Virginia could soon have more than 2,500 MW of solar. We just need customers.

Photo by Activ Solar via Wikimedia Commons.

A review of the Virginia Department of Environmental Quality website reveals developers have at least started the permitting process for 64 solar farms across 40 jurisdictions, representing over 2,400 megawatts (MW) of solar capacity.

This includes projects that are already in operation, like the thousand-acre, 80 MW Amazon Web Services farm in Accomack that kicked off the solar gold rush here in 2015. Amazon also has another 5 projects in development. By the end of 2017, Amazon will have 260 MW of solar in Virginia, accounting for more than half the solar in the state.

The DEQ total only includes projects above 5 MW. It also omits another 94 MW of Dominion Energy projects permitted by the State Corporation Commission, all of which will be in operation by late fall. (Under legislation passed this year, Dominion’s projects will now also follow the DEQ Permit By Rule process, which applies to projects between 5 and 150 MW.)

In all, Virginia would have over 2,550 MW of utility-scale solar if all the projects were to be completed, at the maximum size for which they are seeking permits. But a closer look at the DEQ “notices of intent” suggests that so far the projects seem to have attracted only a limited number of customers: Amazon, our utilities, and the Commonwealth of Virginia itself.

Governor McAuliffe pledged that the Commonwealth would buy 110 MW of solar, enough to meet 8% of its electrical demand, split between onsite and offsite arrays. Announced deals include 18 MW at Naval Station Oceana and two projects totaling 32 MW that will serve the University of Virginia. The Commonwealth is also the off-taker of a project that provides Microsoft with RECs, to date the only announced deal involving a corporation other than Amazon.

Dominion Energy Virginia committed to 400 MW in 2015, and the utility’s 2017 integrated resource plan proposes a continuous build-out of 240 MW per year for the next 25 years. Old Dominion Electric Cooperative has also contracted for 30 MW of solar at two locations, with Dominion Energy owning the projects. Most recently, Central Virginia Electric Cooperative contracted for the output of two 5-MW solar farms. (These do not appear on the DEQ site.)

Where can we find more customers?

This leaves most proposed solar farms in Virginia without identified customers. Certainly, Dominion will prove to be the buyer for many, and there is no good reason it should stop at 240 MW per year. Appalachian Power is also considering sites in Virginia and West Virginia, but its appetite appears limited to 25 MW. The Commonwealth probably has a couple more deals in the works to complete McAuliffe’s pledge, and the next governor could up the ante—especially now we know that purchases by public colleges and universities count.

But for renewable energy to make a serious contribution to our energy supply, new customers have to commit. Fortunately they don’t need to sign onto Dominion’s half-baked green tariff proposal; they can contract directly with developers, as Amazon did initially. When Dominion Energy bought the first Amazon project from its from developer, the parties negotiated a special rate. Industry members say that deal is too complicated to serve as a model for others, but Dominion has indicated an interest in finding a solution.

Dominion’s participation was not necessary for Amazon to move forward, and it would not be required for other large customers to follow suit. In particular, a financial model known as a “virtual PPA” may offer an attractive option. In this arrangement, a large user contracts for the output of a solar or wind farm, but does not actually take delivery of the electricity. Instead, the power is sold into the wholesale market while the customer buys electricity from its utility as usual. The sale of electricity in the wholesale market offsets the cost of power purchased from the utility, acting as a hedge against rising energy prices. The customer gets the renewable energy certificates (RECs) to legally “green” its electricity supply.

A virtual PPA avoids treading on the monopoly power of a utility because it does not require a customer to take delivery of energy from the solar farm. According to Niels Crone of Customer First Renewables, a company that helps large businesses and institutions maximize the value of renewables, virtual PPAs could be a good option for customers located in Virginia.

Crone says that although virtual PPAs (as well as physical PPAs) deliver the greatest bottom-line benefit with larger projects, smaller customers can aggregate their demand to take advantage of economies of scale. That means the benefits don’t have to be limited to the Amazons of the world. Smaller corporations, universities, hospitals and even local government can band together to lower their energy costs—and make a positive impact on Virginia’s environment and economy.

To Understand Pipeline Economics, Follow the Money

By Thomas Hadwin

I have worked for electric and gas utilities in other states, so I am interested in seeing a modern energy system developed in Virginia. I prefer to find solutions where everyone wins, but Virginia is currently split between those who want to protect our land and waters and those who want the lower cost energy and jobs they think pipelines will bring. We can find ways where all interests are served, but we will have to reshape the plans that have been proposed.

The promised economic benefits are what have motivated many political and business leaders to support the Atlantic Coast Pipeline (ACP). Let’s set aside the environmental issues and focus on the economics. In dealing with contentious issues, it’s often hard to find agreement on the “facts.” We can avoid disagreement by using information that the pipeline owners (Dominion Energy, Duke Energy, and Southern Company, the parent company of Virginia Natural Gas) have filed with the Federal Energy Regulatory Commission (FERC).

To show FERC that a new pipeline would be needed, the pipeline owners had their utility subsidiaries in Virginia and North Carolina sign 20-year firm transportation agreements with the Atlantic Coast Pipeline. FERC’s own guidelines say that this is not enough to prove true market need for a new pipeline, especially if the companies signing those contracts are owned by the pipeline developers. U.S. Department of Energy studies and reports from independent consultants show that existing pipelines can provide all of the gas we need in Virginia and North Carolina. Unfortunately, FERC has not requested any substantive data to prove the need for a new pipeline. Signed contracts are all that have been used to approve pipelines for the past several decades and it appears that this substandard practice will continue.

Dominion claims that the cost savings provided by the ACP are enough to prove it is necessary. Will the ACP actually save ratepayers money in Virginia and North Carolina? Enough to spur new job creation, as has been advertised? The truth is revealed by examining who pays for the $5 billion ACP, and how much it costs compared to other options.

Data filed with FERC show the ACP will cost customers more than existing pipelines

Pipelines charge a fee to transport natural gas. The gas itself is purchased separately. Traditionally, large users of natural gas, such as utilities, have signed long-term contracts to reserve capacity on a particular pipeline. These contracts must be paid in full, whether or not all of the capacity is used. Having the capacity reserved assures that natural gas can be delivered when it is needed and reduces the price volatility compared to paying for pipeline transportation only as it is needed.

Capacity reservations can be a good idea, but not when the cost of the long-term contract is far higher than other alternatives. Based on the fee and the capacity reservation filed with FERC, Dominion’s utility customers could be obligated to pay over $4 billion during the next 20 years to the ACP for the long-term transportation agreement.

Existing pipelines, currently serving Virginia, can transport the same or greater amount of gas as the ACP for a much lower cost, because existing pipelines have been mostly paid for by previous customers. Using gas prices from May of this year, which show a price advantage at the Dominion South zone (the source of supply used by the ACP), the total price of gas delivered by the ACP to Dominion’s Brunswick plant would be 28% more expensive than gas delivered by the connection to the Transco pipeline built in 2015. The fee to use the ACP is over three times more expensive than using the Transco connection. Using existing pipelines in other parts of the state would save even more money compared to the ACP.

The ACP will be one of the most expensive pipelines on the East Coast. The fee to transport gas using the ACP is over 60% of the current price of natural gas. If this seems like a lot to pay just for transportation, it is. A fee this high raises the delivered price of gas compared to what can be delivered by other pipelines.

Dominion study shows savings from the ACP, but doesn’t tell the whole story

The study used by Dominion to publicize the presumed $377 million per year cost savings from the ACP examined a short-term phenomenon that was over in 2016, but was assumed to last until 2038. The calculation of savings during that anomalous period was extended over twenty years and subjected to a magic multiplier to increase the apparent savings even more. But the study left out one important factor, the cost of transportation. If the FERC rate for using the ACP to transport the gas was added to the savings in the price of gas during this especially favorable period, there would be no savings, just added costs.

The ACP is more expensive than using existing pipelines

As new takeaway pipelines are added in 2017-2018 to the production zone used by the ACP, it is expected that the gas price in this zone will equalize with other regions, so that the difference in the price of delivered gas will be due mainly to pipeline transportation costs. This will put the ACP at a considerable disadvantage to other alternatives. Using the ACP to deliver gas over the long-term is far more expensive than using existing pipelines.

Long-term agreements with existing pipelines cost money too, and differences do occur from time to time between production zones. An independent analysis identifies that using the ACP in Dominion’s territory compared to existing pipelines will create a net cost to ratepayers of $1.6 to $2.3 billion over the next 20 years. Perhaps about half that amount would be an extra cost to Virginia Natural Gas customers to use the ACP rather than connections to existing pipelines during that same period. In general terms, the ACP would add about $3 billion in costs to Virginia energy consumers over the next 20 years. The ACP will raise energy costs and therefore, diminish job creation, exactly the opposite of what has been claimed.

Can existing pipelines deliver the gas? Dominion’s actions say yes.

Dominion argues it can’t get enough gas from other pipelines, but its actions indicate otherwise. The ACP’s FERC application identifies that the Columbia Gas Pipeline can deliver Dominion’s full allotment of gas from West Virginia to Virginia for use in power plants. Columbia Gas is adding about 87 percent of the capacity of the ACP to its system in the region. Transco is adding 400 percent of the capacity of the ACP to its corridor moving southbound through Virginia and North Carolina. Dominion says the capacity being added to the Columbia Gas and Transco systems isn’t available. Yet Dominion obtained capacity from Transco for use at the Cove Point LNG plant that it claims is “unavailable” for use in power plants.

Cabot Oil & Gas Corp., the gas supplier over the Transco Pipeline to Cove Point, plans to increase production by 1.7 Bcf/d (more than the capacity of the ACP) in the next two years. Dan Dinges, Cabot’s CEO, says Cabot is getting calls “from various people looking to secure . . . long-term supplies . . . and we are definitely answering those calls.”

It certainly appears that Dominion could receive its full allotment of 0.3 Bcf/d using existing pipelines, much cheaper than using the ACP, if only it was willing to ask.

Gas service to southeast Virginia and to North Carolina could be accomplished with connections to existing pipelines, mostly over existing rights-of-way, at a fraction of the cost and impacts associated with the ACP. Southeast Virginia could obtain as much, or more, natural gas using a connection to existing pipelines, entirely over existing rights-of-way. The region could have its own source of supply for 80 years for a fraction of the price it would pay for the 20-year contract with the ACP.

North Carolina would receive as much, or more, capacity to supply the same customers in the same locations as proposed by the ACP. A connection to Transco would be made over 105 miles of the Cardinal Pipeline corridor, then connect to the last 90 miles of the ACP right-of-way to serve the same delivery points. This shorter pipeline would meet the same needs but save North Carolina residents billions of dollars compared to the ACP and avoid disruption of West Virginia and Virginia mountains and pristine streams, as well as national forest lands.

Connections to the Transcontinental Pipeline corridor serve the same customers in North Carolina as the ACP, saving billions.

With demand for natural gas slowing, rushing to build the ACP risks making a costly mistake

Dominion and Duke have been scaling back the number of gas-fired units that require service from the ACP and pushing back the expected dates for initial operation. Just this year, the two companies cut in half the number of large gas-fired power plants needed in the next 15 years. The first unit is not needed until 2025, in Virginia. There is no need to rush through the regulatory process. We have time to do a thorough evaluation of the need, costs and impacts of new pipeline projects.

Growth in U.S. natural gas use has slowed markedly, further undermining the ACP’s need argument and the artificial sense of urgency to gain regulatory approvals. An industry analyst says, “With domestic demand gains slowing across power burn, residential, commercial, and industrial, the North American gas market must find new levers to pull. It is likely that the biggest demand lever for the U.S. gas market over the next five years and beyond will be LNG exports.” This statement indicates that the rapid growth in natural gas use is not shaping up as policymakers were led to believe. The industry is looking to greater LNG exports as a way to increase natural gas prices and rescue Wall Street’s failing investments in natural gas developers.

As the red line of the chart shows, pipeline capacity in the Appalachian Basin is growing much faster than the supply of natural gas.

The Appalachian Basin is not producing enough gas to fill all of the pipelines that are currently in front of FERC for approval. The production of natural gas would have to increase by 50 percent in the Marcellus/Utica shale plays to fill the pipelines currently proposed over the next several years. Rather than reducing the number of pipelines built, the industry is suggesting that we need to drill for more gas.

Australia tried to use its ample reserves of natural gas to increase domestic use and LNG exports. They converted many factories to natural gas in hopes of creating more jobs. Instead of greater prosperity, domestic gas prices rose 3-4 times in 10 years, factories closed or converted back to coal, and utility bills skyrocketed.

Learning from others’ mistakes: Florida’s example

The ACP is not the only pipeline project to overestimate demand. Further south, Sabal Trail, the most recent pipeline to go into operation, is running at 25% capacity, all of it taken from existing pipelines. This new pipeline, in rapidly growing Florida, was promoted as being absolutely necessary to meet growth in natural gas demand by its utility holding company owners, NextEra and Duke Energy. Yet, total natural gas usage in Florida is down 4% over last year, undercut by cheaper renewables.

If Virginia’s families and businesses lose, who wins?

It can be puzzling to understand why utility holding companies want to build a pipeline if it isn’t needed. It seems unlikely that an unregulated, private corporation would invest billions of dollars in a project the market doesn’t support. The answer has to do with the way the utility subsidiaries are compensated. Our utilities get paid more when they build more. Today, there is little reason to build new power plants, because demand for electricity is no longer growing nationwide, even though there is growth in our economy and population. Demand for electricity in Virginia is growing only because of new data centers and Dominion’s studies show that growth from that source will taper off by 2023.

FERC offers a 50% higher return for gas pipelines than for interstate transmission lines. The holding company executives are making what they see as a prudent decision to chase this extra money, while revenues from their utility subsidiaries are flat, and shift the risk and higher costs to the utility ratepayers.

A choice that is good for the shareholders but bad for the ratepayers is not one that we should encourage. A company cannot be successful in the long run setting the interests of its owners against the interests of its customers. If Dominion builds the pipeline and successfully convinces the SCC to pass on the full costs of the 20-year agreements to the ratepayers, customers will pay billions more for no benefit. This would give them a reason to do less business with Dominion in the long run (using energy efficiency and self-generation with solar to reduce their usage). The higher costs due to the pipeline would create a less healthy state economy and a less healthy utility.

We need to create different approaches where everyone can benefit. To do that, we must reset the role of our utilities and pay them differently so they can prosper when they serve us better, as other states are doing.

Given that the economic benefits we have been promised will not materialize, we should ask the state and federal regulators to fully analyze the need for this project and make a thorough assessment of its impacts. We have the time. The process could take two more years and still not affect the operation of any of the new power plants in Virginia or North Carolina that were used to justify the pipeline.

 

Thomas Hadwin

Waynesboro, VA

Thomas Hadwin worked for electric and gas utilities in Michigan and New York.  He led a department which was responsible for the site selection and approval of multi-billion dollar projects working with state and federal agencies, as well as assuring that all company facilities complied with existing environmental regulations.  He founded a computer and telecommunications business about which the Wall Street Journal wrote an article describing its innovative business model.  As a “healer of businesses” he helped ailing companies throughout the U.S. get back on their feet.  He is currently working to help establish a 21st century energy system for Virginia.

 

A Candidate’s Guide to Clean Energy and the Pipelines

Anti-pipeline activists gather at an event called Hands Across the Appalachian Trail on August 19. Photo courtesy of Chris Tandy.

Recently I attended a forum where a candidate for statewide office discussed his energy policies and voiced his support for wind and solar. He embraced a goal of Virginia reaching at least 30% renewable energy by 2030, which was roundly applauded. But then he added that we couldn’t get started on it without advances in battery storage, because, he said, without storage there is no way to put surplus wind and solar on the grid.

People around the room look dumbfounded. They weren’t energy experts, but they knew that was flat-out wrong. Later he made other statements that showed he misunderstood facts about energy, climate change and the grid, hadn’t questioned what he’d been told by utility lobbyists, or just hadn’t been paying much attention.

Maybe you are a candidate yourself (or you work for one), and you don’t want to embarrass yourself by saying so, but you frankly don’t understand what was wrong with that statement about wind and solar. Or perhaps you are an activist and you’d like to help your local candidate for office bone up on some of the most important issues he or she will have to vote on while in office.

Allow me to help. Here is what you need to know about the hot-button energy issues in Virginia today. I’ll also offer my opinion about where you should stand on those issues, but that part is up to you.

Solar is coming on strong—and it is the cheapest energy in Virginia today. This astounds people who don’t keep up with energy trends, but it’s what Dominion Energy Virginia’s latest integrated resource plan (IRP) reveals. Utility-scale solar farms, 20 megawatts (MW) and up, can produce electricity at a cost that beats coal, gas and nuclear. That’s why Dominion’s IRP proposes a build-out of 240 MW of solar per year. It’s why Amazon Web Services has been building 260 MW of solar in five Virginia counties to supply its data centers. It’s why, over the past year, developers have proposed more than 1,600 MW of additional solar capacity in counties across the state. It’s also why today, solar already employs more Virginians than coal.

None of the solar under development includes battery storage. It doesn’t have to, because electricity from solar all goes into one big grid.

The grid is HUGE. If you’re from around here, you probably remember the earthquake of August 2011. It was centered in Mineral, Virginia, but did damage all the way to Washington, D.C. It also caused an immediate shutdown of Dominion’s two nuclear reactors at North Anna that lasted for more than three months. That meant 1,790 megawatts (MW) of generating capacity, enough to power 750,000 homes, suddenly went offline. Do you remember what happened to your power supply at home? You probably don’t. Why not? Because your power didn’t go out.

That’s because the North Anna nuclear plants are only two out of more than 1,300 generating units (power plants) feeding a 13-state portion of the transmission grid managed by independent operator PJM Interconnection. When one unit fails, PJM calls on others. PJM’s job is to balance all this generation to meet demand reliably at the lowest cost.

The grid has no problem with solar. While solar makes up less than 1% of its electricity supply currently, a PJM study concluded the grid could handle up to 20% solar right now, without any new battery storage. Wind and solar together could make up as much as 30% of our electricity with no significant issues. The result would be less coal, less gas, and less carbon pollution—and $15.6 billion in energy savings.

Virginia already has energy storage. You could even say we are swimming in it. Bath County, Virginia is home to the world’s largest “battery” in the form of “pumped storage.” A pair of reservoirs provide over 3,000 megawatts of hydropower generating capacity that PJM uses to balance out supply and demand.

Actual batteries are also an option today, not sometime in the future. The price has dropped by half since 2014, to the point where solar-plus-storage combinations compete with new gas peaker plants. Batteries are also being paired with solar today to form microgrids that can power emergency shelters and other critical functions during widespread outages.

If Virginia goes totally gangbusters with solar, a day will come when there is so much electricity being generated from the sun in some areas that we’d need batteries. But, sadly, we aren’t anywhere near there yet.

So, you should definitely get on board with battery storage; just don’t make the mistake of thinking we can’t ramp up renewable energy today without it.

Make renewable energy your BFF. It probably polls better than you do. Renewable energy has favorability ratings most politicians only dream about. A Gallup poll last year showed 73% of Americans prefer alternative energy to oil and gas, a number that rises to 89% among Democrats. Republicans love it, too; North Carolina-based Conservatives for Clean Energy found that 79% of registered Republicans in their state are more likely to support lawmakers who back renewable energy options.

Distributed renewable energy—think rooftop solar—is especially popular with the greenies on the left and the libertarians on the right, and pretty much everyone in between. It offers benefits that utility solar does not. The policy that makes it affordable is called net metering. It gives solar owners credit for the excess solar electricity they put on the grid in the daytime, to be applied against the power they draw from the grid at night. If you want to support your constituents’ ability to power their own homes with solar, you should protect and expand their right to net meter their electricity.

People who understand Dominion’s pipeline hate Dominion’s pipeline. The proposed Atlantic Coast Pipeline would carry fracked gas 600 miles from inside West Virginia through the heart of Virginia and into North Carolina. Instead of following highways, it cuts across mountains, rivers, forests and farms, and requires land clearing 150 feet wide the whole way. Landowners along the route are furious, as are lovers of the national forests and the Appalachian Trail, people who care about water quality, people who care about climate change, and fans of caves, bats and other wildlife.

The gas it will carry is extracted from shale formations deep underground using hydraulic fracturing, or fracking, a loud, dirty and dangerous practice that doesn’t poll well in Virginia. More quietly (but in many ways worse), leaking wells, pipes, and storage reservoirs are estimated to emit enough greenhouse gases to cancel out the climate advantages of burning gas over coal, and increase smog. An analysis using industry data found that building the ACP and a second controversial pipeline project, the Mountain Valley Pipeline, would more than double the carbon footprint of Virginia’s power sector.

Sea level rise is already taking a toll in Virginia with “sunny day” flooding regularly crippling low-lying areas of Hampton Roads. If you’ve pledged to address climate change, you need to understand how building gas pipelines will undermine the very efforts to reduce such threats.

Now, if you don’t want to oppose Dominion, you might be inclined to minimize all these issues, or to tell voters the destruction of all we hold dear is just the price we pay for cheap energy. I’m sure you can phrase it better than that.

Before you do, though, you should also spend a few minutes to understand why critics say the ACP will raise energy prices, not lower them. That’s because Dominion’s gas-burning electric generating plants already have long-term contracts to use another company’s pipeline, for less money. Using the ACP instead of cheaper alternatives means raising costs to consumers.

Dominion also plans to build more gas-fired power plants so it can fill the pipeline. Gas plants are built to last 30 years or more, pipelines 50 years. Locking us into gas infrastructure for decades when solar is already cheaper than gas now is a seriously bad bet.

And if you think Dominion is going to shoulder the loss of a bad bet, better think again. That’s what its captive ratepayers are for.

Another name for those people is “voters.”

Virginia utilities and advocates square off over net metered solar

Solar now employs more Virginians than coal, but utility efforts to roll back net metering threaten Virginia businesses that install rooftop solar. Here, staff of Mountain View Solar (in high-visibility clothing) and Secure Futures conduct commissioning tests for Albermarle High School’s solar installation. Photo courtesy of Secure Futures LLC.

Advocates of distributed solar energy in Virginia are watching nervously this summer as electric utilities and the solar industry negotiate the future of net metering, the policy that makes rooftop solar economically viable in a state with no other incentives.

Virginia utilities finally see the value of solar to themselves, which is good news for the solar businesses that build large projects. But the utilities’ enthusiasm does not extend to solar owned by their customers. Dominion Energy Virginia and its fellows see rooftop solar as a threat to their monopoly power that needs to be curtailed, not a contribution to our energy security that they should encourage. But by attacking net metering, they endanger the many small businesses whose bread-and-butter comes from the residential and commercial sector.

The utilities’ own solar plans are fairly modest compared to national trends, but they are practically revolutionary for a state with deep ties to fossil fuels. Dominion Energy Virginia proposes to add 240 MW of solar annually, presumably in addition to projects supplying corporate customers like Amazon. Appalachian Power is looking to add 25 MW of solar in Virginia or West Virginia by the end of 2019. Old Dominion Electric Cooperative (ODEC), which serves most of Virginia’s rural electric cooperatives, announced contracts for two projects totaling 30 MW. (Dominion Energy immediately bought the projects.)

All this activity has helped to fuel a rapid rise in the number of solar jobs in Virginia. (In case you missed it, solar employs more Virginians than coal.) But utility projects represent only part of the potential market in Virginia, especially if residents and businesses are encouraged to invest in solar themselves.

The utilities’ hostility to customers generating their own electricity has led to barriers that hold back the market for distributed solar. These barriers include limits on system sizes, standby charges, program caps and challenges to third-party power purchase agreements (PPAs). (For a full discussion of these barriers, see my 2017 guide to Virginia wind and solar policy.)

Utilities would particularly like to do away with net metering, a program that allows solar owners to feed excess solar power to the grid during the day and then draw power from the grid when the sun isn’t shining, paying only for the net of the power drawn from the grid. Utilities say net metering results in solar owners not paying their fair share of grid upkeep. Solar advocates say everyone benefits when customers invest in solar.

“Value of solar” studies from other states largely support the advocates’ contention that solar owners provide more value to the grid and to their fellow customers than they get in return. Three years ago the Virginia Department of Environmental Quality facilitated the beginnings of a value of solar analysis for Virginia, but the utilities walked away when they didn’t like where it was headed. Without this kind of valuation, utilities and advocates are left talking past each other.

The future of net metering is now a subject for discussion by the Rubin Group, an informal, by-invitation-only committee formed by the utilities and solar industry members in 2016. The project is named for its moderator, Mark Rubin. Although barely a year old and lacking full stakeholder representation, the Rubin Group has achieved almost a quasi-legislative status with the blessing of the chairmen of the House and Senate Commerce and Labor Committees. Last year these committees passed only solar bills that had been negotiated through the Rubin Group (or in one case, that the House chairman himself had introduced), and committee members were discouraged from offering amendments.

But the Group’s lack of transparency and limited input was a mistake, Rubin has since acknowledged. This year the Group expanded to include the Southern Environmental Law Center (SELC) and the Virginia Manufacturer’s Association. In addition, outsiders have been invited to participate in occasional conference calls and meetings.

At the first such meeting in June, Rubin said the Group would work on four other topics besides net metering: implementation of last year’s “community solar” legislation; addressing barriers to large utility-scale projects; meeting the needs of corporate purchasers; and land use issues.

But net metering was the hot-button concern, with most of the attendees urging action to expand opportunities for rooftop solar and remove current limits on net metering. By contrast, utility interests expressed a desire for “alternatives.”

A second stakeholder meeting in July further increased advocates’ concern. Participants report Rubin began the discussion of net metering by saying the Group believed “net metering as it is now operating in Virginia is unsustainable.” Such an assertion prejudges the issue, says Aaron Sutch of VA-SUN, and implies the existence of supporting data that the utilities simply don’t have. “Nearly every every study shows that net metered solar benefits all users of the electric grid by providing power when and where it’s needed most.”

In fact, he pointed out to Rubin in a later email, a 2016 Navigant study commissioned by Dominion “concludes that up to 2,000 MW of distributed solar can be integrated into the [Virginia] grid without major upgrades or system-wide issues,” and with cost savings to ratepayers of $75 per MWh.

Sierra Club volunteer Susan Stillman, who runs the Solarize program for the Town of Vienna, also wrote to the Rubin Group to express her concern that the entire discussion seems to be focused on limiting net metering as a way to discourage distributed solar. “No one ever said what aspect of net metering is not sustainable.  How do you solve a problem that you’ve not defined? Net metered solar in Virginia is minuscule so I’m hard pressed to understand that this is a technical issue and that the grid is being harmed.”

Virginia law caps net metered solar at 1% of a utility’s overall electric utility sales. There is no website to tell the public how much net metered solar currently exists—which in itself is a problem—but industry members say we are nowhere near the 1% limit today.

Stillman says net metering is critical to keeping the program simple enough for the average homeowner to understand. “The calculation that every prospective solar customer makes is ‘when will my system be paid off?’  Solar companies know how to approximate this payoff now to a reasonable level of accuracy, and net metering helps with this calculation.  When you change net metering so that customers don’t get full retail, a whole new level of FUD (fear, uncertainty and doubt) is introduced making prospective solar customers more uncomfortable and less likely to move forward with the purchase.​”

Sutch and Stillman are members of the Virginia Distributed Solar Alliance, a group of solar industry members and advocates who are seeking to expand opportunities for residents and businesses to install solar. Alliance members have made protecting and expanding net metering their top priority this year. Unfortunately, they were not offered a seat at the Rubin Group table.

The Rubin Group is supposed to act only by consensus, and at least two of the members say they are committed to protecting the interests of the distributed solar community. SELC attorney Will Cleveland and Scott Thomasson of the advocacy group Vote Solar, who is also a board member of the solar industry trade group MDV-SEIA, have both said they disagreed with Rubin’s characterization of net metering as unsustainable. Indeed, says Cleveland, the problem with the net metering law is that it is too restrictive.

Utilities like Dominion Energy are used to getting what they want, and no doubt they see the Rubin Group as one more way to achieve their aims. But they’ve been doing very well with it. Last year the Rubin Group helped them expand their ability to build more utility scale solar at lower cost to themselves, for which they gave up nothing in return. This year, the Rubin Group is trying to help them some more through the work of the other subgroups. It seems reasonable that in exchange for all this help, they should return the favor and give small solar companies a chance to expand their businesses, too.

Who leads on climate and energy in the General Assembly—and how to get your legislators to up their game

Sierra Club Legislative Chair Susan Stillman presents the Good Government award to Senator Chap Petersen. Photo credit Sierra Club.

Each year the Virginia Chapter of the Sierra Club issues grades to Virginia legislators for their votes on bills related to energy and climate change. It’s not an easy task, especially in the House, where too many good bills die on unrecorded voice votes in small subcommittees, defying attempts to hold legislators accountable. Other bills become victims of party politics. In spite of this, the scorecard manages to separate the champions from the also-rans, not to mention the boneheads running in the opposite direction. Guest blogger Corrina Beall, Legislative Director for the Virginia Sierra Club, lays it all out for you.

 

By Corrina Beall

The Sierra Club Virginia Chapter 2017 Climate and Energy Scorecard grades the Commonwealth’s state-level elected officials on their votes during the 2017 General Assembly Session on legislation that will have an impact on Virginia’s energy policies and standards to fight climate change. Eighteen of Virginia’s 40 senators and 36 of 100 delegates received a score of 80 percent or better on the 2017 Scorecard, reflected in their A+, A and B grades.

Check out your Senator’s and Delegate’s grades and let them know what you think! Thank them for supporting good environmental policies, or let them know that they need to do better. Scorecard available online, here: http://www.sierraclub.org/virginia/general-assembly-scorecard

As a voter, your elected officials care about your opinions even when you disagree. Regardless of party affiliation, your legislator will be interested to know that passionate environmentalists live in his or her district. Even if you never thought it was possible, you may be able to find some common ground. Talk with your legislator about shared values, and from there, the outcome of a friendly conversation about how we govern is anybody’s guess.

Legislators at all ends of the political spectrum need to hear from environmentalists who live in the districts they represent. The environment isn’t a partisan issue: everyone wants clean air to breathe, clean water to drink, and to protect those resources for future generations.

Nine legislators deserve your special thanks this year for their work to protect our environment our air, water or land during the 2017 Legislative Session. Seven will be awarded by are receiving awards from the Virginia Chapter this summer:

  1. Senator Chap Petersen, Good Government Award
  2. Senator Scott Surovell, Water Champion Award
  3. Delegate Mark Keam, Energy Freedom Award
  4. Senator Jennifer Wexton, Energy Freedom Award
  5. Delegate Rip Sullivan, Legislative Leader Award
  6. Senator Jeremy McPike, Environmental Justice Award
  7. Delegate Kaye Kory, Environmental Justice Award

In addition, Senators Amanda Chase and Richard Stuart will be recognized for outstanding contributions on specific bills that help protect Virginia’s water quality from the consequences of our fossil fuel dependency.

Here is the full run-down:

Senator Richard Stuart (R-28) has led on water quality issues in coastal Virginia during his tenure in the Virginia Senate. Since the first commercial oil well was drilled in 1896 in Virginia, it is estimated that seven thousand oil and gas wells have been drilled in the state. Until 1950, there were no permitting or environmental requirements of well operators– and wells no longer in use were not plugged or closed, but simply abandoned. These abandoned wells, and those that are abandoned by insolvent companies, are called “orphan” wells.

According to the latest state review of oil and natural gas environmental regulations, there are at least 130 orphaned wells in Virginia. Orphaned wells that predate regulation often go unnoticed because their locations were never recorded. According to the Virginia Department of Mines, Minerals and Energy (DMME), the cost of plugging an orphaned well is between $50,000 and $60,000. It took fifteen years for DMME to accumulate sufficient funds to complete a project of plugging seven wells.

Virginia’s orphan well program is funded by fees charged to well operators when they apply for a well site permit. The fee was set at $50 in 1990, and remained stagnant until this General Assembly Session. Sen. Stuart introduced successful legislation Senate Bill 911 that will increase the fee from $50 to $200.

Senator Chap Petersen (D-34) showed remarkable leadership by proposing to repeal a statute enacted in 2015 (the now-infamous SB 1349), which froze electric rates at levels that are designed to allow Dominion and Appalachian Power to over-collect money from customers. Virginians are now paying too much for their electricity because our largest utilities are earning unjustified profits. Petersen’s bill would have unfrozen utility rates, and allowed for base rate reviews for both utilities, ultimately resulting in lower electric bills and possibly a refund to consumers.

Additionally, Petersen sponsored Senate Bill 1593, which would ban political contributions from regulated monopolies. Petersen’s stand brought the issue of money in politics to the forefront, a focus that has spilled over into the gubernatorial race.

Senator Scott Surovell (D-36) introduced successful legislation this year to place a moratorium on coal ash disposal permits until the issue has been studied and information has been provided to the regulating entity, the Department of Environmental Quality. Senate Bill 1398 requires Dominion to assess a range of alternatives for disposing or recycling coal ash, the toxic byproduct of burning coal for electricity.

Despite the dangers associated with coal ash, it remains both ever-present and under-regulated. Coal ash is the second largest industrial waste stream in the United States. Vast quantities of poorly-contained ash sit in numerous pits along many of the Commonwealth’s most prized rivers, including the James, the Clinch, and the Potomac Rivers. In many cases, coal ash disposal sites are located upstream from popular fishing, kayaking, and hunting destinations.

The bill is an important step toward protecting every Virginian’s right to clean water. Senator Amanda Chase (R-11) co-patroned the bill. Chase raised the profile of this issue and rallied support around this measure, and after a weakened version of the bill passed in both chambers, she pushed for the Governor to strengthen the bill by amending it to include a prohibition on future issuance of permits until the studies are submitted to DEQ in December of 2017.

At the Request of the Virginia Distributed Solar Collaborative, Senator Jennifer Wexton (D-33) and Delegate Mark Keam (D-35) introduced companion legislation to establish community-owned renewable energy programs in Virginia with Senate Bill 1208 and House Bill 2112. Community-owned projects are not legal in Virginia, but could provide the option to power homes and businesses with clean energy for renters, apartment and condo dwellers, low-income families, and buildings that have unfavorable characteristics for on-site generation like deep shade.

Development of wind or solar energy that provides power to multiple community members leverages an economy of scale to reduce the price for each individual customer. By owning or leasing the solar or wind system, each community member taking part in the project can reduce his or her utility bills. Although these bills failed, they helped legislators understand what a true “community solar” bill looks like, and have helped set the stage for future efforts.

Delegate Rip Sullivan (D-48) introduced a suite of bills on energy efficiency this year in addition to a bill to establish renewable energy property tax credits in Virginia, HB 1632. Sullivan’s bills include HB 1703 (energy efficiency goals), HB 1636 (adjusting energy efficiency programs’ criteria for approval by the SCC), and HB 1465. Only HB 1465 passed.

House Bill 1465, which will become law in July, requires the Department of Mines, Minerals, and Energy (DMME) to track and report on the state’s progress towards meeting its energy efficiency goal. Virginia has a voluntary goal, set in 2007, of reducing electricity consumption by 10 percent by 2022, and we are only a tenth of the way there. Despite the modesty of our goal, at our current pace we will not attain it. This legislation requires that the Governor, the General Assembly and the Governor’s Executive Committee on Energy Efficiency will receive an annual report on our progress. Sullivan’s bill will provide a tool to hold the Commonwealth accountable for reaching our energy efficiency goal, and increase government transparency.

Senator Jeremy McPike (D-29) and Delegate Kaye Kory (D-38) introduced Senate Bill 1359 and its companion, House Bill 2089, which require every public school board in the state to adopt a plan to test for lead in each school’s drinking water. Children are particularly vulnerable to the harmful effects of lead poisoning, but often do not look sick. Lead in the body can cause brain damage and developmental problems including learning disabilities, impulsive behavior, poor language skills and memory problems. This bill will become law in July.

2017 guide to Virginia wind and solar policy

You can tell this picture wasn’t taken in Virginia because it has wind turbines in it. But at least the solar farm will look familiar to many Virginians these days. Photo credit Dennis Schroeder, NREL.

After several years of writing this annual update and often finding little to cheer about, I can finally share some good news. The nationwide boom in utility-scale solar has hit Virginia full force, juiced by low panel prices, corporate and state government demand, favorable tax policy and an abundance of good sites near transmission lines. We are a long way from unleashing our full potential; a lack of incentives, utility-inspired barriers, and a legislature still in thrall to fossil fuel interests continue to hold us back. In spite of this, Virginia is now attracting hundreds of millions of dollars in solar energy investments, and today the solar industry employs more of our residents than the coal industry.

The same cannot be said for wind energy; we are alone among all neighboring states in having no operating wind farms. Distributed generation like rooftop solar also remains a weak spot, even as customer interest continues to grow.

This survey of current policy is intended to help decision-makers, industry, advocates and consumers understand where we are today, who the players are, and where we could be going in the coming year. A few disclaimers: I don’t cover everything, the opinions expressed are purely my own, and as legal advice it is worth exactly what you’re paying for it.

  1. Overview: Virginia still lags, but we’ve now got some mo’

Even last summer it was clear utility-scale solar was on a roll in the commonwealth, leading me to predict Virginia would hit 200 megawatts (MW) by the end of 2016, up from 22 MW at the end of 2015. According to the Solar Energy Industries Association, we beat that number and then some.

Maryland North Carolina W. Virginia Tennessee Virginia
Solar* 637.8 3,015.8 3.4 171.1 238.3
Wind** 191 208 686 29 0
Total 828.8 3,223.8 689.4 200.1 238.3

Installed capacity measured in megawatts (MW) at the end of 2016. One megawatt is equal to 1,000 kilowatts (kW). Note that SEIA does not provide 2016 numbers for W. Virginia; shown are 2015.

*Source: Solar Energy Industries Association **Source: American Wind Energy Association 

The big numbers, however, still lie ahead. At the May event where Governor McAuliffe announced his directive to the Department of Environmental Quality (DEQ) to develop a carbon limit for Virginia, he also reported that Virginia has a total of more than 1,800 MW of solar installed or under development.

Several developments are driving these numbers:

  • Once the federal investment tax credit is factored in, the levelized cost of energy from solar is now below that of coal, nuclear, and natural gas.
  • Dominion committed to 400 MW of solar as part of 2015 legislation, and now indicates in its IRP an intent to build 240 MW per year through at least 2032.
  • Governor McAuliffe committed the state to getting 8% of its electricity from solar, a total of 110 MW.
  • Corporations, led by Amazon, are using new approaches to procure renewable energy on favorable terms, including indirect and virtual PPAs; this forces utilities to cooperate or be cut out of the action.
  • Other customers have stepped up pressure on their utilities to provide renewable energy.

You can find the list of projects that have submitted permit applications on the DEQ website. The list currently does not include regulated utility-owned projects, which until this year received permits from the State Corporation Commission (SCC). Under legislation passed in 2017, however, these projects will also be governed by the DEQ permit-by-rule process.

Industry experts caution that not all of these solar projects will get built; we may even be seeing a speculative bubble of sorts, reflecting a scramble to lock up the good sites now and worry about customers later.

You will find only one wind project on the DEQ list: Apex Clean Energy’s 75 MW Rocky Forge wind farm, which received its permit earlier this year but has not yet begun construction.

And in spite of Dominion Virginia Power having won the right to develop an estimated 2,000 MW of wind power offshore of Virginia Beach, there is still no timeline for offshore wind in Virginia. Dominion continues to include its two-turbine, 12 MW pilot project in its 2017 Integrated Resource Plan, with a projected in-service date of 2021. It does not include the larger resource as an option.

  1. Most customers still can’t buy renewable energy from Virginia utilities

Currently, the average Virginia resident can’t pick up the phone and call their utility to buy electricity generated by wind and solar farms (unless they are members of some rural electric cooperatives—see below). Worse, they can’t buy renewable energy elsewhere, either.

Virginia law is not the problem. Section 56-577(A)(6) of the Virginia code allows utilities to offer “green power” tariffs, and if they don’t, customers are supposed to be able to go elsewhere for it. Ideally, a utility would use money from voluntary green power programs to build or buy renewable energy for these customers. However, our two big investor-owned utilities, Dominion Energy Virginia (formerly Dominion Virginia Power) and Appalachian Power Company (APCo), have not done this. Instead, the utilities pay brokers to buy renewable energy certificates (RECs) on behalf of the participants. Participation by consumers is voluntary. Participants sign up and agree to be billed extra on their power bills for the service. Meanwhile, they still run their homes and businesses on regular “brown” power.

In Dominion’s case, these RECs meet a recognized national standard, and some of them originate with wind turbines, but they primarily represent power produced and consumed out of state, and thus don’t displace any fossil fuel burning in Virginia. For a fuller discussion of the Dominion Green Power Program, see What’s wrong with Dominion’s Green Power Program.

Since RECs are not energy, Dominion customers are free to buy RECs from other providers, such as Arcadia. If you’re considering this route, read this post first so you understand what you are getting. Personally, I recommend instead making monthly tax-deductible donations to GRID Alternatives to put solar on low-income homes.

Appalachian Power’s “green pricing” program is worse than Dominion’s, consisting only of RECs from an 80 MW hydroelectric dam in West Virginia. In April of 2016 APCo filed a proposal with the SCC for a true renewable energy tariff under of §56-577(A)(6) that would combine wind, solar and hydro. None of the power would come from new projects; partly as a result, the tariff will cost more. That led a hearing examiner to recommend that the SCC reject the tariff as not in the public interest. A ruling by the SCC is expected this summer or fall.

Can you go elsewhere? Since the State Corporation Commission has ruled that REC-based programs do not qualify as selling renewable energy, under the terms of §56-577(A)(6), customers are currently permitted to turn to other licensed suppliers of electric energy “to purchase electric energy provided 100 percent from renewable energy.”

That means you should be able to go elsewhere to buy wind and solar. But Virginia utilities claim that the statute’s words should be read as requiring not only that another licensed supplier provide 100% renewable energy, but that it also supply 100% of the customer’s demand, all the time. Obviously, the owner of a wind farm or solar facility cannot do that. Ergo, say the utilities, a customer cannot go elsewhere.

In August of 2016, a hearing examiner for the SCC rejected this reading in favor of the plain language of the statute. Unfortunately, the case was terminated without the commissioners themselves ruling on the issue.

In spite of the roadblocks, an independent power seller called Direct Energy announced plans last year to sell a renewable energy product to Virginia residents in Dominion’s territory. (The company described the product as a combination of wind and municipal waste biomass.) This spring the SCC confirmed Direct Energy’s right to enter the Virginia market, but also ruled that Direct Energy will have to stop signing up customers once Dominion has its own approved renewable energy tariff. As of this writing, Direct Energy has not decided whether to proceed.

Within a few weeks of the ruling, Dominion filed plans for several new 100% renewable energy tariffs for large commercial customers, and indicated it expected to offer a residential renewable energy tariff as well. Until we see the details, it is hard to know whether this should be viewed as a genuinely positive step for customers or is merely intended to scare off competitors like Direct Energy. Because Dominion’s tariff is designed to meet the company’s “100% of the time” interpretation of the statute, it will include sources like forest biomass, which counts as renewable under the Virginia code but is highly polluting and doesn’t meet many national standards for sustainability. That makes it questionable whether anyone will want to pay extra for its product. If the SCC confirms its hearing examiner’s report rejecting the similar APCo tariff, Dominion may be forced back to the drawing board. (Note to Dominion CEO Robert Blue: Bob, you have the nation’s largest pumped storage facility. Wind, solar and pumped hydro would combine beautifully. You do not need to foist biomass on customers to meet your notion of 100% renewable.)

A new solar option is in the works. For both APCo and Dominion customers, another option is on the way. Under legislation passed this year under the misleading banner of “community solar,” both utilities will contract for power from solar farms to sell to consumers. Details—including price—still have to be worked out in a rulemaking proceeding at the State Corporation Commission. The new programs explicitly do not count as ones selling “electric energy provided 100 percent from renewable energy,” though ironically, they may be the first programs from Dominion and APCo to do exactly that for residential consumers.

Some coop members do have wind and solar options. Recently I learned that there are good green power programs in place in Virginia, available to members of some rural electric cooperatives. Old Dominion Electric Cooperative (ODEC), which supplies power to member cooperatives, buys the output of three wind farms in Maryland and Pennsylvania, and has contracted for two solar farms in Virginia that are slated to come online this year. Not all coops participate; ODEC has the list of those that do on its website.

  1. Community solar

Dominion loves the name “community solar.” The reality, not so much. The solar tariff discussed in section 2 uses that name but keeps the utility in control and gives customers no ownership interest. Dominion opposed true community solar legislation this year (as in past years) that would have put consumers in the driver’s seat.

This is not the first time Dominion has used the name “community solar” for a program that isn’t. In 2015 Dominion received SCC approval for a program it billed as an offer to sell electricity from solar panels. Unfortunately it turned out the “Dominion Community Solar” program would have involved customers paying extra so Dominion could sell solar energy to other people. Reading the details, it seemed clear it would attract customers only to the extent they didn’t understand it. Fortunately the company still hasn’t launched the program, but I’ve seen no formal withdrawal.

As for true community solar, only one Virginia utility offers it: a member-owned rural electric cooperative in southwestern Virginia called BARC.

  1. The miserable sham that is Virginia’s Renewable Portfolio Standard (RPS)

Many renewable energy advocates focus on an RPS as a vehicle for inducing demand. In Virginia, that’s a non-starter. Virginia has only a voluntary RPS, which means utilities have the option of participating but don’t have to. And unfortunately, the statute takes a kitchen-sink approach to what counts as renewable energy, so meeting it requires no new investment and no wind or solar. The SCC also insists that utilities take a least-cost approach to meeting the RPS, which means they use RECs from trash incinerators, wood burning, and old out-of-state hydro projects built prior to World War II. If utilities build wind and solar, they are required to sell the high-value RECs from these projects and buy low-cost junky ones instead. Thus, no matter how much solar Dominion builds, the RPS operates to ensure customers will never see solar as part of their energy mix.

The targets are also modest to a fault. Although nominally promising 15% renewables by 2025, the statute sets a 2007 baseline and contains a sleight-of-hand in the definitions section by which the target is applied only to the amount of energy not produced by nuclear plants. The combined result is an effective 2025 target of about 7%.

There appears to be no appetite in the General Assembly for making the RPS mandatory, and efforts to improve the voluntary goals have repeatedly failed in the face of utility and other industry opposition. The utilities have offered no arguments why the goals should not be limited to new, high-value, in-state renewable projects, other than that it would cost more to meet them than to buy junk RECs.

But with the GA hostile to a mandatory RPS and too many parties with vested interests in keeping the kitchen-sink approach going, it is hard to imagine our RPS becoming transformed into a useful tool to incentivize wind and solar.

That doesn’t mean there is no role for legislatively-mandated wind and solar. But it would be easier to pass a bill with a simple, straightforward mandate for buying or building a certain number of megawatts than it would be to repair a hopelessly broken RPS.

  1. Customer-owned generation 

Given the lack of wind or solar options from utilities, people who want renewable energy generally have to build it themselves. Low panel prices and the federal 30% tax credit make it cost-effective for most customers. The emergence of bulk purchasing coops, sometimes also called “solarize” programs, such as those offered through nonprofits VA-SUN and LEAP, makes the process easy for homeowners and businesses and further reduces costs.

Virginia allows net energy metering at the retail rate, though with limits (see section 6). Large commercial customers should also consider the advantages of solar in reducing high demand charges.

In 2016 the GA passed legislation enabling Property Assessed Clean Energy (PACE) loans for commercial customers. Localities now have an option to offer low-cost financing for energy efficiency and renewable energy projects at the commercial level. Arlington County received a federal grant to develop a PACE program that is expected to launch this year and be a model for other jurisdictions. A bill to extend PACE authorization to residential customers did not get out of committee last year.

Virginia offers no cash incentives or tax credits for wind or solar. The lack of a true RPS in Virginia means Virginia utilities generally will not buy solar renewable energy certificates (SRECs) from customers. SRECs generated here can sometimes be sold to utilities in other states or to brokers who sell to voluntary purchasers.

  1. Limits on retail net metering

Section 56-594 of the Virginia code allows utility customers with wind and solar projects to net energy meter at the retail rate. System owners get credit from their utility for surplus electricity that’s fed into the grid at times of high output. That offsets the grid power they draw on when their systems are producing less than they need. Their monthly bills reflect only the net energy they draw from the grid.

Residential customers can net meter systems up to 20 kW, although standby charges will apply to those between 10 and 20 kW (see section 8). Commercial customers can net meter up to 1,000 kW (1 MW). There is an overall cap of 1% of a utility’s peak demand that can be supplied by net metered systems (as measured at their rated capacity).

If a system produces more than the customer uses in a month, the credits roll over to the next month. However, at the end of the year, the customer will be paid for any excess credits only by entering a power purchase agreement with the utility. This will likely be for a price that represents the utility’s “avoided cost” of about 4.5 cents, rather than the retail rate, which for homeowners is about 12 cents. This effectively stops most people from installing larger systems than they can use themselves.

In 2015, the definition of “eligible customer-generator” was tightened to limit system sizes to no larger than needed to meet the customers demand, based on the previous 12 months of billing history. The SCC wrote implementing regulations (see 20VAC5-315-10 et seq.) but failed to address what happens with new construction.

The limitation presents a new barrier to current customers who want to expand their solar arrays because their business is expanding or they plan to buy an electric car. Why should they have to wait twelve months? But the limitation is also stupid. If customers want to install more clean, renewable energy than they need and are willing to sell the surplus electricity for avoided cost, why would you stop them from performing this service to society?

  1. Progress on meter aggregation derailed by agricultural solar bill

Under a bill passed in 2013, owners of Virginia farms with more than one electric meter are permitted to attribute the electricity produced by a system that serves one meter (say, on a barn) to other meters on the property (e.g., the farmhouse and other outbuildings). This is referred to as “agricultural net metering.” Unfortunately, there have been complaints from installers about a lack of cooperation from utilities in actually using this provision.

Advocates had hoped that agricultural net metering would be a first step towards broader meter aggregation options, but 2017 legislation instead took agricultural customers in a new direction. Beginning this year, farmers can elect to devote up to a quarter of their acreage to solar panels, up to 1.5 MW or 150% of their own electricity demand. The electricity must be sold to the utility at its avoided cost, while the farmer must buy all its electricity from the utility at retail. A farmer who chooses to do this cannot also use agricultural net metering. Agricultural net metering will be terminated entirely in 2019 in territory served by electric cooperatives, though existing customers are grandfathered.

The change would seem to give farmers no rights they did not already have under federal law, but industry sources I trust say some farmers will indeed be able to make money this way. However, taking away the agricultural net metering option is a backward step for farmers who want to use the solar they produce and aggregate meters.

  1. Standby charges on larger home systems

The current system capacity limit for net-metered residential solar installations is 20 kW. However, for residential systems between 10 kW and 20 kW, a utility is allowed to apply to the State Corporation Commission to impose a “standby” charge on those customers. Both Dominion and APCo have approval from the SCC to impose standby charges so high that solar installers say the larger systems often don’t make economic sense.

Utilities argue that customers with solar panels don’t pay their fair share of the upkeep of the grid, shifting costs to those who don’t own solar. A range of “value of solar” studies in other states have generally found the reverse, concluding that distributed solar provides a net benefit to the grid and to society at large. A stakeholder group in Virginia completed the initial phase of a value of solar study in 2014 but got no further after the utilities pulled out of the process.

Standby charges and other net metering issues will be a major focus of attention this year as a topic in the “Rubin Group” discussion. See section 19.

  1. Homeowner associations cannot ban solar

Homeowner association (HOA) bans and restrictions on solar systems have been a problem for residential solar. In the 2014 session, the legislature nullified bans as contrary to public policy. The law contains an exception for bans that are recorded in the land deeds, but this is said to be highly unusual; most bans are simply written into HOA covenants. In April of 2015 the Virginia Attorney issued an opinion letter confirming that unrecorded HOA bans on solar are no longer legal.

Even where HOAs cannot ban solar installations, they can impose “reasonable restrictions concerning the size, place and manner of placement.” This language is undefined. The Maryland-DC-Virginia Solar Energy Industries Association has published a guide for HOAs on this topic.

  1. Third-party ownership

One of the primary drivers of solar installations in other states has been third-party ownership of the systems, including third-party power purchase agreements (PPAs), under which the customer pays only for the power produced by the system. For customers that pay no taxes, including non-profit entities like churches and colleges, this is especially important because they can’t use the 30% federal tax credit to reduce the cost of the system if they purchase it directly. Under a PPA, the system owner can take the tax credit (as well as accelerated depreciation) and pass along the savings in the form of a lower electricity price.

The Virginia Code seems to sanction this approach to financing solar facilities in its net metering provisions, specifically §56-594, which authorizes a “customer generator” to net meter, and defines an eligible customer generator as “a customer that owns and operates, or contracts with other persons to own or operate, or both, an electrical generating facility that . . . uses as its total source of fuel renewable energy. . . “ (emphasis added).

Notwithstanding this provision, in 2011, when Washington & Lee University attempted to use a PPA to finance a solar array on its campus, Dominion Virginia Power issued cease and desist letters to the university and its Staunton-based solar provider, Secure Futures LLC. Dominion claimed the arrangement violated its monopoly on power sales within its territory. Secure Futures and the university thought that even if what was really just a financing arrangement somehow fell afoul of Dominion’s monopoly, surely they were covered by the exception in §56-577(A)(6) available to customers whose own utilities do not offer 100% renewable energy. (See Section 2, above.)

Yet the threat of prolonged and costly litigation was too much. The parties turned the PPA contract into a lease, allowing the solar installation to proceed but without the advantages of a PPA.

(Note that PPAs are sometimes referred to as “leases,” but they are distinct legally. Leasing solar equipment is like renting a generator; both provide power but don’t involve the sale of the electricity itself. I have never heard of a utility objecting to a true lease.)

In 2013 Dominion and the solar industry negotiated a compromise that specifically allows customers in Dominion territory to use third-party PPAs to install solar or wind projects under a pilot program capped at 50 MW. Projects must have a minimum size of 50 kW, unless the customer is a tax-exempt entity, in which case there is no minimum. Projects can be as large as 1 MW. The SCC is supposed to review the program every two years beginning in 2015 and has authority to make changes to it. I’m not aware the SCC has reviewed the program to date.

Appalachian Power and the electric cooperatives declined to participate in the PPA deal-making, so the legal uncertainty about PPAs continues in their territories. In June of 2015, Appalachian Power proposed an alternative to PPAs. An evidentiary hearing was held September 29, 2015. A veritable parade of witnesses testified that APCo”s program was expensive, unworkable and unnecessary, given the plain language of the statute allowing PPAs.

Almost a year later, on August 31, 2016, the hearing examiner finally issued her report, recommending that APCo’s application be rejected, both because it was a lousy program and because she, too, read the Code to allow PPAs currently, making a utility alternative unnecessary. Before the commission itself could confirm the ruling, APCo withdrew its application.

In 2017, the legislature passed a bill to allow private colleges and universities—but no one else—in APCo territory to use PPAs to install a maximum of 7 MW of renewable energy.

Meanwhile, Secure Futures has developed a third-party-ownership business model that it says works like a PPA for tax purposes but does not include the sale of electricity. This allows the company to install larger projects in more parts of Virginia (including most recently a 1.3 MW solar array to be installed at Carilion New River Valley Medical Center in Southwest Virginia, which I have to mention here because the project combines solar and sheep farming and therefore will make for cute photos). Currently Secure Futures is the only solar provider offering this option, which it calls a Customer Self-Generation Agreement.

  1. Tax exemption for third-party owned solar

In 2014 the General Assembly passed a law exempting solar generating equipment “owned or operated by a business” from state and local taxation for installations up to 20 MW. It did this by classifying solar equipment as “pollution abatement equipment.” Note that this applies only to the equipment, not to the buildings or land underlying the installation, so real estate taxes aren’t affected.

The law was a response to a problem that local “machinery and tools” taxes were mostly so high as to make third-party PPAs uneconomic in Virginia. In a state where solar was already on the margin, the tax could be a deal-breaker.

The 20 MW cap was included at the request of the Virginia Municipal League and the Virginia Association of Counties, and it seemed at the time like such a high cap as to be irrelevant. However, with solar increasingly attractive economically, Virginia’s tax exemption rapidly became a draw for solar developers, including Virginia utilities.

In 2016 Dominion proposed changing the exemption to benefit its own projects at the expense of those of independent developers. In the end, the statute was amended in a way that benefits utility-scale projects without unduly harming smaller projects. Many new projects will now be only 80% exempt, rather than entirely exempt. However, the details are complex, with different timelines and different size classes, and anyone looking to use this provision should study it carefully.

  1. Dominion-owned distributed solar

In 2011, the General Assembly passed a law allowing Dominion to build up to 30 MW of solar energy on leased property, such as roof space on a college or commercial establishment. The demonstration program was intended to help Dominion learn about grid integration. The SCC approved $80 million of spending, to be partially offset by selling the RECs (meaning the solar energy would not be used to meet Virginia’s RPS goals). The “Solar Partnership Program” resulted in several commercial-scale projects on university campuses and corporate buildings, but the program did not offer any economic advantages, and it seems to have fizzled out. The new Dominion Energy web page still mentions it, but currently the link does not lead to more information.

  1. Dominion Solar Purchase Program

The same legislation that enabled the “Solar Partnership” initiative also authorized Dominion to establish “an alternative to net metering” as part of the demonstration program. The alternative is a buy-all, sell-all deal for up to 3 MW of customer-owned solar. As approved by the SCC, the program allows owners of small solar systems on homes and businesses to sell the power and the associated RECs to Dominion at 15 cents/kWh, while buying regular grid power at retail for their own use. Dominion then sells the power to the Green Power Program at a hefty markup. It is not clear whether the program continues to be available; the links on the new Dominion Energy website don’t lead anywhere helpful.

I ripped this program from the perspective of the Green Power Program buyers, but many installers also feel it is a bad deal for customers, given the costs involved and the likelihood that the payments represent taxable income. Finally, selling the electricity may make new system owners ineligible for the 30% federal tax credit on the purchase of the system.

  1. Utility renewable energy tariffs for large customers

In May of this year, Dominion applied to the SCC for permission to offer six new voluntary schedules for customers with a peak demand of at least 1,000 kW (1 MW). The tariff would use a mix of sources that count as renewable under the Virginia Code but still pollute, including biomass—making it only sort-of green.

For large customers that want wind and solar, the options are more limited. In 2013, Dominion Power introduced a Renewable Generation Tariff to allow customers to buy renewable power from providers, with the utility acting as a go-between and collecting a monthly administrative fee. The program was poorly designed and got no takers.

In 2015, Amazon Web Services made Dominion’s RG tariff irrelevant. Amazon contracted directly with a developer for an 80 MW solar farm, avoiding Dominion’s monopoly restrictions with a plan to sell the electricity directly into the PJM (wholesale) market. Dominion Energy (the merchant affiliate of Dominion Virginia Power) then bought the project, and Dominion Virginia Power negotiated a special rate with Amazon for the power. This contract became the basis for an “experimental” tariff that Dominion now offers to customers with a peak demand of 5 MW or more, with a program cap of 200 MW.

Since that first deal, Dominion and Amazon have followed up with contracts for an additional 180 MW of solar in five Virginia counties.

Dominion used a different model for a deal with Microsoft. After the SCC turned down Dominion’s application to charge ratepayers for a 20-MW solar farm in Remington, Virginia, Dominion reached an agreement with Microsoft and the Commonwealth of Virginia under which the state will buy the output of the project, while Microsoft buys the RECs.

Dominion has also entered into a contract to sell the output of a 17 MW solar facility to the University of Virginia and the Darden School of Business.

Dominion has a strong incentive to make deals with large institutions that want a lot of renewable energy: if they don’t like what Dominion is offering, they can do an end run around the utility. Amazon has shown other companies how to use PJM rules that let anyone develop projects for the wholesale market regardless of utility monopolies, and then “attribute” the solar or wind energy to their operations in any state. With the tax exemption discussed in section 11, Virginia projects apparently now pencil out pretty well.

Some observers caution that the process is still not easy. One of the tasks the Rubin Group says it plans to take on this year is considering further changes to help large customers.

  1. Dominion continues to add utility-scale solar for its own portfolio

Even before Amazon and Microsoft showed an interest in large-scale solar projects here, Dominion had announced it wanted to develop 400 MW of solar in Virginia. In 2015, two bills promoted the construction of utility-scale solar by declaring it in the public interest for utilities to build solar energy projects of at least 1 MW, and up to an aggregate of 500 MW. The bill was amended at the solar industry’s behest to allow utilities the alternative of entering into PPAs for solar power prior to purchasing the generation facilities at a later date, an option with significant tax advantages.

Dominion got off to a rocky start when the SCC rejected the company’s plan to charge ratepayers for its first project, a 20 MW solar farm in Remington, Virginia because the company had not considered cheaper third-party alternatives. Governor McAuliffe helped save the project by working out a deal with Microsoft, as discussed above. Further projects fared better, however, and Dominion is now so enthusiastic about solar that its latest Integrated Resource Plan (IRP) calls for it to engage in a continuous build-out at a rate of 240 MW per year, all for the benefit of its regular ratepayers.

Although Dominion will be able to charge ratepayers for these projects, the SCC will probably insist that the RECs be sold—whether to utilities in other states that have RPS obligations, or to customers who want them for their own sustainability goals, or perhaps even to voluntary green power customers. If this happens, the result will be that Dominion still won’t use solar to meet the Virginia RPS, and ordinary customers will still not have solar as part of the electricity they pay for. That’s the weird world of RECs for you.

  1. Governor McAuliffe initiates program to purchase 110 MW of solar

Following a recommendation by the Governor’s Climate Change and Resiliency Commission, on December 21, 2015, Governor McAuliffe announced that the Commonwealth would commit to procuring 8% of its electricity from solar, with 75% of that built by Dominion and 25% by private developers.

The first deal that will count towards this goal is an 18 MW project at Naval Station Oceana, announced on August 2, 2016. The Commonwealth will buy the power and the RECs. (The Remington Project did not count, because as the buyer of the RECs, only Microsoft can claim the right to be buying solar power.) A 17 MW solar farm supplying the University of Virginia will also count towards the 8%, according to Deputy Secretary of Commerce and Trade Hayes Framme.

  1. Still waiting for wind

No Virginia utility is actively moving forward with a wind farm on land. Dominion Power’s website used to list 248 MW of land-based wind in Virginia as “under development,” without any noticeable progress. The current web page omits mention of these projects.

On the other hand, Appalachian Power’s most recent IRP suggests an interest in wind as a low-cost renewable resource. The bad news is that it isn’t proposing to build any new wind in Virginia.

With no utility buyers, Virginia has not been a friendly place for independent wind developers. In previous years a few wind farm proposals made it to the permitting stage before being abandoned, including in Highland County and on Poor Mountain near Roanoke.

Nonetheless, Apex Clean Energy has obtained a permit to develop a 75-MW Rocky Forge wind farm in Botetourt County. No customer has been announced, but the company believes the project can produce electricity at a competitive price, given its good location and improved turbine technology. Construction, once planned for this year, is now slated for 2018.

As for Virginia’s great offshore wind resource, little progress has been made towards harnessing it, even as the nation’s first offshore wind project began generating electricity in the waters off Rhode Island last year. Dominion won the federal auction for the right to develop about 2,000 MW of wind power off Virginia Beach in 2013, and the company has completed a Site Assessment Plan (SAP) that is awaiting approval.

We had originally been told the federal government’s timeline would lead to wind turbines being built off Virginia Beach around 2020. Now, however, the Bureau of Ocean Energy Management says Dominion has five years from approval of the SAP to submit its construction and operations plan, after which we’ll have to wait for review and approval. Presumably the project will also require an environmental impact statement. So the whole process would be quite slow even if Dominion were committed to moving forward expeditiously.

But in fact, it seems increasingly clear that Dominion is just going through the motions and has little interest in seeing the project through. Its 2017 Integrated Resource Plan (IRP) does not even include offshore wind in any of its scenarios for the next 15 years, except for the 12 MW that would be produced by the two test turbines of its VOWTAP project.

Yes, so what about VOWTAP? Dominion had been part of a Department of Energy-funded team to try out new technology, with two pilot turbines due to be installed in 2017. After a second round of bids to build the project still came in higher than expected, Dominion told DOE last spring it could not commit to construction even by 2020, upon which DOE pulled funding. Dominion executives have not declared the project dead, however, and while there has been no public discussion of reviving it, the 2017 IRP suggests an in-service date of 2021.

[Update: on July 10, 2017, Dominion announced it had signed a memorandum of understanding with Denmark-based DONG Energy, one of the largest offshore wind developers in Europe, to complete the two pilot turbines. According to a Dominion press release, the MOU also gives DONG “the exclusive rights to discuss a strategic partnership with Dominion Energy about developing the commercial site based on successful deployment of the initial test turbines.”]

  1. The EPA Clean Power Plan is (probably) dead; long live the McAuliffe clean energy plan!

The Trump administration’s pullback on the Paris accord and the Clean Power Plan are depressing evidence that the Koch brothers have more influence on government than the American people do. Yet the practical effect in Virginia is small. The Clean Power Plan’s targets for Virginia were modest to a fault, and the state could have written an implementation plan that complied with the federal law while still allowing construction of an unlimited number of new gas-burning plants, sending total carbon emissions soaring.

Governor McAuliffe’s recent Executive Directive 11, on the other hand, ties emissions reductions from Virginia power plants to those in other states that have committed to reducing carbon emissions, leaving somewhat less room for mischief in implementation. There are still plenty of pitfalls ahead, and some Republican leaders have vowed to prevent it from ever taking effect. But any constraints on greenhouse gas emissions would serve to increase the value of emissions-free sources like wind and solar. The DEQ web page will show public participation opportunities.

  1. Solar initiatives underway ahead of the 2018 Session

The legislative initiatives that passed in 2017 dealt primarily with utility-scale solar. Since then, the solar industry has announced plans to focus more on removing barriers to distributed generation, a decided challenge given the utilities’ determination to curtail net metering.

The utilities and the solar industry have reconvened solar policy discussions via the Rubin Group, named for its moderator, Mark Rubin. Steering committee members this year include the electric cooperatives, Dominion, APCo, the solar industry trade group MDV-SEIA, the farm advocate Powered by Facts, the environmental group Southern Environmental Law Center, and the Virginia Manufacturer’s Association. The Rubin Group held a meeting on June 19 to get input from other stakeholders, and a follow-up email announced plans for the following subgroups:

  • Large Customer  (Convener: Katharine Bond, Dominion Energy, with Advanced Energy Economy, Ceres, and World Wildlife Fund as Key Participants)
  • Large Developer/Utility-Scale Solar (Convener: Francis Hodsoll, SolUnesco & MDV-SEIA Board Member)
  • Net Metering (Co-Conveners: Sam Brumberg, Virginia’s Electric Cooperatives & Scott Thomasson, Vote Solar & MDV-SEIA Board Member)
  • Land Use (Convener: Karen Schaufeld, Powered by Facts)
  • Community Solar Implementation for Dominion Energy (Conveners: Katharine Bond & Nate Frost, Dominion Energy)

The Rubin Group will accept comments at RubinGroup2017@gmail.com. [Update: Although this was the email address given out at the public meeting, we have learned it goes to Sam Brumberg, attorney for the electric cooperatives, who says he checks it only a few times per month. He recommends contacting Mark Rubin directly at rubin.mark3@gmail.com.]

A separate initiative is the Virginia Distributed Solar Alliance, which includes solar companies, environmental groups, consumers and solar advocates, but not utilities. As its name suggests, it focuses on removing barriers to smaller-scale, customer-sited projects, defending net metering and educating the public about the added benefits distributed solar bring to the grid and the community. The VA-DSA recently launched its website and is welcoming members.

 

 

Hearing examiner rules Appalachian Power’s renewable energy tariff isn’t good enough

Appalachian Power’s plan to repackage power from existing renewable energy projects in its portfolio into a new, higher-priced green option hit a bump this week when a hearing examiner for the Virginia State Corporation Commission recommended rejection of the tariff, saying it wasn’t a good deal for consumers.

Approval of the tariff would have allowed APCo to block competition from other renewable energy suppliers. Virginia law provides that if a customer’s own utility doesn’t offer a tariff for 100% renewable energy, the customer has the right to buy from any other provider.

APCo had argued its tariff met the letter of the law, and that should be the end of the SCC’s inquiry. Since it was a voluntary tariff, customers could take it or leave it. Hearing Examiner A. Ann Berkobile disagreed. Because approval of the tariff would adversely affect competition and restrict the rights of customers, she found, the tariff could only be approved if APCo proved it was “in the public interest and its rate is just, reasonable and unlikely to prejudice customers.”

In this case, she concluded, APCo failed to do so, having “made no effort to establish the reasonableness of its proposed Rider REO rate.”

She went on: “Stated somewhat differently, Rider REO has the potential to suppress or even curtail customer access to 100 percent renewable energy by precluding sales by [Competitive Service Providers] while at the same time offering an incumbent utility alternative that is simply too costly for customers to bear. The overall price of Rider REO (and associated rate) should, therefore, be considered when deciding whether to grant approval.”

Testimony in the case had established that the existing wind farms APCo proposed to use were providing power at a higher price than could be obtained from new sources, which the Hearing Examiner suggested made the proposed tariff rate unreasonable. In addition, using old sources rather than new ones would not “promote the development of renewable energy in accordance with the objectives of the Commonwealth Energy Policy set forth in §§ 67-101 and 67-102 of the Code.”

The Hearing Examiner’s report is only a recommendation to the SCC, which will have the final say. The case is PUE-2016-00051.

Ruling could affect Dominion tariff

If the SCC adopts the Hearing Examiner’s recommendation, that could also affect the SCC’s evaluation of Dominion’s proposed 100% renewable commercial tariff. Dominion’s tariff will likely use biomass as a source because of Dominion’s insistence that a 100% renewable product must use sources that together produce renewable energy 100% of the time. But while Virginia’s overbroad definition of renewable energy includes “biomass, sustainable or otherwise,” biomass often doesn’t satisfy corporate sustainability goals. As the Hearing Examiner’s opinion suggests, it’s not enough for a tariff to meet the requirement of providing 100% renewable energy if it isn’t also good enough to attract customers.

The Hearing Examiner’s emphasis on the cost to consumers is also a relevant consideration. If the SCC affirms the APCo decision, Dominion would have to justify using higher-cost biomass over much cheaper wind and solar.