Dominion wants Wise County coal plant to stay as is

In nine-month economic viability report, utility defends continued operation of waste coal facility

By: - November 23, 2022 12:03 am

Virginia City Hybrid Energy Center in Wise County. (Sarah Vogelsong / Virginia Mercury)

A report by Dominion Energy finds the company’s largely coal-fired Virginia City Hybrid Energy Center in Wise County is economically viable, but critics say it lacks substantial, in-depth analysis to support its claims that the plant’s economic and environmental benefits justify continuing its current operations.

Dominion filed the 28-page report as part of a deal made earlier this year with the State Corporation Commission and the Sierra Club’s Virginia chapter, which argued the plant should be closed next year. The company’s own calculations, the chapter contended, found the plant’s operations will cost ratepayers almost $500 million by 2030 while producing only 6.3% of the power it’s capable of generating.

Under that deal, Dominion agreed to “complete an analysis of a possible pathway towards economic viability” for VCHEC “on a going-forward basis.” 

Dominion agrees to study viability of Wise power plant that’s not producing much power

The report was required to consider scenarios in which the plant retired prior to 2045, the deadline for fossil fuel plant retirements under the Virginia Clean Economy Act, and analyze alternative uses for the site, including solar, wind and energy storage development. Additionally, it was required to include discussion of local economic impacts, system reliability, environmental justice and the social cost of carbon.

What resulted was a discussion of the plant’s annual $156 million in economic benefits to Wise County, the environmental benefits of using coal waste as fuel and the potential siting of a battery storage facility or small modular nuclear reactor at the location. 

“The facility’s operations are currently economic, given present market conditions and high natural gas prices, and it has a path for economic operation through at least 2045,” the report states. “The significant regional economic and environmental benefits which would be foregone in any early-retirement scenario also militate against early retirement.”

But critics say the report fails to fully analyze the plant’s possible uses, particularly in light of the recently passed Inflation Reduction Act and bipartisan infrastructure law, or grapple with the question of whether ratepayers, all of whom live outside Wise County, should be paying for the plant’s benefits.

“We’re pretty disappointed with it,” said Evan Johns, a senior attorney with West Virginia-based Appalachian Mountain Advocates, which is representing the Sierra Club. “There are some obvious omissions from it.”

In response to several questions from the Mercury about ratepayer impacts and plant operations, Dominion Energy spokesperson Jeremy Slayton provided a two-sentence statement.

“VCHEC plays an important role in providing our customers with reliable and affordable electricity,” Slayton said. “Additionally, the station provides hundreds of jobs and significant contributions to the local economy in Southwest Virginia, while helping clean up millions of tons of waste coal, thereby improving environmental quality in the region.”

Dominion defends ongoing operation

VCHEC began operations in July of 2012 and produces 610 megawatts of electricity using a combination of waste coal, waste wood and regular coal as fuel. 

It was built after the General Assembly in 2004 passed a law declaring a plant fired with Virginia coal and located in the coalfield region of the state to be in the public interest. In 2007 the legislature amended the statute to allow Dominion to recover costs of the facility through a rider, or additional fee on customers’ bills.

Today, VCHEC supports about 121 direct and 180 indirect jobs, according to Dominion’s viability report. The plant further provides over $11 million in tax revenue to Wise County annually, regional property taxes and more than $3.5 million in charitable giving.

Beyond the dollars the plant pumps into the region, Dominion argues that it produces a range of environmental benefits. All wastewater discharged is treated on-site, boilers capture carbon and the facility cleans up the toxic byproduct of coal production known as gob coal. 

Southwest Virginia has more than 100 million tons of gob, the report states. That waste can reach waterways, and natural oxidation in piles of gob releases methane and carbon dioxide, both of which contribute to climate change. 

Legislation passed in 2022 directs the Department of Energy to submit a report to the General Assembly by next month on options for cleaning up gob piles, which Dominion contends can only be done permanently through VCHEC.

Additionally, with the rising costs of natural gas and oil, VCHEC’s use of coal makes it an “important” part of Dominion’s generation fleet that can be used in high-demand periods, the report argues. 

If closed early, the company calculates VCHEC would cause Dominion customers losses of between $40.9 million and $158.8 million.

Overall, Dominion says it would need to recoup $1.8 billion from ratepayers to close VCHEC in 2026, $2.4 billion to close it in 2030 and $4.4 billion to close it in 2045.  Customers would see steeper cost peaks if the plant were closed earlier: For residential customers, the rider would peak in 2024 at $7.80 for retirement in 2026, $5.35 for retirement in 2030 and $3.78 for retirement in 2045.

In analyzing potential alternative uses of the site, Dominion says onshore wind isn’t viable, and only 6 megawatts of solar could be supported. But because the plant is not connected to Dominion’s distribution system — Appalachian Power Company is the local transmission operator — there would be financial and technical challenges to connect it.

The company says a roughly 600 megawatt energy storage facility could be supported at the site, but placing such a facility at a location with greater power needs would be a better value to customers, and a battery storage facility would support fewer jobs.

Another option could be an SMR, which could produce up to 300 megawatts of power with fewer manufacturing requirements than a larger nuclear plant. But because the technology is not ready for deployment in the U.S. (the first aren’t expected to come online until the end of the decade), such plans are speculative, the report states.

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Critics say report falls short

While developing state policy to create economic and environmental benefits for a region is one thing, said William Shobe, director of the Center for Economic and Policy Studies at the Weldon Cooper Center for Public Service at the University of Virginia, having Dominion customers foot the bill for them is another. 

“There is no net gain from the state’s point of view by moving money from (outside the region) to Wise County through electricity rates,” Shobe said. “There seems to be an assumption in here that people across the state are responsible for cleaning up gob without thinking about what the cost is to people in the rest of the state.”

Furthermore, for the plant to produce those benefits, it “almost certainly” requires ratepayers to pay more than the value of the electricity generated by the plant to keep it open, Shobe said.  

Use of VCHEC has been dropping: A recent filing by Dominion with the State Corporation Commission shows that the plant’s capacity factor, a measurement of the actual power a facility produces compared to how much it’s capable of producing, will peak in coming years at 15.5% in 2024 and then continue to decline to 6.33% in 2029.

“Electricity from VCHEC is simply too expensive most of the year for the plant to be dispatched. Other sources are cheaper,” Shobe said. “The state would need to subsidize the operation of the plant for it to run at a higher capacity factor.”

Johns said the report was also overly dismissive of other potential uses for the site

While he noted solar and wind may be difficult to develop at VCHEC, he said the report unnecessarily dismisses its battery storage potential and fails to consider benefits included in the Inflation Reduction Act. Those include incentives for clean energy projects for communities that have historically relied on coal mining, like those in Southwest Virginia. Additionally, funding is available from the bipartisan infrastructure law to address abandoned mine land recovery and finance programs to help alleviate the cost of fossil plant retirement.

“It’s just really disappointing to have all of these legislative provisions that affect a lot of the issues being looked at in this report and to just completely omit them,” Johns said.

Finally, he said, the report discusses the social cost of carbon in one fuel cost case, but not another. And it doesn’t clearly indicate where Dominion is sourcing its fuel for the burning of gob coal, which Johns said will likely get more expensive and less useful over time.

It just doesn’t have the “kind of discrepancies you like to see if you’re really trying to isolate variables [to] look at how a facility like VCHEC is expected to run under a wide array of scenarios,” he said.

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Charlie Paullin
Charlie Paullin

Charles Paullin covers energy and environment for the Mercury. He previously worked for Northern Virginia Daily in the Northern Shenandoah Valley and for the New Britain Herald in central Connecticut. An Alexandria native, Charles graduated from the University of Hartford initially wanting to cover sports. He's received several Virginia Press Association awards for his coverage of crime, local government and state politics. Catch him in nature experiencing all the outdoors has to offer, and contact him at [email protected]

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