energy costs are higher than ours …
      • California regulators next month will consider a plan to replace three natural gas-fired power plants with energy storage, significantly building on the state’s apparent comfort with batteries as grid solutions.
      • The California Public Utilities Commission (CPUC) is scheduled to vote Jan. 11 on a proposal for Pacific Gas and Electric to issue a request for solicitations for storage projects that would replace the Metcalf Energy Center, Feather River Energy Center, and Yuba City Energy Center.

      “Navigant Research forecasts hybrid energy storage system (combined storage and generation) capacity will grow from 78.6 megawatts in 2017 to 2.1 GW in 2026, meaning for utilities, the storage future is here.” Today mostly installed for critical facilities …
      Look to New York next year for release of an energy storage roadmap by the New York State Energy Research and Development Authority (NYSERDA) and an energy storage goal set by state regulators. This year, utilities in states ranging from Indiana and North Carolina to Arizona, New Mexico and Oregon have included energy storage in their long term planning processes.

      Maybe the upfront financial issue has something to do with change on the islands.

  10. djrippert Avatar
    djrippert

    “The energy industry is highly competitive and highly innovative.”

    In Virginia, at least, this is patently untrue.

    When Washington and Lee University in Lexington, Va., installed solar panels a few years ago, for example, the local utility, Dominion Virginia Power, threatened legal action. The utility said that only it could sell electricity in its service area. The university and the solar firm it worked with had to change their lease arrangement and forfeit valuable tax credits.

    “Virginia has long been viewed by solar advocates as a backwater for residential solar due in part to a lack of state incentives and the outsized influence of the state’s electric utilities.”

    “The move also comes as the solar industry and is many advocates in Virginia are making limited progress loosening Dominion Virginia Power’s firm grip on solar policy during this year’s General Assembly. This year’s session formally concludes February 25.”

    http://southeastenergynews.com/2017/02/20/solarcity-expanding-its-southeast-presence-with-entry-into-virginia/

    1. James A. Bacon Avatar
      James A. Bacon

      The statement that “the energy industry is highly competitive and innovation” was clearly meant in a national context of developing new technologies. And it was clearly referring to all energy sectors, not just electricity.

      1. djrippert Avatar
        djrippert

        ” … clearly referring to all energy sectors, not just electricity.” Interesting zig-zag given the title of your article, “Electric Plant Construction Costs Getting Cheaper”.

        I was in San Francisco for New Year’s Eve and Day. Took a tour of the city on New Year’s Day. The guide pointed out many places where small scale (but high priced) mixed use construction was underway. Guess what most of the lots used to be? Gas stations. Regular was $3.20 per gallon. Lots of hybrid and electric cars. I have to wonder how important non – electrical energy is going to be in 20 years.

    2. TooManyTaxes Avatar
      TooManyTaxes

      A problem I see is that a public utility has a duty to serve. In exchange for that obligation, the utility is given a monopoly. Absent the monopoly, cream skimmers will take the customers who are the most profitable. When that happens, the high fixed costs associated with any utility are passed on to lower-volume customers. How is that good public policy?

      Having said this, the GA should amend the statute to permit the SCC to allow for retail competition when the customer electing another generator or the competitor itself to pay fair and cost-justified fees for access to, and use of, the grid and access to the dominant provider’s generation system. That prevents smaller-volume users from having to pick more fixed costs. Of course, if the customer truly opts out from the grid, such that it cannot obtain access to utility power at all or sell excess capacity to the utility (or as adjusted for the PJM process), no standby fees should be imposed.

      1. Acbar Avatar
        Acbar

        Agreed with you, TMT. I think DJR’s view is OBE.

        1. djrippert Avatar
          djrippert

          Thank you for awarding me the Order of the British Empire. I am not sure what authority you have to make such awards but I’ll assume you have some powers granted by Her Majesty, Queen Elizabeth II.

          Given this award I’ll ask that all future references to me be Sir DJR.

      2. TomH Avatar
        TomH

        TMT,

        You are limited by the 20th century (and Virginia’s) view of what a utility is, or should be. You assume that a utility must be responsible for every aspect of the energy system, i.e. they must generate, transmit, distribute, sell, bill, and encourage energy efficiency. This is the vertically integrated utility model that exists in Virginia and many other states. It has worked very well through most the 20th century, but started showing its limitations at the end of the century. As the growth in demand stabilized or declined in the last decade, the shortcomings of this aging business model became even more apparent.

        Other states are exploring separating the portions of the utility business that make sense; keeping as a monopoly those things that reduce duplication (the wires – transmission & distribution), and opening up things like centralized and distributed generation, storage, demand management services, energy efficiency, etc. Utilities can still operate generating units,etc. in this scenario. They just must do it on a level playing field with other organizations without asking ratepayers to assume the risks and pay for bad decisions. If we pay our utilities properly to run the grid, and the transactional system for all parties, the utilities still prosper, innovation increases, costs decline and we make better decisions because they are not all made by just a few organizations.

        1. TooManyTaxes Avatar
          TooManyTaxes

          Tom – I understand your positions, but mine reflect the current state of the law. If a company has a duty to serve all, it needs a monopoly or pseudo competitors will come in and cream skim. The results are much higher rates for those who remain – generally small businesses and residential customers. The law can change. But should it?

          As I recall, much of the nation tried electric deregulation and some tried separation of generation and distribution. It was a colossal failure. There was no retail competition. Perhaps it was too soon. But with the track record, I would hope legislators would move carefully.

          If we move towards separation or competitive generation, if you will, we need all users of the grid to pay for its maintenance and updating. We also need to eliminate government support of generation through subsidies and tax credits. Otherwise we have competition based on artificial economics. And something that is very hard to unravel.

          Also, we won’t have competition until the new competitors (which could include the incumbent through a fully separate affiliate) offer lower-than-current-market prices. I don’t see that coming.

          For several years, I received proposals from a Dominion affiliate selling natural gas in competition with Washington Gas. What was offered? Not a lower price, but rather, a higher price guaranteed not to increase for a year. What a joke. I also remember proposals from renewable energy generators offering me higher-priced green electricity. Duh! This is not competition. It’s the start of crony capitalism.

          Before we junk today’s model, I want to know why elected officials and government agencies think competition means price cuts for residential and small business customers?

          1. TomH Avatar
            TomH

            TMT,

            You make many good points that must be addressed in considering how to make our current system work better. There are 19 states that have unbundled generation from retail sales. It seems to be working quite well. The nine RGGI states, for example, have done this. The utilities do not have to protect their generating assets or build new ones to make money. This has allowed them to embrace energy efficiency and renewables. As a result, they have significantly lowered their CO2 output, and saved their ratepayers over $2 billion since 2009. During that same time period, costs to ratepayers in Virginia increased, especially from what it should have been.

            I think your memory of failure applies mostly to California. In the late 1990s, they attempted to open up competition to improve supply and lower prices. The regulators caved to pressure from the utilities to maintain many of the old rules. So they created a system that was somewhat like the old system and a little like what a more modern system needed to look like. But what they created was a system that was not enough one way or the other to make it workable and it was vulnerable to manipulation. Enron and others were happy to provide the manipulation and the hybrid failed miserably.

            All variations of the new schemes under consideration keep utilities in charge of the grid. Every customer does pay for grid maintenance and updating, as you suggest. Many schemes allow utilities to compete in the generation marketplace on an equal footing with third-parties, but ratepayers do not assume the risk and costs of new units. The units are paid for by revenues from wholesale sales of energy. Legacy units built under a cost-of-service scheme are still paid for under the original terms. Avoiding putting new units in the rate base helps lower energy costs. Making units pay for themselves on the wholesale market discourages utilities from building units unnecessarily in order to get a long-term stream of revenues from captive ratepayers.

            A significant source of revenues for the utilities comes from building and operating a platform, the grid and transactional system to settle the payments between parties. Amazon, Google, and Facebook, are doing quite well in the “platform” business.

            I would like to see subsidies removed from all types of generation. To me competition means competing on the merits of your solution, not seeing who can buy the most legislative favors to advantage themselves and disadvantage their competitors. The wind and solar subsidies are due to expire in a few years, and they will do fine without them. But losing the far larger subsidies for fossil fuels and nuclear would cripple those industries. I doubt that Congress would pass such legislation. Recovering the hundreds of billions of dollars per year that go to the fossil and nuclear energy industries would help with the annual deficit. But too much money goes to Congress to keep that welfare program in place.

            Those industries see the threat that lower cost new energy technologies pose to their businesses. They were able to get provisions in the new tax law that hamper renewables and have lobbied for solar tariffs to be applied that will aid just 2-3 U.S. businesses but will add to the energy costs of families and businesses nationwide.

            The price savings comes from creating an open market for innovation and the application of lower cost technology. As long as the utility business model requires them to build new plants and increase revenues each year in order to make money, customer costs will continue to increase and obstacles will be erected to incorporating these new technologies. The utilities will want to own and control it all. Their calculus will be about what is best for the shareholder and they will use legislative levers to reduce the regulators ability to protect the ratepayers.

            The bad examples you refer, come from partial, ill-conceived solutions that are often supported by utilities to prove that we should not change the status quo.

            There are ways for utilities, new businesses, and customers to win. It will require careful consideration and the political will to move towards a better solution, rather than succumb to political pressure to keep things as they are. I believe a revised system would be better for utilities too. Hanging on to the old too long, just because it is known and currently profitable, will only make the inevitable adjustment more painful and expensive for all.

          2. TooManyTaxes Avatar
            TooManyTaxes

            Tom – My comments were based on my personal and limited experience in Fairfax County. Unlike telecom, where choices have exploded and prices dropped due to competition, “competition” in the energy industry offered higher, but often stable prices.

            I don’t see Dominion as saintly, but I trust what that company says much, much more than any environmental group or other proponent of changes. From what I’ve been reading, here and elsewhere, the costs for renewable energy are dropping and, absent market manipulation, will replace much of older technology, over time. Environmentalists seeking to impose change by rule are merely looking for power and money. I don’t trust them on energy matters any more than I trust the MSM to report the factual news.

  11. LarrytheG Avatar
    LarrytheG

    I still stick with my original premise when it comes to reducing fossil fuels.

    When I see island nations discontinue electric generation from diesel fuels.. I’ll believe we have reached what the studies say we can do.

    I’m a believer in what we do – not what we say we will be able to do.

    No one is more an optimist than I … on this issue – but I’m also duty-bound to be from pragmatist from Missouri… show me – don’t tell me.

    1. TomH Avatar
      TomH

      Larry,

      You have made this comment numerous times. I have provided you ample evidence that it is happening now. Yet you repeat, that you will have to wait and see someone doing it before you believe that it is practical.

      I have given you specific information about two solar/storage facilities on Kaua’i (one in operation, another under construction) where solar energy produced during the day is being stored to meet the evening peak. This is displacing diesel generators that have traditionally met this need, because the solar/storage facility is considerably less expensive. The new installation will be 30% cheaper per kilowatt-hour than the solar/storage unit that went into operation last year. Costs are continuing to decline.

      Solar/storage units are being constructed as part of the rebuilding of the grid in Puerto Rico.

      Islands do have higher energy costs, so these facilities make sense now. It will take just a bit longer for the economics to make sense for these facilities over many parts of the continental U.S. But solar and storage costs are decreasing rapidly, while energy costs of fossil units are increasing because of fuel costs.

  12. LarrytheG Avatar
    LarrytheG

    TomH – yup.. I still keep saying it because right now there are very, very few places that are actually replacing in toto all of their diesel generation.. with nothing but renewables and storage on their own as utilities rather than with govt subsidies and pilot programs.

    No one more than I wants to see this transformation happen but as I said – I have to actually SEE dozens, hundreds of islands that have done this conversion – and especially Puerto Rico which one would think would be the ideal lab for totally replacing imported diesel (and gas) and replacing it with renewables/storage.

    We have to deal with the realities…beyond our own hopes and optimism.

    no one more than I wants to see this actually happen.

    1. TomH Avatar
      TomH

      Larry,

      I guess where we have a difference is in our basic assumptions. You are assuming that solar/storage options have no value unless they can replace fossil alternatives completely.

      I see many places (not just islands) where they are cost-effective solutions today. To me, if they make meet the requirements of specific situations right now, they have “arrived”.

      This is a good example, of why it’s hard to agree on energy solutions. People are coming at the issue with different sets of assumptions. No wonder it is difficult to reach agreement.

    2. Acbar Avatar
      Acbar

      I think Tom’s got you, Larry. It’s not a question of replacing those expensive diesels overnight, or even over years, but of finding the breathing room to replace anything. Many of these island grids are strapped, and already very expensive to run, and can’t raise prices any further to pay for the capital needed to do much more than keep up with load growth, which means nothing gets retired unless it wears out. But if third parties want to invest incrementally in solar and wind, the island grid operater is open to that.

  13. TBill Avatar
    TBill

    I can’t sink my teeth into this article, as far as cost of generation going down. Nuclear is still very expensive and I do not see a short term change in that.

    I do believe natural gas always had a capital cost advantage over coal and nukes. The only thing holding back natural gas in the USA all these years was an incorrect assumption of extremely high future natural gas prices. That assumption turned out to be totally wrong when the bottom fell out of the natural gas fuel cost around 2009 or so.

    At the moment we have favorable commodity prices (for steel on the ground) and low interest rates, so it is probably a good opportunity for the USA to invest in putting “steel on the ground” either for nat gas or wind turbines or whatever investment actually.

    The fact the nuclear is still expensive in this favorable scenario is telling.

    1. TomH Avatar
      TomH

      Gas did not always have a cost advantage over coal. That is a relatively recent phenomenon. For a period, up until the late 1980s, natural gas was banned as a fuel for new power plants because of a concern about its long-term availability. The financial bubble and the meltdown of the mortgage securities market brought a great deal of cheap money into oil & gas exploration since 2008. This was a time of high gas prices (up to $13.50 /mcf) so the use of expensive technologies such as fracking and horizontal directional drilling became economical for the first time.

      Gas producers soon learned that shale-gas wells peaked within 3-5 years instead of decades that was common with conventional wells. They had to keep producing to pay their loans (even if it was below cost). This led to a surplus of production over market demand, which we still see today. This sent the price crashing down to historic lows.

      Wall Street wants gas prices to rise in order to get their money back. Exporting LNG is the quickest way to increase prices.

      If we build a lot of new gas-fired plants because money is available and cheap, even if we don’t need them to maintain a reliable supply of electricity, we put our selves in the position of seeing energy prices rise as gas prices increase. Dominion projects a return to at least $8.00 gas within 10-15 years. It will go even higher if we overdo it with LNG exports.

      We made the same mistake overbuilding LNG import facilities in the late 90s and early 2000s. We thought we needed to import a lot more gas and FERC approved every application. Many import facilities were built, such as Cove Point, that turned out not to be needed or profitable.

      Given the 60+ year history of nuclear power, I don’t see any likelihood of it being a cost-effective choice. It is an inflexible source of generation which is completely the opposite of what will be needed in a modern energy systems.

  14. LarrytheG Avatar
    LarrytheG

    I still think we are a long way from a scenario where solar/wind run and when they are not – that we have storage that will carry the load until solar and wind come back.

    But that should be where we are headed… I’m just not convinced that we have robust enough and cost-effective enough storage to do that on a 24/7 basis.

    Some day – we may have a process where solar creates hydrogen. and we have enough solar to create enough hydrogen to carry – maybe days… if necessary.

    Or we might get a breakthrough in Nuclear so that it’s not deadly and can – cost effectively power the grid – for no higher costs than what solar/wind might cost.

    And we MIGHT end up with either hydrogen/nuclear or something else that enables micro-grids… so that those locations can power themselves like would be what would have allowed Puerto Rico to recover quickly and on a wider basis that they have. You would think if micro-grid technology was actually here that – that’s how the places in Puerto Rico still lacking power from the grid could have come up and operate – at least in a partial mode until the grid is repaired.

    One would presume if this were actually a possibility right now – that it would be happening now. instead of the almost daily news reports telling us that some places in Puerto Rico will not have power until May 2018.

    somehow – we need to reconcile the optimism of those who say we are “here” today/right now and those who say – we will be decades away from any reality like that.

    I think Puerto Rico tells us the reality and I take no satisfaction is noting it.

  15. TomH Avatar
    TomH

    Larry,
    Based on your previous comment that revealed a large difference in our assumptions, I wanted to clarify mine. As a former utility guy, I know that energy planners don’t make decisions based on optimism. You have to be hard headed about the facts.

    My assumptions for the next 15 years (Dominion’s IRP planning horizon) are as follows:

    1. We already have all of the generation capacity that we need to meet demand 15 years from now.

    Energy efficiency is a proven technology and abundant opportunities exist to offset the need for new generation at a cost of 2-3 cents per kilowatt hour. The only impediment to this coming true is our current regulatory scheme and utilities’ traditional belief that building more is their only path to prosperity. Virginia’s population and economy can continue to grow without the need for more electricity, as is currently being shown in other states.

    2. Renewables (mostly solar at this time in Virginia) should be installed whenever it is the cost-effective choice. At least half of the solar additions should be small to medium scale distributed units to add resiliency and reliability to the grid.

    Dominion has recognized that solar is the lowest cost source of new generation in their 2017 IRP. It is also the choice of the customers that are providing only source of new load growth in Virginia (data centers).

    Solar has value without storage. It will contribute low-cost energy whenever it is available. Solar will displace more expensive intermediate and peak load units when the sun is shining. Its variability will be offset by our existing fleet of peakers. As more solar is added and batteries become cheaper, the variability will be picked up by grid sited utility-scale batteries more rapidly and more cheaply than older oil- and gas-fired peakers. Batteries will also economically provide a variety of other valuable grid services such as voltage and frequency control.

    Extended drops in output from solar due to bad weather can be predicted well in advance with new forecasting tools and the existing peakers and intermediate (cycling) units can be brought online to provide a reliable supply of electricity. These units are currently in the rate base and we will be paying for them whether we use them or not. Market-based capacity prices will value them appropriately and help pay for them. No new generation will be required (no rate increases from RACs) and the solar units will reduce our energy costs.

    3. Fifteen years from now the first 60-year old nuclear unit can be replaced by a mix of energy efficiency, demand management methods, and renewables plus storage (of various types, including existing pumped storage). Extending Dominion’s nuclear units for just 20 more years is projected to cost more than $3 billion today. It will probably cost far more when the time comes. There are many far cheaper options for providing this capacity. Fifteen years from now, based on a well established technology learning curve, solar and storage will be 1/8th the price they are today.

    Many others contributing to this blog assume we will need a significant amount of new generation in the next 15 years, just as we have in the past. They also assume that the addition of solar requires backup or storage beyond what we have today. Storage will be added as costs decrease, but only because it will be cheaper than other options and provide greater benefits. If we have enough units to meet demand today and demand does not increase, we will have enough capacity to meet our needs when the renewables do not generate. This avoids the rate increases involved in building new conventional units, and the higher energy costs from running fossil-fired units of all types whenever solar is available.

    To me this seems like a simple solution. It is based on selecting only the lowest priced units of proven technology. There is no need for “optimism” about storage technologies. And lower energy costs are provided by embracing energy efficiency and modernizing our regulatory system, which we should do in any case.

    Utilities, ratepayers, and our state economy all benefit from this approach; rather than having just one winner (the utilities), as we do today. Innovation is encouraged. New businesses are attracted to the state, bringing highly skilled, young workers.

    This appears to be a simple solution. It is not necessarily an easy one to implement until we show the utilities that it will be better for them too. If you see flaws in the logic, please let me know.

  16. LarrytheG Avatar
    LarrytheG

    We do come from different perspectives and I much benefit and are appreciative … and learn …from others but I do have views… 😉

    And myself, as much or more than others wants us to move away from fossil fuels and nuclear as currently implemented but the impediment seems to be even after doing as much demand – side as possible.. we’ll still end up with the fact that renewables do vary in output and thus need some kind of complementary generation – and/or cost-effective storage.

    And my truth model for when we will get to that point where we have a grid that does not rely heavily on fossil fuels – are islands – because they are the places where that has the most incentive / motivation to evolve since the fossil fuels they do continue to need and need – when solar is not available cost a lot more because they have to be imported on boats.. and typically electricity generated by imported fossil fuels like diesel can cost 3 to 4 times as much as continents with native fossil fuels. Those places that do import fossil fuels would seem to have the most to gain by transitioning to solar – AND storage if storage has come of age. I’m sure most islands would stop importing diesel fuel the day they could operate stand-alone.. and so that’s the day I’ll KNOW that we are there… and that we should expect the utilities like Dominion to be moving forward and not giving reasons why we’re not ready yet.

    I was very hopeful that re-building Puerto Ricos grid would present opportunities to install a LOT of solar, perhaps some state-of-the art storage… perhaps some microgrids.. and to “top it off” with imported fossil fuels..

    maybe they are doing that.. anyone know?

    1. TomH Avatar
      TomH

      There are days now where the Kaua’i Island Utility Cooperative meets over 90% of its load with solar (plus storage).

      On Kaua’i they plan to meet 60% of their annual load with solar/storage in the next 3-5 years. They will retire diesel generators when this happens, or at least keep them in reserve for those rare occasions when the sun does not shine.

      Obviously, not everyplace has the conditions that exist on Kaua’i. But you specifically talked about islands being the proof needed for the value of the concept. My point is that solar/storage has value to them today. Every year both solar and storage get cheaper. They built one facility. Another one is underway. More will be built in the future. A steady phased-in approach to new technology makes sense on Kaua’i, just as it does in Virginia.

      Tesla is installing solar+battery facilities in PR now. I have not heard if other providers are doing it too.

      PR is looking at making their new grid a series of interconnected medium-sized grids (larger than microgrids). This will allow cities or segments of the island to isolate themselves from the larger grid during severe weather events. With some amount of self generation, they can maintain a moderate level of operation when other parts of the grid are down. It will also make it easier to bring sections back online without needing to bring most of the grid back up first. This lessens their reliance on the transmission backbone that has caused much of the delay in restoring service to certain areas. Much of the generation exists on one side of the island on PR and most of the load exists on the other side.

      My point about Virginia was that we can add more solar each year, thereby reducing energy costs. The variability can be covered by existing generation that was mostly displaced by solar without new investment. Storage can be added as it becomes cost effective, making the grid even more reliable and resilient. This plan makes economic sense today and requires no bets on some future technology being available.

  17. LarrytheG Avatar
    LarrytheG

    yes. when I say islands – I mean many… beyond the initial/pilot stage….

    so when I see dozens , hundreds of islands running without diesel generators at all – then I will believe that we have reached the point where we don’t need fossil fuels…. except on rare occasions. So that’s my truth model.

    At that point, we’ll KNOW… and we can expect the utilities to actually be moving to do that now..and not be saying “some day”.

    Once the islands have a standard solution and can power themselves from solar and storage and only use the diesel during rare times – we’ll know the grid in Virginia is ready also.

    that’s my view… but I am certainly open to hear others.

    1. Acbar Avatar
      Acbar

      I agree with TomH, the experience in HI indicates we are basically there with time-shifting in high-cost environments like the Pacific Islands. As I said earlier the fact that new technology is cost effective doesn’t mean you can expect to see the old equipment retired anytime soon. There’s the sunk cost issue, but also there’s the load growth on these islands, some of it a backlog pent up due to existing supply and cost limitations.

      The Caribbean is NOT a good example because the PR and VI grids are basket cases. In PR the utility has been so badly run and so poorly funded for so long with so much political interference that it’s a miracle it delivered power at all, BEFORE the storms hit. Of course they should be installing solar there as part of the rebuild! But that takes initiative, and time, and capital, and a working grid, and a vision. They have even bigger problems.

  18. Acbar Avatar
    Acbar

    Let me comment further on one other thing: Jim’s initial point about new nuclear technologies. Nuclear power is one of those tantalizing technologies that always seems to be full of unrealized, futuristic potential for societal good, undermined by bureacratic nightmares and cost overruns and often-irrational public fears and, now, by changing grid generation profiles.

    But strip away the rhetoric. A nuclear reactor is simply a heat source to make steam. The generator is simply a large (several hundred MW) but traditional generating device driven by a steam turbine. The big cooling tower that accompanies nearly every nuclear plant in this country (and unfairly symbolizes them) is simply what’s required to condense and recycle the steam rather than heat the nearest rivers intolerably. And the nuclear heat process is too inflexible for routine cycling.

    The real question is, what’s the future for base load generation of any kind, even on the biggest mainland grids (let alone remote islands). If we are moving into a new era of electric generation where time-shifting and ALM is cheap and “base-load” NGCC units can be cycled and the marginal cost of renewables power is near zero, when available, is there enough “base” left that we can efficiently use more nuclear plants to serve it, 24/7? Especially given the gyrations in the markets for unprocessed uranium recently?

    These questions have to be answered BEFORE you even get to the discussion of newer versus older reactor technologies.

    Nuclear power makes all kinds of sense from the point of view of reducing the carbon footprint of the mainland grid. And developments like increasing electricity’s share of the transportation energy sector may yet flatten the demand profile of the grid — maintaining the attractiveness of old fashioned baseload generation — despite the inroads of cheap solar. But there are LOTS of big questions to be answered (and hopefully they will be answered in Georgia) before the SCC, or DOM for that matter, commits Virginia ratepayers to pay for the construction of NH3.

  19. TomH Avatar
    TomH

    Well said Acbar.

    Although, ratepayers have already paid $300 million for NA3 as part of the rate freeze. With Dominion expecting to recover several hundred million more, with no benefit to ratepayers.

  20. Acbar Avatar
    Acbar

    Like owning a time-share condo in West Miami Beach. “How could we be so stupid?” “Well, we bought it, so now we have to go use it, if only to prove we weren’t so stupid.”

  21. LarrytheG Avatar
    LarrytheG

    re: Caribbean Islands… think bigger .. there are hundreds of islands in the world way beyond the Caribbean and Hawaii… do a little look at Wiki to see them all…

    The thing with Puerto Rico – is precisely since it’s grid and infrastructure HAS been destroyed – it would seem to be the perfect Lab for state-of-the-art replacement to include solar …. storage… and microgrids.. but heck if you don’t like Puerto Rico or Hawaii.. there’s a slew of other islands where one might presume – every acre of new solar – reduces how much diesel fuel has to be brought in… You don’t even have to be closing the diesel plants and replacing them.. just adding solar so you need to burn LESS diesel!

    It’s not an either/or binary choice… it’s about the evolution from fossil to renewables… and if we are NOT seeing this evolution as a widespread trend among most of the worlds islands – why would we expect that kind of evolution in …say Virginia? I suspect Dominion could make the same argument.. that solar is not ready for prime time… and we have no choice but to build more gas plants…. isn’t that, in fact, what they are saying?

    that’s their position, right? We can disagree and do… but heck if Hawaii and Puerto Rico that both burn millions of gallons of fuel oil to produce electricity that costs 4 times as much as in Virginia. Geeze -wouldn’t we EXPECT them to transition to a lower cost fuel if they could – forget about the fossil fuels.. just a lower cost electricity…

    1. TomH Avatar
      TomH

      Larry,
      That is not Dominion’s position. It was in their 2016 IRP, but not in their 2017 IRP.

      A year ago Dominion was proposing 400 MW of solar. This year the plan includes 3000+ MW of solar.

      The SCC told them that they must have their own solar tariff to exclude third-party PPAs. So Dominion developed some special solar tariffs, primarily for the new data centers. The solar additions closely correspond to the amount of demand from new data centers expected to be added in the next five years.

      The gas-fired combined cycle unit scheduled for 2022 was cancelled and the NGCC planned for 2032 was moved up to 2025, but independent opinions (PJM and others) do not support the need for such a unit at that time.

      Acbar told you why we don’t see more solar on islands. There is no way to finance them. The governments and utilities on small islands are bad credit risks. The PR utility was bankrupt. It is only because of the hurricane and the disaster relief funding that is allowing the system to be rebuilt.

      The utility on Kaua’i is a co-op and had years of financials showing the ability to repay the cost of the system. Tesla provided the capital and will receive a stream of payments in return. The same for the second project. Most other small islands cannot provide that same assurance to investors.

      So no new solar projects are undertaken on these islands, despite it being clear that they are the better option. Most of these islands do not have a business that has the capital or the ability to train the people needed to develop a residential solar industry either.

      You are making an assumption that it is a flaw in the technology or the economics that is holding back solar development on islands, when that is not the case.

      1. LarrytheG Avatar
        LarrytheG

        re: ” Acbar told you why we don’t see more solar on islands. There is no way to finance them. The governments and utilities on small islands are bad credit risks. The PR utility was bankrupt. It is only because of the hurricane and the disaster relief funding that is allowing the system to be rebuilt.’

        Geeze – if we make the argument that Nukes are not fiscally viable… should’t we be using the same standard for all fuels? Solar is NOT capital intensive anyhow ..in the way that gas and nukes are…

        I guess I would say that electricity is a commodity that should stand on it’s own and not require govt subsidies anyhow … and as soon as I say that I realize that there ARE subsidies…

        but still.. adding solar … is not the same as a huge up front investment like you’d see for a nuke or gas plant.

        You add solar and you reduce the fuel oil costs – operationally – and those solar basically pay for themselves in a short amount of time .. I would think…

        no?

    2. Acbar Avatar
      Acbar

      I agree with TomH, but there are two kinds of solar: there’s the kind built by utilities to generate for sales on the grid; and there’s the kind built by homeowners to reduce purchases from the grid.

      Both require some knowledge, some initiative, some capital, and some government support (if not tax incentives, simple stuff like modifying building code requirements that stupidly get in the way of rooftop solar, and pressuring the local utility to allow it).

      Utility scale solar makes perfect sense for PR — except, they have no cash to finance it. They are bankrupt, as well as grotesquely poorly managed. And as TH said, they’ve got some federal cash to rebuild with, but FEMA keeps a tight list on those funds to make sure they are used for rebuilding, not upgrading. That’s a tragic mistake in this case when rebuilding a 1970s electric grid in 2018 is NOT what PR needs! But the feds, somewhat logically, I think, say, FEMA’s job is emergency repairs and to do more is not the feds’ responsibility, or at least not FEMA’s responsibility; that’s up to the State. And the PR territorial government is as broke as the electric company. And the Trumpistas are already blaming PR for abusing the terms of FEMA’s aid to make long-overdue infrastructure improvements.

      So who’s left? Private electric customers, doing their own rooftop solar. How many of them have the knowledge, the initiative (especially given other storm-recovery priorities), the capital, and the freedom from obstruction by bureaucrats? Hopefully a few businesses will rise to the challenge and begin the solar education process.

      We really need a Peace Corps initiative to PR. It’s a third world nation — only it’s our third world nation! And our embarrassment, too.

  22. TomH Avatar
    TomH

    TMT,

    “competition” in the energy industry offered higher, but often stable prices.

    “I don’t see Dominion as saintly, but I trust what that company says much, much more than any environmental group or other proponent of changes.”

    We really haven’t tried competition much in the utility business. Most of the efforts have been half-baked and not comprehensive enough to offer a solution that benefits utilities, third-parties and ratepayers.

    New York is perhaps coming the closest by offering a privileged and profitable position to utilities to be Distribution Platform Providers and opening up grid and energy services to third-parties in ways that are coordinated by the utilities.

    My recommendations are not coming from a strictly “environmental” point of view. In the 20th century we needed to trade off the societal benefits of energy generation against the environmental damage it caused and find some acceptable middle ground. Today, the cheapest sources of energy (energy efficiency and renewables) also have the least environmental impact. We no longer have to set one against the other.

    I am looking at it from a “systems” point of view. Having been involved in the early days of the personal computer revolution, I have seen the benefits, in terms of higher productivity and lower costs, that came from shifting from a tightly controlled centralized system (mainframes) to a market-driven, high freedom-of-choice system of decentralized computing (personal computers and networks). That same shift is beginning to operate in our energy system.

    There are some differences. But in the early days, the wires that made networking possible were owned by a monopoly power (Bell/AT&T). The opening up of that system to competition allowed for numerous opportunities for innovation and business success. Both for the old Regional Bell Operating Companies and others.

    It makes sense in the energy industry to avoid duplication in building transmission and distribution lines. But access to those lines should be available to all. That is what the independent system operators and RTOs accomplished. Acbar was one of the pioneers. Working with PJM, he helped usher in a market-based system for generation planning and equal, properly compensated, access to transmission systems.

    I am suggesting changes in our regulations in order to give utilities a chance to thrive in this new era, just as the RBOC’s did. Otherwise both ratepayers and shareholders will pay a heavy price. The shareholders will pay later, but perhaps more severely, if the utilities seek legislative remedies and obstacles to competition. Choices are multiplying despite what utilities try to do.

    Utilities and others in the energy industry are attempting to build castles with moats in an age of wireless and drones. I would prefer to collaborate with utilities, third-parties and customers to give everyone an opportunity for success by creating better, lower cost solutions.

    I am surprised that more of the conservative/libertarian voices in this blog do not speak up more strongly in favor of more market-based approaches to our energy issues.

    There have been a few references to subsidies for renewables, but little recognition of the far larger subsidies for fossil fuels or nuclear energy. There was no outcry about FERC Commissioner Chaterjee’s proposal to add market subsidies for coal and nuclear plants that would favor just 4 or 5 companies.

    Dominion operates the nation’s most profitable nuclear plant (Millstone), according to the Wall Street Journal, yet they threatened the Connecticut legislature with closure of the plant, if they did not receive a subsidy.

    What I hope for is a fair system that pays utilities more if they serve the customers better. Dominion has many skilled employees. Let’s give them a way to prosper by concentrating on innovation and service, rather than on political and financial manipulations, and projects that benefit only their shareholders.

  23. Acbar Avatar
    Acbar

    TomH, you say, “I am surprised that more of the conservative/libertarian voices in this blog do not speak up more strongly in favor of more market-based approaches to our energy issues.”

    But you and I come at this from the filed-rates electric utility regulatory model. Contrast that with the communications model which, as you know, has been back and forth with utility-style regulation (thanks to Chairman Ajit Pai, lately) but is now in de-regulated “free market” mode. As I recall, communications regulation is TMT’s background. “No net neutrality obligation”? Net neutrality is the communications analog of non-discriminatory open access, as in electric retail access. God help the electric grid if we were to scrap non-discrimination and open access as grid operating principles. My fear is that we might actually attempt a true libertarian, competitive approach to electric power in this country and undo the centrally managed grid — for better or worse!

    1. TooManyTaxes Avatar
      TooManyTaxes

      Just as an aside, a couple comments on network neutrality. There are things I like about it and others about which I have problems. I’ll note only the latter.

      Prioritizing packets. Unless voice and video packets are prioritized, the services themselves (voice and video) will fail to provide adequate service quality. Ergo, it cannot be unlawful to prioritize packets.

      Fast lanes. So long as there has been private line (point to point or point to multipoint) services, customers have been able to pay more for a faster service with more capacity. I struggle to understand how we can allow this variety of services to continue to exist and, at the same time, prohibit this from occurring with Internet transport.

      Business Welfare. Why should some entrepreneur get a subsidy from those companies willing to pay more for fast transit? They sure won’t share their wealth with anyone else. Let your venture capital investors pay for the fast service if you want it.

      Common Carrier Status. While I think the former classification of ISPs as common carriers is clearly sustainable, the intention of the 96 Act was more competition and less regulation. And imposing common carrier status on companies that did not have such status for Internet service does provide a disincentive for investment.

      Politics. The FCC adopted network neutrality rules on a party line basis and repealed them on a party line basis. President Obama interjected himself in the process to see strong rules were adopted. President Trump interjected himself in the process to see the rules repealed. Except in the minds of the MSM and the left, politics are even.

      1. Acbar Avatar
        Acbar

        You have much to teach the rest of us about communications policy; I merely brought up the analogy with electric regulation and how imperfect that analogy is.

        But as a matter of law, the concept of the public service “common carrier” obligation as a tradeoff for government privileges/rights/franchises runs through many public service industries, and I don’t know how we would be where we are without it. As you know, it goes back to the monopoly charters granted by the King, and early concepts of patent and copyright law, and the way we applied those precedents to the early construction of public improvements (harbors and public docks and canal and turnpike construction and toll bridges) in our new nation. All before the railroads. The basic idea all along was, if you provided a service to the public, you couldn’t discriminate against anyone willing to meet your posted terms — ALTHOUGH you could discriminate between different types/classes of service with different, posted rules and prices for each. Yes, there’s tension between these, and lots of opportunity for abuse of the “different classes of service” loophole, but the basic concept has worked pretty well.

        Until the internet, that is. Providing different classes of internet service makes sense to me, but offends many users, apparently because the gradations or “classes” of service are hard to implement transparently. And it’s a moving target: people expect “ordinary” download speeds that were unimaginable just a few years ago. And, the typical internet provider today also has a large stake in various entertainment contents and therefore a huge conflict of interest when it comes to talking about content neutrality.

        Personally, the notion of Title II utility-style regulation for ISPs doesn’t bother me if implemented fairly and in a way that doesn’t lock in obsolete standards or technology. That’s always the problem with regulation. I also don’t think it’s the end of the world to do what the FCC has done, and see what happens. Since the FCC has been held to have the authority to regulate ISPs as common carriers, it can always go back to that if the law is not changed. And that is not likely to happen anytime soon.

      2. djrippert Avatar
        djrippert

        Well if Jim Bacon or the Virginia General Assembly have anything to do with it, the internet fast lanes in Northern Virginia will come with sky high congestion tolls to account for the website settlement patterns up here while the channels to Richmond will be free.

  24. TomH Avatar
    TomH

    I am with you Acbar. My usual approach is balance and moderation. My comment comes from my frustration with Virginia’s situation and our primary utility with monopoly power overriding appropriate regulatory oversight by the SCC and shutting out cheaper sources of renewable generation by wanting to control it all and putting it in the rate base at an extra expense to ratepayers without providing any benefits in return.

    When utilities build a large combined-cycle plant, they provide capital and expertise that is not commonly available and they should be compensated for that. The same is not true for a moderately sized solar facility. The utility could still provide capital in return for an ITC or a future stream of income. What else have they added that deserves a 10% rate of return for 35 years?

    There are many new technologies that can be provided by third-parties now. If we set up appropriate rules and coordinate the implementation of these services to customers over the utility mediated “wires” platform, we can have access to more innovative technologies at a lower price. It won’t be the Wild West if we do it right, but it need not be the Victorian Age either.

    Things are changing, we have more choices now and those choices should not be limited to only what a utility thinks is best for its shareholders. The SCC exists to balance those issues and should be re-impowered to function in that role.

    I want what is good for utilities, but not at the exclusion of other considerations. When I hear companies nowadays talking about a “free-market” I look for special favors they are seeking to help themselves or limit competition. That is an inappropriate extreme too.

    PJM improved things by setting up reasonable rules, including non-discrimination, and a market mechanism to select the best new sources of generation. Without that utilities would have based their decisions purely on self-serving interests and the ratepayers would have paid more unnecessarily.

    I think a diverse energy system that provides customers with a variety of choices will provide the best results. Utilities will oversee and improve the “wires” system and be properly compensated for it. Others that provide energy services should have access to those “wires” in order to provide generation or other special services (storage, demand response, etc.) and the utilities should be compensated for the wires and and their transactional services, as well as their conventional generation. This would encourage utilities to be at the top of their game and provide customers with more choices at a lower cost. Obviously, all of this must be done in a way that maintains or improves reliability.

    We should not be satisfied with a mechanically-controlled, one-way energy system just because it served us well in the 20th century.

    1. TBill Avatar
      TBill

      I have never been happy with the State/Utility monopoly structure. When I lived in NJ 20-years ago they were blocking smaller nat gas plants (built by for example industrial users). NJ wanted to say it should be coal-fired plants built by the utilities themselves. The only reason I am less angry about the Utility structure is that at least coal has fallen in use. Not too many years ago I was still angry at the continuation of coal here in Virginia, but some of the big new plants were thankfully cancelled, and some of the new ones were at least smaller (eg; Hybrid center).

  25. LarrytheG Avatar
    LarrytheG

    Some of what I get out of this – very informative conversation from guys who do know far more facts and realities is that the govt is what is holding back investment in solar and the utilities investing in gas plants is the safer financial path for them?

    On the islands – not all islands are fiscal basketcases, take Bermuda … a pricey place including the electricity and building codes as far as I can tell are not a real impediment , many islands actually encourage solar.. as well as demand-side conservation… etc.. Some of these places, it’s actually cheaper to run fridges on propane than island electricity!

    islands are – in my view …examples of how you’d scale solar beyond individual homes… to microgrids or mini-grids… similar to the mainlands like we used to see with municipal utilities that would power a town with parts of the county around that town – without a real fail-safe connection to a monolithic PJM type grid. Before rural electrification – this is actually how it worked.. towns had electricity and the rural – not.. and it was not from the “grid”.

    But I’m getting confused over the narrative about the need for the govt to subsidize solar.. verses the narrative that the utilities oppose it because their fossil-fuel business model is more lucrative than a grid with more solar.

    so on one hand. a narrative that says solar is a no-brainer and it’s the utilities who see it as a threat to their business models.. then on the other hand – when it comes to islands – it’s the lack of govt subsidies that keep it from going forward.

    I’m quite sure – it’s much more complex than that but it sure feels like we’ve got some differing ideas about why solar is “hard” on mainlands and “hard” on islands!!!

    If you HAVE to rebuild the “grid” on Puerto Rico and it WILL require govt subsidies than why not state-of-the-art especially if it leads to less electricity costs and a more resilient grid?

    Just from this guys view.. solar panels – quickly installed in the places where it will take months to re-build power lines? Why not if the govt is going to do it anyhow?

    Is it the case the utility in Puerto Rico is ALSO opposed to solar because it will also threaten it’s business model?

    1. TomH Avatar
      TomH

      “But I’m getting confused over the narrative about the need for the govt to subsidize solar.. verses the narrative that the utilities oppose it because their fossil-fuel business model is more lucrative than a grid with more solar.”

      I am not aware of any narrative for the “need” to subsidize solar. Solar would be the lowest cost source of generation in Virginia without any subsidies. In any case, those subsidies begin to phase out in 2020. The much larger subsidies for fossil and nuclear will remain, and even increase if Rick Perry (DOE) has his way.

      I’m concerned about the concerted effort to harm renewables through provisions in the new tax law and by the application of import tariffs on solar panels. So much for a meritocracy determining our energy choices. If you can’t compete, call your Congressman and get a law passed.

      Dominion’s concern about solar is when it is owned by others. That lowers their revenues.

      It is not a lack of government subsidies that is constraining solar development on islands. See Acbar’s posts.

      “the utility in Puerto Rico is ALSO opposed to solar because it will also threaten it’s business model?”

      The utility on Puerto Rico was and is not opposed to solar. They did not build solar because they had no money. They were $9 billion in debt. Many solar facilities, and some solar/storage units, are part of the rebuild because now they have disaster funds to spend.

  26. Acbar Avatar
    Acbar

    Perhaps Tom and I are in “violent agreement” on this, but I still want to reply to TBill. Tom says, “Things are changing, we have more choices now and those choices should not be limited to only what a utility thinks is best for its shareholders. The SCC exists to balance those issues and should be re-impowered to function in that role.” Yes, but how to do that? I believe the choice for any privately-held utility is “only what [the] utility thinks is best for its shareholders.” it is the role of the State utility regulator to align the shareholder’s interest with the public interest. That means, among other things, making the Board of Directors keenly aware that State regulators will reward the utility’s shareholders for providing capital for what is in the long term public interest, and conversely, frown severely upon them for funding things that may be profitable but are NOT in the long term public interest. It is not the State regulator’s role to try to persuade utility management to “do what is right” and act in a manner contrary to the shareholders’ interest. That just isn’t going to happen; it’s naive even to imagine such a thing.

    But in Virginia, the GA has undercut the authority of the SCC to the point that the utilities (in this case, DOM) are not afraid of the SCC’s disapproval. Indeed, the SCC is so scared of the GA that it hardly dares to express its own opinion on the really controversial utility issues confronting Dominion (either to DOM or the GA) — let alone, push Dominion forcefully in the direction of the SCC’s own preferences. This is not healthy for Virginia. Only the SCC is in a position to invite its regulatees to take the long view, to draw up an integrated resource plan to implement that long view, and to make it clear how DOM’s pursuit of that shared vision will cause its shareholders to be rewarded. Few in the GA can afford to step back from the current political scene in the way the SCC ought to do — indeed, was created to do.

    TBill, the meanderings and reversals of federal policy on extracting and transporting and burning and disposing of ash from natural gas and coal and oil have filled textbooks already and will fill many more. NJ has had more than its share of oil-fired electric generation also, and nuclear power, and had to deal with some of the most rapid load growth in the nation. It was partly in response to the higher cost of PSE&G and MetEd and ACE’s retail electricity (compared to, say, Dominion’s) that NJ customers looked to build their own n.g. generation to give themselves a little leverage. The NJ utilities also pushed for the construction of jointly owned power plants in western PA, along with big new transmission lines to bring the power east — something we take for granted today but it was innovative at the time, in the ’60s and ’70s. A couple of those were coal plants — not your favorites — but the principle of shared ownership of generation connected to a common grid and run for mutual benefit was the beginning of today’s centrally dispatched regional energy market. Meanwhile, as you say, the advantages of coal slipped away and utilities changed their own plans in spite of what the regulators wanted. But I’d still rather have the regulators fully engaged and participating, as they did in those NJ debates, than quietly going through the motions of investigating the future of the grid and then shelving their own conclusions, as they seem to prefer to do here in Virginia.

    1. TomH Avatar
      TomH

      Acbar,

      We are in agreement. I did not intend to imply that utilities should not look out for the shareholder’s interests. That is the board’s and the CEO’s fiduciary responsibility. What I was trying to say was that the utility should not use its economic and political influence to make shareholder’s interests the only consideration.

      What you pointed so well is that, in Virginia, the utility control over the General Assembly has reduced the ability of the regulator to properly represent the interests of the ratepayer. The Consumer Advocate in the Attorney General’s Office has been silent on these issues as well.

      When I was in the utility business, we didn’t always agree with the decisions of the state regulator, but we respected the need for a balancing process. We just wanted to make it better and we collaborated with them to do that. We did not mount a campaign to hobble their ability to represent the ratepayers. We tried to find ways to align what was good for the shareholders with what was good for the ratepayers.

      1. Acbar Avatar
        Acbar

        Exactly so. Esp. your last paragraph.

  27. Reed Fawell 3rd Avatar
    Reed Fawell 3rd

    “3. Electricity market mayhem gets real

    The Federal Energy Regulatory Commission faces a Jan. 10 deadline to respond to the Energy Department’s request to propose a rule that would compensate nuclear and coal plants for their ability to store electricity fuel on site for 90 days. (Most other electricity sources can’t do that). It’s wonky as all get-out, but the fight over America’s stagnant electricity market is a fight that affects almost all parts of the energy sector.

    On top of this unfolding debate, expect to see more companies announce shutdowns of coal and nuclear power plants, due to increasingly tough competition from cheap natural gas and renewables.”

    See: https://www.axios.com/eight-energy-and-climate-issues-to-watch-in-2018-2519370363.html

  28. LarrytheG Avatar
    LarrytheG

    continuing interesting discussion.. and appreciated..

    Interesting article on Indonesia which is the 4th largest country by population – as big as the US.. and it is comprised of 14,000 islands of which 6000 are inhabited some of them large and have abundant fossil fuels.

    It actually has a LOT of coal and natural gas – and actually exports it but only about half their people have electricity and many of them on the islands who do have it , get it from diesel generators.

    Oh.. and yes.. the govt is the utility…. and no particular point in posting it.. I just found it interesting juxtaposed against Virginia and Dom… and Dom.. energy mix…

    Indonesia: Energy Rich and Electricity Poor

    http://www.powermag.com/indonesia-energy-rich-and-electricity-poor/

    1. Acbar Avatar
      Acbar

      Correct. It IS interesting. But I think the lack of solar equipment in places like Indonesia’s islands is much more “technology lag” than evidence that solar doesn’t make sense in those places. Rather, the heavy use of diesels for third world generating is due to: (1) they are cheap, low maintenance engines and often available used as salvage from older machinery, trucks, boats, etc. to jury-rig to drive a small generator; (2) the fuel, while costly in bulk, is readily available even in small remote villages because diesel fuel is used for so many things including even cooking; and (3) alternatives like solar have not been available at low prices for more than a very few years, and there’s a huge natural reluctance in third world circumstances to gamble on new technology when it’s unfamiliar and there are no examples to see up close. And of course (4): solar isn’t available after dark. I’ll bet if you went to the fancier tourist oriented areas you’d find solar generation with diesel or natural gas backup to be making more headway.

Leave a Reply

Read More