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Northern Virginia governments look at major renewable energy energy purchase

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If the Northern Virginia Regional Commission has its way, local jurisdictions will buy power from a solar or wind farm in the near future. Photo credit Christoffer Reimer.

The Northern Virginia Regional Commission has selected a consultant to assist area localities in a joint procurement of renewable energy. Participating cities and counties will be able to aggregate their demand to get the kind of economies of scale that have allowed corporations like Amazon and Facebook to lower their energy cost by investing in large solar and wind farms.

On November 17, NVRC announced that Customer First Renewables, a national expert in matching large energy users with renewable energy projects, will serve as its technical advisor. Customer First Renewables and NVRC plan to issue a Request for Proposals (RFP) to identify one or more “shovel-ready,” large scale projects to present to NVRC’s thirteen member governments. Those local governments will individually decide whether to participate in the group purchase.

According to a Request for Qualifications that NVRC issued in its search for a consultant, the project(s) to be selected must be greater than 10 megawatts in size and result in new renewable energy capacity added to the grid. Preference will go to projects located in Virginia or in the regional grid that serves Virginia, known as PJM.

NVRC will act as a central contact and facilitator, but it will be up to the participating localities to negotiate a contract. NVRC Director Robert Lazaro said discussions with representatives of area localities indicate the interest is there for a major renewable energy buy like this. Arlington, Alexandria, Manassas Park, and Falls Church are among the jurisdictions most interested, with others possibly joining as they learn more.

“We see this as a way to green the grid, save money, and assist the solar industry in Virginia,” said Lazaro.

Niels Crone, Senior Vice President for Business Development at Customer First Renewables, said his company was excited to be involved in the procurement effort. “We are delighted to work with NVRC to help Northern Virginia jurisdictions get affordable, large-scale renewable energy,” he said.

NVRC is following an ambitious timeline. A project workshop for local government staff is scheduled for December 11, and a Request for Proposals (RFP) is due January 2, 2018.

How does a group purchase work?

Amazon and other large corporations have become major drivers of new wind and solar projects in PJM, including several large solar farms in Virginia. The steadily-tumbling costs of wind and solar make it possible for the companies to green their energy supply while lowering their overall energy costs using innovative financing approaches. Not all of these would work in Virginia, but one that does is the wholesale, or “virtual” power purchase agreement.

A virtual PPA allows a customer to buy and sell energy in the wholesale market, avoiding potential obstacles such as a utility’s monopoly on the retail sale of electricity.

Local governments in Virginia buy electricity from Dominion Energy Virginia at retail under a contract negotiated by the Virginia Energy Purchasing Governmental Association (VEPGA). That contract makes Dominion their only electricity supplier, and Dominion currently does not offer wind or solar as an option. A virtual PPA would not change this relationship; Dominion will continue to supply localities with electricity from its (decidedly un-green) power plants.

A virtual PPA would, however, let participating localities contract for the output of a renewable energy project, with the electricity sold into the wholesale market rather than delivered to the localities. Given the right project, the price for the electricity in the wholesale market could exceed the price paid to the project owner under the PPA, allowing the localities to pocket the difference—indirectly lowering their energy costs. The localities would also receive an additional benefit in the form of renewable energy certificates generated by the projects, demonstrating they have legally “greened” their energy supply.

There is some financial risk involved, since the PPA price is fixed, while wholesale prices fluctuate. Part of Customer First Renewables’ job will be to find the best project economics with the least risk. Corporate buyers, universities and large institutions around the country have used this approach successfully to lower their energy costs and meet their sustainability goals.

As members of the Metropolitan Washington Council of Governments (MWCOG), Northern Virginia localities are committed to reducing greenhouse gas emissions to 80 percent below 2005 levels by 2050, with an interim goal of 20 percent by 2020. MWCOG’s 2017-2020 Regional Climate and Energy Action Plan (available here) also sets a target of meeting 20 percent of the region’s electric consumption from renewable sources by 2020.

As the report notes, however, “There needs to be an immense undertaking to meet the 2020 and 2050 goals.” Here’s hoping Northern Virginia is ready to do its share.

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Show up and be counted

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Just in case you own neither a television nor a mailbox, don’t read a newspaper, only use your computer to watch videos of a Japanese cat with a thing for boxes, and never answer a telephone call from an unfamiliar number because it might be Rachel from Cardholder Services . . .

Tomorrow is Election Day in Virginia. Judging from the ads, politicians think you are most interested in which candidate has a hidden agenda of coddling violent gang members, or which one will dramatically lower our taxes simply by cutting the waste that every one of his predecessors somehow missed.

But I’d like to put in a plug for choosing candidates who support people over corporations, the public good over special interests, the environment over polluters, and the free market over monopoly. And if the candidates you’re choosing between don’t do any of those things as well as they should, vote anyway, because only by voting do you have the right to hold elected officials accountable.

The Virginia Chapter of the Sierra Club has endorsed candidates at the state and local level whose background and responses to questionnaires and interviews show they are most likely to support the environment in office. The endorsements are made by the chapter’s Political Committee and the volunteer Executive Committee, in consultation with members most knowledgeable about the issues and the candidates. As a non-partisan organization, the Sierra Club can and does endorse Republicans as well as Democrats, but the Republican vow of ignorance on climate change tends to make it hard to find ones the Club can endorse. (The standout exception is Republican Delegate Randy Minchew of Leesburg.)

A group called Activate Virginia has also compiled a handy list of candidates who have pledged not to take contributions from the likes of Dominion Energy, which has used its remarkable influence to enrich itself at the expense of consumers and lull even otherwise savvy leaders into supporting the expansion of fossil fuel infrastructure.

Personally, I find it pretty easy to know who to vote for. No serious candidate still denies that the planet is warming or that humans are causing it. (Regrettably, we have a lot of un-serious candidates.) Governor McAuliffe finally put in motion a proposed rulemaking that would lower carbon emissions from power plants. Ralph Northam has pledged to see it through if he is elected Governor. Ed Gillespie has pledged to kill it. Northam gets my vote.

New fracked gas pipelines will raise energy prices and commit Virginia to decades more of rising greenhouse gas emissions, while crowding out cleaner and cheaper renewable energies like wind and solar. Candidate for Lieutenant Governor Justin Fairfax opposes the pipelines, while Jill Vogel repeats the mindless “all of the above” pablum so popular with politicians who aren’t troubled by the difference between a mountaintop dotted with wind turbines and one blown up for its coal. Fairfax gets my vote.

Attorney General Mark Herring has been a champion for the environment and consumers in court and before the State Corporation Commission. His challenger John Adams has a cool name. Herring gets my vote.

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Electric Co-op Seeks to Double Fixed Access Charge in Move Against Solar

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IMG_0042

A residential solar installation in REC’s rural territory.

In a little-noticed move earlier this year Rappahannock Electric Cooperative applied for a rate increase and restructuring that will make homeowner solar less attractive, and disproportionately affect many low-income customers in the process. REC, Virginia’s fourth largest electric utility, asked the State Corporation Commission to approve doubling the monthly access charge all residential customers must pay. The SCC hearing in the case is set for for October 31. REC’s move has received virtually no attention in the media despite its potential large impact on consumers and the commonwealth’s utility and solar industries.

A utility rate increase by itself might not be big news. What’s unusual is that the new revenues REC says it needs would come mostly from hefty access-charge increases for all residential and small-commercial customers. The access charge is the fixed monthly amount all consumers pay just for having a meter hookup, regardless of how little or how much electricity they consume. In what will surely be a shock to many low-income and low-consumption REC customers, the co-op’s residential access charge would double from $10 to $20 per month.

REC cites rising costs in delivering power as the reason for seeking more revenue. In a speech at the co-op’s annual meeting last August, REC president and CEO Kent Farmer claimed that the main reason for redesigning its rates so as to double access charges is that “[w]e’ve got a lot of customers who are installing solar panels.” But REC employee Matthew Faulconer acknowledged in the co-op’s SCC filing just last week that in fact only 0.3 percent of REC’s customers have thus far installed any form of distributed generation.

So REC’s move to restructure how it collects revenues appears to be an effort to stall the growth of future solar (and efficiency), rather than an attempt to solve any rate-design problem that the co-op currently has. REC’s low-usage customers, most of whom don’t have solar, will still see large increases in their monthly bills. They’ll be collateral damage in the co-op’s effort to slow solar growth. In his August speech REC’s Farmer emphasized that customers with average (not to mention higher) monthly electricity usage may not pay all that much more, since “by increasing that customer [access] charge we were able to reduce the kilowatt hour charge. So hopefully the net effect of what you will pay assuming the Commission approves our rate increase is just slightly more than what you are currently paying.” Yes, “hopefully,” that is assuming your monthly usage is average or above.

But of course, unlike children in Lake Wobegon, not all REC customers are above average. A good number of the co-op’s members obviously use less electricity than the average co-op member’s 1,283 kWh monthly consumption. And it’s a safe bet that a good number of those low-usage customers have lower incomes than those who consume more than average. Low-usage consumers will see a much bigger percentage jump in their bills.

In the co-op’s SCC filing last week REC’s Faulconer, with a (metaphorical) wave of the hand, dismissed the basic fairness issue this poses for the co-op’s low-income customers. He argues that in fact REC’s low-income customers tend to consume electricity in higher-than-average amounts. What makes REC think this is the case? Faulconer says “a good indicator of income level is whether a consumer qualifies for state administered fuel assistance, which includes income as an eligibility factor.” And, Faulconer explains, “the typical REC member receiving fuel assistance used an average of 1,323 kWh per month, 40 kWh higher than the current residential class monthly average.”

Implicit in Faulconer’s and REC’s reasoning is that customers receiving state fuel assistance are a good proxy for all low-income customers. But that proposition is absurd on its face. Surely it would come as a surprise to those low-income customers who keep their electricity consumption low to live within their means without government assistance, or who heat with wood to save money, or who cannot afford or don’t want air conditioning.

Certainly consumer groups aren’t buying the notion that access-charge hikes don’t harm low-income customers. The American Association of Retired Persons (AARP) has opposed rate-restructuring efforts like REC’s that increase fixed monthly charges. Joining AARP in fighting such increases are the NAACP, Consumers Union, and the National Consumer Law Center. All these groups point out that increasing fixed fees makes it harder for customers to control their monthly bills.

The fact is, REC’s proposed rate restructuring, if approved, would be a significant wealth transfer from low-consumption customers to higher-consuming members. To accomplish such a fundamental shift in an effort to stall solar growth is very much in line with the philosophy of Koch brothers-funded groups such as the American Legislative Exchange Council (ALEC), Americans For Prosperity, and similar organizations. (REC through its membership in the National Rural Electric Cooperative Association (NRECA) supports ALEC.) Even if REC isn’t coordinating directly with these groups, the co-op seems to have internalized their way of thinking about the need to fight homeowner solar so utilities can keep burning fossil fuel.

In a Sierra Club filing in REC’s rate case Melissa Whited of Synapse Energy Economics notes that the co-op could raise the additional revenues it needs without raising access charges and thereby disproportionately favoring one group of customers over another. Whited points out that REC’s proposal, by favoring those who consume more over those who consume less, gives inefficient price signals that promote waste in electricity consumption.

Utilities across the country, working with Koch-affiliated groups, have been fighting distributed solar by attempting to roll back renewable energy mandates and net metering laws. They’ve also been trying to raise fixed monthly access charges, although often being denied or scaled back by their regulators. In these efforts utilities rarely mention the significant benefits of distributed solar, and REC certainly didn’t, either in Farmer’s speech to co-op members, or in the utility’s SCC filing. REC this summer sent out a number of “beat the peak” messages, asking customers to cut back their usage on hot sunny afternoons to save the co-op from having to buy expensive power during those peak hours. But the co-op never acknowledges that its customers with solar are helping the co-op in a big way during those peak hours. It’s certainly easier to make a case for solar-discouraging rate restructuring if you ignore the benefits that solar brings to the co-op and its members.

REC may also be seeking a rate restructuring before the SCC now as a stalking horse for Dominion Energy Virginia, which is also an ALEC member and also rarely passes up an opportunity to slow distributed solar. In 2009 the General Assembly, in a subtle anti-solar maneuver that seems to have attracted little notice, passed legislation allowing Virginia electric cooperatives to increase access charges without SCC approval, provided the overall rate change is revenue neutral (such as when higher access charges are offset by reduced kWh rates). REC temporarily waived its right to skip SCC scrutiny for access-charge increases as part of its acquisition of customers from Allegheny Power in 2010, but that temporary waiver ends in two years. So REC could have delayed its access-charge restructuring until then and skipped SCC review for it. But going before the SCC now can give REC’s board and management some cover against angry customers, and also can help Dominion and other utilities by setting a precedent, if the SCC approves.

If the SCC staff analyzed how REC’s access-charge doubling will disproportionately affect low-income customers, it hasn’t disclosed its reasoning. In his prefiled testimony in the rate case, SCC principal utilities analyst Marc A. Tufaro simply said: “Staff is generally not opposed to the proposed increases in the Access Charges by REC.”

Virginia Attorney General Mark Herring is also a party in the case, through the Office of Consumer Counsel. That office has yet to publicly reveal its position concerning the access charge.

Seth Heald is a member of REC. He received an MS degree in energy policy and climate this year and serves as chair of the Sierra Club Virginia Chapter.

UPDATE: November 1, 2017: 

The Sierra Club announced today that it and the other parties to the REC rate case reached a settlement, pending final SCC approval.  The settlement reduces the overall revenue increase from $22.2 million to $18 million and scales back the residential access-charge increase from 100% to 40%. “This settlement is a significant win for REC’s member-owners because doubling their fixed access charges would have disproportionately harmed members who have invested in clean energy and energy efficiency,” said Kate Addleson, Director of Sierra Club’s Virginia Chapter. “REC’s proposal also would have harmed many low-income customers who try to reduce their energy consumption to keep their bills affordable, and would have discouraged co-op members  from investing in energy efficiency and rooftop solar in the future.”

As part of the settlement, REC also agreed to work with the Sierra Club to implement specific methods and procedures to provide co-op members advance notice and an opportunity to provide in-person and written comments to REC’s board before access charges can be increased in the future.

 

 

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Times-Dispatch articles expose Dominion’s manipulation of government for its own enrichment—and that ain’t the half of it

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Over the past few days the Richmond Times-Dispatch has run a three-part special report detailing Dominion Energy’s grip on the Virginia General Assembly and the company’s abuse of that power to enrich itself at the expense of its captive customers. Journalists Robert Zullo and Michael Martz examine how Dominion’s use of business and personal connections, campaign contributions and lobbying led to a series of laws that enriched the company and eroded the State Corporation Commission’s regulatory authority.

And Dominion still gets off too easy.

But before we get into that, first let me praise the RTD for even running this series. As recently as a few years ago, the paper assiduously avoided printing anything critical of Dominion outside the narrow confines of letters to the editor. News articles almost invariably adopted Dominion’s messaging and quoted Dominion spokespersons with no effort at independent verification. A single quote from an environmentalist or other critic, buried deep in the text, represented the only nod towards journalistic balance.

This has changed, as the paper’s remarkable exposé demonstrates. Zullo and Martz are not alone; columnist Jeff Schapiro frequently criticizes Dominion in ways that would never have seen print before. Somehow the RTD’s editors have found their spine.

The authors don’t editorialize. They quote a wide array of insiders and observers, though the absence of voices from the environmental community is striking. The coverage of personalities is sometimes even positive; Dominion CEO Tom Farrell, for example, comes off more as an upstanding citizen than as a master manipulator.

Indeed, many of the critics interviewed for the series pull their punches. Most of those quoted are full participants in the “Virginia Way,” a system in which going along to get along is embedded in the political culture. They are careful when criticizing Dominion, unwilling to tar their colleagues and, perhaps, aware they owe their own professional success to the same system that got us into this mess.

Overall, however, Dominion is right to hate the hot white light of journalistic scrutiny. Corporate greed doesn’t look good in print when the readers are its victims, and Dominion’s machinations are recorded here in excruciating detail. They culminate in the passage of 2015’s SB 1349, the law stripping the State Corporation Commission of its authority to review utility base rates and order refunds until 2022.

Dominion positioned its bill as a way to “protect” customers from the costs of complying with the federal Clean Power Plan, but it was not hard to recognize the Clean Power Plan as a politically charged fig leaf. SB 1349 was always about letting Dominion keep excess earnings. The Clean Power Plan, after all, was not scheduled to kick in until 2022, when rates would unfreeze. Meanwhile, as one SCC commissioner estimates, Dominion will keep as much as a billion dollars of money it has not earned.

Yet by concentrating on the money, the RTD misses bigger implications. Dominion’s corruption of our legislative process doesn’t just mean consumers are getting ripped off. It means Dominion has been able to undermine efforts to reduce energy use, protect our electric grid, move to greater use of renewable energy, and free us from dependence on fossil fuels.

Heck, under Dominion’s influence, elected leaders don’t even appreciate why these should be their priorities. Politicians genuinely think building fracked-gas pipelines like the Atlantic Coast and Mountain Valley pipelines will lower energy costs. (In case you missed it, they won’t.) This is the real damage Dominion does, that legislators don’t even know they’ve internalized the utility’s propaganda. This is the exercise of the “third dimension of power,” the hidden type of power described in former UVA professor Vivian Thomson’s recent book Climate of Capitulation.

As a result it doesn’t occur to our elected leaders to ask questions when Dominion promises to reduce carbon emissions while planning to build more fossil fuel generation. (The answer to the question is in the fine print; or if you prefer blunt speech, it’s a lie.)

These leaders acquiesce when Dominion lobbyists urge them to reject mandatory energy efficiency standards on the basis that Virginia has such low-cost electricity (wrong) that we can’t succeed at energy efficiency the way other states do (and anyway the SCC won’t let us, so we shouldn’t even try).

Dominion takes baby steps on renewable energy, and elected officials express their gratitude without noticing how dismally far behind our neighboring states we remain. (How kind of Dominion! Let’s give them some more money!) Democrats used to try to pass renewable energy mandates; they don’t any more. Dominion doesn’t like to be told what to do. So rather than fight and lose, legislators now say they don’t like mandates. That’s a true climate of capitulation.

In short, the people’s representatives pass bills Dominion wants, or reject ones Dominion opposes, and persuade themselves the legislature is in charge.

The RTD cites one especially telling example of this. “Since 1996, Dominion has been [Delegate Ken Plum’s] top political donor, contributing $105,750, according to the Virginia Public Access Project.” Yet, “’I’ve never felt squeezed by them,’ Plum said of the utility’s lobbying corps. ‘I have felt informed by them.’”

That’s what you call good lobbying. The lobbied official never feels squeezed, just informed.

It’s obvious enough that Dominion distributes money to legislators from both parties because it expects to buy influence. Legislators know this, and many acknowledge that it works on their colleagues. As for themselves, however, they are certain they can take money without being influenced. Even Ken Cuccinelli, who advocates for the SCC to regain its authority over Dominion, dismisses the idea of banning campaign contributions from public utilities. (Mind you, he offers no other solutions.)

Voters are rightly more skeptical, as demonstrated by the groundswell of support for Senator Chap Petersen’s proposals to repeal the rate freeze and to bar campaign contributions from regulated public utilities. Dozens of candidates seeking office this year have pledged not to take Dominion money, and according to the group Activate Virginia, 8 incumbents and 46 House candidates have promised to roll back the rate freeze.

In both cases, the question is why so few incumbents have signed on. Perhaps, after reading the RTD’s report, they will understand why they should. What’s at stake goes way beyond money.

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A 5-year plan for economic growth: 10% solar and 50,000 new jobs

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Source: The Solar Foundation

A new analysis from the non-profit Solar Foundation shows Virginia could create 50,400 jobs if it commits to building enough solar energy in the next five years to provide just 10% of our electricity supply.

The analysis takes the form of an “infographic” showing the implications of 10% solar. It would require building 15,000 megawatts of solar, divided among utility-scale solar farms, commercial installations, and the rooftops of houses. At the end of 2016, Virginia had a total of only 241 MW of solar installed, representing one-tenth of 1 percent of total electricity consumption. Getting to 10% by the end of 2023 would mean an annual growth rate of 61 percent. That would be impressive growth, but well below the 87 percent growth rate averaged by California and North Carolina over the past 6 years.

So 10% in five years should be doable. And indeed, viewed against the need to dramatically lower our carbon footprint, it seems like a very small step indeed. The McAuliffe administration wants to significantly cut statewide carbon emissions, and it is hard to see how we can do that without replacing the dirtiest fossil fuels with solar (and wind, and energy efficiency).

The good news is that the market is in our favor. Dominion Energy’s 2017 Integrated Resource Plan (IRP) identified utility-scale solar as the least-cost energy resource available in Virginia today. And participants in local cooperative buying programs for homeowners and businesses, known as “Solarize” programs, report payback times of under 10 years for rooftop solar, after which they will have nearly free electricity for 20 or 30 years.

Recent solar deals involving Amazon, Microsoft, and now Facebook show just how strong the demand is from customers. The very companies that our political leaders want so desperately to attract to Virginia are insisting on renewable electricity.

These deals demonstrate the direction of the market, and they will give an initial boost to solar employment, especially in the rural communities that are the best locations for solar farms. But restricting solar to a handful of new companies just coming into Virginia won’t get us to 15,000 MW and 10% solar. It’s also fundamentally unfair to the rest of us who are stuck with a dirty grid. Why should existing customers get left with polluting sources, while big tech companies get solar?

For us, Dominion’s IRP caps its solar plans at 240 MW per year, an amount it admits is arbitrary. In other words, Amazon got 260 MW, Facebook is getting 130 MW, but all the rest of Dominion’s customers put together will get just 240 MW per year.

As for customers who are determined to take matters into their own hands with rooftop solar, a host of unnecessary restrictions continue to limit growth. Virginia needs to put policies in place to push utilities to do more, to support local governments and schools that want solar, and to remove the barriers that limit private investment.

Solar companies around the state say if we can do that, they will do their part by hiring more Virginians. Here’s what some of them had to say about the 10% solar goal, and how to achieve it:

“We believe, as Virginians, that we can solve our energy challenges. Ours is a Virginia company founded and based in Charlottesville, and we are committed to building Virginia-based energy production facilities that benefit all Virginians. But the fact is that over the past few years our growth has come from business in other states. We have 26 employees in Virginia now, and we could increase that dramatically if Virginia promotes solar through policy changes that incentivize business owners to invest, allows competition, and supports the environmental message.” –Paul Risberg, President of Altenergy, Charlottesville

“The economics have never been better for solar in Virginia than they are right now. Prospect Solar has grown from two employees in 2010 to 16 full time employees today. Roles such as electricians, skilled labor, engineers, project managers, and sales people are integral to the success of each project. We hope Virginia will commit to a rapid, sustained buildout of all sectors of the solar industry, allowing us to continue adding local jobs.” –Andrew Skinner, Project Manager at Prospect Solar, Sterling

“Nationwide, the solar market was a 23 billion dollar industry in 2016. One out of every 50 new jobs in America was created by the solar industry last year. Sigora has been part of that. We have doubled in size in the past year and now employ 80 people in the Commonwealth.” –Karla Loeb, Vice President of Policy and Development for Sigora Solar, Charlottesville

“Local energy, local jobs, local investment. Our workforce is made up of local people—three of us went to Virginia Tech, one went to New River Community College, which has an Alternative Energy Program. An increase in demand of this scale would mean we’d hire more local people.” –Patrick Feucht, Manager of Baseline Solar, Blacksburg

“Residential and commercial rooftop solar has created most of the solar jobs in Virginia to date, and it has to be a part of the push to 10 percent. As we know, rooftop solar creates more jobs than utility solar, and these are good-paying, local jobs for local people. That’s one reason Virginia should lift the outdated 1 percent cap on net-metered solar, and leave the market open to anyone who wants to invest in their own home-grown energy supply.” –Sue Kanz, President of Solar Services, Virginia Beach

“Ten percent solar is a modest goal to shoot for given the strong economics of solar and the demand we are seeing from customers. Virginia has been held back by restrictive policies that have made it a ‘dark state.’ Reforming our policies would lead to a lot more economic development around solar.” –Tony Smith, President of Secure Futures LLC, Staunton

 

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New pipelines report shows the ACP is part of a widespread, systemic market failure

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Photo courtesy of Chris Tandy.

Anyone who examines the corporate deals that underlie the Atlantic Coast Pipeline comes away with a strong sense of looking at a broken regulatory system. The Federal Energy Regulatory Commission (FERC) is supposed to approve only those pipelines that can demonstrate they are actually needed. Pipeline companies demonstrate need by showing that customers have contracted for most or all of the pipeline’s capacity. In the case of the ACP, Dominion Energy and its partners manufactured the need by making their own affiliates the customers of the pipeline.

What’s weird is that FERC seems to be okay with this. It recently approved another pipeline with a similar setup—the Nexus pipeline that will carry fracked gas from Ohio through Michigan to Canada. FERC ignored blatant self-dealing between the pipeline company and its regulated utility affiliate, including clear evidence the regulated utility affiliate increased its share of the pipeline’s capacity only to create a “need” for its parent company’s project.

A new report from Oil Change International concludes the U.S. is currently building unneeded fracked-gas pipelines as a result of FERC’s regulatory failures, including its failure to police self-dealing. The result will be excess pipeline capacity, paid for by regulated utility customers.

The primary cause of the overbuilding, and the reason companies like Dominion engage in self-dealing to create the impression of “need,” is that FERC sets an absurdly high rate of return on pipelines—14%, compared to a typical utility rate of return of 10%. FERC set the high rate back in 1997 when interest rates were double what they are now, so it was more expensive to build large infrastructure. FERC hasn’t changed the rate since then even though it is causing obvious market distortions—and creating an incentive for utilities to jump into the pipeline business.

What is even weirder is that Virginia’s State Corporation Commission seems to be okay with self-dealing, too. The ACP is also using affiliate contracts that commit the customers of state-regulated electric utilities (including Dominion Energy Virginia) to pay for the use of the pipelines.

The SCC’s job is to protect electric utility customers from precisely this kind of exploitation. These customers don’t have the option to walk away from the likes of Dominion Energy Virginia; they are required by law to get their electricity from that utility and no other. If the SCC looks at self-dealing and shrugs, where are the customers supposed to go for protection?

That’s why Virginia has a law called the Affiliates Act that requires SCC approval before a regulated utility can commit its customers to any contract or arrangement with an affiliated company. Dominion had to commit electricity customers to the ACP in order to show FERC the pipeline was needed. Yet Dominion never even asked the SCC for approval.

Recognizing the risk to ratepayers, the Sierra Club petitioned the SCC to require Dominion to comply with the Affiliates Act by disclosing the affiliate relationship and seeking approval of the arrangement that affects captive customers. Without SCC approval, Dominion would seem to be on thin ice telling FERC it has the contracts in place that demonstrate the “need” for the ACP.

One would have thought the SCC would jump at the chance to weigh in. The FERC filings show it will cost ratepayers three to four times more to use the ACP than to stick with the competing pipeline that Dominion already has long-tem contracts with.

But on September 19, the SCC denied the Sierra Club’s petition. One of the reasons cited was that Dominion will have to get SCC approval before it actually charges ratepayers for any gas carried by the pipeline.

Meaning, the SCC says it will consider the merits of the problem only after Dominion has secured FERC approval, and after the ACP has already ripped a 600-mile gash across the countryside, dispossessing landowners, tearing up forests, and endangering streams and water supplies.

Well, that poses a bit of a problem, doesn’t it? If the SCC turns down Dominion’s rate recovery request at that point, its decision will cancel out the very argument of “need” that Dominion and its partners used to get the ACP approved by FERC. Meaning, the ACP should never have been built.

But the pipeline will be there in all its razed-earth, $5 billion glory. What then? Perhaps Dominion will instead use the pipeline to serve its LNG export terminal at Cove Point or go hawking its expensive gas to new industrial customers, as some politicians hope. But more likely, this being Virginia, we would expect our General Assembly to order the SCC to grant rate recovery anyway, citing energy security or whatever fig leaf Dominion comes up with.

And a systemic market failure will leave Virginians, along with residents of other states, paying more to burn fracked gas for decades, unwillingly and unfairly doing our part to exacerbate the climate crisis.

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

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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.

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To Understand Pipeline Economics, Follow the Money

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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.

 

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A Candidate’s Guide to Clean Energy and the Pipelines

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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.”

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Virginia utilities and advocates square off over net metered solar

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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.