by James A. Bacon
Two months ago the Department of Navy announced the signing of a contract with Dominion Virginia Power to purchase enough solar electricity to meet 6% of Naval Station Norfolk’s electric power needs for more than 10 years. The next day, Dominion announced the purchase the Morgans Corner Solar Facility, located within Dominion’s North Carolina service territory but developed by Chicago-based Invenergy, Inc. The net result: Morgans Corner would supply green electricity to the naval station.
Key terms of both deals were not released. Dominion did not say how much it paid to purchase the project from Invenergy, nor did the Navy say how much it would pay for the electricity. Invenergy had little to say about anything. There was little tangible information in either press release, nor could I extract information in interviews to determine if the transactions are in the best interest of U.S. taxpayers or Virginia rate payers.
Virginia’s electric power companies are under pressure from a voluntary Renewable Portfolio Standard to generate 15% of the state’s electricity from renewable sources by 2025. At the same time implementation of the Environmental Protection Agency’s Clean Power Plan, which requires Virginia to reduce its carbon dioxide emissions 32% by 2030, will compel power companies to phase out coal-fired electricity production in favor of natural gas and renewables. Given the relative economics of wind and solar in Virginia, it looks like solar will be the main vehicle for reaching clean power goals.
Here’s the problem: These deals are about as transparent as a muddy windshield. As Virginia utilities position themselves to devote hundreds of millions of dollars in renewables — Dominion alone expects to invest $743 million over the next six years — the public doesn’t know what kind of deals are being cut.
When I started digging into this story, I hoped that the Morgans Corner deal might provide some insight into the economics of solar energy in Virginia. After all, Naval Station Norfolk is part of the Department of the Navy, a public agency that one would think would have a commitment to transparency on matters not compromising the safety of our military forces. But after badgering Navy spokesmen for weeks, all I could get was an email response with information that I, for the most part, had extracted already from Navy websites. Dominion was more cooperative — the company set up interviews with two executives — but the company was limited by non-disclosure agreements as to what they could say. As for Invenergy, repeated interview requests yielded no more than a referral to the company’s original boilerplate-laden press release.
Taxpayers are paying for this solar electricity. Why can’t we have access to the terms of the contract? It’s not as if Naval Station Norfolk is a corporation that maintains secrecy for competitive reasons. I feel like something is being hidden from the public. Sadly, the public doesn’t know enough to care.
Here’s what we know…
As part of the Obama administration’s larger goal of reducing government greenhouse gas emissions, the Department of the Navy has set a goal of producing or procuring 1 gigawatt of renewable electricity by the end of 2015 on its way to producing 50% of its electricity from alternative sources by 2020.
According to Diane Corsello, Dominion’s director of business development for solar generation, the utility has developed a “good working relationship” with the Navy over the years. “They reached out to us,” she said, for help in meeting the renewable mandate. The Navy and Dominion explored multiple options for providing green energy to Naval Station Norfolk, including both on-site and off-site facilities.
Around that time, Invenergy was developing a 20-megawatt solar facility in North Carolina’s Pasquotank County, taking advantage of state and federal tax benefits. The company, which specializes in developing and constructing renewable energy projects, had 3,500 megawatts of such projects in the development pipeline as of September. Developing a solar project entails, among other things, acquiring land, typically near a high-capacity electric transmission line, and obtaining a slew of permits before construction can begin.
“It takes a lot of time to develop a site from a greenfield condition,” explained Todd Flowers, senior business development manager for Dominion.
While working with the Navy, Dominion identified the Morgans Corner project as a good match. Invenergy had moved Morgans Corner far along the development process. The 20-megawatt project, which will install 81,000 solar panels on 110 acres, had all its permits and key agreements in place, and construction was scheduled for completion in April 2016. Dominion could step in and acquire the facility in a “build-transfer” agreement.
“The Morgans Corner project demonstrates Invenergy’s ability to develop and construct utility-scale solar facilities that provide long-term, clean renewable energy,” said Invenergy’s EVP Jim Shield in a press release. “We’re pleased Dominion wants to take ownership of this great project and we look forward to exploring additional opportunities to work with them in the future.”
In turn, Dominion will supply 25 megawatts of electricity to Naval Station Norfolk, equivalent to 6% of its annual consumption, in a 10-year contract with a 10-year option.
Physically, there is no way to deliver the “green” electricity generated by the Morgans Corner facility to directly Naval Station Norfolk. Once the solar-generated electrons enter a transmission line, there is no controlling where they go — they flow through the grid in accordance with the laws of physics. However, mechanisms have been established to certify that Naval Station Norfolk will be consuming green energy.
“We’ll have a meter at the [Morgans Corner] generator and measure every kilowatt generated,” explained Dominion’s Corsello. As that electricity goes onto the grid, Dominion will garner Renewable Energy Credits (REC), which, in the jargon of the electric power industry, will be “retired,” or credited, to Naval Station Norfolk. “For every megawatt hour that’s generated, we will retire an REC on behalf of the Navy.” These transactions will be tracked and certified by PJM Interconnection.
But is it a good deal?
While the parties are open about the legal structure of the deal, they won’t say much about the underlying economics. How much will the green electricity cost Naval Station Norfolk, and indirectly the nation’s taxpayers on a per-kilowatt basis? No answers. “We will not disclose the price,” said Corsello.
The average cost per Kilowatt for Dominion’s residential customers is about 10.9¢ per hour; the rate for large industrial customers is 5.7¢. We don’t know what the Department of Navy will be charged.
I asked Lt. Chika Onyekanne with the Navy Office of Information what price the Navy will pay, and whether the Navy will save money either in the near- or long-term future.
“The rate that the Navy will pay is consistent with the current rate structure over the agreed term,” Onyekanne responded in an email. I guess it all depends on what the meaning of “consistent with” is.
The Navy justifies the move to renewable energy nationally on the grounds that it “promotes more secure and resilient installation operations.” How does that work out in the case of the recently inked solar deal for Naval Station Norfolk, I asked. How is solar energy more “secure” than Dominion’s existing power mix? How is it more “resilient”?
Onyekanne’s response: “Signing long-term contracts for renewable energy helps to increase the DON’s energy security by providing long-term cost stability and diversifying our resources.”
Again, no hard numbers.
The wonderful thing about solar energy is that the fuel is free — and it won’t increase in cost, as many observers think will happen to natural gas. But the benefit of cost stability provided by the Morgan Corner solar plant will be offset to some degree by higher up-front capital costs per kilowatt-hour generated and the need to access backup power when the sun isn’t shining in northeastern North Carolina.
How well, I asked, does the power output of Morgan Corner match up with the electricity demand profile of Naval Station Norfolk? No answer from the Navy. Dominion at least answered the question in general terms. Naval Station Norfolk, the largest naval base in the world, has a rate structure that encourages the facility to manage its peak demand, said Corsello, and most of the solar plant’s generation will occur during on-peak periods, she added.
So, maybe Morgans Corner is a good deal, but, then, maybe the Navy paid through the nose to meet the end-of-year deadline for meeting its 1 gigawatt-per year green-power goal. (A gigawatt is 1,000 megawatts.) At this point, it’s impossible for the public to know.
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