In a sane world no electric company would propose a 40% rate increase. That Dominion Energy has just done this for Virginia shows how crazy net zero carbon laws really are.
The Legislature has in effect ordered Dominion to spend untold billions of dollars rebuilding their power generation system by adding a huge collection of expensive intermittent wind and solar. Dominion loves this because they will make a fortune at ratepayer’s expense.
As a regulated monopoly Dominion makes a good profit on every dollar they spend, as long as the projects are approved. In this case they are in effect mandated by Virginia’s new net zero carbon law. As Kant said, to will the end is to will the means, so the law mandates as much wind and solar generation as possible. This lets the utility rebuild its asset base on a massive scale.
Dominion’s new 15 year plan calls for ongoing rate increases of about 3% per year for the next 10 years. This works out to roughly 40% over the decade, a huge increase by normal utility standards. The promise is that someday this massive investment will actually lead to savings, but the huge cost is here and now.
Given that they have something like 2.4 million customers this is a lot of money, a good chunk of which will go to the stockholders. Thanks to smaller renewables projects the dividends have already been growing nicely. Under the net zero mandate they should grow dramatically. The poor paying the rich. Raises to all executives.
The renewables build is breathtaking. On the exotic side there is over 5,000 MW of offshore wind generation. Conventional land based wind costs around a million dollars a MW, which would be a cool $5 billion. But offshore wind is much more expensive to build.
Then there is a whopping 16,000 MW of new solar generation, for many more billions of dollars.
The typical utility scale solar project is just a few hundred MW so this is an enormous amount.
There is also a reported 2,700 MW of storage, probably billions of dollars worth of batteries. However, batteries are not generators, so MW is just the discharge rate. What the storage capacity might be is anybody’s guess, so there is no way to tell how much the batteries might backup the intermittent renewables.
Together these three items a out to about 24,000 MW. By coincidence this is roughly equal to Dominion’s total existing generating capacity, a lot of which will be shut down as the renewables come online, especially their fossil fuel capacity.
Note that approval of the plan, which has yet to occur, does not mean the numerous expensive projects are approved. It is more of an invitation to propose specific projects. No engineering has been done at this point, so the cost estimates may well change.
The extensive and massive offshore wind facilities will be especially challenging. Unlike Europe, where most offshore wind has been developed, offshore Virginia is subject to relatively frequent hurricanes and tropical storms. This vulnerability may require a different and stronger design for both the towers and their foundations. Thus the cost estimates in the plan may well be very low, especially if these estimates are based on the European experience.
What the 15 year plan does not say is that this is just the first of two or more hugely expensive steps. For one thing this huge buildup does not get the utility even close too net zero emissions, which the law requires in 2045. There is still a lot of gas fired capacity in Dominion’s system.
Of course under the strange concept of “net” zero it is okay to have fossil fuel emissions as long as those are offset somehow. The reality is that offsets may not be possible at the scale needed. If everyone else is also shooting for net zero then everyone will need offsets, which means there might not be any for sale. Or they might be hugely expensive.
For example, Virginia already has huge federal forests, well over a million acres worth. So planting trees to offset emissions might require buying valuable farm land just to fill with new trees. There is also talk of technologies to remove CO2 from the air. Then too there is flue gas CO2 capture with storage in deep wells. Any of these will be very expensive and none are included in the wildly expensive present 15 year plan.
But then there is also the problem that makes anything even remotely close to 100% renewables unworkable. This is the fact that there will be times when there is zero wind and solar generation, even though the need for electricity is as big as it gets (called peak demand).
This problem is called the Bermuda high, which sounds like fun but is not. It is a massive high pressure system that causes summer heat waves. In Virginia this often means temperatures near 100 for a week at a time, which causes the maximum use of electricity the state will see.
A big feature of this stagnant high is that there is is no useful wind power. Wind generators need sustained wins of 25-30 mph to generate full power. With winds less than 8-10 mph they generate nothing and this is what you get during a Bermuda high.
And of course there are hot nights, with no solar generation as well, during these no wind power events. In fact solar only produces full power for 6-8 hours a day. So we can expect a series of 16 hour periods with near peak demand but no wind or solar power. Note that at today’s prices batteries are far too expensive to do this backup job. The biggest battery backup sites in the world only provide about 20 minutes of backup, not 16 hours a day for solar or a week’s worth for wind. But if the solar is going flat out to meet demand it cannot also be used to charge the batteries for that night.
In short, to keep the lights on Dominion has to have reliable, long duration backup power equal to the output of their entire wind and solar capacity. That is another huge expense that is not in the present plan.
To summarize, there are at least three reasons why the incredible 40% rate hike is just the beginning of outrageously expensive electricity in Dominion’s Virginia.
First the cost estimate for the present plan may well be far too low, especially for the massive offshore wind generation.
Second, the present plan does not even come close to meeting the 2045 net zero carbon requirements.
Third, going to intermittent wind and solar for primary generation requires an enormous amount of reliable backup capacity, especially for protracted periods of hot weather with low wind speeds.
Dominion Energy loves all these enormous expenses, because the more they spend the more they make. It is the rate payers that should revolt.