Panda Power Funds has commenced commercial operations at its 778-megawatt “Stonewall” combined-cycle, natural gas-fired power plant near Leesburg. The plant is capable of providing the electric power needs of up to 778,000 homes in the Washington metropolitan area, the company announced in a press release yesterday.
“Panda Stonewall is one of the newest, cleanest and most efficient natural gas-fueled power plants in the United States,” said Todd W. Carter, CEO and senior partner of Dallas, Tex.-based Panda Power Funds.
Panda estimated that the project will inject $7.1 billion into Virginia’s economy during the construction phase and first 10 years of operation. The Bechtel Corp./Siemens Energy Inc. consortium employed 700 people at peak construction. The plant employs 27 full-time employees to oversee operations and maintenance of the facility.
The Stonewall project is Panda’s sixth built in a three-year period. The Stonewall facility raised debt capital of approximately $570 million. Panda Power Funds supplied equity capital along with large institutional co-investors, including Siemens Financial Services. Said Kirk Edelman, Global Head of Energy Finance at Siemens Financial Services: “Our investment underscores Siemens’ strong commitment to supporting projects that deliver cleaner, more environmentally-friendly and sustainable energy.”
The plant, located four miles southeast of Leesburg, will use reclaimed water from the town to cool the facility.
The press release did not say who Panda Stonewall will sell electricity to, noting only that the plant is located in “one of the fastest growing metropolitan areas of the United States.” The company quoted the George Mason Center for Regional Analysis as saying that the metro region is projected to add more than 410,000 new households by 2023 as a result of job growth. In addition, “Loudoun County, dubbed ‘Data Center Alley,’ hosts the largest concentration of data centers in the world. More than 70 percent of the world’s Internet traffic flows through the County on a daily basis.”
Panda Stonewall will be able to draw upon gas from either Dominion Energy or Columbia Gas, both of which pass through the plant site. The plant connects to the grid through an existing Dominion 230 kV electric transmission line that connects the Pleasant View and Brambleton sub-stations.
Bacon’s bottom line: The press release does not say who will purchase Panda Stonewall’s electricity, but it seems reasonable to infer that the plant will sell into the PJM Interconnection wholesale market. As a combined-cycle facility, Stonewall will be a base-load facility, not a peaking facility. Panda Power would not have made the investment unless it was confident that it could displace older, more expensive electricity sources serving the Washington metro market.
While a power plant theoretically can serve markets anywhere — power companies don’t control where their electrons flow — the shape of the electric transmission grid creates choke points, which get incorporated into the price charged to electricity consumers. I don’t know what the electric transmission grid looks like in the Washington metro area, but I would conjecture that Panda views the location on the metropolitan fringe as a competitive advantage for Stonewall over electricity wheeled in from greater distances. Additionally, the incorporation of state-of-the-art technology will make the plant more efficient than coal-fired plants and even older gas-fired plants.
Reading between the lines, it appears that Panda thinks the power plant will pay for itself and generate a profitable return over a relatively short time line — 10 years. Why do I say that? Because the press release calculates the plant’s economic impact over a 10-year period. Admittedly, that is pure surmise and needs to be confirmed by the company. But if I am correct, it says a lot about the competitive advantage of natural gas as an electric energy source in the near- to mid-term future. Even if electric utilities in the Washington metro area — Dominion, Potomac Electric Power Co., and the electric cooperatives — begin building solar energy on a large scale, merchant generators like Panda calculate that either (a) they can pay off their investment and generate a competitive return within 10 years, (b) they can continue continue selling electricity profitably beyond the 10-year horizon, or (c) some combination of the two.
Update: Panda spokesman Bill Pentak says there is no connection between the 10-year time frame of its economic-impact analysis and the company’s financial payback model. Additionally, he said that the $7.1 billion estimate of impact includes the multiplier effect of dollars circulating in the local economy.
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