SCC challenges Dominion’s IRP Assumptions

In May when Dominion Energy filed its 2023 Integrated Resource Plan (IRP) with the State Corporation Commission (SCC) it essentially showed that Virginia plans to decarbonize the grid under the VCEA had collided with the exploding demand of the unconstrained growth of the data centers in Northern Virginia. The IRP is meant to guide the SCC decisions about Dominion’s generation fleet- building new generation and shutting down old generation.

Just to refresh your memory, the 2020 VCEA is the state’s law outlining a path to decarbonize the electric grid by 2050. VCEA requires the Commonwealth to retire its natural gas power plants by 2045 (Dominion) and 2050 (Appalachian Power). These facilities currently comprise 67% of the current baseload in-state generation as well as 100% of the power plants that meet peak demand. About 30% of Virginia’s generation is from nuclear. When the VCEA was crafted, they did not foresee the explosive demand for electricity that unconstrained data center development would drive.

The IRP plan presented would increase Dominion’s  carbon emissions from current levels, instead of dropping to zero by 2040, as required under the VCEA. In the IRP submitted to the SCC Dominion forecasted that power demand would rise 80% and that peak load will rise from a bit more than 17,000 megawatts now to 27,000 megawatts by 2037. You cannot plan that amount of electricity demand growth 10 years while eliminating generation capacity. It has never been done, and Dominion admits that they need to not only keep all their fossil fuel power generation operating, but  are asking to build more dispatchable fossil fuel generation to meet this forecast demand.

Their plan to do that requires over 4,500 MW of incremental energy storage and more than 3,000 MW of incremental Small Modular Nuclear, SMR, (which is still in the demonstration stage where costs on the first prototype plant have risen more than 50%). Even with these additional resources, Dominion would have to purchase 10,800 MW of additional capacity from PJM in 2045 and beyond, raising significant concerns about system reliability and energy independence, including over-reliance on out of-state capacity to meet customer needs. This Plan will also require a substantial increase in energy purchase limits from both PJM and the SCC.

Now, the SCC is examining and challenging the growth assumptions that went into that forecast. As reported in the Richmond Times Dispatch, the SCC hired a consultant, Bernadette Johnson, to examine the growth forecast. “She said the increase Dominion forecasts is larger than the actual growth her firm has measured in Texas' self-contained electric grid, where increases have been driven by data center expansion, cryptocurrency operations and faster overall job growth than Virginia sees.”

In addition, the Times Dispatch reports that “environmental groups and a clean energy trade association told the SCC that Dominion's electricity demand forecast is based on an unrealistic view.”   So, it remains to be determined whose forecast is correct. However, the New York Times reported Nvidia sales results soaring and sales jumping 101% year over year to$13.5 billion.  “Nvidia’s roaring sales contrasted sharply with the fortunes of some of its chip industry peers, which have been hurt by soft demand for personal computers and data center servers used for general-purpose tasks…

Some analysts believe that spending on A.I.-specific hardware, such as Nvidia’s chips and systems that use them, is drawing money away from spending on other data center infrastructure. IDC, a market research firm, estimates that cloud services will increase their spending on server systems for A.I. by 68% over the next five years.”

I would like to point out that crypto currencies are very different than deployment of A.I. and hyperscale data centers. In a demand response program, cryptocurrency miners simply shut down and get paid for stepping off the grid. At the right price they are happy to oblige the grid operators. The Texas grid is larger and the data centers represent a smaller proportion of the overall.  Data centers cannot as easily step off the grid, they must keep operating and require a viable backup. We are more and more dependent on the internet.  If the day comes when A.I. is operating much of our infrastructure control, automobiles etc. there will be no ability for the data centers to shut down in a demand response program. 

A recent Harvard Business Review article by Ajay Kumar and Tom Davenport stated that: “The data center industry… is responsible for 2–3% of global greenhouse gas (GHG) emissions. The volume of data across the world doubles in size every two years. The data center servers that store this ever-expanding sea of information require huge amounts of energy and water (directly for cooling, and indirectly for generating non-renewable electricity) to operate computer servers, equipment, and cooling systems. These systems account for around … 2.8% of the United States’ electricity use.

AI models are generated by “hyperscale” (very large) cloud providers with thousands of servers that produce major carbon footprints; in particular, these models run on graphics processing unit (GPU) chips. These require 10–15 times the energy a traditional CPU needs because a GPU uses more transistors in the arithmetic logic units. Currently, the three main hyperscale cloud providers are Amazon AWS, Google Cloud, and Microsoft Azure.”

What has happened decade after decade in the tech industry is that growth surprises, demand soars, back logs build, companies double or triple order to ensure their growth and then demand slows and sometimes crashes. In data centers, the demand may be not yet at the peak, past the peak, or about to take off for A.I. specialty data centers. My crystal ball is cloudy, but we do know that Virginia has given up control and management of the situation to the unrestrained approval for the building of data centers and the requirement the power be delivered on request. Which future will be ours- empty shells decaying along the road or a county crisscrossed by power lines energized by fossil fuels?