The Virginia City Hybrid Energy Center. Credit: Hansellts / Wikimedia Commons

An analysis warns that market forces and policy changes put the underperforming Virginia City Hybrid Energy Center on a path to abrupt closure.

An energy think tank has issued a dire warning to Dominion Energy: Devise a transition plan for its 8-year-old underperforming coal plant now or risk leaving a Southwest Virginia county in more of an economic lurch when market and policy changes likely force an abrupt shutdown.

Analysts with the nonprofit Institute for Energy Economics and Financial Analysis are demanding accountability from Richmond-based Dominion on the plant’s future in a report issued today. Dominion is, by far, Virginia’s largest utility. 

“Virginia Coal Plant’s Future Isn’t Bright: Preparation for Transition Should Commence Now” centers on the viability of the 624-megawatt Virginia City Hybrid Energy Center, which runs on coal and some wood waste. Institute researchers say the plant — completed in July 2012 — operated at about 20% capacity from January through August this year.

The report details how the Wise County energy center’s situation is more precarious than Dominion has publicly acknowledged. It states that its closure would cost the community roughly 153 full-time plant jobs and up to 400 additional indirect jobs.

As well, the region would lose between $6 million and $8.5 million in local annual tax revenues.

Karl Cates, a transition policy analyst; Seth Feaster, an energy data analyst; and analyst Brent Israelsen jointly authored the report.

“VCHEC’s underperformance, coupled with shrinking utility industry appetite and demand for coal-powered electricity, show clearly that there is no sensible business case for keeping the plant open other than to reward Dominion shareholders with ratepayer-subsidized dollars,” they wrote.

During its peak performance in 2013 and 2014, the plant operated at slightly more than 65% of its capacity. However, their research shows that fell to 54% in 2018 and 22% in 2019. 

If the plant remains online, the report said Dominion estimates its annual capacity factor will average less than 7.7% over the next decade. That output will be insignificant on a grid operated by the 13-state PJM Interconnection, which has access to 180,000 MW of other generation capacity. 

A graphic provided by the Institute for Energy Economics and Financial Analysis illustrates capacity factor projections for the Virginia City Hybrid Energy Center. (Image courtesy of Institute for Energy Economics and Financial Analysis)

While Dominion has some motivation to keep the plant online even as a marginally productive generator, the report stated, the utility is likely to run into regulatory resistance, as ratepayers would be footing the bill for a money-losing operation.

Dominion did not respond directly to a list of questions, but spokesperson Jeremy Slayton said the utility remains committed to operating the plant because of the role it plays in delivering reliable and affordable power in the region.

“The station provides hundreds of jobs and significant local revenue, while helping clean up millions of tons of waste coal and thereby improving regional water quality,” he added.

The report’s authors laid out three concrete steps for state and county officials to take immediately. They suggested a need to acknowledge the plant’s imminent retirement, demand transparency and local reinvestment from Dominion, and devise a plan that accounts for the loss of jobs and figures out how to remediate the site. 

“Community leaders should press for full transparency from Dominion on its plans for the plant and aggressively call for serious reinvestment in the local economy,” said Cates, the lead author.

Cates pointed to proposals that account for other early closures — the Navajo Generating Station in Arizona, the San Juan power plant in New Mexico, the Centralia Coal Plant in Washington and part of the Comanche Generating Station in Colorado — as potential models for responsible change.

The institute, headquartered near Cleveland, examines issues related to energy markets, trends, and policies. Its mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

Institute spokesperson Vivienne Heston said the research on the specific plant was conducted based on a request from Appalachian Voices “in light of information revealed in the recent Dominion Integrated Resource Plan proceeding.”

Chelsea Barnes, the new economy program manager at Appalachian Voices, said that in October her nonprofit asked the institute to delve into revelations presented by Virginia Attorney General Mark Herring before the State Corporation Commission about Dominion’s IRP.

That testimony, which used Dominion data, showed that continued operation of the plant over the next 10 years would cost ratepayers $472 million more than it’s worth.

“We wanted to better understand the likely timeline for closure, the status of the power plant, and the impacts it would have on the local communities in Wise and Russell counties so we could better help with the transition, whenever it occurs,” Barnes said in an interview.

Her organization, which set up an office in Wise County five years ago, advocates for a healthy environment and a just economy in Appalachia.

Appalachian Voices is among the groups backing legislation that would require utilities to be transparent about expected power plant closures so local officials and state agencies can be informed and assist with energy transitions in communities.

Democratic Gov. Ralph Northam and a Democratic-majority General Assembly have made an abrupt turn away from some fossil fuels over the last several years. One of the latest moves was this year’s enactment of the Virginia Clean Economy Act. It’s far from perfect, but it’s designed to shift energy priorities and speed up the retirement of coal- and natural gas-fired plants

To decarbonize Virginia’s electricity grid over the next several decades, the bipartisan bill establishes aggressive energy efficiency standards, broadly expands incentives for rooftop solar and kickstarts a massive offshore wind industry.

It mandates that Dominion switch to renewable energy by 2045 and that Appalachian Power, the state’s smaller investor-owned utility, complete a changeover by 2050. The new law means shuttering all but two of the state’s remaining six coal-fired plants by the end of 2024. 

In Virginia, coal accounted for 44% of electricity generation in 2008, according to numbers in the institute’s report. By 2019, that figure had dropped to 4% as electricity providers transitioned to gas and renewables.

Another recent sign of a significant pivot is the decision by a government agency in Southwest Virginia — which operates on fossil fuel dollars — to create a $1 million Renewable Energy Fund to attract businesses and train residents to find jobs in a burgeoning field.

The General Assembly started what’s called the Virginia Coalfield Economic Development Authority in 1988 to serve the historic coal counties of Buchanan, Dickenson, Lee Russell, Scott, Tazewell and Wise, and the city of Norton.

Jonathan Belcher, executive director of the authority, told the Energy News Network in an interview that the mountainous region, with its long history of energy production, is a prime location for a wide range of renewable projects. 

Creating the new fund was a “very bold” act, he emphasized.

“Alternative energy has been on our radar for a while,” Belcher said. “It’s also due and needed because more business prospects would ask about incentives. You risk being looked over if you don’t have a competitive advantage. Our whole purpose is to attract jobs, so we’d be left behind if we didn’t do this.”

Elizabeth is a longtime energy and environment reporter who has worked for InsideClimate News, Energy Intelligence and Crain Communications. Her groundbreaking dispatches for InsideClimate News from Kalamazoo, Michigan, “The Dilbit Disaster: Inside the Biggest Oil Spill You Never Heard Of” won a Pulitzer Prize for National Reporting in 2013. Her book, "Outpedaling 'The Big C': My Healing Cycle Across America" is available from Bancroft Press. Based in Washington, D.C., Elizabeth covers the state of Virginia.