The other shoe drops: APCo follows Dominion in seeking rate increase due to high fossil fuel costs

Virginia residents who buy electricity from Appalachian Power will see a rate increase of almost 16% this year if the State Corporation Commission approves the utility’s request to recover more than $361 million it has spent on higher-than-expected coal and natural gas prices. APCo proposes to recover the excess over two years, meaning rates will remain elevated even if fossil fuel prices drop. According to the filing, a customer who uses 1,000 kWh per month would see an increase of $20.17.

The SCC is likely to approve the request because it has little room to do otherwise. Virginia law allows utilities to recover their spending on fuel dollar-for-dollar, though they cannot tack on a profit for themselves. Last month, the SCC approved Dominion’s request to increase rates by an average of nearly $15 per month for the next three years to cover past excess fuel costs. 

The good news, says APCo, is that Virginia customers will see lower bills in the future because the utility is investing in renewable energy. “Incorporating more renewable sources of power into the company’s energy mix is another step in reducing customer fuel costs,” declares the company’s press release, issued the same day as its SCC filing. “As Appalachian Power adds more renewables, there is less need for coal and natural gas to generate power.”

Well, yes, but wouldn’t it have been nice if APCo had come to this conclusion before now? The current situation was entirely predictable. A supply glut kept natural gas prices low for almost a decade, but drilling companies weren’t making money. Today’s higher prices make it profitable to drill for gas, but oil and gas companies don’t trust that the market will stay strong, so they are returning profits to shareholders rather than investing in new wells. So tight supplies may keep prices high. Or not! Nobody knows. (As for coal, natural gas generation and coal are ready substitutes for each other, so coal prices track natural gas prices.) 

For years clean energy advocates like me have been urging utilities and the SCC to value price stability in generation planning, only to be ignored. Other states took the lead in installing price-stable renewable energy, while Virginia added more gas plants. When I dug into the data this summer, it became clear that the great majority of states with lower rates than Virginia also had higher amounts of renewable energy in their generation mix. I’ve reprinted a summary table here. 

StatePrice cents/kWh% REsource of RE
Virginia12.837biomass, hydro, solar
Idaho9.8674mostly hydro
Washington10.1275mostly hydro
North Dakota10.4840mostly wind
Utah10.6615mostly solar
Montana11.0052mostly hydro
Wyoming11.0619mostly wind
Nebraska11.1128mostly wind
Oregon11.2268mostly hydro, some wind
Missouri11.5412mostly wind
Arkansas11.7510mostly hydro
Louisiana11.984biomass
South Dakota12.0382wind, hydro
Iowa12.0960almost all wind
North Carolina12.2616mostly solar and hydro
Oklahoma12.3845mostly wind
Kentucky12.637hydro

I compiled this table in July, using then-current Energy Information Agency data. Now EIA has updated its data, and Virginia’s position is worse than ever. As of July 2022, Virginia’s average residential electricity rate has now hit 14.42 cents/kWh. This puts us above every state in the South Atlantic except Georgia. (Poor Georgia comes in at 16.02, but that’s what building nuclear plants will do for your rates.) Meanwhile, the states whose rates increased the least are those with high levels of wind, solar and hydro. 

This isn’t rocket science, folks. Wind and solar have lower levelized costs than coal and gas, and they insulate consumers from the volatility of the world oil and gas markets. You don’t have to be a climate advocate to understand this, but apparently it helps.

Your electric bills are skyrocketing. Blame our failure to invest in renewable energy.

Photo by Pixabay on Pexels.com

Fossil fuel prices are higher everywhere, and the effect is hitting electric bills as well as prices at the gas pump. 

Utilities that generate power from natural gas and coal face fuel costs two or three times as high as they were just a couple of years ago —and those costs are passed on to customers. Some utilities employ hedging strategies and long-term contracts to reduce the impact of price spikes. But as a general matter, how painful your bill increase will be is a function of how much electricity your utility generates from fossil fuels. 

Gee, don’t you wish we had more renewable energy in Virginia? 

Let’s review the problem. Dominion Energy Virginia, our largest utility, generates most of its electricity from gas and coal, with 29 percent from nuclear and a tiny percentage from solar and biomass. Our second-largest utility, Appalachian Power, derives 85 percent of its power from coal and gas and only 15 percent from renewable energy, primarily wind and hydro. 

Both utilities are investing more in renewables now, but for years they lagged other states even as wind and solar became the lowest-cost sources of energy nationwide. Because the “fuel” for wind turbines and solar panels is free, those sources generate electricity at a stable price that looks even better when coal and gas prices go up. (Nuclear reactors are fueled by uranium, so they aren’t affected by the fossil fuel crunch either; even so, most of them need subsidies to compete in the wholesale market.) 

As previously reported in the Mercury, Dominion filed a request with the State Corporation Commission in May to increase the “fuel factor” portion of its customer bills, citing the higher prices. In the past year, according to Dominion, the price of the natural gas it bought has gone up 100 percent. High gas prices cause utilities to switch to coal generation when it’s cheaper, so the price of coal also rose by 92 percent. In all, the company said it incurred more than a billion dollars more in fuel costs over the past year than it budgeted for a year ago. 

Under Virginia law, Dominion and APCo “pass through” the costs of fuel directly to customers. They don’t collect a profit, but they don’t have to swallow unexpected increases themselves. Customers will have to pay higher rates for as long as it takes Dominion to recoup the extra spending. The only question for the SCC is how quickly Dominion should collect the money.

Consumers in other states are also being hit by higher electricity bills, but the effect is uneven across the country. States that built more renewable energy protected their residents from fuel price increases. 

Data collected by the U.S. Energy Information Agency shows that with few exceptions, states with lower electricity rates than Virginia’s have more renewable energy than we do. Since the EIA data doesn’t reflect all the planned increases due to rising coal and gas prices, the disparity will become even more pronounced over the coming year. 

States in the Pacific Northwest with a lot of inexpensive hydroelectric power have especially low rates, but wind and solar are the cheapest forms of new energy. The higher fossil fuel prices go, the better wind and solar look by comparison. 

States in the Great Plains have been building wind for years because it outcompetes everything else, so their rates are low and increasingly insulated from fossil fuel volatility. South Dakota residents pay less per kilowatt-hour than Virginians do, and the state gets a whopping 83 percent of its electricity from renewable energy, primarily wind. Even North Dakota, a deep red state wedded to fossil fuels, gets more than 35 percent of its electricity from wind and another 5 percent from hydro. Its rates are already much lower than Virginia’s, and its renewable energy will cushion fuel cost increases. 

Investments in solar are also paying off. Take Utah for example, where residential rates are also far lower than Virginia’s. Utah has a coal problem, with 61 percent of its electricity from that one dirty source, and another 24 percent from natural gas. But, as EIA reports, “almost all the rest of in-state generation came from renewable energy, primarily solar power.” Moreover, “solar energy powers about 93 percent of Utah’s electric generating capacity added since 2015.” Evidently, Utah spent the past seven years working to future-proof its energy supply, while Dominion kept building more gas plants. 

Virginia’s slow start on the transition to renewable energy is the direct result of poor investment decisions by our utilities and a disgraceful myopia on the part of the State Corporation Commission. Environmental advocates pointed out for years that our over-commitment to fracked gas meant we’ve been gambling on fuel costs and undervaluing price stability. But the SCC kept approving new fossil fuel projects, and actually urged Dominion to build more gas plants.

Indeed, our situation would be even worse if the General Assembly had not passed the Virginia Clean Economy Act in 2020. The VCEA requires our utilities to transition to carbon-free electricity by 2050 and establishes wind and solar targets for Dominion and APCo to achieve by 2035. The targets are still too low to meet the climate emergency — but until the VCEA became law, Dominion was planning to build even more gas plants

Now customers have to pay for Dominion’s folly. Dominion’s filing states that if it recovers the entire $1 billion shortfall over the coming year, residential bills would have to go up by 19.8 percent. Dominion instead proposes to spread the higher charges over three years to ease the shock, making the bill increase 12.2 percent.  The effect would be further moderated this year by other adjustments the company proposes, like moving the costs of participating in the Regional Greenhouse Gas Initiative into base rates, where they can be absorbed because those rates are so inflated. (On the other hand, the SCC just granted Dominion a separate rate increase for spending to extend the life of its aging nuclear plants—an undertaking projected to cost nearly $4 billion.) 

An SCC hearing examiner heard testimony in Dominion’s rate case on July 6 and 7. A ruling is expected later this summer, and the SCC seems likely to approve the three-year plan. 

Spreading the cost of higher fuel prices out over a longer time may reduce the rate shock, but there are drawbacks to this approach. First, Dominion will charge customers the financing costs of deferring collection on the full amount, adding to the total cost burden. (What, did you think the company was offering to absorb that cost itself?) The way it works is that ratepayers will borrow money to pay off our debt to Dominion, then repay the loan with interest over the next three years. 

The second problem is that if the high cost of fossil fuel isn’t temporary, extending the recovery period will lead to even greater shocks in coming years. If prices stay high and we keep kicking the can down the road, we will pay more financing costs and pile up more debt. Where does this end?

This is not mere speculation. Dominion’s filing already projects that “fuel costs will remain elevated over the next year,” and expert witness testimony in the case notes that Dominion revised its natural gas price projections upwards after it filed its request, without updating the amount it is seeking to collect to reflect the higher projections. 

Over at Appalachian Power the situation may not be any better. APCo typically seeks its fuel factor rate increases in September of each year. Last year the utility sought a $3 average increase in residential bills to cover higher fuel costs, at a time when coal and gas prices were still well below this year’s prices. When the company files for its next fuel factor increase two months from now, the rate increase it seeks is likely to pack a much bigger punch. 

What of other Virginia utilities? Our smallest publicly-owned utility, Kentucky Utilities (Old Dominion Power, which serves five counties in southwest Virginia), is also heavily dependent on fossil fuels although now planning to build more renewables. ODP filed for a modest rate increase in February of this year, just before Russia invaded Ukraine and sent world natural gas prices to heights not seen since the start of the fracking revolution. 

Chris Whelan, vice president for communications and corporate responsibility, told me ODP is able to dampen the effect of fuel price volatility through a “flexible fuel procurement strategy that includes long-term contracts to help hedge against price swings as well as the ability to purchase fuel on the spot market when prices drop.” Still, ODP will have to seek another increase next February unless prices suddenly plummet. The utility recovers excess fuel costs (or lowers rates if fuel costs fall) on an annual basis, so customers would pay off the full amount over 12 months. 

Electric cooperatives that buy electricity from Old Dominion Electric Cooperative also face price increases due to high fossil fuel prices and a paucity of renewables. ODEC’s 2021 energy profile shows it generates 38 percent of its electricity from gas, 14 percent from nuclear, and 4 percent from coal. It purchases the rest from the wholesale market (38 percent) and from renewable energy projects (6 percent). Electricity sold on the PJM wholesale market is generated mainly by natural gas, nuclear and coal, so wholesale market prices are also higher now.

According to Kirk Johnson, ODEC’s senior vice president for member engagement, ODEC has had to raise energy prices twice since the beginning of the year, effective May 1 and July 1. Assuming individual distribution cooperatives passed those costs through immediately, residential co-op customers will have seen a 16 percent increase in their electricity rates since Jan. 1. That’s a really steep increase, but Johnson notes ODEC will collect the full amount of the excess cost by Jan. 1, 2023. 

ODEC’s increase for six months is almost four percentage points lower than the increase Dominion would impose for 12 months if it were to collect its full $1 billion in the shortest time possible. Johnson said ODEC engages in a hedging strategy that acts like an insurance policy to limit the effect of fuel price volatility, and that this strategy has saved their ratepayers hundreds of millions of dollars.

So hedging and long-term contracts can smooth out fossil fuel volatility, but rates are going up everywhere in Virginia. The lesson is clear enough: “cheap” fracked gas was a bad bargain. Our utilities should have been building wind and solar over the last several years to protect us from fossil fuel price volatility, rather than waiting for the General Assembly to force them to act. 

Going forward, the more we invest in wind and solar, the more price stability we will have in our electricity rates, and the less we will have to worry about high fossil fuel prices in the future.  

This article originally appeared in the Virginia Mercury on July 18, 2022. I’ve corrected information for Utah.

*EIA’s webpage lists each state’s average residential price of electricity per kilowatt-hour, but finding the fuel mix for each state requires looking up each one separately. For those of you who like to dive into these details, I’ve assembled the information for you. Note that most of EIA’s data is for 2021, but some state data is for 2020. Unfortunately this includes Virginia.

StatePrice cents/kWh% REsource of RE
Virginia12.837biomass, hydro, solar
Idaho9.8674mostly hydro
Washington10.1275mostly hydro
North Dakota10.4840mostly wind
Utah10.6615mostly solar
Montana11.0052mostly hydro
Wyoming11.0619mostly wind
Nebraska11.1128mostly wind
Oregon11.2268mostly hydro, some wind
Missouri11.5412mostly wind
Arkansas11.7510mostly hydro
Louisiana11.984biomass
South Dakota12.0382wind, hydro
Iowa12.0960almost all wind
North Carolina12.2616mostly solar and hydro
Oklahoma12.3845mostly wind
Kentucky12.637hydro

Dear readers: Many of you know that although I write independently of any organization, I also volunteer for the Sierra Club and serve on its legislative committee. The Sierra Club’s Virginia Chapter urgently needs funds to support its legislative and political work towards a clean energy transition. So this summer I’m passing the hat and asking you to make a donation to our “Ten Wild Weekends” fundraising campaign. Thanks!

West Virginia wants to raise Virginia power bills

photo of mountain scraped of soil for coal mining
Under the West Virginia order, customers will pay more to support the state’s coal industry. Sierra Club photo.

Most people are aware by now that inflation has hit the energy sector hard, with fossil fuels in particular skyrocketing in price over the past year. 

Dominion Energy Virginia, the state’s dominant utility, says it needs to charge residential customers an extra $14.93 per month on average to cover higher natural gas prices. Appalachian Power, which serves Southwest Virginia as well as West Virginia, has already asked the West Virginia Public Service Commission for permission to increase residential bills by an average of $18.41 to cover higher coal and gas prices, and is likely to seek a similar increase from Virginia customers this summer.  

But for residents of Southwest Virginia, that could be just the beginning of the rate increases: West Virginia wants to force APCo customers to pay even more, and not just in West Virginia. If the West Virginia PSC has its way, Virginia customers would have to shoulder their “share” of the cost of propping up two money-losing West Virginia coal plants. 

The PSC’s order of May 13 reiterates previous instructions to APCo to keep its West Virginia coal plants running at least 69 percent of the time, even when the plants lose money. This decision comes on top of a decision in October of 2021 allowing APCo to charge customers for hundreds of millions of dollars in costs to prolong the life of these coal plants out to 2040. An expert hired by the Sierra Club found it would cost up to $1.1 billion more to keep the plants operating until 2040 instead of retiring them in 2028. 

For Virginia customers, the problem is that these West Virginia coal plants, Amos and Mountaineer, also provide electricity to Southwest Virginia, so Southwest Virginia residents have to pay for them. Even before the fuel price spikes of the past year and a half, APCo wanted to charge its Virginia customers for the upgrades approved by the West Virginia PSC. The company will certainly also want Virginians to pay for the even higher costs that will follow from the 69 percent run requirement.

Virginia’s State Corporation Commission has so far held off on approving the millions of dollars that would be Virginia’s share of the costs to upgrade Amos and Mountaineer. But with the West Virginia PSC plowing ahead to support its state’s favored industry, it’s not at all clear the SCC will stand its ground. 

APCo’s study claims that closing Amos and Mountaineer will cost ratepayers more than keeping them open, ensuring there will be a battle of the experts come the September hearing. The study is opaque in its methodology and reasoning. But APCo almost certainly didn’t assume the plants would have to run 69 percent of the time regardless of market conditions, and it probably also didn’t factor in today’s sky-high fossil fuel costs that further support retiring the coal plants and investing in cheaper, price-stable wind and solar.

Obviously, the biggest losers here are West Virginia residents. They will bear the largest share of these costs, one more price of living in a state run by fossil fuel oligarchs.

In an alternate universe, West Virginia would have developed an economy that took advantage of its extraordinary natural beauty, one based on small farms, four-season tourism, artist enclaves and vacation homes: think Vermont but with better weather. Instead, fossil fuel and mining barons bought up mineral rights, paid off politicians, and despoiled vast swaths of the state, leaving most residents dependent on dirty jobs or piecing together a living from low-wage work. 

I’m rooting for West Virginia to change course for a post-coal world, but that’s not easy for a state where politicians, bureaucrats and industry conspire to maintain the power of extraction industries. Virginians, however, shouldn’t be forced to enable this misuse of power. The SCC should reject West Virginia’s effort to make Virginia customers pay to prop up West Virginia coal.

This article originally appeared in the Virginia Mercury on June 10, 2022.

Dear readers: Many of you know that although I write independently of any organization, I also volunteer for the Sierra Club and serve on its legislative committee. The Sierra Club’s Virginia Chapter urgently needs funds to support its legislative and political work towards a clean energy transition. So this summer I’m passing the hat and asking you to make a donation to our “Ten Wild Weekends” fundraising campaign. Thanks!

Why most ‘renewable energy’ options don’t add new wind and solar to the grid

bucket of green paint with spill
Photo credit: Neep at the English Language Wikipedia.

Virginia residents who want to do right by the planet are confronted with a bewildering array of renewable energy and “green power” options. Unfortunately, few of these programs actually deliver renewable energy. People who want the gold standard — electricity from new wind and solar projects — are completely out of luck if their utility is Dominion Energy Virginia or Appalachian Power. 

To understand how there can be so many options and none of them good, we first have to talk about renewable energy certificates.  RECs are a topic that is way more interesting than it sounds because — well, it would have to be, wouldn’t it? RECs are how we know that some electricity can be attributed to a renewable source. If you want to know what kind of renewable energy your utility is buying, or if you yourself want to buy renewable energy, RECs matter.

RECs are not electricity; they aren’t even real certificates. They were conceived of as an accounting tool enabling a utility to show it is in compliance with a state mandate to include a percentage of renewable energy in its mix. A utility amasses RECs associated with its own renewable generating sources, or buys them from renewable sources it doesn’t own, and then “retires” them to show compliance with the law. Since RECs are separate from the electricity itself, they can be bought and sold independently. There is even an online marketplace for your REC shopping convenience. 

RECs are also how voluntary buyers of renewable energy, like customers of Arcadia or Dominion’s Green Power Program, know they’re actually getting what they pay for —assuming they understand that what they pay for is not actually energy, and may have no relationship to the electricity powering their home or business. If you buy RECs, you are still using whatever electricity your utility provides, but you are also paying a premium on top of your regular bill. 

There is no nationwide, generally accepted definition of “renewable energy,” just as there is no definition of “natural” in food labeling. In Virginia, there is a state law defining what counts as renewable, and it includes not just solar, wind and hydro, but also a range of burnable fuels like biomass and municipal solid waste that foul the air and contribute to climate change. Buyer beware!  

The Virginia Clean Economy Act narrowed the list of sources that Dominion and APCo can use to meet the law’s new renewable portfolio standard, and also limited the locations of qualifying facilities. After 2025, happily, most of the RECs retired by Dominion and APCo under the VCEA will come from Virginia wind and solar facilities. 

But crucially, the VCEA didn’t change the definition of renewable energy in the code. Dominion won’t be able to use RECs from its biomass plants to meet the VCEA, but it can still sell them to anyone else and label the product “renewable” without falling afoul of the law. Anyone buying a renewable energy product from Dominion had better check the list of ingredients. 

It’s not just Dominion. Anyone buying RECs from Arcadia or anywhere else should take a good look at what they are getting, and ask themselves if the money they spend means new renewable energy will be added to the grid. 

The answer is probably no. If the RECs come from a wind farm in Texas or Iowa, the electricity from those turbines doesn’t feed into the grid that serves Virginia, so you can’t even pretend it is powering your house. It also doesn’t mean anyone built a wind farm because of REC buyers like you. Wind energy is already the cheapest form of new energy in the central part of the U.S. People build wind farms because they are profitable, not because they can sell RECs. In fact, those wind farms are swimming in surplus RECs, because states in the center of the country don’t have renewable energy mandates to make their own utilities buy them.  

For that matter, a lot of RECs come from facilities that were built before the idea of RECs even existed. Hundred-year-old hydroelectric dams can sell RECs; so can fifty-year-old paper mills that sell biomass RECs from burning wood. 

With this background, let’s look at the offerings available in Virginia and see which are worth paying more for. 

Dominion Energy Virginia

In theory, Dominion customers will have the ability to buy real solar energy directly from independent providers beginning as early as 2023, thanks to shared solar legislation sponsored by Sen. Scott Surovell and Del. Jay Jones and passed in 2020. The law envisions independent solar developers building solar facilities in Virginia and selling the electricity (and the RECs) to subscribers who are Dominion customers. But the SCC opened a Pandora’s box last fall by allowing Dominion to propose the rules, and in an act of classic Dominion overreach, the utility has now proposed to collect an average of $75 a month as a “minimum bill” from every customer who buys solar energy from someone else. A fee like that would end the program before it ever started.

 The matter is hardly settled. The solar industry has asked for an evidentiary hearing and suggested that the minimum bill should be set at a single dollar. If all else fails, the program may go forward serving only low-income customers, whom the legislation exempts from the minimum bill. 

Dominion customers can hope for the best, but any shared solar option is still at least two years away. 

In the meantime, the utility’s website lists four renewable energy options: two that sell RECs, one that sells actual energy (and retires the RECs for you) and one that doesn’t exist. 

• The REC-based Green Power Program has been around for a decade, and as of 2019 it had more than 31,000 subscribers. Dominion’s “product content label” projected that for 2020 the program would likely consist of 56 percent wind RECs, 34 percent biomass RECs, and 10 percent solar RECs. Facilities are advertised as being “in Virginia and the surrounding region,” but the fine print reveals sources as far away as Mississippi, Georgia, Missouri and Alabama, none of which are part of the PJM transmission grid that serves Virginia.  (Side note: the biomass icon is a cow, not a tree, which is misleading but charming, unless they might be burning cows, in which case it is deeply disturbing.) With the website out of date, I contacted Dominion for current content information: solar is now up to 13 percent, but, sadly, biomass still makes up 35 percent of the mix (but now it has a leaf icon!).

• REC Select. When I say “buyer beware,” I have this offering in mind. Dominion has been authorized to go Dumpster diving to buy the cheapest RECs from around the country and from any facility that meets Virginia’s overly-expansive definition of renewable energy. The website implies that so far the company is only buying wind RECs from Oklahoma and Nebraska, an indication of just how cheap those are. But under the terms of the program, the RECs could come from 50-year-old paper mills in Ohio or hundred-year-old hydroelectric dams. No educated consumer would buy this product, and both Dominion and the SCC should be ashamed of themselves for putting it out there.

• The 100% Renewable Energy Program delivers actual energy from Virginia, and retires RECs on your behalf. That’s the good news. But only a few of the solar farms are new; the rest of the energy comes from old hydro plants and, worse, from biomass plants that are so highly polluting that they don’t qualify for Virginia’s renewable energy mandate under the VCEA. The inclusion of biomass makes the program more expensive than it would be otherwise. So why include biomass when no one wants it? Because Dominion doesn’t really care if you sign up for this program. The company only offers it to close off a provision in the law that allowed customers to buy renewable energy from competitors if their own utility doesn’t offer it.

• Dominion’s website does list one attractive program under the name “community solar.” Like the shared solar program already discussed, it would deliver actual solar energy from new facilities to be built in Virginia, while retiring the RECs on your behalf. This would pass all our tests, except that it doesn’t exist. The SCC gave Dominion the green light to offer the program more than two years ago, and we’ve heard nothing since, even though the enabling legislation appears to make it mandatoryfor both Dominion and APCo. 

Appalachian Power

APCo never developed a community solar program either, and the shared solar program discussed earlier would not be available to APCO customers even if it gets off the ground. But APCo does have two renewable energy offerings. 

• For its Virginia Green Pricing program, APCo put together wind and hydro from its own facilities. That means it’s actual energy and reasonably priced, at less than half a cent per kWh. But these are existing facilities that all its customers had been paying for until APCo figured out how to segment the market and make more money, and the hydro is old. (As with Dominion’s renewable energy program, the real purpose of the new product was to close off competition.) 

• Even cheaper is Alternative Option-REC, the RECs for which “may come from a variety of resources but will likely be associated with energy from waste, solid waste and hydro facilities.” No biomass, anyway, but I still have trouble imagining who would pay extra for (literally) garbage. 

Virginia electric coops

Some electric cooperatives offer real renewable energy to customers, and a couple have community solar programs that are quite attractive.  

• Central Virginia Electric Cooperative and BARC Electric Cooperativeoffer community solar programs that not only deliver actual solar energy, but also let customers lock in a fixed price for 20-25 years. Four other coops also offer a solar energy option, and at least one other is working on it.

• Many coops also sell RECs, of mixed quality. Shenandoah Valley Electric Cooperative offers RECs generated by wind farms owned or contracted byOld Dominion Electric Cooperative, the generation cooperative that supplies power to most Virginia coops. Rappahannock Electric Cooperative, however, sells only biomass RECs.

• Bottom line: if you are a member of an electric cooperative, you may have better options than either Dominion or APCo is offering — and if you don’t, hey, you’re an owner of the coop, so make some noise!

Arcadia

 If you like RECs, you don’t have to buy them from your own utility. The folks at Arcadia have struggled for years to offer products that put new renewable energy on the grid. In states that allow community solar, Arcadia now offers wind and solar from projects in those states. Everywhere else, they just sell RECs. The website provides no information indicating where the facilities are, meaning they could be out in the same central plains states that are awash in surplus wind RECs. Their game plan appears to be for all the nice liberals with climate guilt to throw enough money at red state RECs that eventually the day will come when demand exceeds supply and drives the price up enough to incentivize new projects. The plan sounds self-defeating to me, but in any case, buyers should keep in mind that the RECs bought before that glorious date will have incentivized precisely nothing. 

Other options

Obviously, if you have a sunny roof, you can install solar onsite and net-meter. Of all the programs available today, that’s the one that will save you money instead of making you spend more. 

If you don’t have a sunny roof, but you’d still like to see your money put solar onto the grid, consider contributing to a church, school or non-profit that is going solar, or to an organization that puts solar on low-income homes. Two that operate in Virginia are Give Solar, which puts solar on Habitat for Humanity houses, and GRID Alternatives, which trains workers to install solar on low-income homes here and abroad. If everyone in Virginia who is currently buying RECs were to choose this alternative instead, it would put millions of dollars to work building new solar in Virginia, and lowering the energy bills of people who most need the help.

And that might make it the best option of all.

A version of this article first appeared in the Virginia Mercury on May 21, 2021.

COVID-19 throws a lemon at Virginia’s plan for an energy transition. It’s time for lemonade.

solar panels on a school roof

The solar panels on Wilson Middle School are saving money for Augusta County taxpayers. Photo courtesy of Secure Futures.

In mid-March, the Virginia General Assembly passed legislation to transition our economy from fossil fuels to clean energy over the coming years. Two weeks later, Virginia shut down in response to the COVID-19 pandemic. Among the businesses whose very existence is now in peril are the energy efficiency companies and solar installers we will be counting on to get us off fossil fuels.

Home weatherization and energy efficiency programs have come to an almost complete halt in Virginia, including programs run by Dominion Energy Virginia. Nationwide, the energy efficiency sector has lost almost 70,000 jobs. Meanwhile, companies that install solar, especially rooftop systems, report plummeting sales. The Solar Energy Industries Association reports that nationally, 55 percent of solar workers are already laid off or suffering cutbacks.

The timing seems terrible — although to be fair, there’s no good time for an economy-crushing, worldwide pandemic. Eventually, however, the virus will run its course or be defeated through vaccine or cure. At that point, we will face a choice: we can stagger blinking out into the sunlight aimlessly wondering now what?, or we can execute the well-developed plan we have spent these weeks and months formulating.

Let’s go with the second option.

First, it’s worth remembering that nothing happening now will change the trajectory of clean energy. Solar and wind had banner years in 2019, continuing their steady march to dominance. Wind has become the largest single source of electricity in two states, Iowa and Kansas. The island of Kauai in Hawaii is now 56 percent powered by renewable energy, mostly solar. Across the U.S. wind, solar and hydro produce more electricity than coal. Wind is the cheapest form of new electric generation nationally; solar takes pride of place in Virginia.

Meanwhile, fossil fuel is even more firmly on its way out. Six of the top seven U.S. coal companies have gone into bankruptcy since 2015. That was before the lockdown sent energy demand down, further hurting high-priced coal.

Fracked gas helped kill coal but is itself vulnerable to price competition from renewables. Odd as it sounds, the collapse in oil prices will make natural gas more expensive. That’s because oil producers in Texas and North Dakota are closing wells that produced natural gas along with oil. The tightening supply of gas may finally make fracking companies in Appalachia profitable, but it means higher prices for utilities. Wind and solar will just keep looking better.

The Trump administration is still trying futilely to hold back the tide, but the U.S. will get a lot farther riding the wave than struggling against it. Congressional leaders should declare the country “all in” on clean energy. Instead of bailing out the highly polluting fossil fuel industries, they should put that money to work creating more jobs and economic development — and actually doing something about climate change — with energy efficiency and renewables.

Congress should return the Investment Tax Credit for solar (and offshore wind) to the 30 percent level in effect last year and keep it there, instead of continuing the phase-out now in effect. Congress should also give solar owners the option of taking the credit as a cash grant, as it did during the last recession, and for the same reason: tax-based incentives are less useful in a recession, when companies can’t use the credits.

Virginia’s Sens. Tim Kaine and Mark Warner have a critical role to play in convincing their colleagues to support solar. So far neither is rising to the task.

On the state level, Northam did the right thing in signing this year’s energy legislation, allowing utilities and industry members to start planning for the future. But the Clean Economy Act gets wind and solar off to a very slow start; Dominion doesn’t have to build Virginia solar for five years yet. And though the new laws remove many policy constraints on customer-sited solar, they offer next to nothing in the way of financial incentives.

Governor Northam should make it clear he intends to make rooftop solar a priority for next year, along with projects on closed landfills, former coal mine areas, and other brownfields, with a special focus on areas hardest-hit economically. He can also encourage corporations that do business in Virginia to meet their sustainability goals with Virginia wind and solar, starting right now.

The governor should also prioritize building efficiency. Virginia will be adopting a new residential building code this year, and if past years are any indication, its energy efficiency provisions will fall short of the most recent model code standard. It’s up to the governor to make sure Virginia adopts the full code.

Local governments are already taking advantage of suddenly-empty buildings to accelerate maintenance and repairs. But it’s a good time to think bigger, with new financing tools available that make energy efficiency retrofits and solar facilities cash-positive right from the start.

Energy performance contracting allows the energy savings to pay for retrofits. The Department of Mines, Minerals and Energy keeps a list of pre-qualified energy service companies and offers expertise to help local government employees navigate the process.

This year’s legislation also greatly expanded local governments’ ability to finance on-site solar through third-party power purchase agreements, effective July 1. The PPAs are structured so that a school district, municipality or any commercial or non-profit customer can have a solar array installed at no cost, paying just for the energy produced.

In December, Fairfax County awarded contracts for PPAs to install solar on more than a hundred sites, including schools and other government buildings. The county’s contract is “rideable,” which allows other counties and cities to piggyback, getting the same terms without the need for new contract negotiations.

Unfortunately, local governments in southwest Virginia are prevented from pursuing PPAs — not by state legislation, which allows it starting July 1, but by a contract with Appalachian Power that governs their electricity purchases from the utility. The contract is up for renewal this year; disgracefully, APCo is refusing to agree to new terms allowing the localities to use solar PPAs. APCo should back off, and let local governments in economically depressed southwest Virginia start saving money and supporting solar jobs this year.

Arlington County has gone beyond on-site solar, contracting for a share of a large solar farm in southern Virginia that will provide more than 80 percent of the electricity for county government operations. It’s a model any locality can adopt.

Virginia residents and businesses also have good reasons to focus on clean energy. The enforced down-time many people are experiencing means more time to research options, and companies are motivated to offer low prices on energy efficiency upgrades and rooftop solar.

The federal government offers more generous tax credits this year than next. Credits for residential energy efficiency equipment and a deduction for energy efficient commercial buildings expire at the end of this year.

The investment tax credit for solar (as well as for geothermal heat pumps, fuel cells and small wind turbines) stands at 26% for projects placed in operation this year, but it will drop to 22% in 2021. It falls to 10% for commercial customers and disappears altogether for residential customers in 2022. If Congress acts to raise the credit to 30%, buyers will get an even bigger boost. If it doesn’t, there will be a rush this year to get projects done by the end of the year, so customers should secure their place in line now.

Virginia nonprofits have helped hundreds of residents and businesses save money on solar and EV chargers through bulk purchasing programs. Virginia Solar United Neighbors just announced a series of virtual information sessions to promote the Arlington Solar EV Co-op. And LEAP, which closed operations temporarily due to the virus, reports it has restarted two programs, Solarize NOVA and Solarize Piedmont.

In an ideal world, the U.S. would already be well along in executing a comprehensive plan for a clean energy transition, one that includes job retraining for workers, and that resists counterproductive efforts to save the fossil fuel industry. But we can do the next best thing, and use the tools of government, the market and consumer choice to speed us in the right direction.

COVID-19 has handed all of us a big, fat lemon. Let’s make some lemonade.

 

A version of this article appeared originally in the Virginia Mercury on April 30, 2020.

 

With a framework for Virginia’s energy transition in place, here’s what happens next

workers installing solar panels on a roof

One expected effect of the Clean Economy Act will be a boom in solar jobs across Virginia. Photo courtesy of NREL.

With Democrats in charge, Virginia passed a suite of bills that establish a sturdy framework for a transition to renewable energy in the electric sector.

At the center of this transformation are the Clean Economy Act, HB1526/SB851, and the Clean Energy and Community Flood Preparedness Act, HB981/SB1027. Other new laws direct further planning, make it easier for customers to install solar, improve the process for siting wind and solar farms, and expand financing options for energy efficiency and renewable energy.

Gov. Ralph Northam has signed some bills already, and has until April 11 to sign the others or send them back to the General Assembly with proposed amendments. Once signed, legislation takes effect on July 1.

I assume the Governor has other things on his mind right now than asking the General Assembly to tinker further with a bill like the Clean Economy Act, though bill opponents may be using the virus pandemic to argue for delay. That would be a self-defeating move; as the economy restarts, Virginia is going to need the infusion of jobs and investment that come with the build-out of clean energy. And one of the strongest arguments in support of our energy transition, after all, is that it will save money for consumers.

So what happens after July 1? How does this all work? Let’s look at the way these major pieces of legislation will change the energy landscape in Virginia.

Virginia joins RGGI, and CO2 emissions start to fall. 

Virginia’s Department of Environmental Quality has already written the regulations that call for Virginia power plants to reduce emissions by 30 percent by 2030. The mechanism for achieving this involves Virginia trading with the Regional Greenhouse Gas Initiative, a regional carbon cap and trade market.

The regulations have been on hold as the result of a budget amendment passed last year, when Republicans still ruled the General Assembly. After July 1, DEQ will be able to implement the regulations, with the commonwealth participating in carbon allowance auctions as early as the last quarter of this year or the first quarter of 2021.

In addition to joining RGGI, the Clean Energy and Community Flood Preparedness Act also allows the commonwealth to earn money from the allowance auctions. The Department of Housing and Community Development will spend 50 percent of auction proceeds on “low-income efficiency programs, including programs for eligible housing developments.”

The Department of Conservation and Recreation will get 45 percent of the auction proceeds to fund flood preparedness and climate change planning and mitigation through the Virginia Community Flood Preparedness Fund. The last 5 percent of proceeds will cover administrative costs, including those for administering the auctions.

Energy efficiency savings become mandatory, not just something to throw money at.

Two years ago, the Grid Transformation and Security Act required Dominion and Appalachian Power to propose more than a billion dollars in energy efficiency spending over 10 years, but the law didn’t say the programs had to actually be effective in lowering electricity demand.

This year that changed. For the first time, Virginia will have an energy efficiency resource standard (EERS) requiring Dominion to achieve a total of 5 percent electricity savings by 2025 (using 2019 as the baseline); APCo must achieve a total of 2 percent savings. The SCC is charged with setting new targets after 2025. At least 15 percent of the costs must go to programs benefiting low-income, elderly or disabled individuals, or veterans.

The EERS comes on top of the low-income energy efficiency spending funded by RGGI auctions.

Dominion and Appalachian Power ramp up renewables and energy storage. 

The Clean Economy Act requires Dominion to build 16,100 megawatts of onshore wind and solar energy, and APCo to build 600 megawatts. The law also contains one of the strongest energy storage mandates in the country: 2,700 MW for Dominion, 400 MW for Appalachian Power.

Beginning in 2020, Dominion and Appalachian must submit annual plans to the SCC for new wind, solar and storage resources. We’ll have a first look at Dominion’s plans just a month from now: the SCC has told the company to take account of the Clean Economy Act and other new laws when it files its 2020 Integrated Resource Plan on May 1.

The legislation provides a strangely long lead time before the utilities must request approval of specific projects: by the end of 2023 for APCo (the first 200 MW) or 2024 for Dominion (the first 3,000 MW). But the build-out then becomes rapid, and the utilities must issue requests for proposals on at least an annual basis.

In addition to the solar and land-based wind, Dominion now has the green light for up to 3,000 MW of offshore wind from the project it is developing off Virginia Beach, and which it plans to bring online beginning in 2024. All told, the Clean Economy Act proclaims up to 5,200 MW of offshore wind by 2034 to be in the public interest.

Dominion’s plans for new gas plants come to a screeching halt.

Before the 2020 legislative session, Dominion’s Integrated Resource Plan included plans for as many as 14 new gas combustion turbines to be built in pairs beginning in 2022. In December, the company announced plans to build four gas peaking units totaling nearly 1,000 MW, to come online in 2023 and 2024.

But that was then, and this is now. The Clean Economy Act prohibits the SCC from issuing a certificate of convenience and necessity for any carbon-emitting generating plant until at least January 1, 2022, when the secretaries of natural resources and commerce and trade submit a report to the General Assembly “on how to achieve 100 percent carbon-free electric energy generation by 2045 at least cost to ratepayers.”

Even with no further moratorium, Dominion will find it hard to sell the SCC on the need for new gas plants on top of all the renewable energy and energy storage mandated in the Clean Economy Act. Solar and battery storage together do the same job that a gas peaker would have done — but they are required, and the gas peaker is not. Meanwhile, the energy efficiency provisions of the act mean demand should start going down, not up.

Dominion has already signaled that it recognizes the days of new gas plants are largely over. On March 24, Dominion filed a request with the SCC to be excused from considering new fossil fuel and nuclear resources in its upcoming Integrated Resource Plan filing, arguing that “significant build-out of natural gas generation facilities is not currently viable” in light of the new legislation.

Fossil fuel and biomass plants start closing.

By 2024, the Clean Economy Act requires the closure of all Dominion or APCo-owned oil-fueled generating plants in Virginia over 500 MW and all coal units other than Dominion’s Virginia City Hybrid plant in Wise County and the Clover Station that Dominion co-owns with Old Dominion Electric Cooperative.

This mandate is less draconian than it sounds; it forces the closure of just two coal units, both at Dominion’s Chesterfield plant. Other Dominion coal plants in Virginia have already been retired or switched to using gas or biomass, and one additional coal plant in West Virginia lies beyond the reach of the legislation. Oil-fired peaking units at Yorktown and Possum Point were already slated for retirement in 2021 and 2022. APCo owns no coal or biomass plants in Virginia.

Although the exceptions might appear to swallow the rule, the truth is that coal plants are too expensive to survive much longer anyway. One indication of this is a March 24 report Dominion filed with the SCC showing its fuel generation sources for 2019: coal has now fallen to below 8 percent of generation.

By 2028, Dominion’s biomass plants must shut down, another victory for consumers. All other carbon-emitting generating units in Virginia owned by Dominion and APCo must close by 2045, including the Virginia City plant and all the gas plants.

As of 2050, no carbon allowances can be awarded to any generating units that emit carbon dioxide, including those owned by the coops and merchant generators, with an exception for units under 25 MW as well as units bigger than 25 MW (if they are owned by politically well-connected multinational paper companies with highly-paid lobbyists).

Solar on schools and other buildings becomes the new normal.

In December, Fairfax County awarded contracts for the installation of solar on up to 130 county-owned schools and other sites, one of the largest such awards in the nation. Using a financing approach called a third-party power purchase agreement (PPA), the county would get the benefits of solar without having to spend money upfront. The contracts were written to be rideable, meaning other Virginia jurisdictions could piggyback on them to achieve cost savings and lower greenhouse gas emissions.

Fairfax County’s projects, along with others across the state, hit a wall when, on Jan. 7, the SCC announced that the 50 MW program cap for PPAs in Dominion territory had been reached. But with the passage of the Clean Economy Act and Solar Freedom legislation, customers will be able to install up to 1,000 MW worth of solar PPAs in Dominion territory and 40 MW in APCo territory.

Fairfax County schools will soon join their counterparts in at least 10 other jurisdictions across the state that have already installed solar. With the PPA cap no longer a barrier, and several other barriers also removed, local governments will increasingly turn to solar to save money and shrink their carbon footprints.

Virginia agencies start working on decarbonizing the rest of the economy. 

In spite of its name, the Clean Economy Act really only tackles the electric sector, with a little spillover into home weatherization. That still leaves three-quarters of the state’s greenhouse gas emissions to be addressed in transportation, buildings, agriculture and industry. Ridding these sectors of greenhouse gas emissions requires different tools and policies.

Other legislation passed this session starts that planning process. SB94(Favola) and HB714 (Reid) establish a policy for the commonwealth to achieve net-zero emissions economy-wide by 2045 (2040 for the electric sector) and require the next Virginia Energy Plan, due in 2022, to identify actions towards achieving the goal. Depending on who the next governor is, we may see little or nothing in the way of new proposals, or we may see proposals for transportation and home electrification, deep building retrofits, net-zero homes and office buildings, carbon sequestration on farm and forest land and innovative solutions for replacing fossil fuels in industrial use.

Collateral effects will drive greenhouse gas emissions even lower.

Proposed new merchant gas plants are likely to go away. With Virginia joining RGGI and all fossil fuel generating plants required to pay for the right to spew carbon pollution, the developers of two huge new merchant gas plants proposed for Charles City County will likely take their projects to some other state, if they pursue them at all.

Neither the 1,600 MW Chickahominy Power Station and the 1,050 C4GT plant a mile away planned to sell power to Virginia utilities; their target is the regional wholesale market, which currently rewards over-building of gas plant capacity even in the absence of demand. The Chickahominy and C4GT developers sought an exemption from RGGI through legislation; the bill passed the Senate but got shot down in the House.

If the C4GT plant goes away, so too should Virginia Natural Gas’ plans for a gas pipeline and compressor stations to supply the plant, the so-called Header Improvement Project.

Other coal plants will close. Although the CEA only requires Dominion to retire two coal units at its Chesterfield Power Station, other coal plants in the state will close by the end of this decade, too. That’s because the economics are so heavily against coal these days that it was just a matter of time before their owners moved to close them.

Adding the cost of carbon allowances under RGGI will speed the process along. That includes the Clover Station, which Dominion owns in partnership with Old Dominion Electric Cooperative (ODEC), and the Virginia City Hybrid Electric plant in Wise County, Dominion’s most expensive coal plant, which should never have been built. 

The Atlantic Coast and Mountain Valley Pipelines find themselves in more trouble than ever. If I had a dollar for every time a Dominion or Mountain Valley spokesperson said, “Our customers desperately need this pipeline,” I would not be worried about the stock market right now.

The fact is that no one was ever sure who those customers might be, other than affiliates of the pipeline owners themselves—and that doesn’t exactly answer the question. With Virginia now on a path away from all fossil fuels, neither pipeline has a path to profitability inside Virginia any longer, if they ever had one.

 

A version of this article originally appeared in the Virginia Mercury on March 31. 

New laws clear away barriers to small solar projects

Edward Hicks’ “Peaceable Kingdom,” Metropolitan Museum of Art. Not shown: the 50 guys with muskets making darn sure the lions don’t try anything.

Virginia General Assembly members have an expression for when opposing interests agree on a bill: they call it “peace in the valley.”

The phrase comes from a gospel song by Thomas A. Dorsey, written for Mahalia Jackson and then later sung by a bunch of white guys including Red Foley and Elvis Presley. The lyrics, written on the eve of World War II, speak of a longing for the peace of the afterlife, where “the bear will be gentle, the wolf will be tame, and the lion will lay down by the lamb.”

I’m not sure the General Assembly has ever inspired anything quite so wonderful as the song describes. More typically, a legislator uses the expression to indicate that a bunch of special interests, having duked it out amongst themselves, have now each gotten everything they thought they could get out of negotiations and so are offering up a compromise that legislators can adopt without having to trouble themselves too much with the details.

So, not exactly the peace of God, but still a pretty good state of affairs from the point of view of committee members who have thirty or forty other bills to deal with that day.

Peace rarely used to characterize bills supporting distributed solar generation. The lion had no reason to lie down by the lamb. Indeed, more typically the lamb was lunch.

But the November election shifted the balance of power in the General Assembly. At first it wasn’t clear how much power the lion and bear were going to have to cede. In fact, no one is quite sure even now where the balance of power lies, even after weeks of intense skirmishing finally produced the flawed but-still-transformational Clean Economy Act. The bill passed, and the parties all claimed victory, but anyone who thinks there might be peace in the energy valley is advised to stick around for next year.

The skirmishing over distributed solar was decidedly less intense. Advocates and utilities achieved peace on a number of provisions removing barriers to rooftop solar, dramatically increasing program caps for third-party power purchase agreements (PPAs), raising the net metering cap, establishing shared solar programs, and making it easier for customers in homeowner’s associations to install solar.

Much work remains. Removing barriers is a necessary first step, but now the challenge is to make small-scale solar a priority for Virginia. The Clean Economy Act focused on cheap utility-scale projects, but an economy that runs primarily on renewables needs solar on places other than farmland. Getting to 100 percent carbon-free energy means putting solar on as many sunny homes and businesses as possible—not to mention government buildings, warehouses, data centers, parking lots, highway rest areas, closed landfills, brownfields, former mining sites and vacant land around airports.

Solar Freedom and the Clean Economy Act

The final version of the Solar Freedom bill, HB572 (Keam) and SB710(McClellan), made eight changes affecting customers of investor-owned utilities. Customers of electric cooperatives are excluded; a law passed last year addressed many of these issues.

• It raises the cap on the total amount of net metered solar allowed from 1 percent currently to 6 percent (broken out as 1 percent for low and moderate income customers and 5 percent for everyone else). This means customers installing rooftop solar will continue getting credit for surplus energy at the retail rate. When net-metered projects reach 3 percent, or in 2024 for APCo or 2025 for Dominion, the State Corporation Commission will conduct a solar study to determine the appropriate rate structure for new net metering customers. Existing net metering customers will not be affected.

• It raises the program cap on third-party power purchase agreements (PPAs). PPAs are the financing mechanism that schools, local governments, universities and other customers have been using to install solar on-site with no money down. The original program cap of 50 MW in Dominion territory was reached this fall, halting projects across the state. In Dominion territory, the limit will now go to 500 MW for jurisdictional customers (that’s most people) and 500 MW for non-jurisdictional customers (including local governments and public schools). The new cap in Appalachian Power territory is 40 MW for all customers, and there will be no limit in Old Dominion Power (Kentucky Utilities) territory. In addition, the legislation broadens who can take advantage of this program to any tax-exempt customer, and all other customers with projects over 50 kW.

• It increases the allowable size of net-metered commercial projects from 1 MW today to 3 MW.

• It increases the allowable size of residential net-metered projects to 25 kW, from 20 kW today.

• It removes standby charges for residential customers with solar facilities of less than 15 kW in Dominion territory, and removes them entirely for customers of Appalachian Power and Old Dominion Power.

• It allows residents of apartment buildings and condominiums in Dominion Energy and Old Dominion Power territories to share the output of on-site solar facilities.

• In Dominion territory, it allows customers to install enough solar to meet 150 percent of their previous year’s demand, recognizing the needs of growing families and EV owners. In APCo territory the limit remains at 100 percent of previous demand.

• Finally, it allows Fairfax County to move forward on a 5 MW solar project on a closed landfill, with the electricity serving government facilities. This will be the first such project in the state.

Solar Freedom overlaps with the Clean Economy Act, HB1526 (Sullivan) and SB851 (McClellan), on several of these provisions, including the net metering cap and PPAs. The Clean Economy Act also creates a Renewable Portfolio Standard (RPS) focused on utility-scale projects, but with a small carve-out for distributed “wind, solar and anaerobic digestion resources of one megawatt or less located in the Commonwealth.” The carve-out is limited to 1 percent of Dominion’s RPS targets. This level is so modest it probably won’t act as a market stimulus, especially for projects not owned by Dominion itself, and the addition of anaerobic digestion should give anyone pause. Also, there is no carve-out in APCo territory.

The failure of the Clean Economy Act to drive small-scale solar growth is a missed opportunity that will need to be addressed in the future if the General Assembly truly wants to achieve a clean energy economy. I recommend taking away the appalling subsidies for paper companies and letting those millions fund distributed solar.

Community solar

The provision in Solar Freedom that allows residents of multifamily buildings to share onsite solar arrays looks favorable to customers but requires an SCC proceeding this year to determine the bill credit rate for subscribers. The rate “shall be set such that the shared solar program results in robust project development and shared solar program access for all customer classes.” Further, “the Commission shall annually calculate the applicable bill credit rate as the effective retail rate of the customer’s rate class, which shall be inclusive of all supply charges, delivery charges, demand charges, fixed charge, and any applicable riders or other charges to the customer.”

While the Solar Freedom provision is restricted to multifamily residential buildings, the General Assembly also passed legislation more generally allowing for third-party owned community solar, rebranded as “shared solar.”

SB629 (Surovell) and HB1634 (Jones) instruct the SCC to set up a shared solar program for customers of Dominion and Old Dominion Power by Jan. 1, 2021. Shared solar projects must be no larger than 5 MW, can be owned by any for profit or nonprofit entity, and require at least three subscribers. The program is capped at a total of 150 MW, with an additional 50 MW possible if the utility demonstrates that 45 MW of shared solar has gone to low-income consumers.

The success of a shared solar program ultimately depends on whether project owners can make money and customers can save money. It remains to be seen whether that will happen. The provisions in these bills are less favorable to customers than the multifamily solar provisions of Solar Freedom. Customers will have to pay a minimum bill amount (waived for low-income customers), and there is no requirement that the bill credit rate be set at a rate than results in “robust project development.”

Finally, HB573 (Keam) requires that community solar projects owned by investor-owned utilities must include higher-cost facilities located in low-income areas.

Homeowner associations

Another successful piece of legislation is HB414 (Delaney) and SB504(Petersen), clarifying the respective rights of homeowners and HOAs when it comes to solar panels.

Since 2014, Virginia law has prohibited HOAs from banning solar panels unless the ban appears in the association’s recorded declaration. However, the law respects the right of HOAs to place “reasonable restrictions” on the size, place, and manner of placement of solar facilities on members’ property.

The fact that the law did not define “reasonable” turned out to be a problem. Some HOAs decided it was “reasonable” to insist solar panels be confined to the rear of a roof, whether there was sunshine back there or not. The result has been acrimony, added expense and blocked projects.

Aaron Sutch of Solar United Neighbors of Virginia estimates that since the 2014 legislation, HOAs have blocked over 300 Virginia installations with a value of over $6 million. Sutch negotiated with lobbyists for homeowners associations to achieve peace in this particular valley.

The new legislation provides that a restriction is not reasonable if it increases the cost of installation of the solar panels by 5 percent over the projected cost of the initially proposed installation, or reduces the energy production by 10 percent below the projected production. The owner must provide documentation prepared by an independent solar panel design specialist to show that the restriction is not reasonable by these criteria.

Other legislation

A few other bills should help customers finance solar panels.

B654 (Guy) authorizes DMME to sponsor a statewide financing program for commercial solar, energy efficiency and stormwater investments. The effect will be to boost the availability of low-interest financing through Commercial Property Assessed Clean Energy (C-PACE) in areas of the state where the locality has not developed a program of its own.

B754 (Marsden) authorizes (though it does not require) electric cooperatives to establish on-bill financing of energy efficiency and renewable energy. The program allows for the costs to be paid for out of the savings these improvements deliver. The coops asked for this authority, so presumably at least one plans to follow through.

Finally, B542 (Edwards) repeals the sunset date on crowdfunding provisions and provides fixes for obstacles to a financing approach that, to my knowledge, has been used only once for solar projects in Virginia.

This article appeared first in the Virginia Mercury on March 18,2020. 

It was a messy, chaotic General Assembly Session. It also worked out pretty well.

Solar arrays on Richmond Public Schools were some of the last projects to go forward before a statutory limit on PPAs halted similar projects across the state. Legislation this year raises the cap on PPAs. Photo credit Secure Futures.

This time last year, I didn’t have much good to say about the General Assembly session that had just concluded. This year, try as I might to be cynical and gloomy (and I do make a good effort), I see mostly blue skies. Or at worst, light gray. What follows is a brief run-down of the bills that passed.

Bills that were still alive at the time of my halftime report but that don’t appear in today’s roundup are dead for the year.

Most of these bills don’t yet have the Governor’s signature. Virginia allows the Governor to propose amendments, so what you see here may not be the final word. Bills that do get signed take effect July 1.

Energy Transition

HB1526/SB851, the Clean Economy Act, is an omnibus energy bill that contains a two-year moratorium on new fossil fuel plants, mandatory carbon reductions, mandatory energy efficiency savings, mandatory construction of wind, solar and offshore wind, mandatory energy storage acquisition targets, mandatory closures of some coal and biomass plants, and a mandatory renewable portfolio standard, along with cost recovery provisions, a new program to limit utility bills of low-income earners, and some loosening of restrictions on net metering and third-party power purchase agreements.

The bill is not perfect, and the clean energy transformation it strives for is incomplete. Its provisions mostly don’t apply to electric cooperatives, and while it forces the eventual closure of Dominion’s biomass plants, it actually requires utility customers to subsidize biomass use by paper companies. Dominion is given too free a rein on spending, the energy efficiency targets are weak, and the bill focuses on utility-scale projects to the almost total exclusion of customer-sited projects.

For all that, the legislation is groundbreaking and transformational. Advocates will be back next year with refinements to the bill and proposals to fill the gaps, but putting this necessary framework in place is a huge achievement for Virginia.

SB94 (Favola) and HB714 (Reid) rewrites the Commonwealth Energy Policy to bring it in line with Virginia’s commitment to dealing with climate change, and even to challenge leaders to do more. The bill sets a target for net-zero greenhouse gas emissions economy wide by 2045, and in the electric sector by 2040. These targets are more ambitious than what is in the Clean Economy Act; not only is the electric sector decarbonization deadline earlier (and inclusive of the coops), this is the first legislation to set a target for the economy as a whole. The Commonwealth Energy Policy is advisory and tends to be ignored in practice; however, the bill also requires that the Virginia Energy Plan, developed every four years in the first year of a new governor’s term, include actions to achieve a net-zero economy by 2045 for all sectors.

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.

RGGI

The Democratic takeover of the General Assembly means Virginia will finally join the Regional Greenhouse Gas Initiative (RGGI). HB981 (Herring) and SB1027 (Lewis), the Clean Energy and Community Flood Preparedness Act, 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. As with the Clean Economy Act, votes for the RGGI fell along partisan lines but for one Republican senator, Jill Vogel, who voted for both.

RPS

The Clean Economy Act contains a mandatory renewable portfolio standard (RPS) requiring utilities to include in their electricity mix a percentage of renewable energy that ratchets up over time. It’s weak, especially for distributed solar, and it allows paper company biomass to qualify—an inexcusable corporate welfare provision for politically powerful WestRock and International Paper.

Customer-sited solar/net metering

Watch this space for a post dedicated to net metering, PPAs and community solar bills. Meanwhile, here’s the short version:

Solar Freedom SB710 (McClellan), HB572 (Keam) and HB1184 (Lopez) lift barriers to customer-sited renewable energy such as rooftop solar. HB1647 (Jones) contains some of the elements of Solar Freedom, but a few provisions are in conflict. Advocates have asked the Governor to sign the first three bills but not the fourth. Some Solar Freedom provisions are also in the Clean Economy Act. The new provisions lift the net metering cap to 6% for IOUs; raise the PPA cap to 1,000 MW in Dominion territory and 40 MW in APCo territory; remove standby charges below 15 kW in Dominion territory and completely for APCo; raise the residential size cap to 25 kW and the commercial project size cap to 3 MW; allow Dominion customers to install enough solar to meet 150% of the previous year’s demand (APCo stays at 100%); allow shared solar on multifamily buildings; and enable a 5 MW landfill solar project in Fairfax County to move forward. The provisions do not apply to electric cooperatives.

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 increase the cost of the solar facility by more than 5%, or decrease the expected output by more than 10%.

Community solar

SB629 (Surovell) and HB1634 (Jones) creates a program for shared-solar that allows customers to purchase subscriptions in a solar facility no greater than 5 MW.

HB573 (Keam) requires that an investor-owned utility that offers a so-called “community solar” program as authorized by 2017 legislation must include facilities in low-income communities “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.”

Offshore wind

The Clean Economy Act contains detailed provisions for the buildout and acquisition of offshore wind. SB998 (Lucas), SB860 (Mason) and HB1664 (Hayes) puts the construction or purchase of at least 5,200 MW of offshore wind in the public interest and governs cost recovery for the wind farms under development by Dominion. The bills appear to have the same language that is in the Clean Economy Act.

HB234 (Mugler) establishes a Division of Offshore Wind within the Department of Mines, Minerals and Energy. Its role is to help facilitate the Hampton Roads region as a wind industry hub, coordinate the word of state agencies, develop a stakeholder engagement strategy, and basically make sure this industry gets underway.

Nuclear

SB828 (Lewis) defines “clean” and “carbon-free” energy to include nuclear energy for purposes of the Code. SB817 (Lewis) declares that nuclear energy is considered a clean energy source for purposes of the Commonwealth Energy Policy.

HB1303 (Hurst) and SB549 (Newman) direct DMME to develop a strategic plan for the role of nuclear energy in moving toward renewable and carbon-free energy.

Energy Efficiency

HB1526/SB851, the Clean Economy Act, contains a mandatory energy efficiency resource standard (EERS) and other provisions for spending on low-income EE programs. HB1450 (Sullivan) appears to be the same as the efficiency provisions of the Clean Economy Act. A sentence added late in the process provides that the bill won’t take effect until passed again in 2021. Presumably the passage of the Clean Economy Act makes this bill moot.

HB981 (the RGGI bill) specifies that a portion of the funds raised by auctioning carbon allowances will fund efficiency programs.

HB1576 (Kilgore) 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.

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 on its website to include advice that purchasers should obtain a residential building energy analysis as well as a home inspection prior to settlement.

Energy storage

The Clean Economy Act requires that by 2035, Appalachian Power will construct 400 MW of energy storage and Dominion 2,700 MW. None of the projects can exceed 500 MW, except for one project of up to 800 MW for Dominion (a possible reference to the pumped storage project Dominion is reportedly considering). Projects must meet competitive procurement requirements, and at least 35% of projects must be developed by third-party developers.

SB632 (Surovell) has a fair amount of overlap with the Clean Economy Act, but the details are different, and it will be interesting to see what the Governor does about that. SB632 makes it in the public interest to develop 2,700 MW of energy storage located in Virginia by 2030. At least 65% must take the form of a “purchase by a public utility of energy storage facilities owned by persons other than a public utility or the capacity from such facilities.” Up to 25% of facilities do not have to satisfy price competitiveness criteria “if the selection of the energy storage facilities materially advances non-price criteria, including favoring geographic distribution of generating facilities, areas of higher employment, or regional economic development.” Utility Integrated Resource Plans must include the use of energy storage and must include “a long-term plan to integrate new energy storage facilities into existing generation and distribution assets to assist with grid transformation.”

SB632 also fixes a problem introduced a couple of years ago, when the ownership or operation of storage facilities was added to the definition of a utility in one chapter of the Code (§56.265.1), though not in others. With the fix, a public utility may own or operate storage, but so can third parties without them thereby becoming utilities.

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

Siting, permitting, and other issues with utility-scale renewable energy 

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.

HB656 (Heretick) and SB875 (Marsden) allow (but do not require) 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 $1,400 per megawatt on solar PV projects, in exchange for which an existing tax exemption is expanded.

HB657 (Heretick) exempts solar facilities of 150 MW or less from the requirement that they be reviewed for substantial accord with local comprehensive plans, if the locality waives the requirement.

HB1434 (Jones) and SB763 (Barker) provides a step-down of the existing 80% machinery and tools tax exemption for large solar projects, and eliminates it after 2030 for projects over 5 MW.

SB870 (Marsden) authorizes local planning commissions to grant special exceptions for solar PV projects in their zoning ordinances and include certain regulations and provisions for conditional zoning for solar projects.

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.

Grants, tax deductions, tax credits and other financing

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.

SB754 (Marsden) authorizes electric cooperatives to establish on-bill financing programs for energy efficiency and renewable energy.

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.

HB1707 (Aird) makes changes to the Clean Energy Advisory Board, which is (already) authorized to administer public grant funding.

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.

SB542 (Edwards) repeals the sunset date on crowdfunding provisions and provides fixes for certain existing obstacles to this financing approach.

Customer rights to shop for renewable energy

HB868 (Bourne) allows customers to buy 100% renewable energy from any licensed supplier, regardless of whether their own utility has its own approved tariff. The Senate killed a companion bill, and Commerce and Labor passed HB868 only with an amendment that requires the bill to be reenacted in 2021. (Credit Edwards, Deeds, Ebbin and Bell for not going along with the amendment.) After Senate passage the bill went to conference, and the House conferees caved. So technically the bill passed, but it has no effect. Interesting note: 41 House Republicans still voted against it in the end.

HB 889 (Mullin) was originally broader than HB868, but after the Senate got through with it, the bill is now a pilot program for the benefit of just those large corporations that, as of February 25, 2019, had filed applications seeking to aggregate their load in order to leave Dominion and buy renewable energy elsewhere. The pilot program is capped at 200 MW, and the SCC will review it in 2022.

Other utility regulation

HB528 (Subramanyam) requires the SCC to determine the amortization period for recovery of costs due to the early retirement of generating facilities owned or operated by investor-owned utilities. In the absence of this legislation, Dominion would have been allowed to use excess earnings for immediate payoffs of the costs of early fossil fuel plant closures; this puts the SCC back in charge of the schedule. The fact that this bill passed is nothing short of miraculous. House Republicans voted against it en masse, and it made it through Senate Commerce and Labor over the objections of Dominion’s best friends from both parties (though most came around for the floor vote when it was clear it would pass).

SB731 (McClellan) affects 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. Note that although this bill is recorded as having passed both chambers, it looks like there were amendments that do not appear on the Legislative Information Service website.

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.) Ware acceded to some amendments that Dominion wanted, and eventually Dominion told legislators the company was not opposed to the bill. Hence it passed both chambers unanimously. Notwithstanding Dominion’s happy talk, this bill makes cost recovery for the Atlantic Coast Pipeline much, much more difficult, one more indication that Dominion may be preparing to fold up shop on this project.

[Updated March 17 to correct an error–I had included a bill as having passed that in fact died in the House. Bummer.]

It’s halftime at the GA, and do we ever have a show!

battle scene

Tense negotiations over the Clean Economy Act. (Aniello Falcone, Metropolitan Museum of Art)

Welcome to “Crossover,” the day on which the Virginia House and Senate have to finish the work on their bills and send them over to the other chamber. This is sudden death time; if a bill didn’t get across the finish line in time, it is dead for the year.

In past years, henceforth to be known as “the bad old days,” almost nothing good even got out of committee, much less reached Crossover. Clean energy advocates could pretty much plan vacations for the second half of February.

This year the Democrats are on a tear, especially in the House. Yes, a lot of good bills have been heavily watered down. This is still the Old Dominion, with the emphasis on Dominion. And it is definitely too early to break out the champagne, because the action isn’t over for the bills still in play. But overall, 2020 is shaping up to be a watershed year for clean energy.

BILLS STILL ALIVE

Energy Transition

HB1526/SB851, the Clean Economy Act, has been the subject of intense and continuous negotiation. First there were a bunch of amendments that weakened it; then there were a bunch that strengthened it. It’s been a wild ride, and we may still see more changes during the second half of Session. But it’s alive! (HB1526 passed the House 52-47; Democrats Rasoul and Carter voted no. SB851 passed the Senate on a party-line vote of 21-19.)

SB94 (Favola) rewrites the Commonwealth Energy Policy to bring it in line with Virginia’s commitment to dealing with climate change. The bill 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 supported the bill. (Passed the Senate 21-18, on party lines.)

Delegate Reid’s HB714 is similar to SB94 but contains added details, some of which have now been incorporated into SB94. (Passed the House 55-45 with a substitute.)

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. (Passed the House 55-44 with a substitute.)

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. (Passed the House 54-45.)

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), was incorporated into HB981. (HB981 passed the House 53-46. SB1027 passed the Senate 22-18.)

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. Essentially it gives special treatment to two planned gas generation plants that aren’t needed and therefore have sketchy economics unless they get this giveaway. Clean energy advocates will be looking to kill this one in the House. (Passed the Senate 27-13. A number of Democrats who should know better voted for the bill.)

RPS

The Clean Economy Act contains 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 appears to be identical to the RPS and storage provisions of the CEA (of which Sullivan is also the patron). (Passed the House 52-47.)

Customer-sited solar/net metering

Solar Freedom SB710 (McClellan) and HB572 (Keam) lifts barriers to customer-sited renewable energy such as rooftop solar. The changes include lifting the caps on PPAs and net metering, and eliminating standby charges. Nearly identical versions were filed by Delegates Lopez (HB1184) (rolled into HB572) and Simon (HB912) (ditto). SB532 (Edwards), a stand-alone bill to make PPAs legal, was rolled into SB710. (SB710 passed the Senate 22-18 with a substitute that is much more limited than the original bill. HB572 passed the House with just a minor substitute 67-31. HB1647 (Jones) is a Solar Freedom bill that also includes community solar. (Passed the House 55-45.) Several provisions of Solar Freedom also appear in the Clean Economy Act.

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 increase the cost of the solar facility by more than 5%, or decrease the expected output by more than 10%. (HB414 passed the House 95-4. SB504 passed the Senate 40-0.)

Community solar

HB1647 (Jones) (see above) includes community solar in a bill that otherwise looks like Solar Freedom.

SB629 (Surovell) creates a program for “solar gardens.” (Substitute passed the Senate 39-0.)

HB1634 (Jones) requires utilities to establish shared-solar programs that allows customers to purchase subscriptions in a solar facility no greater than 5 MW. (Amended with a substitute; it now looks a lot like SB629. Passed the House 99-0.)

HB573 (Keam) affects the utility-controlled and operated “community solar” programs required by 2017 legislation. 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.” (Passed the House 90-8.)

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. (Passed House unanimously with substitute.)

SB860 (Mason) and HB1664 (Hayes) puts the construction or purchase of at least 5,200 MW of offshore wind in the public interest. (SB860 passed the Senate 22-18. HB1664 amended to incorporate HB1607, but with less gold-plating than the other bill. HB1664 passed the House 65-34.)

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. (HB1607 amended to incorporate HB1664; only 1664 moves forward. SB998 passed the Senate 40-0.)

Nuclear and biomass

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. After an uproar and a crash course on biomass, both bills eventually went back to being only about nuclear. (Both bills passed the Senate unanimously.) Unfortunately, some biomass from paper companies did creep into the Clean Economy Act in spite of the best efforts of clean energy advocates.

Energy Efficiency

HB1526/SB851, the Clean Economy Act, contains a mandatory energy efficiency resource standard (EERS) and contains other provisions for spending on low-income EE programs. HB981 (the RGGI bill) specifies 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. (HB1450 passed House 75-24,picking up a respectable number of Republicans. SB354 stricken at request of patron in C&L.)

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. (Passed the House, 99-0.)

HB575 (Keam) beefs up the stakeholder process that Dominion and APCo engage in for the development of energy efficiency programs. (Passed the House 99-0 and referred to Senate C&L.)

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. (Passed the Senate 40-0.)

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. (Passed the Senate 26-14.)

Energy storage

HB1183 (Lopez) requires the SCC to establish a task force on bulk energy storage resources. (Passed the House 91-9 with a substitute.)

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. (Passed the Senate 20-19 with a substitute.)

Siting, permitting, and other issues with utility-scale renewable energy

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. (Passed the House 81-12, now goes to Senate Finance.)

HB656 (Heretick) and SB875 (Marsden) allow local governments to incorporate into their zoning ordinances national best practices standards for solar PV and batteries. (Both bills passed their chambers unanimously with substitute language.)

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. (HB1131 Passed the House 54-42 with a substitute. SB762 passed Senate 40-0.)

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. (HB657 passed the House with a substitute, 59-41. SB893 was passed by indefinitely—killed—in Local Government.)

HB1434 (Jones) and SB763 (Barker) reduces the existing 80% machinery and tools tax exemption for large solar projects. (HB1434 passed the House 57-41. SB763 passed the Senate 40-0.) 

SB870 (Marsden) authorizes local planning commissions to include certain regulations and provisions for conditional zoning for solar projects over 5 MW. (Passed Senate 40-0 with a substitute.)

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. (Passed House 89-7.)

Grants, tax deductions, tax credits and other financing

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. (Passed House 75-23. Assigned to Senate Committee on Local Government.)

SB754 (Marsden) authorizes utilities to establish on-bill financing of energy efficiency, electrification, renewable energy, EV charging, energy storage and backup generators. (Passed Senate 40-0 with a substitute.)

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. (Passed the House 95-4.)

HB1707 (Aird) makes changes to the Clean Energy Advisory Board, which is (already) authorized to administer public grant funding. (Passed the House 65-33 with a substitute. Referred to Senate Ag.)

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. (Passed the Senate 32-7. Senator Surovell has requested a budget amendment of $1 million for the fund. )

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. (Passed the Senate 40-0.)

SB542 (Edwards) repeals the sunset date on crowdfunding provisions and provides fixes for certain existing obstacles to this financing approach. (Passed the Senate 40-0.)

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. (HB868 passd the House 55-44. But note that its Senate companion SB376 was passed by indefinitely in C&L.)

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. (HB889 passed the House 56-44. But its Senate companion SB379 passed by indefinitely in C&L.)

Other utility regulation

HB528 (Subramanyam) requires the SCC to decide when utilities should retire fossil fuel generation. (Passed the House 55-44.)

HB1132 (Jones, Ware) put the SCC back in control of regulating utility rates. (Passed the House 77-23.)

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. (Passed the Senate 38-1.)

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. (Passed the House unanimously with a substitute. It will now go to Senate C&L, where it may still have trouble from a Dominion-friendly committee.)

DEAD FOR THE YEAR

Green New Deal HB77 (Rasoul) sets out an ambitious energy transition plan and includes a fossil fuel moratorium. (Sent from Labor and Commerce to Appropriations, where it was not brought up. This is a polite way of killing a bill without anyone having to vote on it).

Undercutting RGGI 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. (Left in Labor and Commerce.)

Clean energy standard Instead of an RPS, SB876 (Marsden) proposed a “clean energy standard” that made room for some coal and gas with carbon capture. (Recognizing a number of problems with this approach, Senator Marsden rolled his bill into SB851; that’s GA-speak for killing a bill while still giving the patron points for trying).

Greenhouse gas inventory HB525 (Subrmanyam and Reid) require a statewide greenhouse gas inventory covering all sectors of the economy. (Laid on the table in a subcommittee, which also means it was killed.)

Brownfields 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. (Stricken from docket in House Ag.) 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. (Continued to 2021, yet another polite way of killing a bill, though it leaves them not technically dead. So should we call them the undead? Let’s hope the concept is resurrected next year, anyway.)

Local action HB413 (Delaney) authorizes a locality to include in its subdivision ordinance rules establishing minimum standards of energy efficiency and “maintaining access” to renewable energy. (Left in Cities, Counties and Towns.)

Retail choice 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. (Continued to 2021.)

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. (Continued to 2021.)

Net metering 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.) (Continued to 2021.)

Utility restructuring

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. (This was politely continued to 2021 in Labor and Commerce with no debate. The patrons were complimented for “starting a conversation.”)

HB206 (Ware) was, I’m told, the beta version of Delegate Keam’s HB1677. (Incorporated into HB1677, which was continued to 2021.)

SB842 (Petersen) seeks to achieve the same end as HB1677 and HB206, 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. (Continued to 2021.)

Anti-renewable energy bills

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. (Laid on the table in subcommittee.)  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. (Continued to 2021.) 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. (Laid on the table in subcommittee. FWIW, we’re told it was aimed at hotels, not wind. Yeah, sure . . .) HB1628 (Poindexter) prohibits the state from joining RGGI or adopting any carbon dioxide cap-and-trade program without approval from the General Assembly. (Passed by indefinitely in subcommittee. Yep, another way to kill a bill.)

Financing

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). Unfortunately, loose drafting would have also made the credit available for wood-burning stoves and other non-clean energy applications. (Died in a Finance subcommittee on a 5-5 vote.)

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

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.” (Continued to 2021.)

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. (Continued to 2021.)

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. (Left in Appropriations.)

[Updated February 12 to include late votes and fix a random meaningless line, and later to correct various other screw-ups that people have kindly brought to my attention.]

Appalachian Power gets approval to sell 100 percent renewable energy to customers. Hold the champagne.

Photo credit Andy Beecroft via Wikimedia.

Last week the State Corporation Commission (SCC) approved a request from Appalachian Power Company (APCo) to offer its customers the option of buying electricity entirely from renewable sources. The sources will be primarily wind and hydro, with some solar to be added as it gets built. Participants will pay a premium of less than 4% over ordinary “brown” power, resulting in bill increases of $4.25 per month for a customer who uses 1,000 kW per month.

The approval gives APCo more than a new way to meet customers’ desire for renewable energy. It also triggers a provision in Virginia law that blocks competitive service providers from selling renewable energy to all but the largest of a utility’s customers once the utility itself has an approved offering. Both APCo and Dominion Energy Virginia have long sought to close off competition, but this marks the first time either has succeeded.

The SCC order goes against the recommendation of hearing examiner D. Matthias Roussy, Jr., who had advised against approval of APCo’s tariff.

The SCC had previously rejected a similar program APCo proposed in 2016, primarily due to its high cost. That program, too, would have repackaged the utility’s existing wind and hydro projects that all ratepayers currently pay for, and passed on the cost of those contracts to participants in the renewable energy program. The result was a price premium for the program of about 18%, which the SCC deemed unreasonable.

But APCo didn’t go back to the drawing board and redesign its program; it just changed the pricing. The cost to participants will now be based on the market value of renewable energy certificates (RECs) generated by facilities like the ones APCo owns.

REC prices are set by supply and demand, and an oversupply of wind RECs in the market has pushed prices way down over the past few years. Using REC prices allowed APCo to slash the cost of its renewable energy program by more than 75%.

On the one hand, this is a false calculation, since the value of RECs has little to do with the actual cost of developing and operating a project. On the other hand, the SCC liked the result: a lower cost to participants.

Some customers agreed. A number of APCo’s customers offered support for the program at the SCC. For them, this marks the first opportunity they will have to buy energy from specific wind and solar projects (okay, and a lot of decades-old hydro, too). Currently their only option is buying RECs to offset the dirty power they use, so they are willing to accept a price premium based on REC values.

Other customers were less impressed. Wal-Mart Stores opposed the program because the company prefers to save money by buying renewable energy, not spend more on it. As summarized by the Hearing Examiner, Wal-Mart felt the APCo tariff would be okay as a REC offering, but a real renewable energy tariff ought to “permit the customer to realize the benefits and risks of taking service from renewable energy sources”—i.e., offer at least the potential of saving money for the customer.

Wal-Mart has a point. Given the plunging costs of building and operating new renewable energy projects in recent years, a utility could, in theory, offer a renewable energy tariff at below the cost of brown power. Wind and solar increasingly outcompete even existing coal plants, and APCo is still heavily reliant on coal.

But APCo isn’t going to do any such thing. If its customers can buy renewable energy at a discount, who would want to buy power from fossil fuels?

So APCo had to make sure its program costs more. Tying it to REC prices means it always will, because RECs are always an additional cost.

Just as importantly, APCo has to make sure no other seller of electricity can be allowed to compete with a better or cheaper product. That’s where section § 56-577 A 5 of the Virginia Code comes to the aid of our monopoly utilities. Now that APCo has an approved tariff for a 100% renewable energy tariff, no competitive supplier can come on to its turf with a product that’s better, or simply different. (The Code contains an exception for very large customers.)

Concern about this squelching of competition drove most of the opposition to APCo’s tariff at the SCC, from both competitive suppliers like Collegiate Clean Energy and environmental advocates like the Southern Environmental Law Center, as well as a number of customers. For them, the SCC Order approving APCo’s program represents a loss for consumer choice that will inevitably lead to less renewable energy development.

Separately, Dominion Energy Virginia filed for approval of its own renewable energy tariff, following the Commission’s rejection of the company’s initial proposal last year (correctly in my view). Last month a hearing examiner recommended Dominion’s new tariff be approved, though with changes that would make it significantly cheaper than what Dominion wants. Dominion’s proposal as filed would have cost the average customer an extra $20 per month.

But on January 9, two days after the SCC approved APCo’s tariff, Dominion filed a request to withdraw its application. The request states that the company intends to file a new application “consistent with the principles outlined” in the APCo order.

Although Dominion’s request doesn’t specify which principles it has in mind, they likely include the SCC’s determination that a renewable energy tariff need only match demand on a monthly basis, not the hourly basis Dominion used. According to the hearing examiner’s report, Dominion’s insistence on hourly matching was a significant factor in the program’s high cost.

Dominion’s withdrawal of its renewable energy tariff grants a temporary reprieve to competitive service providers like Direct Energy, which wants to offer renewable energy to Dominion customers. But if Dominion re-files with a program that meets SCC approval, the window of opportunity for competition in the electric sector in Virginia will close permanently in both major utility territories, absent a change in the law.

Anticipating this, Direct Energy sought legislation in the 2018 session that would have ensured the ability of competitors to offer renewable energy even after the SCC approved a utility’s own tariff. Neither the House bill (from Delegate Michael Mullin, D-Newport News) nor the Senate bill (from Senator David Sutterlein, R-Roanoke) made it out of the Commerce and Labor committee. Delegate Mullin is trying again this year; his bill is HB 2117.

Cliona Robb, a lawyer with the law firm of Christian & Barton who represents Direct Energy, says her client hopes for a better outcome in the General Assembly this year.

With the SCC’s order approving APCo’s program, harm to competition is no longer hypothetical. If legislators are serious about renewable energy development in Virginia, keeping the door open to competition has to be a key priority.


This article first appeared in the Virginia Mercury on January 10, 2019.

Update: Senator Sutterlein has also filed a bill this year that would continue to allow competition even once a utility has an approved green tariff. The Senate bill is SB 1584.