Utility Dive Brief: December 6, 2020

Dominion suspends plan to add 1.5 GW of peaking capacity as Virginia faces gas glut

By Robert Walton, Utility Dive

Dive Brief:

Dominion Energy on Wednesday announced it suspended a request for proposals (RFP) that targeted up to 1,500 MW of dispatchable peak capacity in its Virginia territory, which observers said would have likely resulted in natural gas additions.

  • Announced in November, the utility said the RFP aimed to replace retiring generation and provide system balancing needs as more renewables are added onto the grid. Dominion said it may reissue the RFP in the future, if it determines the capacity is needed.
  • The utility’s announcement follows reporting from S&P Global that the company has been over-forecasting its demand for years in order to justify spending on new natural gas facilities.

Dive Insight:

Dominion declined to give a reason for the RFP cancellation, but opponents of the plan said the utility’s decision is a recognition that Virginia does not need or want more fossil-fuel based generation, and instead must add significant clean energy resources to meet the state’s goal of delivering carbon-free electricity by 2050.

The utility’s plans to add more gas resources “have stretched the bounds of credulity with regulators and lawmakers,”  Walton Shepherd, Virginia policy director for the Natural Resources Defense Council, told Utility Dive.

Virginia Gov. Ralph Northam, D, in September set the state on a course to reach 30% renewables by 2030, and 100% carbon-free power by 2050.

“The regulatory environment was looking less favorable,” said Shepherd.

“It’s mainly a question of passing muster with lawmakers and regulators, justifying more customer spending,” he said. “Energy efficiency and renewables are the preferred resources.”

The RFP had a “bias against solar-storage solutions,” Mary-Stuart Torbeck, senior organizer of the Sierra Club’s Virginia Chapter, said in statement. Canceling it “is an admirable recognition that bringing costly new gas-fired generation into the commonwealth is incompatible with Virginia’s longterm clean energy future,” she said.

Virginia is facing a glut of gas-fired generation say renewables advocates, and the utility’s ​”dubious economics” surrounding those buildouts are to blame, according to S&P.

Rocky Mountain Institute Principal Mark Dyson says the practice is common.

“Our own analysis of FERC data has shown that this practice of over-forecasting future demand growth is common across utilities, and has been at least a decade,” he told Utility Dive in an email.

On average, Dyson said utilities and regional transmission planners over-forecast future demand growth by approximately 1% per year of the forecast.

“Because 10+ year forecasts drive investment decisions for 30-year assets, this over-forecasting has led to the present situation of extremely high reserve margins across much of the US, costing captive utility customers billions each year,” Dyson said.

As for Dominion’s Virginia decision, Dyson said “it’s encouraging to see a procurement for new capacity resources being re-considered in this light.”