Dominion Doubles Down on Renewable Energy, Awaits Decisions on Atlantic Coast Pipeline

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Researched by Industrial Info Resources (Sugar Land, Texas)--Dominion Energy Incorporated (NYSE:D) (Richmond, Virginia) executives described the impact of COVID-19 on the company so far as "muted." In the company's Power segment, new data centers in its primary service territory of Virginia have helped buoy electricity demand. Its South Carolina territory saw some decline because of lower use by large-scale industrial customers, but this represents a much smaller portion of Dominion's income. The company's Cove Point liquefied natural gas (LNG) in Maryland operates on take-or-pay contracts, so customers are obligated to pay regardless of usage. Meanwhile, Virginia legislation is leading to a large buildout in renewable projects, and Dominion awaits a Supreme Court decision on whether construction of the Atlantic Coast natural gas pipeline, running from West Virginia to North Carolina, can proceed along its proposed route.

In March, the Virginia General Assembly passed the Virginia Clean Economy Act (VCEA), requiring the state's largest utilities to deliver electricity from 100% renewable sources by 2045 and setting a timeline for the closure of old fossil fuel plants. The state governor signed the bill into law last month. Among its provisions is 5.2 gigawatts (GW) of offshore wind by 2036, 16.1 GW of solar or onshore by wind by 2036 and 2.7 GW of energy storage by 2035.

While Dominion has several solar projects under construction, it remains one of the leading companies for U.S. offshore wind power, with a 12-megawatt (MW) pilot-scale facility set to begin construction this summer and plans for a larger installation afterward. In this week's earnings conference call, Dominion Chief Executive Officer Tom Farrell spoke of these projects. He said, "We're pleased with the progress today on both our pilot and full-scale deployments. Despite the pandemic, the primary pilot project components have arrived from Europe ... and we expect installation to begin this quarter with commercial in-service by yearend." The pilot-scale windfarm will include two 6-MW turbines. Farrell said Dominion was working on developing an installation vessel for the full-scale project "that will be equipped to handle all current turbine technologies as well as the next generation turbine sizes of 12 MW and larger. These mega turbines result in fewer foundations and reduce construction and maintenance costs, thereby lowering the levelized cost of energy." The full-scale project is planned to generate 2,600 MW. For more information, see Industrial Info's project reports on the pilot-scale and full-scale projects.

Farrell said that Dominion expects most of Virginia's VCEA mandate for solar and onshore wind to be met by solar, for which the state is better suited. He said Dominion plans to install approximately 700 MW of solar power per year for the next 15 years. In accordance with the legislation, Dominion has updated its capital spending guidance in this area from $3.7 billion in its 2019-23 plan to $5.5 billion in its 2020-24 plan. Among Dominion's active solar projects in Virginia is the 150-MW Phase II addition at its facility in Spring Grove, about 45 miles southeast of Richmond. The addition includes approximately 500,000 Hanwha solar modules on a single-axis tracking system. Strata Solar LLC (Chapel Hill, North Carolina) is providing engineering, procurement and construction services. For more information, see Industrial Info's project report.

In regard to energy storage, while Dominion has been approved to set up some small battery energy storage projects, its main focus in this area is a pumped-storage hydropower plant in southwestern Virginia. The 800-MW facility near Tazewell would involve constructing an upper reservoir where water would be pumped in times of lower energy use, from where it would flow into a lower reservoir during times of high demand, generating power from four 200-MW turbines. The project remains in the very early planning stage and wouldn't begin construction for at least a few years. For more information, see Industrial Info's project report.

Atlantic Coast Pipeline (ACP)
One of the Dominion's largest projects, the Atlantic Coast natural gas pipeline, which it is constructing with a consortium of companies including Duke Energy Incorporated (NYSE:DUK) (Charlotte, North Carolina), faces some uphill permitting challenges. The U.S. Forest Service granted permission for the pipeline to run under the Appalachian Trail in Virginia, which was invalidated by the Fourth Circuit of Appeals. The case is now pending a decision from the U.S. Supreme Court.

Farrell said, "On February 24, the Supreme Court heard oral arguments on the case. We expect the court to rule on ACP's favor in the coming weeks. Such a ruling would restore the authorization of the project to proceed along the existing route. Despite the pandemic, the court continues to meet telephonically and release orders on cases heard earlier in the term." The pipeline also is awaiting certain permitting from the U.S. Fish and Wildlife Service, which is expected by the end of this quarter. The $8 billion pipeline will carry up to 1.5 billion cubic feet per day of natural gas from the Utica and Marcellus shales in West Virginia to eastern North Carolina. Click here for a list of related projects.

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