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Dominion to continue nuclear spending, eyes new gas, solar generation

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


Dominion to continue nuclear spending, eyes new gas, solar generation

DominionVirginia Power anticipates the need for more natural gas-fired generation andrenewable resources as part of efforts to comply with the U.S. EPA's CleanPower Plan. In addition, the company will continue to spend millions on theplanning and development of a third unit at its 1,452-MW nuclear plant, eventhough it has not decided whether or not it will build the project.

TheDominion Resources Inc.utility, legally known as VirginiaElectric and Power Co., laid out its potential generation needs forthe next 15 years as part of its 2016 integrated resource plan filed April 29with the Virginia State Corporation Commission. Simultaneously, Dominion NorthCarolina Power filed its integrated resource plan with the North CarolinaUtilities Commission.

Muchlike its 2015 integrated resourceplan, Dominion presented several options to comply with the CO2reduction goals set by the CleanPower Plan, which in February was by the U.S. Supreme Court.

Basedon that uncertainty, Dominion Virginia Power developed a least-cost alternativeknown as Plan A that assumes no federal limits on CO2 emissions during theplanning period, which it views as unlikely, as well as four CPP-compliantplans, evaluating rate-based andmass-based approaches. Only one of these plans, viewed as the mostexpensive option, includes North Anna unit 3.

Compliance plans

PlanB, known as the intensity-based dual rate selection plan, includes anadditional 1,100 MW of utility-scale solar capacity plus the addition of twocombined-cycle gas generation units with the total capacity of approximately3,183 MW and one 458-MW combustion turbine.

PlanC, using an intensity-based state average compliance approach, calls for 3,400MW of utility-scale solar generation by 2031, in addition to a 1,591-MWcombined-cycle facility and the 458-MW combustion turbine.

PlanD, with a mass-based emissions cap for existing units only, also includes alarge addition of solar capacity by 2031 at 2,400 MW, as well as the gasgeneration outlined in Plan B.

PlanE, a mass-based emission cap for existing and new units, "places extremelyheavy emphasis on zero-carbon generation" with 7,000 MW of solar capacity,the addition of North Anna 3, as well as more than 2,400 MW of gas-firedgeneration, including a combined-cycle facility and three new combustionturbines. This is viewed as the most expensive option, according to Dominion,with the potential by 2030 to raise the typical monthly residential bill for1,000 kWh of energy usage by more than 18% versus a no compliance option, whichis "6 to 10 times greater than the bill increases" under the otheralternatives.

Basedon its analysis, Dominion Virginia Power said that if the CPP is upheld,Virginia should adopt a compliance strategy compatible with an intensity-baseddual rate program.

"Thisapproach would provide Virginia with the most flexibility in meeting theenvironmental regulations, mitigating compliance costs and customer rateimpacts, and promoting economic development," Dominion Virginia PowerPresident Robert Blue wrote. "In contrast, a Mass-Based approach —particularly one including a hard cap on emissions from both existing and newunits — would impose much higher costs, lead to larger price increases forcustomers, and severely restrict compliance options."

The "commonelements" of all five of the plans that Dominion studied include thedevelopment of 400 MW of utility-scale generation in Virginia by 2020; theaddition of 600 MW of solar non-utility generation under long-term powerpurchase agreements in North Carolina by 2017; the development of the 12-MWVirginia Offshore WindTechnology Advancement Project, online in early 2018; thecompletion of the 1,585-MW GreensvillePower Station by 2019; additional 20-year license extensions forNorth Anna units 1 and 2, as well as Surry units 1 and 2; implementation of demand-sidemanagement programs; and the closure of Yorktown coal-fired units 1 and 2, with a combinedcapacity of 323 MW, by 2017.

Allfour "alternative plans" include the closure of the oil-fired Unit 3at Yorktown, coal fired units 3 and 4 at Chesterfield, and both coal-fired units at theMecklenburg PowerStation.

North Anna 3

WhenVirginia regulators approvedDominion's 2015 integrated resource plan, they acknowledged that the state'sDivision of Consumer Counsel raised concerns about the on the North Anna 3 reactorincurred even before the company has applied for state approval of the project.

TheSCC directed Dominion to answer several questions about North Anna in its 2016integrated resource plan, including how much the company plans to spend onNorth Anna before applying for a certificate of public convenience andnecessity and/or rate adjustment clause.

Whilenoting that the "earliest possible in-service date" for North Anna 3is September 2028, delayed one year from the 2015 plan, Dominion said "itis prudent" to continue focusing on the activities needed to obtain acombined operating license, or COL, from the NRC, expected in 2017.

Dominionsaid it has slowed spending on North Anna 3, in the meantime, but estimatesthat spending on the unit will hit $647 million by the time it receives afederal operating permit. This spending breaks down to approximately $345million, excluding financing, on top of a $302 million write-off.

"Thecompany has not quantified any particular dollar limit that it intends to incurfor North Anna 3 before seeking recovery," the integrated resource planstates. "The company stresses that its development efforts thus far forNorth Anna 3 have been prudent, and continuing to pursue the COL, a valuableasset with an indefinite life, is a reasonable and prudent decision."

"Thecompany maintains that an option such as this is of great value to customersgiven the uncertainty of the CPP and the uncertainty of any other federal orstate law or regulation that the company and its customers may face in the future,"the integrated resource plan states.