Monthly Archives: December 2017

How Did Virginia Get So Far Behind on Energy Efficiency?

by
  • Dominion Energy ranks 50th in energy efficiency among the 51 largest electric utilities in the nation (ACEEE)
  • Virginia has captured only 2% of its efficiency potential (EPRI)
  • Robust energy efficiency policy in VA could increase employment by 38,000 jobs by 2030 (DMME Energy Plan 2014)
  • VA’s residential electricity bills ranked 10th highest in the U.S in 2015, commercial bills ranked 13th highest (U.S. Energy Information Administration)

In the past year, numerous reports from research institutes, industry think tanks, and government entities have exposed Virginia’s poor energy efficiency performance. Considering the clear economic and environmental benefits that energy efficiency provides to Virginia’s businesses and residents, and in light of Virginia’s untapped energy efficiency potential, electric utilities should prioritize meeting demand through improving energy efficiency rather than building new expensive power plants.

Virginia Utilities Are Significantly Underperforming in Achieving Energy Efficiency.

Virginia’s largest investor-owned utility, Dominion Energy, holds a very weak record on energy efficiency – ranking 50th (next to last) in efficiency efforts among the 51 largest electric utilities in the nation, according to the American Council for an Energy-Efficient Economy (ACEEE). In this utilities report, Dominion Energy earned only 11% of total energy efficiency points (5.5 out of 50) and performed far worse than peer utilities in the Mid-Atlantic region (MD, NJ, PA, and VA). In contrast, Maryland’s BG&E utility company ranks 4th in the nation. In addition, a 2016 independent survey of the 30 largest investor-owned utility companies ranked Dominion last for energy efficiency using two separate measures.

Virginia investor-owned utilities are not even close to reaching Virginia’s voluntary energy efficiency goal of reducing electricity use by 10% by 2022 (relative to 2006 base consumption – equal to a reduction of 10.76 million megawatt hours). According to the Virginia Department of Mines, Minerals, and Energy (DMME), utilities had achieved less than 10% of the reduction goal by the end of 2015. In Dominion’s 2017 Integrated Resource Plan (IRP), State Corporation Commission (SCC) staff witness Eichenlaub testified that, based on current programs, Dominion Energy could achieve only 80% of the 10% reduction target by 2032—still deficient a decade late.

Graphic1

Even the electric utility industry’s own research organization (Electric Power Research Institute, or “EPRI”) reveals how far behind Virginia is in energy efficiency efforts. EPRI’s recent report shows that Virginia has captured only 2% of its efficiency potential. Based on current programs, policies and activities, Virginia will only achieve 7% of its energy efficiency potential by 2035, ranking near the lowest in the nation – 48th out of 50 states and the District of Columbia.

Achieving Advances in Energy Efficiency Will Reap Great Benefits for Virginia.

Improving energy efficiency is the lowest cost and most readily available resource to save money and meet energy demand. Energy efficiency consistently ranks as the lowest-cost resource—averaging 3 cents per kilowatt hour—and is one-half to one-third the cost of building new power plants.[i] While improving energy efficiency will obviously conserve natural resources, reduce pollution, and mitigate adverse health effects from air pollutants, improvements will also bring direct economic benefits to Virginia through job creation, increased economic competitiveness, and reduced electricity bills.

Graphic2

Energy efficiency is a growing industry in Virginia. According to the Virginia Energy Efficiency Council (VAEEC), revenue generated from this sector has increased from nearly $300 million in 2013 to $1.5 billion today. Energy efficiency currently already supports over 75,000 jobs in Virginia but it could support more. Indeed, Virginia’s Energy Plan states that robust energy efficiency policy could increase employment by 38,000 jobs by 2030.

Energy efficiency can help maintain and attract business to Virginia. Almost half of Fortune 500 companies (48% in 2016) have set greenhouse gas emissions reduction and/or energy efficiency targets. In Dominion’s 2017 IRP case, a coalition of data center providers and customers in Virginia recently confirmed that their investors want them to reduce greenhouse gas emissions. Data centers constitute the largest share of Dominion’s forecasted load growth. Advanced Energy Economy confirms, “for many companies, the ability to control energy costs […] is a key factor when deciding where to locate or expand their operations.” By lowering greenhouse gas emissions, efficiency will make Virginia more attractive to businesses.

Improving energy efficiency will benefit consumers, especially low-income consumers vulnerable to increases in electricity bills. Dominion Energy claims to have among the lowest rates in the nation. Yet a report by the Virginia Poverty Law Center reveals that Dominion Energy’s rates are average and its bills have increased 30% between 2006 and 2016. Of that increase, 42% comes from rate adjustment clauses (RACs)[ii] – keeping the base rates low but resulting in higher bills. These increases impact low-income households more severely, as these households spend a greater proportion of their income on utilities than the average family. Rappahannock Electric Co-op recently confirmed that low-income customers often consume more electricity due to poor insulation and older, less efficient appliances.

Dominion Energy is planning several large new power plants to meet projected demand. Yet Virginia has great, untapped potential for reducing customers’ electric bills and meeting demand by pursuing energy efficiency instead. Advances in energy efficiency will grow Virginia’s economy, increase its economic competitiveness, and benefit consumers (especially low-income consumers).

Policy Recommendations

There are several regulatory obstacles to stronger utility energy efficiency action in Virginia. Other peer states have achieved significant advances through the following policies.

  1. Make the voluntary energy efficiency resource standard (EERS) a mandatory EERS.
  2. Broaden the State Corporation Commission’s cost-effectiveness criteria to include more energy efficiency benefits. This broadened definition would result in more energy efficiency programs being approved.
  3. Allow electric utilities to decouple their profits and sales, and provide utilities with performance incentives. (Decoupling has already occurred for Virginia natural gas companies.)

Key Recent Reports

 

____________________

[i] For additional information on energy efficiency as a resource, see the Alliance to Save Energy’s Energy 2030 Reports, available at http://bit.ly/2BMHFl3, and McKinsey & Company’s 2009 report Unlocking Energy Efficiency in the US Economy, available at http://bit.ly/2hf3HAM.

[ii] For additional information on Rate Adjustment Clauses (RACs), see Virginia Energy Purchasing Governmental Association’s Elected Official’s Guide to Ensuring Fair Regulation for Electricity at http://vepga.org/wp-content/uploads/2017/06/VEPGA_16SummaryUpdate_ElectedOfficialsGuide.pdf. One example of RACs are fuel adjustment clauses that affect prices for fossil fuels, such as natural gas and coal. Thus, when prices spiked during the polar vortex several years ago, the price increase is reflected in an RAC.

 

____________

About Melissa Christensen

Melissa is an intern with the Virginia Sierra Club Legislative Committee researching opportunities in energy efficiency. Having grown up in Belgium and recently lived in Shanghai for two years, Melissa is passionate about accelerating the world’s transition to a sustainable economy.

 

 

Want more solar in Virginia? Here’s how to get it.

by

A Solar Foundation analysis showed Virginia could create 50,000 new jobs by committing to build enough solar to meet 10% of energy demand. Photo credit: Dennis Schroeder, NREL

If there is an energy issue that Republicans and Democrats can agree on, it is support for solar energy. It’s homegrown and clean, it provides local jobs, it lowers our carbon footprint, and it brings important national security and emergency preparedness benefits. Dominion Energy Virginia even says it’s now the cheapest option for new electric generation.

Yet currently Virginia lags far behind Maryland and North Carolina in total solar capacity installed, as well as in solar jobs and the percentage of electricity provided by solar. And at the rate we’re going, we won’t catch up. Dominion’s current Integrated Resource Plan calls for it to build just 240 megawatts (MW) per year for its ratepayers. How can we come from behind and score big?

First, our leaders have to set a serious goal. Virginia could create more than 50,000 new jobs by building enough solar to meet just 10 percent of our electricity demand by 2023. That requires a total of 15,000 MW of solar. Legislators should declare 15,000 MW of solar in the public interest, including solar from distributed resources like rooftop solar.

The General Assembly should consider a utility mandate as well. Our weak, voluntary Renewable Portfolio Standard (RPS) will never be met with wind and solar, and making it mandatory wouldn’t change that. (To understand why, read section 4 of my 2017 guide to Virginia wind and solar policy, here.) Getting solar into the RPS would require 1) making it mandatory; 2) increasing the targets to meaningful levels (including removing the nuclear loophole); 3) including mandatory minimums for solar and wind so they don’t have to compete with cheap renewable energy certificates (RECs) from out-of-state hydroelectric dams; and 4) providing a way for utilities to count the output of customer-owned solar facilities in the total, possibly through a REC purchase program to be set up by the State Corporation Commission.

The other way to frame a utility mandate would be to ignore the RPS and just require each utility to build (or buy the output of) its share of 15,000 MW of solar. Allowing utilities to count privately-owned, customer-sited solar towards the total would make it easier to achieve, and give utilities a reason to embrace customer investments in solar.

Second, the General Assembly has to remove existing barriers to distributed solar. Customers have shown an eagerness to invest private dollars in solar; the government and utilities should get out of the way. That means tackling several existing barriers:

  • Standby charges on residential solar facilities between 10 and 20 kilowatts (kW) should be removed. Larger home systems are growing in popularity to enable charging electric vehicles with solar. That’s a good thing, not something to be punished with a tax.
  • The 1% cap on the amount of electricity that can be supplied by net-metered systems should be repealed.
  • Currently customers cannot install a facility that is larger than needed to serve their previous year’s demand; the limitation should be removed or raised to 125% of demand to accommodate businesses with expansion plans and homeowners who plan to buy electric vehicles.
  • Customers should be allowed to band together to own and operate solar arrays in their communities to meet their electricity requirements. This kind of true community solar (as distinguished from the utility-controlled programs enabled in legislation last year) gives individuals and businesses a way to invest in solar even if they don’t have sunny roofs, and to achieve economies of scale. If community solar is too radical a concept for some (it certainly provokes utility opposition), a more limited approach would allow condominiums to install a solar facility to serve members.
  • Local governments should be allowed to use what is known as municipal net metering, in which the output of a solar array on government property such as a closed landfill could serve nearby government buildings.
  • Third-party power purchase agreements (PPAs) offer a no-money-down approach to solar and have tax advantages that are especially valuable for universities, schools, local governments and non-profits. But while provisions of the Virginia Code clearly contemplate customers using PPAs, Virginia utilities perversely maintain they aren’t legal except under tightly-limited “pilot programs” hammered out in legislation enacted in recent years. The limitations are holding back private investment in solar; the General Assembly should pass legislation expressly legalizing solar third-party PPAs for all customers.

Third, the Commonwealth should provide money to help local governments install solar on municipal facilities. Installing solar on government buildings, schools, libraries and recreation centers lowers energy costs for local government and saves money for taxpayers while creating jobs for local workers and putting dollars into the local economy. That makes it a great investment for the state, while from the taxpayer’s standpoint, it’s a wash.

If the state needs to prioritize among eager localities, I recommend starting with the Coalfields region. The General Assembly rightly discontinued its handouts to coal companies in that region, which were costing taxpayers more than $20 million annually. Investing that kind of money into solar would help both the cash-strapped county governments in the area and develop solar as a clean industry to replace lost coal jobs.

Coupled with the ability to use third-party PPA financing, a state grant of, say, 30% of the cost of a solar facility (either immediately or paid out over several years) would drive significant new investment in solar.

Fourth, a tax credit for renewable energy property would drive installations statewide. One reason North Carolina got the jump on Virginia in solar was it had a robust tax credit (as well as a solar carve-out to its RPS). One bill has already been introduced for Virginia’s 2018 General Assembly session offering a 35% tax credit for renewable energy property, including solar, up to $15,000. (The bill is HB 54.)

Fifth, Virginia should enable microgrids. Unlike some other East Coast states, we’ve been lucky with recent hurricanes. The unlucky states have learned a terrible lesson about the vulnerability of the grid. They are now promoting microgrids as one way to keep the lights on for critical facilities and emergency shelters when the larger grid goes down. A microgrid combines energy sources and battery storage to enable certain buildings to “island” themselves and keep the power on. Solar is a valuable component of a microgrid because it doesn’t rely on fuel supplies that can be lost or suffer interruptions.

The General Assembly should authorize a pilot program for utilities, local governments and the private sector to collaborate on building solar microgrids with on-site batteries as a way to enhance community preparedness, provide power to buildings like schools that also serve as emergency shelters, and provide grid services to the utilities.

One way or another, solar energy is going to play an increasingly large role in our energy future. The technology is ready and the economics are right. The only question is whether Virginia leaders are ready to make the most of it in the coming year.