Monthly Archives: January 2020

And finally, energy efficiency and storage bills

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advocates holding clean energy signs

Hundreds of grassroots activists turned out on January 14 to lobby for clean anergy. Photo by Alex Kambis.

You’ve heard these statistics before: Virginia residents pay the 7th highest bills in the nation, due in large part to the fact that our utilities rank among the lowest in the nation for energy efficiency programs. 2018’s “grid mod” bill required massive utility investments in efficiency spending, but the legislation did not actually mandate results, and Dominion has been slow to propose programs.

That leaves Virginia with a lot of low-hanging fruit that looks mighty tempting as we seek to decarbonize our energy supply at the least possible cost.

Not surprisingly, then, spending on energy efficiency programs is central to the big energy transition bills like HB77, the Green New Deal, and HB1526/SB851, the Clean Economy Act. RGGI bills generally also specify that a portion of the funds raised by auctioning carbon allowances will fund efficiency programs.

There are also a few standalone efficiency bills. HB1450 (Sullivan) and SB354 (Bell) appear to be the same as the efficiency provisions of the CEA, though the standalone applies only to Dominion and APCo.

HB1576 (Kilgore) doesn’t set new efficiency targets, but it makes it harder for large customers to avoid paying for utility efficiency programs. In the past, customers with over 500 kW of demand were exempt; this bill allows only customers with more than 1 MW of demand to opt out, and only if the customer demonstrates that it has implemented its own energy efficiency measures.

HB413 (Delaney) authorizes a locality to include in its subdivision ordinance rules establishing minimum standards of energy efficiency and “maintaining access” to renewable energy.

HB575 (Keam) beefs up the stakeholder process that Dominion and APCo engage in for the development of energy efficiency programs.

SB963 (Surovell) establishes the Commonwealth Efficient and Resilient Buildings Board to advise the Governor and state agencies about ways to reduce greenhouse gas emissions and increase resiliency. Every agency is required to designate and energy manager responsible for  improving energy efficiency and reducing greenhouse gas emissions.

SB628 (Surovell) requires the residential property disclosure statement provided by the Real Estate Board to include advice that purchasers should obtain a residential building energy analysis as well as a home inspection prior to settlement.

Funding efficiency

These bills are also covered under the renewable energy roundup.

HB633 (Willett) establishes a tax deduction up to $10,000 for the purchase of solar panels or Energy Star products.

HB654 (Guy) authorizes DMME to sponsor a statewide financing program for commercial solar, energy efficiency and stormwater investments. The effect would be to boost the availability of Commercial Property Assessed Clean Energy (C-PACE) in areas of the state where the locality has not developed a program of its own.

HB947 (Webert) expands the authority of localities to grant tax incentives to businesses located in green development zones that invest in “green technologies,” even if they are not themselves “green development businesses.” Green technologies are defined as “any materials, components, equipment, or practices that are used by a business to reduce negative impacts on the environment, including enhancing the energy efficiency of a building, using harvested rainwater or recycled water, or installing solar energy systems.”

SB754 (Marsden) authorizes utilities to establish on-bill financing of energy efficiency, electrification, renewable energy, EV charging, energy storage and backup generators.

HB1656 (O’Quinn) authorizes Dominion and APCo to design incentives for low-income people, the elderly, and disable persons to install energy efficiency and renewable energy, to be paid for by a rate adjustment clause.

HB1701 (Aird) authorizes the Clean Energy Advisory Board to administer public grant funding, and makes small changes to the Board.

SB634 (Surovell) establishes the Energy Efficiency Subsidy Program to fund grants to subsidize residential “efficiency” measures, interestingly defined as solar PV, solar thermal or geothermal heat pumps. It also creates a subsidy program for electric vehicles.

SB1061 (Petersen) allows Property Assessed Clean Energy (PACE) loan programs to include residential as well as commercial customers.

Energy storage

HB1183 (Lopez) requires the SCC to establish a task force on bulk energy storage resources.

SB 632 (Surovell) creates a storage target of 1,000 MW and states that this is in the public interest.  Senator Surovell says this bill originated with the Governor’s office.

HB1306 (Kory) directs the Department of Mines, Minerals and Energy to adopt regulations allowing appropriate brownfields and lands reclaimed after mining to be developed as sites for renewable energy storage projects.

 

The bill roundup continues: climate, energy transition, and other utility regulation

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Young woman holding sign that says Climate Action Now

An activist at the Clean Energy Lobby Day on January 14. Photo by Alex Kambis.

If you need evidence that Virginia legislators finally recognize global warming as a crisis, you could simply look at this year’s plethora of bills addressing coastal flooding and resilience. We’ve barely begun to address the greenhouse gas pollution that drives climate change and sea level rise, but already Virginia has entered the age of adaptation.

Meanwhile, however, the need for mitigation measures is more pressing than ever. The new Democratic majority has responded with a long list of bills that address the problem in various ways: by joining the Regional Greenhouse Gas Initiative (RGGI), requiring energy efficiency and renewable energy investments, offering incentives for private investments, lowering barriers to investments, or all of the above.

In an earlier post I described two omnibus energy transition bills, the Clean Economy Act, HB1526 (Sullivan) and SB851 (McClellan), and the Green New Deal Act, HB77 (Rasoul). A second post brought together all the renewable energy bills.

Now I’m moving on to the rest of the climate policy bills, as well as other utility regulation.

Climate and energy policy

 SB94 (Favola) rewrites the Commonwealth Energy Policy to bring it in line with Virginia’s commitment to dealing with climate change. The latest draft of the bill, as it passed out of subcommittee, sets a target for net-zero greenhouse gas emissions economy wide by 2045, and in the electric sector by 2040. This section of the Code is for the most part merely advisory; nonetheless, it is interesting that Dominion Energy Virginia supported the bill in subcommittee. [Update: the bill, with further amendments, passed out of Commerce & Labor on January 20 and now goes to the Senate floor.]

Delegate Reid’s HB714 is similar to SB94 but contains added details, some of which have now been incorporated into SB94.

HB672 (Willett) establishes a policy “to prevent and minimize actions that contribute to the detrimental effects of anthropogenic climate change in the Commonwealth.” State agencies are directed to consider climate change in any actions involving state regulation or spending. Local and regional planning commissions are required to consider impacts from and causes of climate change in adapting comprehensive plans.

HB525 (Subrmanyam and Reid) require a statewide greenhouse gas inventory covering all sectors of the economy.

HB547 (Delaney) establishes the Virginia Energy and Economy Transition Council to develop plans to assist the Commonwealth in transitioning from the use of fossil fuel energy to renewable energy by 2050. The Council is to include members from labor and environmental groups.

Meanwhile, efforts are already underway to undercut the effectiveness of all this great policy work. Witness the latest strategy from Dominion, involving a pair of bills put forward by Senator Lewis. SB828 and SB817 declare that any time the Code or the Energy Policy refers to “clean” or “carbon-free” energy, it must be read to include nuclear energy. In subcommittee, Senator Lewis suddenly announced he was amending the bills to add “sustainable biomass” as well, turning the bills into a mockery of science and the English language, not to mention terrible policy.

Biomass—that is, burning wood—causes more pollution than coal, it emits more carbon than coal, and it isn’t carbon neutral in the timeframe that matters to climate. Oh, and it’s very expensive energy. Insisting that the words “clean” and “carbon-free” include biomass is like saying the color blue includes the color yellow. It just doesn’t.

[Update 1/22: Both bills passed out of subcommittee, but in full committee, Lewis appears to have presented the unamended SB817, with no biomass language. It sailed through and now goes to the Senate floor. Lewis then presented additional amendments to SB828 to limit biomass to “sustainable residual” biomass, but then asked to have his bill passed by for the day instead of having it voted on. The amendments are not yet available on the LIS.]

RGGI bills (good and bad)

The Democratic takeover of the General Assembly means Virginia will finally join the Regional Greenhouse Gas Initiative (RGGI), either according to the regulations written by DEQ or with a system in place that raises money from auctioning carbon allowances.

HB981 (Herring) and SB1027 (Lewis) is called the Clean Energy and Community Flood Preparedness Act. It implements the DEQ carbon regulations and directs DEQ to enter the RGGI auction market. Auction allowances are directed to funds for flood preparedness, energy efficiency and climate change planning and mitigation. We are told this is the Administration’s bill. A similar bill, HB20 (Lindsey), is not expected to move forward.

HB110 (Ware) says that if Virginia joins RGGI, DEQ must give free carbon allowances to any facility with a long-term contract predating May 17, 2017 that doesn’t allow recovery of compliance costs. Rumor has it the bill was written to benefit one particular company.

SB992 (Spruill) requires the Air Board to give free allowances for three years to any new power plant that was permitted before June 26, 2019, the effective date of the carbon trading regulations. It’s not clear why new facilities should get special treatment; it was not exactly a secret that these regulations were in the works. And the result of this law would be to encourage companies to go ahead and build anything that has a permit, which just can’t be a good result.

HB1628 (Poindexter) prohibits the state from joining RGGI or adopting any carbon dioxide cap-and-trade program without approval from the General Assembly.

Other utility regulation

“Other” makes this section sound like an afterthought, but in fact several of the most impactful bills of the session appear here.

HB1677 (Keam) replaces Virginia’s current vertically-integrated monopoly structure with one based on competition and consumer choice. Existing monopoly utilities would be required to choose between becoming sellers of energy in competition with other retail sellers, or divesting themselves of their generation portfolios and retaining ownership and operation of just the distribution system. Other features: a nonprofit independent entity to coordinate operation of the distribution system; performance-based regulation to reward distribution companies for reliable service; consumer choices of suppliers, including renewable energy suppliers; an energy efficiency standard; a low-income bill assistance program; and consumer protections and education on energy choices.

HB206 (Ware) is, I’m told, the beta version of Delegate Keam’s bill and will be pulled, and that Delegate Ware is on board with HB1677.

HB528 (Subramanyam) requires the SCC to decide when utilities should retire fossil fuel generation.

SB842 (Petersen) seeks to achieve the same end as the House bills, but it puts the SCC in charge of writing the plan. The bill provides for all retail customers of electricity to be able to choose their supplier, and instructs the SCC to promulgate regulations for a transition to a competitive market for electricity. Existing utilities will continue to provide the distribution service. The bill also requires suppliers of electricity to obtain at least 25% of sales from renewable energy by 2025, 50% by 2030, and 100% by 2050. Renewable energy is defined to include “sustainable biomass” but not waste incineration or landfill gas.

Not ready to bust up the monopolies yet? How about at least putting the SCC back in control? The last few years have seen a steady chipping away of the SCC’s authority to regulate utility rates. HB1132 (Jones, Ware) seeks to reverse this trend and possibly get some rate relief for consumers.

SB731 (McClellan) also affects rates, in this case by addressing a utility’s rate of return. The SCC determines this rate by looking first at the average returns of peer group utilities, and then often going higher. The bill lowers the maximum level that the SCC can set above the peer group average.

And finally (but by no means least), HB167 (Ware) requires an electric utility that wants to charge customers for the cost of using a new gas pipeline to prove it can’t meet its needs otherwise, and that the new pipeline provides the lowest-cost option available to it. (Note that this cost recovery review typically happens after the fact, i.e., once a pipeline has been built and placed into service.) Last year Ware carried a similar bill that passed the House in the face of frantic opposition from Dominion Energy, before being killed in Senate Commerce and Labor.

Renewable energy bills to watch

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People gathered with signs supporting climate action

Grassroots activists gather at the steps of the Virginia Capital on January 14. Photo courtesy Sierra Club.

Yesterday’s post launched my annual roundup of energy and climate bills with a comparison of the two major energy transition bills filed to date, HB1526/SB851, the Clean Economy Act, and HB77, the Green New Deal Act. Today I’m covering other renewable energy bills. You will be glad to see I am addressing each only briefly, given the large number of them. Bills can still be filed as late as tomorrow evening, and there is often some lag in the Legislative Information System, which posts the bills, their summaries, their committee assignments, and what happens to them. I will add to this list once I’ve seen the rest, so check back for updates.

Most of these bills will be heard in Senate Commerce and Labor, or now in the House, Labor and Commerce, committees. Both House and Senate have established energy subcommittees. In the Senate, the subcommittee is advisory and does not have the power to kill a bill outright. The House subcommittee used to be a killing field for good bills. Hopefully this year will be different.

Bills with monetary implications typically must go to Finance or Appropriations.

As always, the action will be fast and furious, and it is already underway. Blink and you will miss it.

RPS

Both HB1526/SB851, the Clean Economy Act, and HB77, the Green New Deal Act, contain a renewable portfolio standard (RPS) requiring utilities to include in their electricity mix a percentage of renewable energy that ratchets up over time. In addition, HB1451 (Sullivan) is a stand-alone RPS bill that also includes an energy storage mandate. It applies only to IOUs but otherwise appears to be identical to the RPS and storage provisions of the CEA (of which Sullivan is also the patron).

Instead of an RPS, SB876 (Marsden) establishes a “clean energy standard” applicable to both IOUs and coops. A “clean energy resource” is defined as “any technology used to generate electricity without emitting carbon dioxide into the atmosphere,” including “(i) electric generation facilities that are powered by nuclear, solar, wind, falling water, wave motion, tides, or geothermal power; (ii) a natural gas-fired generation facility with 80 percent carbon capture; or (iii) a coal-fired generation facility with 90 percent carbon capture.” Aside from the contradiction in terms inherent in this definition, the clean energy standard also suffers from a delay in its starting point to 2030, when it begins at 30%–or about where Dominion is today with its nuclear plants. Considering only offshore wind and solar development already underway, the CES would not be a meaningful spur to new renewable energy for at least another 15 years. A couple of strong points, however: the bill also requires the closure of all coal-fired generation facilities by 2030, and requires workforce transition and community assistance plans. [Update: we’re told Senator Marsden agrees with the criticisms of this bill and does not intend to present it, at least without significant amendment.]

SB842 (Petersen) provides for all retail customers of electricity to be able to choose their supplier, and instructs the SCC to promulgate regulations for a transition to a competitive market for electricity. Existing utilities will continue to provide the distribution service. The bill also requires suppliers of electricity to obtain at least 25% of sales from renewable energy by 2025, 50% by 2030, and 100% by 2050. Renewable energy is defined to include “sustainable biomass” but not waste incineration or landfill gas.

Customer-sited solar

“Solar Freedom” is back this year for another attempt to lift barriers to customer-sited renewable energy, including rooftop solar. The primary vehicles are SB710 (McClellan) and HB572 (Keam), with nearly identical versions from Lopez (HB1184) and Simon (HB912). It contains 8 provisions:

  1. Raising from 1% to 10% the cap on the total amount of solar that can be net metered in a utility territory, ensuring small-scale solar continues to grow.
  2. Making third-party financing using power purchase agreements (PPAs) legal for all customers of IOUs, removing current cap. The SCC reports the program in Dominion’s territory is now filled, putting in jeopardy Fairfax County’s ambitious solar plans. In Southwest Virginia in APCo territory, the program is even smaller and narrower, and several projects have been unable to move forward.
  3. Allowing local government entities to install solar facilities of up to 5 MW on government-owned property and use the electricity for schools or other government-owned buildings located on nearby property, even if not contiguous. This would allow Fairfax County to move forward with a planned solar facility on a closed landfill; localities with closed landfills across the state could similarly benefit.
  4. Allowing all customers to attribute output from a single solar array to multiple meters on the same or adjacent property of the same customer.
  5. Allowing the owner of a multi-family residential building to install a solar facility on the building or surrounding property and sell the electricity to tenants. This is considered especially valuable for lower-income residents, who tend to be renters.
  6. Removing the restriction on customers installing a net-metered solar facility larger than required to meet their previous 12 months’ demand. Many customers have expressed interest in installing larger facilities to serve planned home additions or purchases of electric vehicles.
  7. Raising the size cap for net metered non-residential solar facilities from 1 MW to 3 MW, a priority for commercial customers.
  8. Removing standby charges on residential facilities sized between 10-20 kW. Current charges are so onerous that few customers build solar arrays this size, hurting this market segment.

Other PPA and net metering bills

HB1647 (Jones) is similar to Solar Freedom but includes community solar and leaves out meter aggregation.

Five of the eight provisions of Solar Freedom also appear in the Clean Economy Act, omitting only numbers 3,4 and 5. SB532 (Edwards) is a stand-alone bill to make PPAs legal, using an approach similar to that of Solar Freedom and the CEA. HB1067 (Kory) deals with a specific situation where a customer has solar on one side of property divided by a public right-of-way, with the electric meter to be served by the solar array on the other side. The legislation declares the solar array to be located on the customer’s premises. (Item 4 of Solar Freedom would also solve the problem.)

Resilience hubs

HB959 (Bourne) directs DMME to establish a pilot program for resilience hubs. These are defined as a simple combination of solar panels and battery storage capable of powering a publicly-accessible building in emergency situations or severe weather events, primarily to serve vulnerable communities.

HOAs

HB414 (Delaney) and SB504 (Petersen) clarifies the respective rights of homeowners associations (HOAs) and residents who want to install solar. The law allows HOAs to impose “reasonable restrictions,” a term some HOAs have used to restrict solar to rear-facing roofs regardless of whether these get sunshine. The bill clarifies that HOA restrictions may not add more than $1,000 to the cost of solar facility, or decrease the expected output by more than 10%.

Community solar.

Three years ago legislation passed to allow utilities to set up so-called community solar programs. A couple of coops followed through, notably one from Central Virginia Electric Cooperative. Dominion received SCC approval to launch a small program back in 2018, but still hasn’t done so. That leaves a large base of potential customers—people without sunny roofs, apartment dwellers, or anyone who can’t afford to install solar—with no options.

The Clean Economy Act has detailed provisions for community solar, supported by the trade organization Community Solar Access. An alternative as a stand-alone bill is SB629 (Surovell). It creates an opportunity for subscribers in the territory of investor-owned utilities to buy from small (under 2 MW) “solar gardens” developed by third-party owners. Utilities would credit purchasers at the retail rate minus the utility’s costs. Preference would be given to solar gardens with low-income subscribers.

HB573 (Keam) does not establish a new program. It affects the utility-controlled and operated “community solar” programs required by 2017 legislation (and still not rolled out yet, though I assume the facilities have been selected). The bill requires that “an investor-owned utility shall not select an eligible generating facility that is located outside a low-income community for dedication to its pilot program unless the investor-owned utility contemporaneously selects for dedication to its pilot program one or more eligible generating facilities that are located within a low-income community and of which the pilot program costs equal or exceed the pilot program costs of the eligible generating facility that is located outside a low-income community.” I read this to mean utilities must select more expensive sites and develop more expensive programs in low-income areas than elsewhere, which seems . . . odd.

HB1634 (Jones) requires utilities to establish shared-solar programs that allows customers to purchase subscriptions in a solar facility no greater than 5 MW. (For what it’s worth, the GA passed a similar law in 2017, and we are still waiting for Dominion’s program.)

Resolving local disputes over utility-scale projects

Developers of utility-scale solar and wind sometimes face pushback at the local level. Opposition can come from residents who worry about viewsheds or who have been subjected to anti-renewables propaganda, and from local officials who want to collect tax revenue above the local real estate tax rate. Industry organizations and counties have worked to come up with a number of bills to resolve the concerns, though in some cases the counties have split on whether to support them.

HB1327 (Austin) allows localities to impose property taxes on generating equipment of electric suppliers utilizing wind turbines at a rate that exceeds the locality’s real estate tax rate by up to $0.20 per $100 of assessed value. Under current law, the tax may exceed the real estate rate but cannot exceed the general personal property tax rate in the locality. Wind developer Apex Clean Energy helped develop the bill and supports it.

Bills supported by the solar industry organization MDV-SEIA include:

  • HB656 (Heretick) and SB875 (Marsden) allow local governments to incorporate into their zoning ordinances national best practices standards for solar PV and batteries.
  • HB1131 (Jones) and SB762 (Barker) authorize localities to assess a revenue share of up to $0.55 per megawatt-hour on solar PV projects, in exchange for which an existing tax exemption is expanded.
  • HB657 (Heretick) and SB893 (Marsden) exempt solar facilities of 150 MW or less from the requirement that they be reviewed for substantial accord with local comprehensive plans.
  • HB1434 (Jones) reduces the existing 80% machinery and tools tax exemption for large solar projects.
  • SB870 (Marsden) authorizes local planning commissions to include certain regulations and provisions for conditional zoning for solar projects over 5 MW.

Other RE siting bills

HB1133 (Jones) makes it in the public interest for utilities to build or purchase, or buy the output of, wind or solar facilities located on previously developed sites.

HB1675 (Hodges) requires anyone wanting to locate a renewable energy or storage facility in an opportunity zone to execute a siting agreement with the locality.

A few bills appear designed to make wind and solar projects harder to site, or are intended to rile up sentiment against solar: HB205 (Campbell) adds unnecessary burdens to the siting of wind farms and eliminates the ability of wind and solar developers to use the DEQ permit-by-rule process for projects above 100 megawatts. HB1171 (Poindexter) is a make-work bill requiring an annual report of the acreage of utility scale solar development, as well as the acreage of public or private conservation easements. HB1636 (Campbell) prohibits the construction of any building or “structure” taller than 50 feet on a “vulnerable mountain ridge.” You can tell the bill is aimed at wind turbines because it exempts radio, TV, and telephone towers and equipment for transmission of communications and electricity.

Grants, tax deductions, tax credits and other financing

HB754 (Kilgore) establishes the Virginia Brownfield and Coal Mine Renewable Energy Grant Fund, which will support wind, solar or geothermal projects sited on formerly mined lands or brownfields. (See also Jones’ HB1133, which makes it in the public interest for utilities to build or purchase, or buy the output of, wind or solar facilities located on previously developed sites. And see Kory’s HB1306, which directs DMME to adopt regulations allowing brownfields and lands reclaimed after mining to be developed as sites for renewable energy storage projects.)

HB461 (Sullivan) establishes a tax credit of 35%, up to $15,000, for purchases of renewable energy property. It is available only to the end-user (e.g., a resident or business who installs solar or a geothermal heat pump).

HB633 (Willett) establishes a tax deduction up to $10,000 for the purchase of solar panels or Energy Star products.

HB654 (Guy) authorizes DMME to sponsor a statewide financing program for commercial solar, energy efficiency and stormwater investments. The effect would be to boost the availability of Commercial Property Assessed Clean Energy (C-PACE) in areas of the state where the locality has not developed a program of its own.

HB947 (Webert) expands the authority of localities to grant tax incentives to businesses located in green development zones that invest in “green technologies,” even if they are not themselves “green development businesses.” Green technologies are defined as “any materials, components, equipment, or practices that are used by a business to reduce negative impacts on the environment, including enhancing the energy efficiency of a building, using harvested rainwater or recycled water, or installing solar energy systems.”

SB542 (Edwards) repeals the sunset date on crowdfunding provisions and provides fixes for certain existing obstacles to this financing approach. The bill is the result of lessons learned in developing a 2019 “solar bonds” program for five commercial and non-profit customers.

SB754 (Marsden) authorizes utilities to establish on-bill financing of energy efficiency, electrification, renewable energy, EV charging, energy storage and backup generators.

HB1656 (O’Quinn) authorizes Dominion and APCo to design incentives for low-income people, the elderly, and disable persons to install energy efficiency and renewable energy, to be paid for by a rate adjustment clause.

HB1701 (Aird) authorizes the Clean Energy Advisory Board to administer public grant funding, and makes small changes to the Board.

SB634 (Surovell) establishes the Energy Efficiency Subsidy Program to fund grants to subsidize residential “efficiency” measures, interestingly defined as solar PV, solar thermal or geothermal heat pumps. It also creates a subsidy program for electric vehicles.

SB1039 (Vogel) allows a real property tax exemption for solar energy equipment to be applied retroactively if the taxpayer gets DEQ certification within a year.

SB1061 (Petersen) allows residential customers to qualify for local government Property Assessed Clean Energy (PACE) financing programs for renewable energy and energy efficiency improvements; currently the availability of this financing tool is restricted to commercial customers. Note the potential interplay with HB654, above.

Customer rights to shop for renewable energy

HB868 (Bourne) and SB376 (Suetterlein and Bell) allows customers to buy 100% renewable energy from any licensed supplier, regardless of whether their own utility has its own approved tariff.

HB 889 (Mullin) and SB 379 (McPike), the Clean Energy Choice Act, is broader than HB868. The legislation allows all customers to buy 100% renewable energy from any licensed supplier regardless of whether their utility has its own approved tariff. In addition, large customers (over 5 MW of demand) of IOUs also gain the ability to aggregate their demand from various sites in order to switch to a competitive supplier that offers a greater percentage of renewable energy than the utility is required to supply under any RPS, even if it is not 100% renewable. Large customers in IOU territory who buy from competing suppliers must give three years’ notice before returning to their utility, down from the current five years. The SCC is directed to update its consumer protection regulations.

Offshore wind

The CEA contains detailed provisions for the buildout and acquisition of offshore wind. HB234 (Mugler) directs the Secretary of Commerce and Trade to develop an offshore wind master plan.

SB860 (Mason) and HB1664 (Hayes) puts the construction or purchase of at least 5,200 MW of offshore wind in the public interest.

HB1607 (Lindsey) and SB998 (Lucas) allows Dominion to recover the costs of building offshore wind farms as long as it has a plan for the facilities to be in place before January 1, 2028 and that it has used reasonable efforts to competitively source the majority of services and equipment. All utility customers in Virginia, regardless of which utility serves them, will participate in paying for this through a non-bypassable charge. Surely this bill came straight from Dominion.

 

A first look at the Clean Economy Act and the Green New Deal

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Three young women holding climate action signs

Students joined more than 200 other grassroots activists for a lobby day at the General Assembly on Tuesday. Photo Ivy Main

Climate and energy activists have been pinning their hopes on the 2020 legislative session to produce a framework for transitioning our economy to 100 percent carbon-free energy.

After years of talking big but delivering little in the way of carbon reductions and clean energy, the General Assembly is under pressure to finally deliver.

Much of the initial focus and discussion so far has been on two very different omnibus bills, the Clean Economy Act and the Green New Deal Act. But dozens of other bills also aim to reform Virginia energy law in ways both big (breaking up the monopolies) and small (clarifying HOAs’ abilities to regulate solar panels) — and everything in between (removing barriers to customer solar, taxing fossil fuel investments).

In the coming days I’ll post summaries of many of these bills. But for now, let’s take a look at the two omnibus bills that have energized so many activists. Both have their strong points; both would benefit from strengthening amendments. And both are guaranteed to be better than anything Dominion will put forward in the coming days, if rumors of such a bill prove correct.

The Clean Economy Act

HB1526 (Del. Rip Sullivan, D-Fairfax) and SB851(Sen. Jennifer McClellan, D-Richmond) are the Clean Economy Act put forward by a coalition of renewable energy industry and environmental groups. This is a massive bill, running to 37 pages and covering diverse aspects of the electric sector, and yet it is also surprisingly restrained in its ambitions.

The CEA’s goal is a zero-carbon electricity supply by 2050, a goal that allows nuclear energy to keep its role in the mix, and also one that, after an initial kick, requires a ramp-up of renewable energy of only 3% per year from 2021 to 2050. Utilities also must achieve energy efficiency savings that start slow and creep upwards to a top rate of 2% per year in 2027; utilities generally can’t build new generation unless they first meet the efficiency targets.

The very modest pace of the required investments in renewable energy and efficiency leaves no room for utilities to argue that the targets cannot be met or will cause economic pain. On the contrary, critics can justly complain they are too easy. On the other hand, the bill has lots of elements utilities still won’t like, including an energy storage mandate, community solar, net metering reforms and a limited moratorium on new fossil fuel generation.

The bill includes provisions for joining the Regional Greenhouse Gas Initiative to reduce statewide electric sector carbon emissions 30% by 2030, in accordance with DEQ’s regulations finalized last year. The state would auction carbon allowances, with 50% of proceeds funding energy efficiency programs for low-income, disability, veteran and elderly residents; 16% going to energy efficiency measures on state and local property; 30% for coastal resilience; and 4% for administrative costs.

The renewable portfolio standard provisions look more complicated than they are, but even so, understanding what’s going on is not a job for the meek. First off, note that the RPS only applies to “total electric energy,” which does not mean, you know, total electric energy. The code defines the term to mean total electric energy minus electricity produced by nuclear power. Since nuclear provides about 30% of Virginia’s electric generation, that means the RPS percentages look 30% bigger than they really are. (This is a neat trick Dominion devised years ago to make our voluntary RPS sound more meaningful. People fell for it, which is why our voluntary RPS is widely described as targeting 15% renewable energy by 2025 instead of about 10%.)

Thus, the nominal RPS goal of 41% by 2030 does not mean that Virginia would get 41% of its electricity from renewable energy by 2030. The true percentage would be 41% of 70%, or — oh Lord, now I have to do math — somewhat under 30%.

Not incidentally, 30% by 2030 is the renewable energy target Governor Ralph Northam set in his Executive Order 43 back in September, and that squares pretty well with Dominion’s building plans. (The CEA, however, strives mightily to ensure that less expensive independent developers get a good share of the business.)

The drafters of the Clean Economy Act also chose not to change the code’s existing kitchen-sink definition of renewable energy, foregoing an opportunity to fix the mischief Dominion has got up to lately with what I call its Green Power for Suckers program and the Great Thermal REC Boondoggle. Instead, the RPS provisions exclude biomass and sometimes waste, then limit which specific technologies qualify for each tier of the RPS. The result is that even without changing the definition of renewable energy, biomass and thermal RECs have no place in the CEA mix, municipal waste incineration is limited to existing facilities and old hydro dams will cease to qualify when their contracts run out.

The system of tiers also allows the CEA to prioritize among technologies and project sizes.

  1. Offshore wind has its own tier beginning in 2027, as well as detailed instructions for how it will be developed.
  2. Tier II covers distributed (under 3 MW) Virginia-based wind, solar and anaerobic digestion (presumably meaning biogas from things like pig manure, reflecting Dominion’s deal with Smithfield Foods). This tier is divided into sub-tiers that ensure smaller projects are represented, and 10% of each tier is supposed to be sourced from projects serving low-to-moderate income persons. This tier begins at 3% of the RPS total in 2021, increasing to 9% in 2028, and then bouncing around strangely between 7 and 9% thereafter.
  3. Tier III can be met with Virginia wind, solar, wave, tidal, geothermal or energy from waste (poorly defined, but with a limit on the number of eligible RECs that, I’m told, just covers the output of existing waste incinerators in Virginia), or landfill gas (also from existing landfills and with a limit). These projects don’t have a size limit. Utilities are instructed to issue annual requests for proposals to acquire Tier III resources. Tier III begins at 30% of the RPS, gets as high as 43% in 2030, and then declines as offshore wind in Tier I takes a greater share.
  4. Tier IV can be met with renewable energy certificates from wind, solar and some hydro sources inside or outside Virginia, but within the PJM, the regional transmission organization that coordinates the electric grid in all or parts of 13 states, including Virginia, and the District of Columbia. Tier IV starts at 38% of the RPS total, goes as high as 51% in 2023, and then declines by fits and starts until it is less than 20% in the out years.
  5. The fifth tier consists of the old hydro RECs from PJM with existing purchase contracts. These begin at a whopping 29% of the total but decline rapidly to 6% in 2023 and even less thereafter.

Solar installers who focus on Virginia may be dismayed by the modesty of the in-state requirements. Only Tier II serves distributed generation, and all its sub-tiers and low-income provisions don’t make up for the fact that distributed generation must account for less than 0.3% of total statewide demand in 2021 (3% of the initial 14% goal, adjusted downward for nuclear). This may well be less than the amount of net-metered solar we will have then anyway, with or without the CEA. By 2030, distributed renewables would still account for less than 2.5% of total generation in Virginia, a far cry from the 25% or more that studies have shown is possible.

Meanwhile, Tiers IV and V allow RECs from utility-scale facilities located anywhere within PJM, accounting for more than half the RPS total for the first several years. If utilities choose to buy these out-of-state RECs instead of building new renewable energy in Virginia for this tier, ratepayers will be paying for economic development and jobs in other states, rather than supporting clean energy jobs at home.

(As I’ll describe below, this is an even bigger drawback of the Green New Deal Act.)

Defenders of the PJM RECs approach cite market efficiency and cost; RECs from states that don’t have RPS laws tend to be cheap, and allowing them to qualify for our RPS means projects will get built wherever it is cheapest to do it. That justifies allowing a small percentage of PJM RECs, but not making those RECs the centerpiece.

The CEA already has another, and better, cost-containment measure. If prices of RECs go too high, utilities have an option of paying into a fund administered by the state Department of Mines, Minerals and Energy instead. The money will be used for energy efficiency and renewable energy projects in Virginia benefiting mainly low-income residents. This “deficiency payment” alternative is a standard feature of other states’ RPS laws; it provides a critical cost cap while not letting utilities off the hook.

The CEA also includes community solar provisions and removal of certain barriers to net metering. It raises the net metering cap to 10%, raises the commercial size cap to 3 MW, removes all caps on third-party power purchase agreements, eliminates standby charges on residential and agricultural customers, and allows customers to install facilities large enough to meet 150% of their previous year’s demand. (These net-metering provisions intentionally duplicate five of the eight provisions of the Solar Freedom legislation, HB572, SB710 and others.)

In addition to all of this, the CEA includes a mandate for 2,400 megawatts of energy storage by 2035, with interim targets beginning with 100 MW by the end of 2021.

And just in case Dominion thinks that somehow all this still leaves room for any new fossil fuel plants, the CEA ends with a one-year moratorium on the permitting of any new carbon-emitting generating units that an investor-owned utility might want to build, until the government produces a report with recommendations for achieving a carbon-free electric sector by 2050 at least cost to ratepayers.

If I’d been writing this bill, I would have accelerated the timeline and focused the RPS more on Virginia projects, including rooftop solar. But as a framework this is still a strong bill, and it’s possibly the best we can do this year.

The Green New Deal

HB77 (Del. Sam Rasoul, D-Roanoke) is the Green New Deal Act. Its major features include a moratorium on any new fossil fuel infrastructure; a very aggressive timetable for 100% renewable energy by 2036; energy efficiency standards and a mandate for buildings to decrease energy use; low-income weatherization; job training; a requirement that companies hire workers from environmental justice communities; and assistance for workforce transition for fossil fuel workers.

The GND looks almost nothing like the Clean Energy Act. Its moratorium on new fossil fuel infrastructure is far broader than that in the CEA, covering not just electric-generating plants but also pipelines, refineries, import and export terminals and fossil fuel exploration activities.

It directs DMME to develop a climate action plan that addresses mitigation, adaptation and resiliency, supports publicly-owned clean energy and incorporates environmental justice principles. Forty percent of funds spent under the plan are to be targeted to low-income communities and communities of color.

The GND’s energy efficiency mandates are tougher than the CEA’s, requiring savings of 2.4% per year beginning immediately. These savings will be achieved not just by weatherizing buildings, upgrading heating and cooling, etc., but also by dramatically improving new buildings and requiring installation of rooftop solar wherever feasible.

DMME is also required to set performance benchmarks for scholarships, low-interest loans, job training programs and renewable energy projects to serve EJ communities (“until such date that 100 percent of the energy consumed in such communities is clean energy”), as well as a mandate that 50% of the workforce for energy efficiency and clean energy programs come from EJ communities.

(We should pause here for a reality check. We’re talking about Virginia, where many excellent programs that are already on the books currently go unfunded, and underinvestment in education and social services means companies can’t find enough qualified workers as it is.)

With all its aims of putting the energy transition on steroids, the Green New Deal also has a surprisingly weak RPS. In fact, it appears utilities would not have to build renewable energy projects in Virginia at all — or for that matter, close any fossil fuel plants.

The bill doesn’t actually say so, but it appears to contemplate that the very fast ramp-up of renewable energy to 80% by 2030 can be achieved by utilities buying renewable energy certificates from other states. I’m told Delegate Rasoul has confirmed this is his intention. There is no requirement for utilities to buy from in-state producers.

There is a practical reason for this: given how far behind Virginia is in developing wind and solar, allowing utilities to buy out-of-state RECs is probably the only way to meet an 80% by 2030 target. These RECs are traded on the open market; that makes it easy for utilities to comply, and eliminates reliability concerns because utilities can continue to run their existing fossil fuel plants as usual.

But there’s the rub: the bill contains no requirement to build wind and solar in Virginia, and utilities can run their fossil fuel plants as usual. That’s not the energy transition a lot of people are looking for.

[Update January 23: Dominion did not file a separate bill, but has drafted language it proposes to shoehorn into another bill from a friendly legislator, likely Senator Lucas’ SB998. The proposal is almost comically bad. If it comes with a slogan, it will be “Leave the Driving to Us.” We’ve seen what that means. Watch your wallets.]

The strange case of thermal RECs

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Renewable energy advocates are hoping that 2020 will be the year Virginia finally begins to make wind and solar the centerpiece of its energy planning, rather than a grudging add-on. The General Assembly will consider at least two bills that adopt a mandatory renewable portfolio standard as well as legislation to lower carbon emissions and open the private market to greater investments in renewables.

But good intentions don’t always produce effective legislation. Sloppy drafting causes unanticipated consequences. Minor amendments offered by an opponent produce major consequences only the opponent anticipated.

For a case in point, let’s consider Virginia’s existing, voluntary RPS. Worse than useless, it has enabled all kinds of mischief by defining “renewable energy” to include things that do not contribute carbon-free renewable power to the grid

As currently written, our renewable portfolio standard never has been, and never will be, responsible for a single electron of wind or solar energy. That means that any bill that takes as its starting point the definition that currently exists in the Virginia Code, or even uses the term “renewable energy” without narrowly defining it, risks failing right out of the gate.

Part of the problem is biomass. But a much greater problem is one that has been largely overlooked, mainly because no one understands it. It’s called “thermal” energy, and it is a major piece of mischief all by itself.

Added to the statute in 2015, thermal renewable energy certificates quickly became the primary means for Dominion Energy Virginia to meet its RPS targets, after counting the energy from the utility’s own hydro and biomass facilities and those from which it buys power under contract.

The thing is, no one seems to know where thermal RECs come from. The code offers three possibilities. One is “the proportion of the thermal . . . energy from a facility that results from the co-firing of biomass.” Another is “the thermal energy output from (i) a renewable-fueled combined heat and power generation facility that is (a) constructed, or renovated and improved, after January 1, 2012, (b) located in the Commonwealth, and (c) utilized in industrial processes other than the combined heat and power generation facility.” Finally, there is a tiny (and mainly unused) category for solar hot water systems and swimming pool heating.

The second definition, added to the code in 2015, is so specific that it was clearly written with a particular industrial facility or facilities in mind. From that definition, we can determine that thermal RECs don’t represent renewable electricity added to the grid.

What no one but Dominion seems to have known was that thermal RECs would instantly become the leading category for RECs, and one that would eliminate any chance for wind or solar to ever compete for RPS dollars in Virginia.

The Virginia statute is an oddity. “Thermal” is not a recognized category in the regional registry for purchase and sale of RECs among utilities and voluntary buyers (known as PJM GATS). I also haven’t found another state RPS program that includes thermal in its definition of renewable energy, aside from solar thermal.

A year ago I asked Dominion what kind of industry supplies thermal RECs; I was promised an answer, but none came. So a week ago I asked the staff of the State Corporation Commission. They don’t know either.

Every year in November, Dominion submits a report to the SCC about its renewable energy activities, including information the law requires about a utility’s RPS program. The reports are available on the SCC website.

None of the reports include any discussion of thermal RECs, including the report submitted covering 2015, the first year these RECs were allowed. The reports don’t indicate where thermal RECs come from, what kind of industrial process produces them, or whether there might be a lot more available that could supply Dominion in the future as RPS goals increase.

However, by law Dominion has to provide other information that, read together, allows us to deduce a few bits of information about thermal RECs, and about their role in the RPS:

  • They are generated by one or more Virginia facilities.
  • The facility or facilities were placed in service this decade, confirming that we are talking about that second meaning of thermal.
  • The facilities are not owned by Dominion.

All or almost all the RECs Dominion purchases are thermal RECs. Thermal RECs make up all or nearly all the energy and RECs Dominion has banked to use in future years. (Virginia law allows a utility to hang on to a REC for up to five years after it was generated.) If these were wind and solar RECs instead of thermal RECs, the value of the banked RECs would exceed $40 million, even at the low REC prices currently prevailing in the PJM marketplace.

I compiled the information from these reports into the table below. The 2019 filing, containing information for 2018, also gives us a view into the current year. It states: “The company began 2019 with banked renewable energy and RECs of 4,252,354 MWh and expects to have a bank of approximately 4,113,477 MWh of renewable energy and RECs toward future RPS targets at year-end 2019.”

Source: Virginia State Corporation Commission. (Ivy Main)

As you can see, Dominion has enough RECs banked that, when added to generation from Dominion’s own or contracted renewable energy facilities, Dominion has no need to purchase any RECs from any source until 2022 (when it still won’t need much).

Dominion doesn’t report what it paid for thermal RECs, but they are undoubtedly cheaper than any other qualifying source. One reason: with no competitive market for thermal RECs, Dominion is almost certainly the only buyer. In antitrust parlance, the term for this is “monopsony,” a word I hope you will now want to work into your dinner table conversation.

Monopsony power includes the power to set the price of a product, because the seller has no one else to sell to. In the case of thermal RECs, we don’t know who the seller is, but clearly its primary business is not the production of thermal RECs for sale. In fact, the money it gets for these RECs likely represents a windfall, and it is happy to get anything that covers its administrative cost in documenting its use of thermal energy.

On the other hand, Dominion doesn’t have to be overly stingy, since Virginia law allows the utility to pass on to ratepayers the cost of purchasing RECs for the RPS. One can imagine Dominion CEO Thomas Farrell having a nice dinner with the CEO of the corporation owning the industrial facility that uses the thermal energy, and together deciding what Virginia consumers will pay for these RECs. As long as it is less than the cost of other RECs available to Dominion, who will complain?

Whatever the price is, a monopsony price of thermal RECs will be less than the price of wind and solar RECs in Virginia, because wind and solar have a competitive market and buyers who are willing to pay more.

For years, critics have complained that the voluntary RPS is a failure for every purpose except greenwashing. But with no appetite for reform in the General Assembly, it’s been easy to ignore how the definition of renewable energy was expanding like a slime mold escaping its petri dish.

This year, though, the reformers are on the move. One or more bills requiring utility investments in renewable energy seem likely to gain traction. Advocates will be keeping their fingers crossed—and reading the definitions.

 

This article was originally published in the Virginia Mercury on January 7, 2020.

[Update: Several astute readers pointed me to information indicating that the source of the thermal RECs is WestRock, a Georgia-based multinational paper company that burns wood and black liquor (a toxic byproduct of the pulping process) as a power source. WestRock is the single biggest emitter of air toxics in Virginia, with its facility in Covington topping the ranks as the Commonwealth’s number one air polluter, ahead of even Dominion’s biggest and dirtiest coal plant. So when you are sorting through junk mail or have a cardboard box delivered, take time to savor the moment. Maybe you didn’t actually help make that paper, but you probably contributed your small mite to WestRock CEO Steven Voorhees’ $18 million compensation package.]