Dominion defends resource plan, including North Anna 3 project

Virginia Electric and Power d/b/a Dominion Virginia Power defended its August 2013 integrated resource plan (IRP) in a July 3 post-hearing brief filed at the Virginia State Corporation Commission.

“The Base Plan fills anticipated capacity gaps with a least cost mix of market purchases, construction of new natural gas generation, and [demand side management] DSM,” said the brief. “However, given the uncertainties outlined above, the Company believes it would not be prudent for long-term planning purposes to rely exclusively on a single supply-side resource going forward. Accordingly, the Company also identified construction of the nuclear unit North Anna 3, as well as additional solar and wind resources identified in the Fuel Diversity Plan, to provide important fuel diversity.”

A commission staff witness recommended that, for the company’s “No CO2” Cost Scenario for Plan D, the Coal Plan, the company’s model should use pulverized coal (PC) without carbon capture and sequestration (CCS) technology in future resource plan filings. The company said it will likely know prior to filing the 2015 resource plan whether new non-CCS coal resources are viable alternatives or not and, therefore, whether it is plausible to include such modeling in the 2015 plan.

A commission staff witness recommended that the company conduct an “optimum timing analysis” for the North Anna 3 nuclear unit. Dominion Virginia Power said that such an analysis is not necessary at this stage of project development. North Anna 3 is a complex project with a very lengthy development and construction period, meaning it is not a project that can be easily or practically pulled in and out of the plan as market conditions shift from one year to the next, the utility added.

“Instead, the Company proposed in the Plan to move forward with the reasonable development of various diverse resource options, including North Anna 3,” it said. “The Company expects to receive a Combined Operating License (‘COL’) from the U.S. Nuclear Regulatory Commission in the first half of 2016, at which point the Company will make a determination as to the path forward.”

Dominion says it included the economical renewable options

Environmental groups participating in this case expressed concerns generally that the company did not include more renewables in its Base and Fuel Diversity Plans. “In fact, both the Base Plan and Fuel Diversity Plan include new renewable resources,” the utility responded. “For example, both plans include continued deployment of the 30 MW (nameplate) DC capacity Solar Partnership Program (which equates to 24 MW AC capacity), 3 MW Solar Purchase Program, 50 MW of new Solar NUG Resources, and the recently-completed 153 MW biomass conversions at the Company’s Altavista, Hopewell, and Southampton [formerly coal-fired] generating stations. The remaining new renewable options were not included in the Base Plan because they were not economically selected.”

For the renewable resources that were not selected as part of the Base Plan, the company said it will continue to pursue reasonable development of these resources. For onshore wind, the company has identified potential sites, studied wind data, secured land leases, and continued development activities. The 247 MW of onshore wind included in the Fuel Diversity Plan represent the estimated nameplate capacity for the optimal sites that the company has identified for onshore wind. Beyond that, additional wind resources would likely come from offshore wind resources, which come at a much higher cost.

For solar development, the company is closely monitoring the economics of the solar market. The company is confident that there are sites that have the land availability necessary for solar development included in the resource plan at a reasonable cost and located close to interconnection points. The 220 MW of utility-scale solar included in the Fuel Diversity Plan represented an appropriate near-term projection of new solar additions at the time the 2013 plan was developed, taking into account costs and the goal of fuel diversity, it added. More solar resources could potentially be developed in the future if and when the economics warrant such development.

The Mid-Atlantic Renewable Energy Coalition (MAREC) said in its July 3 post-hearing brief that there is not enough renewables in the IRP, plus: “There is a substantial over-reliance on self-build options in the IRP without adequately considering the value of electricity purchases from third-parties. Third party developers may provide more cost competitive procurement options at less risk to Dominion’s customers since third party developers would not have a mechanism to seek recovery for cost overruns.”

State Consumer Counsel: ‘diversity’ plan is really a North Anna 3 plan

The state Division of Consumer Counsel noted in its July 3 brief: “Virginia Power’s ‘Plan’ is really two plans. The Company’s 2013 IRP proposes to go forward, simultaneously, with (1) a Preferred Plan that relies largely on natural gas capacity additions to meet forecasted demand growth and (2) with a Fuel Diversity Plan including an additional Company-owned nuclear unit at Virginia Power’s North Anna facility. However, what Virginia Power characterizes as a ‘Fuel Diversity Plan’ is in actuality a ‘North Anna 3 Plan,’ as 98.3% of the cost increase of this plan above the Preferred Plan is attributable to North Anna 3 nuclear development costs. The two approaches to satisfying future load obligations are profoundly different.”

The Consumer Counsel said that Virginia Power’s own IRP shows that if the company’s forecasts and market assumptions prove correct, North Anna 3 will not be the most cost-effective option for meeting future demand. “Nonetheless, Virginia Power proposes to spend over $850 million on North Anna 3 by December 31, 2015,” it said. “While Consumer Counsel does not take a position at this time on the prudence of new nuclear development, the Commission should consider the record in this case in any future prudence review of future North Anna 3 development costs.”

The Consumer Counsel also said Virginia Power continues to rely mostly on its own self-built capacity, but that based on recent state law the utility has to consider outside purchases, something the Consumer Counsel has been emphasizing in recent cases at the commission. “Consumer Counsel continues to believe that market purchases of capacity have a role in a diverse portfolio.”

Virginia commission staff said in their July 3 brief: “In its IRP, Dominion Virginia Power presented a Base Plan that, according to the Company, represents the least-cost option for meeting increasing demand, but relies almost exclusively on natural gas for major expansions of generating capacity in the future. Dominion Virginia Power also presented a Fuel Diversity Plan, which, according to the Company, contains additional zero and low-emission options, does not rely as heavily on natural gas, and would promote fuel diversity. More specifically, the Fuel Diversity Plan includes an additional nuclear unit at the Company’s North Anna Power Station (‘North Anna 3’), 247 megawatts (‘MW’)(nameplate) of onshore wind, 20 MW (nameplate) of brownfield solar, 200 MW (nameplate) of solar, and 12 MW (nameplate) for the Company’s Offshore Wind Demonstration Project.

“In addition, the Company presented a Renewable Plan, which provided a way for Dominion Virginia Power to test the feasibility and cost of meeting Virginia’s Renewable Portfolio Standard goals through the increased building of new renewable resources; a Coal Plan, which the Company developed in response to questions it received related to the cost and feasibility of developing coal facilities; a Climate Action Plan, which was designed as one possible Outcome that could occur under the Climate Action Plan the President of the United States announced in June 2013; and an Offshore Wind Plan, which was designed to include significant amounts of offshore wind.”

Commission staff agrees with Dominion on many points

Said staff about the company-preferred Base Plan: “Staff concurs with Dominion Virginia Power that the Base Plan represents the least cost plan. However, while the gas units in the Base Plan have low fixed costs and low project development cost risk, the units do have some operating cost risks. Staff also concurs that the Fuel Diversity Plan has the potential to mitigate future operating cost risk the Company may face were it to rely heavily on natural gas-fired generation, as the Base Plan does. However, while the development of certain resources in the Fuel Diversity Plan, especially North Anna 3, may have lower operating cost risks, these resources would likely have higher project development cost risks as well.”

It added: “Dominion Virginia Power believes that uncertainty associated with the price of natural gas over the long term is a greater risk than the development cost uncertainty of a nuclear unit. However, the Company concedes that no analysis has been performed to support this assertion and states that it is willing to work with Staff to develop analytical processes necessary to conduct such a risk analysis for its 2015 IRP.”

Staff again in the July 3 brief pushed for a timing analysis on North Anna 3. Staff found that delaying the projected in-service date of the North Anna 3 nuclear unit from 2025 to 2030 substantially reduces the net present value (NPV) cost of the Fuel Diversity Plan. “In other words, delaying construction of the nuclear unit by five years would result in significant cost savings to Dominion Virginia Power and to ratepayers. However, these cost savings are realized in exchange for exposure to increased operating risk that would result from delaying the construction. Staff recommends that, if after performing a risk analysis the Company concludes the Fuel Diversity Plan offers reductions in operating cost risks that offset the project development cost risks inherent with the Fuel Diversity Plan, the Company should also conduct an optimum timing analysis for the North Anna 3 nuclear unit. This timing analysis should take into consideration the trade-off between operating cost risks and the cost savings that are realized by delaying the construction of North Anna 3.”

Dominion Virginia Power stated that four operational nuclear units have licenses that are scheduled to expire within the next 26 years. These units are: Surry Unit 1, which is scheduled to be retired in 2032; Surry Unit 2, scheduled to be retired in 2033; North Anna Unit 1, scheduled to be retired in 2038; and North Anna Unit 2, scheduled to be retired in 2040. Surry Unit 1, Surry Unit 2, and North Anna Unit 1 are all 838-MW facilities. North Anna Unit 2 is an 835-MW generator.

Due to the high costs of nuclear retirement, commission staff believes that the company should examine the feasibility of extending the lives and operating licenses of the four existing nuclear units. “It is not known at this time whether the NRC would grant license extensions for these plants, which are almost sixty years old. However, given that these units still provide extremely efficient and dependable baseload generation for the Company, and given the extremely high costs of constructing new nuclear plants, Staff believes that the Company should engage in serious discussions with the NRC to determine whether renewing these licenses is possible. Significantly, Dominion Virginia Power appears to agree with Staff, as the Company indicated at the hearing that it has already entered into preliminary discussions with the NRC on this topic.”

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.