Dominion’s Brunswick gas project a key to replacing coal capacity

The need for the planned Brunswick County Power Station gas-fired project in 2016 is supported by the pending 918 MW of coal retirements at Virginia Electric and Power’s Yorktown and Chesapeake plants, which will occur by 2015 in light of the current and anticipated future environmental and economic constraints on coal-fired generators.

That is one of the points that Virginia Electric and Power, d/b/a as Dominion Virginia Power, made in a Nov. 2 application with the Virginia State Corporation Commission for a certificate of public convenience and necessity (CPCN) for the 1,358-MW (nominal) natural gas-fired combined-cycle (CC) facility in Brunswick County, Va. The company, a unit of Dominion Resources (NYSE: D), also wants approval to construct new 500-kV transmission lines, two new switching stations and associated facilities in Brunswick and Greensville counties, Va., to interconnect the project to the grid.

“The Brunswick County Power Station is the clear economic and operational choice for the Company’s customers as the next required resource in order to meet long-term capacity and energy needs,” said the application. “It will support a balanced portfolio of Company-owned generating facilities that utilize a variety of fuel technologies and can be leveraged for changing economic and operational conditions over time, which is particularly important given the environmental and economic constraints on aging coal-fired generating resources coming into play within and outside of the Company’s system. The Project presents an opportunity to take advantage of favorable construction and equipment markets, access to abundant new and conventional gas supplies, and one of the most advanced high-efficiency generating technologies for the benefit of the Company’s customers.”

While construction of new generating units, unit conversions (including coal-to-gas and coal-to-biomass conversions), and demand-side management programs will meet key portions of the company’s load growth, the need for additional capacity and energy resources in 2016 and beyond still exists, the company said. “The Company’s projections demonstrate peak load growth of over 5,300 MW in the Dominion (‘Dom’) Zone over the next fifteen years-with an average annual growth rate of 1.7%. Likewise, energy requirements are projected to increase by approximately 28,500 gigawatt hours (1.8% average annual growth rate) over this same period. PJM Interconnection, LLC‘s (‘PJM’s’) 2012 Load Forecast Report confirms these growth rates and identifies the Dom Zone as continuing to be one of the fastest growing zones of the twenty control zones in the PJM Regional Transmission Organization (‘RTO’) region.”

Using a conservative 11% resource margin, the company’s capacity gap is expected to grow from 582 MW in 2016 to 4,056 MW in 2027 if the project is not constructed, the application added. The capacity gap decreases to 2,681 MW by 2027 if the project is available.

The project also provides significant fuel cost savings and energy benefits. In 2017, the first full year of operation, the project is expected to provide about 9% of the company’s total energy requirements, and will reduce system-wide fuel expenses, while market purchases will provide 13% of the company’s total energy requirement.

Dominion coal retirements, and those across PJM, support this project

As for the planned 918 MW of coal retirements at Yorktown and Chesapeake, Dominion Virginia Power committed years ago to make investments – over $2.2bn worth – in order to safeguard the continued operation, in an environmentally responsible manner, of its largest and most efficient coal units.

“However, federal regulations currently on the books that further restrict air emissions will render the continued operation of some of the Company’s other coal-fired facilities – including our Chesapeake and Yorktown Power Station units – more costly for our customers than replacement of that generation with new environmentally compliant resources. The retirements at Chesapeake and Yorktown will reduce the Company’s system supply resources by more than 900 MW by 2015. Likewise, generators in the PJM RTO have already announced the retirement of more than 19,000 MW of coal-fired generating capacity from 2011 through 2019, with most of that capacity retiring by the end of 2015. Brunswick reflects a cost-effective, environmentally responsible, and timely replacement of the Company’s retiring resources.”

The analysis conducted for this application reaffirms the 2011 and 2012 integrated resource plans in identifying the need for a new 3×1 CC by 2016. Supporting this conclusion, the company calculated the customer value of the project as compared to three different alternatives: market purchases; simple-cycle CTs (the next best build option); and the environmental retrofit of Chesapeake Units 1-4 and Yorktown Units 1-2. The Brunswick project was selected as the most reasonable and cost-effective means of addressing customers’ growing needs from these options. Over its life, the project provides a customer savings of about $1.3bn net present value (NPV) when compared to market purchases, $898m NPV when compared to CTs, and $1.5bn NPV when compared to the retrofit of Chesapeake Units 1-4 and Yorktown Units 1-2.

“The Project is well-timed to avoid over-dependence on volatile market purchases of energy and capacity, during a period where an extensive number of coal retirements are expected to occur across PJM,” the application said. “The availability of market purchases has been beneficial for Dominion Virginia Power customers since the Company joined the PJM RTO. At times, the market can provide the opportunity to procure lower cost energy and capacity than that associated with self-generation or other resources. While market purchases have been, and will continue to be, an important aspect of meeting customer needs, it is the dependence on these market resources that is cause for concern. It is important for additional economical resources that are owned and controlled by the Company to be added to its portfolio as customers’ needs grow so that the Company does not increase its dependence on market purchases. An over-dependence on the wholesale energy market leaves customers purchasing a significant portion of their power from the highest priced unit that clears the market. This becomes even more important as a large number of generation facilities in the PJM market are expected to retire within the next several years, a significant number of which are happening in regions that have traditionally supported the Company’s market energy purchases. The Company will still utilize the PJM energy and capacity markets when it is cost-effective to do so, but having additional economical generating resources increases dispatch flexibility and ultimately reduces the cost to serve our customers.”

In fact, the company noted, had this unit been available in 2011, it would have reduced the company’s fuel factor cost by an estimated $112m in one year alone. In addition, Brunswick will support a continued balance of company-owned clean coal, nuclear, natural gas and renewable supply resources, in addition to access to the wholesale markets, and will serve as a prudent addition to the generating fleet from a fuel diversity perspective.

Mitsubishi to supply the turbines, Transco the natural gas

The plant will include three Mitsubishi Heavy Industries “G” class combustion turbine generators, three heat recovery steam generators with supplemental firing capability, one Mitsubishi steam generator, and auxiliary equipment necessary to operate the facility. It is expected to achieve, without supplemental firing, a nominal net capacity of approximately 1,194 MW and, with supplemental firing, a nominal net capacity of 1,358 MW. This performance will be achieved at an installed cost of about $934/kW at the 1,358 MW (nominal) rating based on a total estimated construction cost of around $1.27bn, excluding financing costs.

All other major plant equipment will be provided by Fluor Corp., which was selected as the Engineering, Procurement, and Construction (EPC) contractor for the project as a result of a competitive bidding process. Fluor will competitively procure all of the other major plant equipment, except for some facilities related to the transmission line interface, which Dominion will furnish.

The Brunswick County plant will be fueled by natural gas and will have 250,000 Dth per day of reliable firm transportation provided by Transcontinental Gas Pipe Line Co. LLC at a cost-effective rate, the application noted. This arrangement will provide the plant with access to abundant natural gas supplies from the Gulf Coast to the expanding Marcellus Shale region, and other supply regions, as well.

“As a result of the competitive bidding process involving multiple pipelines, Transco proposed the Virginia Southside Expansion Project (‘VSSE’) in response to the Company’s request for firm pipeline capacity to the Brunswick County Power Station,” the company reported. “Transco’s VSSE will include construction of 91.4 miles of 24-inch pipeline on existing right-of-way; 7.2 miles of 24-inch, ‘greenfield’ lateral to the Brunswick County Power Station; modification of a Transco mainline compressor station in Mercer County, New Jersey; and a new compressor station in Pittsylvania County, Virginia. Transco will be responsible for all acquisition, design, construction, installation, land rights, and permitting activities necessary to place in-service the facilities necessary to supply its firm transportation and pressure obligations to the Brunswick County Power Station.”

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.