Natural gas will fuel power generation for years to come at Dominion Energy, one of the largest US utilities, even as it sells a huge pipeline network to Warren Buffett and adjusts to an aggressive clean power mandate in its biggest market.
Dominion, based in Virginia, has set out a goal of “net zero” emissions of carbon dioxide and methane from power plants and gas infrastructure from 2050. Democrats in its home state this spring enacted a law requiring the company’s local electric utility to use 100 per cent carbon-free energy by 2045.
Yet natural gas, the fossil fuel with the lowest carbon emissions, would continue to be crucial to the company’s power mix, said Thomas Farrell, chairman and chief executive.
“In my opinion, for some considerable period of time, I don’t know if it’s 10 years, or 15 years, or 20, you’re going to need fast-start gas-fired power plants that can help cover the needs of the economy when renewable power’s not working,” Mr Farrell told the Financial Times in an interview.
Solar and wind power depend on sunny days or strong breezes to operate. Maintaining reliable electric service requires resources available at any time, such as gas or nuclear generators. Battery storage is emerging as another option to back up renewables, but remains in its infancy on the grid.
Twice weekly newsletter
Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.
Partly in response to the Virginia law, the company this spring dramatically revised a long-term state resource plan that envisages adding more than 15,000 megawatts of solar capacity and 5,000MW of offshore wind turbines in 15 years. More than 2,700MW of storage resources also feature in the plan. Mr Farrell said he was “rooting” for researchers working on batteries.
Dominion’s resource plan also said the company would probably need to preserve thousands of megawatts of gas-fired generating capacity. It projects that gas would account for about 25 per cent of power production in 2035, down from 42 per cent in 2019.
Mr Farrell spoke as he announced a new role for himself as Dominion’s executive chairman, with Bob Blue, head of the Virginia power utility and Dominion’s contracted generation businesses, becoming chief executive. Mr Farrell has served as chief executive since 2006.
This month, Dominion agreed the $9.7bn sale of its natural gas transmission and storage business to Mr Buffett’s Berkshire Hathaway. The same day it cancelled the pursuit of its proposed Atlantic Coast pipeline, even though the US Supreme Court had days earlier ruled the project could receive a crucial federal permit.
Dominion and its project partner Duke Energy said other litigation presented new uncertainties for the Atlantic Coast project, the cost of which had ballooned to $8bn from about $5bn when first proposed in 2014.
A number of factors led to the sale of the gas transmission and storage business to Berkshire Hathaway, including changes to federal policy related to the financing of pipeline businesses, Mr Farrell said.
“But it’s also a recognition by us that we are a leader in clean energy among utilities, and we are going to be the leader,” Mr Farrell said.