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Dominion says economics, load growth drive gas plant investments


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Dominion says economics, load growth drive gas plant investments

This is the first part in a two-part series profiling Dominion Virginia Power's multibillion-dollar investment in combined-cycle natural gas plants.

Dominion Resources Inc. has invested billions of dollars in three large-scale natural gas plants in recent years to help fill what once was a "significant generation gap" in the commonwealth. However, the company has been steadfast in its stance that it has not become overly reliant on a single fuel source.

"It just really hasn't been a focus on building gas units for the purpose of building gas units," Paul Koonce, CEO of Dominion Generation Group, told S&P Global Market Intelligence in a recent interview. "It was really how do we sort of close our generation deficit and how do we create a more energy efficient fleet."

Koonce said the company's current generation plans "trace back to the regulatory compact that [Virginia] put in place in 2009." Legislation adopted by the General Assembly and signed into law, effective Jan. 1, 2009, ended a decadelong effort to transition the electric utility industry to a competitive marketplace.

Koonce noted that Dominion did not build much, if any, new generation for several years up to the enactment of the new regulations in Virginia. At the same time, Virginia continued to experience significant load growth and was the second-largest importer of electricity behind California, he added.

"We had really what I would call a serious generation deficit," Koonce said. "So, [Dominion] began a pretty robust construction program."

Dominion Virginia Power initially set its sights on closing this generation gap through the development of its 622-MW Bear Garden 2-on-1 combined cycle gas plant, which was brought online in May 2011, and the 624-MW coal-fired Virginia City Hybrid Energy Center, which was brought online in July 2012.

The Virginia utility, known legally as Virginia Electric and Power Co., spring-boarded off the development of Bear Garden and Virginia City with state-of-the-art, 3-on-1, combined-cycle natural gas facilities. The first of these plants, the 1,472-MW Warren County Power Station, was brought into service at the end of 2014.

As Warren County came online, construction was well underway at Dominion's 1,358-MW Brunswick County Power Station, which began full commercial operation in April 2016. Less than 10 miles down the road from the Brunswick County plant, Dominion is building the 1,588-MW Greensville Power Station. Each of these plants involves more than $1 billion in investments.

SNL Image

Dominion Virginia Power's Warren County Power Station near Front Royal, Va.

Source: S&P Global Market Intelligence


Koonce noted there are numerous benefits tied to the large gas projects.

"The economics are compelling," Koonce said. "They're highly efficient units and they're good for our customers in keeping energy costs affordable."

"When you look at Warren, Brunswick and Greensville combined ... it's about 4,300 MW [of generation] total, and the customer benefit versus buying out of the [PJM Interconnection LLC] wholesale market is about $3.6 billion over their life," he added. "As we think about operations, they're operationally very efficient. They reside on a fairly small footprint for the megawatt output and the staffing levels are reasonable given the megawatt-hour output.

"When you look at the energy efficiency for customers, when you look at the operational expense, staffing levels, you look at the footprint and when you look at the periodic maintenance that's performed ... it really looks like kind of a low-risk investment for us."

Koonce noted that Dominion used lessons learned in the development and operation of the Warren County plant and applied them to the Brunswick station. Both Warren County and Brunswick have been recognized by Power Engineering magazine as the Gas-Fired Project of the Year and Overall Project of the Year for 2015 and 2016, respectively.

As far as the close proximity between Brunswick and Greensville, Koonce said there are several factors to consider in siting a plant.

"I think that was really more of where was the right place to site generation on our electric transmission grid, so that it did not overtax a certain part of the state and require terrific new investment," he said. "I think it was really driven by the community and their acceptance, and availability of natural gas."

Both Greensville and Brunswick are served by Williams Cos. Inc.'s Transcontinental Gas Pipe Line Co. LLC. The proposed 600-mile Atlantic Coast pipeline would also serve both power stations. Dominion owns a majority stake in the Atlantic Coast pipeline, which the company will build, manage and operate.

"As you think about gas infrastructure, having two large diameter high pressure pipelines able to serve both facilities is a very important aspect," Koonce said.

In response to concerns that Dominion may be too reliant on gas, Koonce underscored that Dominion also has substantial investments in nuclear, renewable energy and efficient coal resources.

"That diversity has really, I think, served our customers well in that we have not been overly impacted by changing policy goals, changing environmental regulations or, for that matter, changing fuel types," Koonce said.