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14 November 2019

Dominion Energy can’t hide fossil-fuel addiction from regulators

Dominion Energy wants more new natural gas peakers in the state of Virginia and announced last week a request for proposals for 1.5 GW of dispatchable peak capacity beginning in 2022. These proposals for new gas-fired generation would be at odds with the state’s policy of going carbon-free by 2050 and will probably be stifled by regulatory bodies, meaning Dominion will have to look elsewhere for a back-up power supply.

The 1.5 GW of capacity is being sought to replace the generation retirements of existing fossil fuel plants, with stated intentions to add this capacity at 500 MW per year between 2022 and 2024.

Dominion announced in March this year that 2 GW of oil, gas and coal-fired capacity would be permanently shut down in the next 2 years with the aim of “lessening dependence on steam-based generation” according to CEO Paul Koonce. The company claimed that many of these units were idled and placed in cold reserve in 2018, providing less than 1% of the utility’s generation. Installing new gas-fired capacity, albeit peaking, is seemingly a U-turn in this regard as Dominion says it aims to meet Virginia’s clean energy goals.

“These new peaking units will be an essential partner to renewables by filling a need when solar and wind aren’t generating enough due to lack of sunlight and/or low wind speed,” Dominion said. “The units will ensure Dominion Energy can produce continuous and reliable energy to meet demand when called upon, particularly when renewable sources are unable to do so.” The standard answer to that is to put renewables with energy storage, usually Lithium-Ion, but that is clearly not an idea that Dominioin has come across.

The state of Virginia has signed an agreement to reach 100% carbon-free power by 2050, with renewables accounting for 30% of its energy mix by 2030. With Dominion as the state’s monopoly utility, meeting these targets will be largely due to the new generation methods adopted in the next few years. The lifecycle of a gas-fired plant is often around 30 years, meaning these projects will very much squeeze the limits on Virginia’s decarbonization by 2050. So actually, this deal immediately puts that zero-carbon promise in jeopardy.

Dominion maintains that it is on track to meet these goals, but identified the requirement of additional generation in a recent Integrated Resource Plan.

In recent years, electricity demand in the state of Virginia has grown by between 9 and 11% per annum, with data centers popping up from companies with large internet and cloud platforms such as Amazon web services and Microsoft. However, these companies all also have promises to go zero carbon and most of them have a comprehensive roster of Power Purchasing Agreements with renewables companies. Dominion is just using these new data centers as an excuse to invest in fossil fuels.

We have previously reported on Dominion’s fickle ‘love’ of renewables, and how despite bold claims to bolster capacity, the company has persisted with a $7.5 billion natural gas pipeline project, which will further lock the state into Dominions fossil-fuel addiction. It is a pipeline that no consumers want passing their doorsteps, and it has come up for mass resistance.

Data center operators could perhaps strong-arm Dominion towards renewables and should have the authority to say that they don’t want to pay for gas-fired power or infrastructure. Amazon web services has nearly 1.7 GW of combined data center capacity in Virginia and North Carolina. If it is serious about statements wanting to run on 100% renewable energy by 2030, a firm discussion needs to be had with Dominion.

This is more likely to come through conversing with the Virginia State Corporation Commission (SCC), which has already rejected aspects of Dominion’s Integrated Resource Plan, insisting in December last year that more focus should be placed on renewables. We predict that stakeholder pressure through this channel will Dominion’s proposals for new gas facilities rejected.

Increasingly across the US, natural gas projects are being rejected, for both environmental and economic reasons, as the price of renewables falls to historic lows. Regulators in other fossil-fuel loving states such as Indiana have started to swing in favor of renewables, with an 850 MW project in May among many rejections in the US this year.

A rejection such as this would see Dominion forced to explore other avenues. Inspiration may be taken from California, which proposed this week to extend deadlines to shut down existing gas facilities, providing a much shorter-term solution to balance the power grid in the absence of sufficient renewable capacity. On the other hand, it could have just ordered more renewables.

While not ideal in terms of emissions, this method would at least prevent new assets becoming stranded in the remote future and would accelerate growth in renewables. This should be implemented alongside a strong push for solar-plus-storage or large-scale grid batteries, with a short lead time in projects, to fill the gap between production and demand in Virginias race to 100% renewables, and allow the retirement of existing facilities in an appropriate timeframe.

USA Today has predicted that 177 gas power plants are currently being proposed in the US, but with the rate of rejections increasing, the gas bubble will burst in the early 2020s, as fear mounts of stranded assets.