Dominion 2024 IRP

Last week Dominion Energy released its 2024 Integrated Resource Plan (IRP)and filed it with the State Corporation Commission(SCC).  In the submission, Dominion details how it plans to meet electricity needs and demands over the next 15 years. The picture they paint is that Dominion cannot both meet the power demand of the exploding number of data centers in Virginia and the mandates of the Virginia Clean Economy Act (VCEA). There is simply too much growth in demand for electricity. Dominion estimates that the cost for all plans is a net present value of $94 billion-$103 billion. In all scenarios generating capacity will only be added, there are no retirements.  There were fewer differences than the portfolio in the past because of the need under all scenarios for more capacity to generate electricity. 

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. Under the VCEA Dominion can run carbon-emitting facilities until 2040 and must build a stated amount of solar and wind generation.  Only by petitioning the SCC and demonstrating a need to maintain grid reliability can they continue running their fossil fuel plants. When the VCEA was crafted, they did not foresee the explosive demand for electricity that unconstrained data center development would drive. I assume that Dominion will comply with the new EPA rules for power plants. In their IRP that cost is given as $6-$6.5 billion.

In the discussion below I have taken excerpts from the IRP. To read the full report, click on this link. 2024 VA IRP (cdn-dominionenergy-prd-001.azureedge.net)

Dominion Energy Virginia does not produce all the electricity it delivers and sells. Dominion Energy is a member of PJM Interconnection, LLC (PJM), the regional transmission organization coordinating the wholesale electric grid in the Mid-Atlantic region of the United States. PJM other members supply a significant amount of the energy used in Virginia. Over the last decade, Virginia has depended on power purchases for an increasing share of total energy served. In 2021, the Dominion purchased 14% of its total energy served from the PJM market, in 2022 that number increased to 21%, and in 2023 that number increased again to 22%.

However, in February 2023, PJM found that the current pace of bringing new power generation to market would be insufficient to keep up with expected retirements and demand growth in the foreseeable future. For the first time in recent history, PJM could face the projected total capacity from generating resources would not meet projected peak loads by the 2028/2029 Delivery Year and beyond.

The auctions for the PJM  base power residuals published for the 2025/2026 Delivery Year resulted in significantly higher prices for the Dominion service area.  The market clearing price for the Dominion service area was $444.26/MW-Day which is over 60% higher than the Regional Transmission Organization (“RTO”) clearing price of $269.92 and 15 times higher than the previous 2024/2025 RTO clearing price of $28.92/MW-Day. Constrained supply has pushed the price higher.

Dominion states that the 2024 IRP focuses heavily on reliance on utility resources, recognizing the limits on the ability to import power from elsewhere in PJM. An over-reliance on imported power creates reliability and price risks for Dominion customers, particularly as conventional generation resources have retired and will continue to retire across PJM for economic and environmental compliance reasons.

The need for additional in-state generation, transmission, and distribution resources to reliably supply power is acute.  Demand for power is forecasted to increase 5.5% annually over the next decade and double by 2039 in Dominion's delivery zone within PJM. In this year’s IRP Dominion states that this time they are confident in its Data Center Load Forecast and detail the factors that give them that confidence. Under the VCEA Dominion is supposed to replace all carbon-emitting facilities by 2040, but  the growth they are forecasting make that impossible. All the new generation built will go to supply the increased demand from data centers. The big drivers of current and future growth include migration to the cloud as businesses outsource information technology functions, smartphone technology and apps, 5G technology, digitization of data, and artificial intelligence (“AI”). From storing videos to hosting AI systems that allow consumers to create documents, web pages, music, and more, data centers serve the needs of the public every day.

Dominion Energy’s Data Center Load Forecast is based on existing contracts with customers. As projects progress, customers enter into a series of contracts with binding financial commitments. Dominion Energy regularly reviews this contractual approach to ensure that its Data Center Load Forecast reflects projects that will come to fruition.. Dominion provides a 15-year data center load forecast to PJM, who independently reviews and verifies before incorporating it into PJM’s own forecast.

While market purchases have been, and will continue to be, part of meeting customers’ needs, overdependence on market purchases could be cause for concern. Power may not be available for purchase when it is needed during extreme weather events or other demand spikes. This risk is expected to be exacerbated in the future by the new environmental regulations, the PJM capacity market reform, and other states’ energy policies.

Dominion’s  generation and transmission adequacy is a vital issue that must be addressed at the state level because of the VCEA. There are challenges to the siting and development of new power generation resources across all technologies. Dominion Energy supplements its generation fleet with third-party PPAs. The Company has existing contracts with renewable energy and fossil based PPAs, for approximately 1,277 MW (nameplate capacity not functional capacity) as of the end of 2023.

Over the past two decades, Dominion has migrated away from coal use towards natural gas and increased renewables. This has resulted in significant reductions in carbon dioxide (“CO2”) emission intensity. CO2 intensity is the quantity of emissions per megawatt hour (“MWh”) delivered to customers. This calculation includes emissions from any source used to deliver power to customers, including Company-owned generation, PPAs, and net purchased power. As shown below  CO2 intensity has decreased by 57% since 2000.

For over half a century, nuclear energy has provided reliable, affordable, and zero carbon electricity to meet customer load demands and remains a fundamental component of the transition to net zero emissions. Dominion Energy is extending the life of its nuclear units and considering additional nuclear energy resources in the form of small modular reactors (“SMRs”). SMRs are a classification of nuclear reactors with an output of approximately 300 MW of electricity per reactor. This output is about one-third of the generating capacity of traditional nuclear power reactors. The modular nature allows for portions of the plant to be factory-fabricated and delivered to the site.

Given the small size and modular construction process, Dominion states it is possible to locate SMRs on a wide variety of sites, including retired fossil-fuel generation sites (hello Possum Point), existing nuclear power generation sites (Lake Anna), other industrial areas, and areas closer to the electric demand. In this IRP Dominion has assumed that SMRs will be developed and available to meet the generation shortfall. Based on updated capital, operating and maintenance costs, continued progress of licensing timelines, it is conceivable that the deployment of SMRs could be further accelerated by Dominion.

Nonetheless, natural gas will remain essential to continue providing electricity to the customers. Natural gas power generators are dispatchable resources that play a vital role in supporting increased reliance on intermittent renewable resources. With flexible operating characteristics, giving them the ability to follow load, natural gas units support the grid to generate energy when it is needed, thus allowing the units to turn on, run during the times of peak energy usage, and/or when intermittent resources are not available and then turn off. This mitigates the risk of insufficient generation to meet large swings in energy output of intermittent generation. (No wind. Night time. Overcast days.), 

In the 2024 IRP, Dominion presents four generation mixes that will meet customers’ needs in the future under different planning assumptions. These Portfolios are designed using constraint-based least-cost planning techniques and proven energy generation technologies. The chart below shows the capacity by generation type, but the full breakout can be found in  Appendix 5C of the IRP.

Dominion made the following key observations on the energy mix:

• Due to changes in the PJM Market and increasing load forecast, generation capacity was the controlling factor.
• Nuclear units are essential for ensuring reliability.
• VCEA resources (i.e., solar, wind, battery storage) will make 3% of energy supplied  in 2025, and grow to approximately 30% in 2039.
• Natural gas-fired generators will increase in total generating capacity with the addition of almost 6 GW of new natural gas-fired generation. However, due to growth in demand natural gas will decrease from just below 50% of generation in 2025, to below 30% by 2039.
• There were fewer differences than the portfolio in the past because of the need under all scenarios for more capacity to generate electricity. All Portfolios built the maximum amount of new offshore wind, SMRs, and natural gas that they were allowed to build.
• The NPVs for the Portfolios that include the new suite of EPA regulations is $6 to $6.5 billion more costly than those that do not.
• By 2030, all Portfolios show the proportion of energy purchases from the market approaching their upper limit set in the model of 20%, and stays near this limit through 2039. Dominion can only meet long-term demand if it relies on the PJM market to satisfy up to 20% of its customers’ energy needs. 

Figure 4.2.1.1 below shows a comparison of a typical bill for a residential customer using 1,000 kWh, projected utilizing the Company Methodology (Dominion's) and the Directed Methodology (SCC's  approach).