Opposition light to Virginia Electric coal-to-biomass conversions

Various parties to a case at the Virginia State Corporation Commission where Virginia Electric and Power Co. is seeking approval to convert three small coal plants to biomass filed recent post-hearing testimony as the commission moves toward a conclusion of the case.

Virginia Electric and Power (also known as Dominion Virginia Power) said in its Feb. 15 post-hearing brief that it wants to take three under-utilized coal-fired generation facilities – Altavista, Hopewell and Southampton – and convert them to baseload generators using renewable biomass, primarily waste wood. These conversions will produce significant energy benefits to customers and will support economic development, including many long-term jobs for the citizens of the Commonwealth of Virginia, the utility said. The hearing was held Jan. 10-12.

“Due to recent market conditions, these three facilities have not been, and are not currently, economically dispatching, resulting in very low capacity factors,” Dominion Virginia Power noted. “As a result, these facilities are not providing optimal value for the company’s customers. Moreover, these units are projected to continue to have low capacity factors – approximately 18% – over the next 25 years if they remain as coal-fired generation facilities. By its application, the company offers a cost-effective plan to convert and better utilize these three generating units, providing significant benefits to the company’s customers and to the Commonwealth.”

The total estimated construction cost for the biomass conversions is $165.8m, excluding financing costs. These conversions involve lower capital costs as compared to constructing new generating facilities, the utility noted. The converted plants are expected to have an economic dispatch capacity factor of 92%. “The company is able to obtain higher capacity factors due to the lower dispatch costs of running the plants on biomass,” the utility explained. “The main drivers of the lower dispatch costs include the currently available federal Production Tax Credits (‘PTCs’), lower variable operating and maintenance (‘O&M’) costs, lower emissions costs, and the value created by selling higher-valued Tier I renewable energy certificates (‘RECs’) that will be produced by the Biomass Conversions.”

As supported by a study conducted by Chmura Economics and Analytics, the conversions will produce incremental economic development benefits in the form of additional jobs and investments in the Commonwealth, Dominion Virginia Power argued. This includes an average economic impact of $25.2m and 159 jobs annually during construction, and $129.5m and 309 incremental indirect and induced jobs once the facilities are operational post-conversion. Many of these jobs come from the hundreds of individual loggers, truckers and biomass suppliers.

The company said it has demonstrated that these benefits will remain in Virginia through the conversions because those dollars that would have been spent to purchase replacement energy through PJM Interconnection LLC would be used for these Virginia renewable energy resources.

Commission staff was somewhat lukewarm about the conversion in its Feb. 15 post-hearing brief. “Staff does not oppose the Biomass Conversions,” the brief stated. “Although staff remains concerned that projections presented in support of the conversions include assumptions that may ultimately prove to be significantly different than projected, all projections in this case need not – and cannot – be perfect. Rather, the overall body of evidence on the prudence and reasonableness of the Biomass Conversions must be credible and sufficient to support approval, which is for the commission to determine. Based on its investigation, staff believes the conversions may be beneficial at levels of production that are achievable and do not rely as extensively on uncertain revenue streams as do company projections.”

The biomass conversions are not critical to the region’s power needs for several reasons, staff added. These reasons include the relatively small capacity and energy production of the conversions, and the recent approval of several larger generation projects that have reduced the company’s reliance on transmission imports into Dominion’s transmission zone.

“First, each of the converted facilities would be a relatively small power station by almost any measure,” staff wrote. “With capacity ratings of 70 MW (gross) and 63 MW (net), the existing Altavista, Hopewell, and Southampton Power Stations are the smallest coal-fired facilities in the company’s fleet. If the facilities are approved for conversions that, as proposed, would result in lower capacity ratings, these power stations would continue to be among the smallest in the company’s fleet. Further, the company clearly does not believe that power stations at the proposed locations – and with higher capacity ratings than the proposed conversions – are critical to Virginia’s energy needs. Indeed, in 2010, Dominion placed Altavista in cold reserve even though the recent dispatch of the facility had been comparable to Hopewell and Southampton. Similarly, the Hopewell facility was kept in cold reserve from 2001 to 2007.”

The Virginia Committee for Fair Utility Rates also submitted on-the-fence testimony. The committee, like commission staff, noted in a Feb. 15 brief that these converted units are not critically needed, but conceded they are relatively cheap projects that can be approved as long as the utility doesn’t get too high a rate reward for doing them.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.