2018 Guide to Wind and Solar Policy in Virginia

[A downloadable PDF of this guide is available here.]

Introduction

Advocates for wind and solar finally begin to feel cautiously optimistic about the prospects for clean energy in Virginia. Prices for wind and solar have dropped to the point where the question is no longer whether they can compete with fossil fuels, but whether fossil fuels can compete with them. Support for renewable energy is high in the General Assembly, new solar projects are popping up across the state, and interest in offshore wind is on the rise again, after a years-long nap.

Still, Virginia’s energy laws were written by and for monopoly utilities that are heavily invested in coal, gas and nuclear. The Virginia Code contains a thicket of barriers that protect utility profits from competition and limit the options of developers, consumers, local governments and businesses.

This survey of current policy is intended to help decision-makers, industry, advocates and consumers understand what options for wind and solar exist today, where the barriers lie, and what we could be doing to take fuller advantage of the clean energy opportunities before us.

A few disclaimers: I don’t cover everything, the opinions expressed are purely my own, and as legal advice it is worth exactly what you’re paying for it.

  1. Overview: Virginia making headway on solar, but still no wind
Virginia Maryland North Carolina W. Virginia Tennessee
Solar* 631.26 932.7 4,411.65 6.05 236.36
Wind** 0 191 208 686 29
Total 631.26 1,123.7 4,619.65 692.05 265.36

  Installed capacity measured in megawatts (MW) at the end of 2017. One megawatt is equal to 1,000 kilowatts (kW).

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

Virginia installed almost 400 megawatts (MW) of solar last year, bringing the total at the end of 2017 to 631 MW, up from 238 at the end of 2016. This nudges us closer to Maryland, though it leaves us further behind North Carolina than ever.

Most of the Virginia solar to date has been installed to serve large tech companies, not the general public. This reflects the companies’ renewable energy commitments, their buying power, and their willingness to pursue new financing models that make the most of solar’s increasingly low cost.

Corporate demand will likely continue to drive the majority of Virginia installations in the near term, but Virginia utilities are starting to add solar to the resource mix that serves ordinary customers.

On the other hand, Virginia remains the only state in our 5-state neighborhood without a wind farm. To be fair, all 5 states have been stuck in the doldrums; an American Wind Energy Association update showed no new wind farms opening in any of them in 2017. That leaves Apex Clean Energy’s 75 MW Rocky Forge wind farm still in limbo; it received its permit more than a year ago and remains construction-ready whenever a buyer shows up.

Among the recent developments showing momentum for solar:

  • In 2017, Dominion Energy Virginia acknowledged for the first time that solar had become the cheapest form of energy in Virginia. In May of this year, a news source reported that the utility’s parent company, Dominion Energy, has given up on building any new combined-cycle (baseload) gas plants and will build only large solar plants, though the company proposes many more of the smaller gas combustion turbines.
  • A new law passed in 2018 (SB 966) puts 5,000 MW of utility wind and solar “in the public interest,” although this language is not a mandate.
  • The 2018 law also makes it in the public interest for utilities to develop up to 500 MW of distributed solar (some parts of the bill say just 50 MW).
  • Dominion’s 2018 Integrated Resource Plan (IRP) includes up to 6,400 MW by 2033 in most of the scenarios it modeled. The IRP is not binding, but it gives regulators and the public a look into how a utility plans to meet customer demand over a 15-year period.
  • Some rural cooperatives and municipal electric utilities in Virginia are now adding solar.
  • Solar projects keep getting bigger. A few years ago, a 20 MW solar farm was considered huge; today it is at the low end for utility-scale. In 2015 Amazon Web Services stunned us all by announcing an 80 MW facility. By the end of 2017 it had contracted for 260 MW of solar in Virginia, including a 100 MW project. In March of this year Microsoft announced it had reserved 315 MW of a planned 500 MW project.
  • An analysisby the Solar Foundation found that Virginia could add over 50,000 jobs by building enough solar to meet 10% of the Commonwealth’s electricity supply over five years.

The Virginia Department of Environmental Quality (DEQ) website contains a list of projects that have begun the permitting process under Virginia’s permit-by-rule provisions, which govern projects up to 150 MW. Larger projects need permission from the State Corporation Commission (SCC). All projects must also obtain local permits.

Like onshore wind, offshore wind still hasn’t taken off in Virginia. In 2014 Dominion Energy Virginia won the right to develop an estimated 2,000 MW of wind power offshore of Virginia Beach, but it still hasn’t offered a timeline for a commercial offshore wind project or even included one in its IRP. The 2018 IRP does include Dominion’s two-turbine, 12 MW pilot project, with a projected in-service date of 2021. Last year Dominion formed a partnership with Danish energy giant Ørsted (formerly DONG Energy) to see the pilot project through.

  1. Customers’ ability to purchase renewable energy is still limited

 Currently, the average Virginia resident or business can’t pick up the phone and call their utility to buy electricity generated by wind and solar farms. Customers of a few rural cooperatives are the exception; see the next section on green power programs, and section 4 on community solar.

Section 56-577(A)(6) of the Virginia code allows utilities to offer renewable energy tariffs, and if they don’t, customers are supposed to be able to go elsewhere for it. Neither of our two major investor-owned utilities, Dominion Energy Virginia (formerly Dominion Virginia Power) and Appalachian Power Company (APCo), currently has an approved tariff for renewable energy. The SCC has previously rejected renewable energy tariffs from APCo and Dominion that the SCC ruled were not in the public interest, mostly because they were too expensive.

Both utilities are trying again. APCo’s latest proposed renewable energy tariff, dubbed Rider WWS, combines wind, hydro, and new solar, and would cost residential customers a premium of 4.25 percent over brown power—a huge drop from the 18 percent increase associated with the earlier, rejected program. (The case is PUR-2017-00179.)

Dominion’s new renewable energy tariff is intended for residential and non-residential customers with a peak demand of less than 1 MW. Rate Schedule CRG-S (case PUR-2017-00157) would consist of hydro, wind and new solar, but possibly also other sources from within the PJM region. Dominion calculates the premium at 17.87 percent over brown power, a surprisingly high premium given how cheap solar, wind and hydro have become.

The SCC has not yet ruled on either program, so it is not clear when, or if, Dominion and APCo will implement these renewable energy tariffs.

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

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

In spite of the roadblocks, an independent power seller called Direct Energy announced plans in 2016 to sell a renewable energy product to Virginia residents in Dominion’s territory. (The company described the product as a combination of wind and municipal waste biomass.) Dominion fought back, but in 2017 the SCC confirmed Direct Energy’s right to enter the Virginia market; however, the SCC also ruled that Direct Energy will have to stop signing up customers once Dominion has its own approved renewable energy tariff.

Legislation defeated in the General Assembly this year would have allowed customers of Dominion and APCo to purchase electricity generated 100 percent from renewable energy from any supplier licensed to business in the state, regardless of whether the utility had its own approved program.

Ron Cerniglia, Director of Corporate and Regulatory Affairs for Direct Energy, says Direct Energy “will be ready to begin offering a full suite of product and service offerings that customers currently receive in other competitive markets including a 100% renewable product by August to non-residential customers (e.g, commercial and industrial) within the Dominion Virginia Power service territory.”

Dominion will soon have a solar option. Legislation passed in 2017 under the misleading banner of “community solar,” authorizes Dominion and APCo to contract for power from solar farms to sell to consumers. Dominion’s program is awaiting approval at the SCC (case PUR-2018-00009). Rider VCS will be available to all retail customers at a premium of about 2.01 cents/kWh in the first year. As of this writing, APCo does not appear to have proposed a similar program.

The legislation states that these “community solar” programs explicitly do not count as ones selling “electric energy provided 100 percent from renewable energy,”though ironically, they may be the first programs from Dominion and APCo to do exactly that for residential and small commercial consumers.

Large customers have more options. As discussed in section 14, Dominion has worked with large tech companies, including Amazon, Microsoft and Facebook, to meet their demands for electricity from solar. Customers of this size also have the market power to sidestep utility control to achieve their aims through the wholesale energy market.

Other companies, institutions, and even local governments can aggregate their demand to achieve the same result, without affecting their retail purchase contracts with their utility (and thus not incurring the ire of the utility). For example, the Northern Virginia Regional Commission has hired a consultant to help area governments develop large-scale solar projects using a wholesale power purchase agreement, an undertaking I wrote about last fall.

  1. “Green power” products: mostly brown power painted green

Instead of offering renewable energy tariffs, for years Dominion and APCo have offered voluntary programs under which the utilities pay brokers to buy renewable energy certificates (RECs) on behalf of the participants. Participants sign up and agree to be billed extra on their power bills for the service. Meanwhile, they still run their homes and businesses on regular “brown” power.

As I wrote a few years back in What’s wrong with Dominion’s Green Power Program, there is little evidence that voluntary RECs from Midwestern wind farms are driving any new renewable energy, whether you buy them from a utility or a third-party supplier like Arcadia. But if you’re considering this route, read this post first so you understand what you are getting. Personally, I recommend instead making monthly tax-deductible donations to GRID Alternatives to put solar on low-income homes.

The situation is better with some rural cooperatives. Old Dominion Electric Cooperative (ODEC), which supplies power to most of Virginia’s coops, signed long-term contracts for the output of three wind farms in Maryland and Pennsylvania, which it resells to some member coops. Customers of participating coops can choose to buy wind power for an additional cost. (See the information posted by Shenandoah Valley Electric Cooperative as an example.) ODEC has contracted for two solar farms in Virginia as well.

But not all coops do this. Most have REC-only offerings. In the case of Rappahannock Electric Cooperative, the RECs come from a biomass plant somewhere “in the greater mid-Atlantic area.” That is, customers voluntarily pay extra to subsidize the burning of trees for power, probably at a facility out of state. Because of wood’s high moisture content, this kind of biomass is a highly polluting way to make energy and an important source of carbon dioxide emissions, calling into question the value of the program to customers who want to support renewable energy.

  1. Community solar: what’s in a name? 

Community solar, in its purest form, enables people to work together to develop and own a solar facility in their community for the use of all the participants. This kind of community solar is not currently an option in Virginia. Solar advocates have introduced enabling legislation for several years running, but it has been defeated every year in the face of utility opposition.

Two Virginia rural electric cooperatives offer programs that come close. In both cases, the coop has contracted for the output of a solar project in its territory and offers shares of the electricity to coop members. BARC, in southwestern Virginia, was the first to offer such a program, using a small 500 kW solar facility. This year Central Virginia Electric Cooperative(CVEC) launched a 4 MW program. Subscribers can lock in the rate for 20 years, one of the most attractive features of community solar.

As noted in Section 2, legislation enacted in 2017 enables a kind of pseudo-community solar controlled by a utility. Using this authority, Dominion has contracted for the development of a number of smaller (up to 2 MW) solar projects around Virginia, and will offer customers the option of paying a 2.01 cents/kWh premium to buy solar. Unlike a true community solar program (or CVEC’s), the price is not fixed but will change annually based on market factors, and it includes a profit margin for Dominion.

It looks like a renewable energy tariff, and it quacks like a renewable energy tariff, but all concerned call it community solar. The program now awaits approval by the SCC (case PUR-2018-00009) and is expected to be available to Dominion customers by the end of the year.

  1. Virginia’s RPS: modest, and with much to be modest about

Most states have adopted renewable portfolio standards (RPS) or other mandates to require utilities to build or buy renewable energy. Leading states have been ratcheting up their percentages while tightening the rules for what qualifies, giving priority to new wind and solar.

Virginia is not among these leading states.

Virginia Code §56-585.2 creates a voluntary RPS, which means utilities have the option of participating but don’t have to. Renewable energy is defined in §56-576 to include not just wind, solar, and falling water, but also highly polluting forms of energy like trash incineration and burning trees, a/k/a biomass (“sustainable or otherwise”), as well as old, large hydroelectric plants that don’t qualify for other states’ programs. Utilities are also allowed to include up to 20% of RECs from renewable energy research and development activities, providing a subsidy to a few Virginia universities with good lobbyists.

Utilities demonstrate compliance with the RPS through the retirement of renewable energy certificates (RECs). The SCC insists that utilities take a least-cost approach to meeting the RPS, which means RECs from trash incinerators, wood burning, and old out-of-state hydro will always edge out wind and solar, simply because there is little competition for those junky RECs. If utilities build wind and solar, they are required to sell the high-value RECs from these projects (to utilities out of state or to the voluntary market) and buy low-cost junky ones instead. Thus, no matter how much solar Dominion builds, customers will never see solar as part of the RPS.

Perhaps it goes without saying that the RPS makes no provision for Virginia utilities to buy RECs from solar homes or businesses.

The targets are also modest to a fault. Although nominally promising 15% renewables by 2025, the statute uses a 2007 baseline, ignoring load growth, and contains a sleight-of-hand in the definitions section by which the target is applied only to the amount of energy after nuclear is excluded. Nuclear makes up a third of Dominion’s energy mix. Thus the combined result is an effective RPS target of well under 10% in 2025.

According to Dominion’s 2017 Annual Report to the State Corporation Commission on Renewable Energy, the “fuel” types used to meet the RPS in 2016 consisted entirely of hydro, municipal solid waste incineration, woody biomass, landfill gas, research and development, and “thermal energy” (another unusual source). The in-service dates of facilities generating renewable energy or RECs range from the 1910s to the 2010s, with the majority clearly pre-dating adoption of the RPS. Almost half the energy or RECs come from out of state. The report does not say who Dominion bought and sold RECs from and to, or for how much.

The General Assembly has rejected numerous bills to make the RPS mandatory, and efforts to narrow the definition of renewable energy have repeatedly failed in the face of utility and other industry opposition. The utilities have offered no arguments why the goals should not be limited to new, high-value, in-state renewable projects, other than that it would cost more to meet them than to buy junk RECs.

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

That doesn’t mean there is no role for legislatively-mandated wind and solar. But it would be easier to pass a bill with a simple, straightforward mandate for buying or building a certain number of megawatts than it would be to repair a hopelessly broken RPS. The GA passed up an opportunity to do just that in this year’s SB 966, which makes up to 5,500 MW of solar and wind “in the pubic interest,” but not mandatory.

Short of that, the GA could require that Dominion apply the RECs from its solar projects to the voluntary RPS, instead of selling them, and allow the utility to buy other RECs only to fill any gaps left over.

  1. Customer-owned generation

The low cost of solar panels and the federal 30% tax credit make it cost-effective for most customers to install solar on a sunny roof or field, with homeowners reporting payback periods of less than 10 years. The federal tax credit will be available in full for projects that commence construction by the end of 2019. It drops to 26% for projects commenced in 2020 and 22% for projects commenced in 2021. Thereafter it drops to 10% for commercial and utility projects but disappears for homeowners entirely. Virginia itself offers no cash incentives or tax credits for wind or solar.

The emergence of bulk purchasing coops, sometimes also called “solarize” programs, such as those offered through nonprofits Solar United Neighbors of Virginia and LEAP, makes the process easy for homeowners and businesses and reduces costs.

Virginia allows net energy metering at the retail rate, though with limits (see section 7). Commercial customers can also reap the advantages of solar in reducing high demand charges.

In 2016 the General Assembly passed legislation enabling Property Assessed Clean Energy (PACE) loans for commercial customers. Localities now have an option to offer low-cost financing for energy efficiency and renewable energy projects at the commercial level. Arlington County has launched the first C-PACE program and is accepting applications now. Several other counties have initiated studies or are developing their own programs. PACE is not available for residential customers.

The lack of a true RPS in Virginia means Virginia utilities generally will not buy solar renewable energy certificates (SRECs) from customers. Back in the old days utilities in other states would buy SRECs generated in Virginia, but those markets have gradually closed. Pennsylvania, which had been the last remaining SREC market for Virginia residents, closed its borders last year.

The fact that the federal tax credit is such an important part of financing solar presents a challenge to customers who don’t pay any taxes, or enough taxes to use the credit. This includes non-profits, government entities, and low-income residents. Third-party financing offers a viable solution for tax-exempt entities, where available (see Section 10), but serving low-income residents remains a challenge.

  1. Limits on retail net metering

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

Residential customers can net meter systems up to 20 kW, although standby charges will apply to those between 10 and 20 kW, generally making the larger sizes uneconomical.

Commercial customers can net meter up to 1,000 kW (1 MW). There is an overall cap of 1% of a utility’s peak demand that can be supplied by net metered systems (as measured at their rated capacity).

If a system produces more than the customer uses in a month, the credits roll over to the next month. However, at the end of the year, the customer will be paid for any excess credits only if they have entered a power purchase agreement with the utility. This will likely be for a price that represents the utility’s “avoided cost” of about 4 cents, rather than the retail rate, which for homeowners is about 12 cents. This effectively stops most people from installing larger systems than they can use themselves.

In 2015, the definition of “eligible customer-generator” was tightened to limit system sizes to no larger than needed to meet 100% of a customer’s demand, based on the previous 12 months of billing history. The SCC wrote implementing regulations (see20VAC5-315-10 et seq.) but failed to address what happens with new construction; in practice, utilities have simply told customers how much they can install.

In 2018 the House Commerce and Labor subcommittee on energy defeated a bill that would have increased the limit to 125% of previous demand and extended this to new construction, for residents in Dominion territory. Dominion had agreed to the change, recognizing that there is already a financial disincentive for customers to install more solar than they can use.

A number of other barriers also restrict customer solar. A building owner cannot install a solar facility and sell the output to tenants. A condo association or homeowners association cannot build a central solar facility to share the output. The owner of two or more separately metered buildings cannot share the output of a solar facility on one building with another building, with a limited exception for farmers (see section 8). A local government cannot install a solar facility at one site to serve another site.

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

Over many years the utilities and the solar industry have tried to resolve their differences on net metering, without success. Efforts began in 2013 with the Small Solar Working Group, a broad stakeholder group facilitated by DEQ. That morphed into the Solar Working Group in 2014, then collapsed when the utilities walked away from a “Value of Solar” report the group drafted. In 2016 the utilities and the solar industry began meeting again privately in the “Rubin Group” (named for the moderator, Mark Rubin). This group produced consensus legislation in 2017 and 2018, primarily enabling the utilities to pursue their own solar goals, but they found no common ground on customer-owned solar.

In the absence of state tax credits or rebates, net metering remains critical to the financial viability of most customer-owned solar, making solar installers unwilling to give it up. For their part, utilities have put themselves into a box by insisting that customers ought to share grid costs equally. Reaching a resolution that allows the private solar market to grow will require taking the top off the box and valuing benefits as well as costs.

The issue is poised to come to a head this year. In addition to ongoing Rubin Group discussions, the Northam Administration has announced that net metering issues will be one focus of attention as the Department of Mines, Minerals and Energy (DMME) develops the 2018 Energy Plan, due at the end of October. DMME appears to have handed the solar work over to Dominion, which, as part of 2018’s SB 966 legislation, had tasked itself with conducting a study of net metering. Dominion has hired a consultant, Meridian Institute, “to design and facilitate a stakeholder engagement process” to consider “improvements” to net metering.

  1. Agricultural customers and meter aggregation

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

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

  1. Homeowner associations cannot ban solar (but they sure keep trying)

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

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

Because of the vagueness of “reasonable restrictions,” HOAs continue to be a problem for many would-be solar homeowners.

  1. Limits on third-party financing (PPAs)

One of the drivers of solar installations in other states has been third-party ownership of the systems, including third-party power purchase agreements (PPAs). In a typical third-party PPA, the customer pays no money upfront and is charged only for the power produced by the system. At the end of the contract, or at some intermediate point, the customer usually can buy the system outright at a greatly reduced cost.

For customers that pay no taxes, including non-profit entities like churches and colleges as well as local government, PPAs are an especially important financing tool because they can’t use the 30% federal tax credit to reduce the cost of the system if they purchase it directly. Under a PPA, the system owner can take the tax credit (as well as accelerated depreciation) and pass along the savings in the form of a lower electricity price.

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

Notwithstanding this provision, in 2011, when Washington & Lee University attempted to use a PPA to finance a solar array on its campus, Dominion Virginia Power issued cease and desist letters to the university and its Staunton-based solar provider, Secure Futures LLC. Dominion claimed the arrangement violated its monopoly on power sales within its territory.

Given the threat of prolonged and costly litigation, the parties turned the PPA contract into a lease, allowing the solar installation to proceed but without the advantages of a PPA. (Note that PPAs are sometimes referred to as “leases,” but they are distinct legally. Leasing solar equipment is like renting a generator; both provide power but don’t involve the sale of the electricity itself. I have never heard of a utility objecting to a true lease.)

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

Although the program got off to a slow start, PPA projects are beginning to come online at a rapid clip, and solar companies say an increase in the program size will be needed so installations don’t suddenly stall.

Outside of Dominion territory, the story is less rosy. Appalachian Power and the electric cooperatives declined to participate in the PPA deal-making. In 2017, the legislature passed a bill to allow private colleges and universities—but no one else—in APCo territory to use PPAs to install a maximum of 7 MW of renewable energy. This year a bill to expand the program for APCo customers was scuttled at the last moment due to APCo’s opposition.

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

Solar schools. The availability of PPA financing has had a direct and noticeable impact on the ability of pubic schools to install solar. The projects that I know about include the following; most (but not all) of these use the PPA structure.

  • Bath County (three schools)
  • Arlington County (two schools; county is currently evaluating bids for other schools)
  • Albermarle County (six schools)
  • City of Lexington (one school)
  • Middlesex County (two schools)
  • Augusta County (seven schools)
  • City of Richmond (ten schools)
  • City of Harrisonburg (RFP issued)
  1. Personal property tax exemption for solar developers

In 2014 the General Assembly passed a law exempting solar generating equipment “owned or operated by a business” from state and local taxation for installations up to 20 MW. It did this by classifying solar equipment as “pollution abatement equipment” under §58-1.3660 of the Code. Note that this applies only to the equipment, not to the buildings or land underlying the installation, so real estate taxes aren’t affected.

The law was a response to a problem that local “machinery and tools” taxes were mostly so high as to make third-party PPAs uneconomic in Virginia. In a state where solar was already on the margin, the tax could be a deal-breaker. A separate code provision (§58-1.3661) permited localities to exempt solar equipment from taxation, but seeking the exemptions on a county-by-county and city-by-city basis proved crushingly onerous for small developers.

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

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

The exemption applies only to solar, not to wind.

  1. Dominion-owned distributed solar

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

Dominion seems to be ready to try again. The 2018 legislation (SB 966) contains language saying it is in the public interest for utilities to develop or own up to 500 MW of distributed solar. Elsewhere in the same legislation the limit is shown as 50 MW, and it is not clear which one is the typo. Either number gives Dominion plenty of leeway to try out fancy technology involving grid integration of renewables to enhance system reliability and community resilience, or just make another go at undercutting customer-owned solar.

Dominion Solar Purchase Program (residential and business customers). The same 2011 legislation that enabled the “Solar Partnership” initiative also authorized Dominion to establish “an alternative to net metering” as part of the demonstration program. The alternative Dominion came up with was a buy-all, sell-all deal for up to 3 MW of customer-owned solar. As approved by the SCC, the program allows owners of small solar systems on homes and businesses to sell the power and the associated RECs to Dominion at 15 cents/kWh, while buying regular grid power at retail for their own use. Dominion then sells the power to the Green Power Program at a hefty markup. It is not clear whether the program continues to be available; as with the Solar Partnership Program, the links on the Dominion Energy website don’t lead anywhere helpful.

I ripped this program from the perspective of the Green Power Program buyers who pay for other people to install solar on their homes. While some installers advertised it as an option, others felt it was a bad deal for customers, given the costs involved, the likelihood that the payments represent taxable income, and the fact that selling the electricity could make new system owners ineligible for the 30% federal tax credit on the purchase of the system.

There are many good ways Dominion could work with the General Assembly to offer alternatives to net metering that also support customer solar. This program isn’t one of them.

  1. Utility renewable energy tariffs for large customers

Large customers that want wind and solar have had to force the issue in the past. In 2013, Dominion Power introduced a Renewable Generation (RG) Tariff to allow customers to buy renewable power from providers, with the utility simply acting as a go-between and collecting a monthly administrative fee. The program was poorly designed and got no takers.

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

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

Dominion used a different approach for a deal with Microsoft. After the SCC turned down Dominion’s application to charge ratepayers for a 20-MW solar farm in Remington, Virginia, Dominion reached an agreement with Microsoft and the Commonwealth of Virginia under which the state buys the output of the project, while Microsoft buys the RECs. This seems to have been done as a favor to Dominion by then-governor Terry McAuliffe, as a way to move the Remington project forward, and I wouldn’t expect to see it repeated.

In the fall of 2017, Facebook negotiated its own terms with Dominion for 130 MW of a 300 MW solar project. With this as its basis, Dominion created yet another new tariff, Schedule RF.

The alphabet soup of tariffs suggest Dominion is still finding its way in serving large corporations. The utility has a strong incentive to make deals with large corporations that want a lot of renewable energy: if they don’t like what Dominion is offering, they can make an end run around the utility by working through the PJM wholesale market, as discussed above in section 2. This appears to be Microsoft’s plan for a 500 MW solar farm announced last year. Perhaps we should watch for Dominion to propose yet another new tariff, if they haven’t run out of letters.

For a customer without the market power of Amazon, Facebook or Microsoft, buying renewable energy from Dominion remains challenging. As noted in section 2, the SCC already rejected one set of voluntary schedules Dominion had proposed for customers with a peak demand of at least 1,000 kW (1 MW). The rejection can’t be called a loss for customers, since the plan was to use a mix of sources that count as renewable under the Virginia Code but still pollute, including biomass—making it only sort-of green. The SCC said the tariff was too expensive, possibly because biomass is expensive compared to other kinds of renewable energy.

While that particular renewable energy tariff was more an effort to close off competition from Direct Energy than to serve the needs of customers, Dominion seems serious about finding solar options for large customers. One of the tasks the Rubin Group says it plans to take on this year is considering further changes to help large customers who want solar.

  1. Dominion plans for utility-scale solar

As early as 2014, Dominion had announced it wanted to begin developing large-scale solar projects in Virginia. In 2015, two bills promoted the construction of utility-scale solar by declaring it in the public interest for utilities to build or buy solar energy projects of at least 1 MW, and up to an aggregate of 500 MW. This year’s legislation increased that number to 5,000 MW and included wind in the total.

Dominion got off to a rocky start when the SCC rejected the company’s plan to charge ratepayers for its first project, a 20 MW solar farm in Remington, Virginia because the company had not considered cheaper third-party alternatives. Governor McAuliffe helped save the project by working out a deal with Microsoft, as discussed above. Further projects fared better, however, and Dominion is now so enthusiastic about solar that its 2018 Integrated Resource Plan (IRP) calls for up to 480 MW per year, all for the benefit of its regular ratepayers.

Dominion’s website currently lists several solar projects in Virginia, but only three of them, totaling 56 MW, serve the Dominion Energy Virginia rate base. Even with the boost from the General Assembly, future projects will still have to gain SCC approval. And while Dominion will be able to charge ratepayers for projects that do get approved, the SCC will probably insist that the RECs be sold—whether to utilities in other states that have RPS obligations, or to customers who want them for their own sustainability goals, or perhaps even to voluntary green power customers. If this happens, the result will be that Dominion still won’t use solar to meet the Virginia RPS, and ordinary customers will still not have solar as part of the electricity they pay for. That’s the weird world of RECs for you.

  1. Governor McAuliffe’s program to purchase solar for state government will be continued under Northam

Following a recommendation by the Governor’s Climate Change and Resiliency Commission, on December 21, 2015, Governor McAuliffe announced that the Commonwealth would commit to procuring 8% of its electricity from solar, a total of 110 MW, with 75% of that built by Dominion and 25% by private developers.

The first deal to count towards this goal was an 18 MW project at Naval Station Oceana, announced on August 2, 2016. The Commonwealth will buy the power and the RECs. (The Remington Project did not count, because as the buyer of the RECs, only Microsoft can claim the right to be buying solar power.) Two solar farms supplying the University of Virginia and its Darden School of Business also counted towards the 8%.

Although no other projects have been announced since McAuliffe left office, Deputy Secretary of Commerce and Trade Angela Navarro confirmed to me that the 110 MW goal remains in place. She adds, “We also have around 2 MW of agency-owned solar installed or slated to be installed this year. We’re still working toward the 110MW goal, and we hope to announce an even more ambitious goal through the Energy Plan process.”

  1. Onshore wind

No Virginia utility is actively moving forward with a wind farm on land. Dominion Energy’s website used to list 248 MW of land-based wind in Virginia as “under development,” without any noticeable progress. The current web page doesn’t mention specific projects or sizes, only that “we are evaluating wind energy projects in Virginia.” If so, none of them has made it into any recent IRP.

On the other hand, Appalachian Power continues to try to add wind power to its mix, though so far not from any Virginia sites. In April of this year, the SCC denied APCo’s request to acquire two wind projects in West Virginia and Ohio, saying the company didn’t need the power.

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

Nonetheless, Apex Clean Energy has obtained a permit to develop a 75-MW Rocky Forge wind farm in Botetourt County. The company says the project is construction-ready and believes it can produce electricity at a competitive price, given its good location and improved turbine technology. However, the company will not move forward until it has a customer.

Looking forward a few years, the ability of wind to complement solar may give it a role as solar dominates new capacity additions in Virginia. Currently, Dominion’s IRP proposes to pair solar with gas combustion turbines, not battery storage. Wind energy paired with solar would reduce the need for gas back-up, perhaps tilting the equation in favor of battery storage instead.

  1. Offshore wind

Progress towards harnessing Virginia’s great offshore wind resource remains slow. Dominion won the federal auction for the right to develop about 2,000 MW of wind power off Virginia Beach in 2013, and last year the company received approval for its Site Assessment Plan (SAP).

We had originally been told the federal government’s timeline would lead to wind turbines being built off Virginia Beach around 2020. Later, however, the Bureau of Ocean Energy Management said Dominion has five years from approval of the SAP to submit its construction and operations plan, after which we’ll have to wait for review and approval. Presumably the project will also require an environmental impact statement.

That would put first construction in the mid-2020s—if Dominion can be prodded into going forward. Right now the company’s Integrated Resource Plan (IRP) does not include offshore wind in any of its scenarios for the next 15 years, except for 12 MW from two test turbines.

Those test turbines may become a reality, now that Dominion has partnered with the Danish energy company, Ørsted, formerly known as DONG Energy, to see the 12 MW project through to completion. Dominion is expected to make some sort of filing with the SCC this summer to move the project along. The IRP lists an in-service date of 2021.

All this is promising, as Ørsted clearly has its eyes on the commercial lease area. Governor Ralph Northam also seems keen to reignite offshore wind in Virginia. This spring DMME issued a Request for Proposals for a plan “to position Virginia as the East Coast offshore wind supply chain industry location of choice,” the first step in what advocates hope will become a Master Plan for Virginia offshore wind.

DMME is also including offshore wind as one focus of the 2018 Energy Plan, with plans for a public listening session and a facilitated stakeholder group.

  1. State carbon trading rules

The Trump administration’s pullbacks on the Paris accord and the Clean Power Plan prompted Governor McAuliffe last year to order the Department of Environmental Quality (DEQ) to write rules lowering carbon emissions from Virginia power plants by 30% by 2030. Under draft rules set to be finalized this fall, Virginia power plants will trade carbon allowances with those in member states of the Regional Greenhouse Gas Initiative (RGGI).

Any rules that put pressure on carbon-emitting power plants should be good for wind and solar, but at this writing there is still some uncertainty about what the final rules will look like.

Governor Northam pushed for legislation this year that would have had Virginia formally join RGGI, rather than just trading with it. Joining RGGI would allow Virginia to auction carbon allowances instead of merely handing them out free to power plants. Auction money would support investments in wind and solar, among other priorities. Republicans in the General Assembly defeated the legislation, but advocates expect it to be re-introduced next year.

The remaining energy bills: energy choice, carbon trading, the SCC, and coal. Plus, will Dominion be forced to give up its ill-gotten gains?

This is the last of my three-part review of energy legislation introduced in Virginia’s 2018 session. The first post covered solar bills; the second focused on energy efficiency, storage, and electric vehicles. I’m concluding with bills from the miscellaneous file–some of which, however, will likely be among the most significant energy bills addressed this year.

Energy Choice

Readers will recall the ruckus at the SCC that ensued when third-party electricity provider Direct Energy proposed to offer renewable energy to current Dominion customers. The SCC confirmed last spring that this is allowed under the Virginia Code, but only until Dominion wins approval for its own renewable energy tariff. Dominion immediately filed a tariff, though eight months later, the SCC has yet to rule on it. Irked by the delay, Dominion has gotten two of its best friends to introduce bills forcing the SCC to act faster when Dominion wants something. The bills are SB 285 (Saslaw) and HB 1228 (Hugo).

Meanwhile, Senator Sutterlein has introduced SB 837, allowing customers of Dominion and APCo to purchase electricity generated 100% from renewable energy from any supplier licensed to do business in the state, and eliminating the condition that permits such purchases only if the utility itself does not offer a tariff for 100 percent renewable energy. This would resolve Direct Energy’s conundrum, since the approval of a similar Dominion tariff would not nullify an existing—or future—renewable energy offering from Direct Energy or anyone else. HB 1528 (Mullin) is the companion bill in the House.

Carbon trading

Last May, Governor McAuliffe announced Executive Directive 11, which started the process for drafting regulations that would have Virginia participate in a carbon emissions trading program known as the Regional Greenhouse Gas Initiative (RGGI). Electric utilities would be allotted, or would buy, carbon emission allowances. This makes non-carbon-emitting sources and energy efficiency more attractive to utilities than fossil fuel generation. Draft regulations were released in late December, and a comment period runs until April 9, 2018. Governor Northam has pledged to follow through on the program.

As part of this effort, the Administration’s bills include SB 696 (Lewis) and HB 1273 (Bulova), which provide for the state to join RGGI. The legislation is not necessary for Virginia to trade with RGGI, but there is an advantage to the state in doing so: RGGI member states auction off carbon allowances to polluters, rather than giving them away. That provides a significant source of income to the state that can be used to support clean energy, climate adaptation, or other priorities. Accordingly, HB 1273 spells out how the auction revenues would be spent. Energy efficiency and renewable energy would both get pieces of the pie.

Republican critics have counter-attacked. HB 1270 (Poindexter) would prohibit Virginia from joining RGGI or implementing carbon rules. Delegate Yancey, whose lucky win following a tied election barely returned him to office, is affirming his Tea Party credentials with HB 1082, prohibiting state agencies from adopting any rules more stringent than what is required by federal law. And then there is HB 549 (Freitas), which tries to hobble the General Assembly itself, prohibiting any future laws that would direct state agencies to adopt regulations that “are likely to have a significant economic impact” (defined as anything over $500!) unless they pass the bill twice to prove they really, truly mean it.

None of these bills pose a real threat to the Administration’s carbon initiative; the Governor will veto any that pass. A more serious challenge takes the form of a constitutional amendment, because it would not be subject to the Governor’s veto. Last year, Republicans pushed through a bill approving a constitutional amendment that would allow the General Assembly (read: the Republican majority) to nullify any existing regulations enacted by any Virginia state agency on any topic at any time. Since constitutional amendments have to be passed two years in a row before going to the voters for ratification, the same language (which Senator Vogel has reintroduced via SB 826 and SJ69) has to pass again this year.

Bills aimed at the SCC

Our investor-owned utilities are not the only barrier to cleaner energy in Virginia; often the SCC does us no favors either. Some of the energy efficiency bills discussed in my last post would force the SCC to evaluate utility efficiency programs differently. Two other bills are also worth noting:

HB 33 (Kory) repeals a provision prohibiting the SCC from imposing environmental conditions that go beyond what is in a permit, and expressly permits (though it does not require) the SCC to consider environmental effects, including carbon impacts, when evaluating new generating sources.

HB 975 (Guzman) would prohibit the SCC from approving new fossil fuel generating plants unless at least 20% of the generating capacity approved that year uses renewable energy. Too bad we didn’t have a rule like this a few years ago, when Dominion sought (and got) approval for the last of its giant combined-cycle gas plants. Today, however, this could be moot. No utility has proposed a new fossil fuel plant other than relatively small gas combustion turbines (peaker plants), which could meet the 20% rule when paired with even the modest levels of solar generation Dominion contemplates.

Coal subsidies

You think you killed the zombie, but it pops right back up. HB 665 (Kilgore) and SB 378 (Chafin) would reinstate the expired tax subsidies for the mining companies who despoil Virginia mountains. There is little risk of this corporate welfare becoming law again, because the governor would surely veto the legislation if it passes. The more interesting question is whether it gets through this year’s more closely divided General Assembly.

Undoing the Dominion handouts

The boondoggle Dominion won in 2015—the now infamous SB 1349, which allowed the utility to keep overearnings and avoid SCC rate reviews until into the next decade—has been in the news a lot lately. Under pressure from legislators and the media, Dominion has agreed to revisit the so-called “rate freeze.” That doesn’t mean it wants to give the money back. We hear the company is working on a deal with House and Senate leaders that lets it spend its ill-gotten gains on things it wants to do anyway: some for renewables, some for grid upgrades, anything but refunds.

So far, Dominion’s friends in the Senate have its back. Under the guidance of Frank Wagner, the original SB 1349 patron, and Dick Saslaw, Dominion’s top ally among the Democrats, the Commerce and Labor Committee today killed Chap Petersen’s SB 9, which would have restored the SCC’s ability to review utility spending and order refunds. The House companion bill, HB 96 (Rasoul) has not yet been taken up. Currently, no other bills are on file addressing the overearnings, but both Saslaw and Republican Tommy Norment have promised they have excellent bills in the works.

UPDATE January 23: On the last day to file legislation, Terry Kilgore presented us with the first of the new utility boondoggle bills. HB 1558 calls for a small portion of the overcharges to be rebated to customers, after which overcharging would go back to being the normal course of business. Wagner, Saslaw and Newman filed their own bills, supposedly on January 19, though these evaded posting on the website until today. I hear they are similar but haven’t ha time to read them. Petersen, meanwhile, played a new card, introducing SB 955, which would empower the SCC to review the overearnings and order refunds as appropriate.

 

2017 guide to Virginia wind and solar policy

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

[This is an awesome guide, isn’t it? But you don’t want to bother with it, because the 2018 update is now available here.]

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

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

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

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

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

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

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

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

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

Several developments are driving these numbers:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  1. Community solar

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

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

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

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

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

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

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

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

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

  1. Customer-owned generation 

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

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

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

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

  1. Limits on retail net metering

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

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

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

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

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

  1. Progress on meter aggregation derailed by agricultural solar bill

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

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

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

  1. Standby charges on larger home systems

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

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

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

  1. Homeowner associations cannot ban solar

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

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

  1. Third-party ownership

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

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

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

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

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

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

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

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

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

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

  1. Tax exemption for third-party owned solar

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

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

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

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

  1. Dominion-owned distributed solar

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

  1. Dominion Solar Purchase Program

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

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

  1. Utility renewable energy tariffs for large customers

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  1. Still waiting for wind

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

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

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

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

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

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

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

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

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

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

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

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

  1. Solar initiatives underway ahead of the 2018 Session

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

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

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

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

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

 

 

Moving to block competition, Dominion files its own sort-of-green energy tariff

Just a couple of the great things that count as “renewable energy” in the Virginia Code.

Dominion Virginia Power has filed for permission from the State Corporation Commission (SCC) to offer a 100% renewable energy tariff to commercial and industrial customers with peak loads of over 1,000 kilowatts. In a footnote, Dominion states that it intends to propose a similar tariff for residential customers in the future. The case is PUR-2017-0060.

Customers who want only carbon-free energy like wind and solar will likely be disappointed. Dominion intends to use a “portfolio of resources” that will include “dispatchable resources”—i.e., hydropower and stuff that can be burned. Dominion promises the sources it uses will meet Virginia’s definition of renewable. That’s not reassuring. Under Virginia law, renewable energy can include sources like landfill gas and municipal solid waste, as well as “biomass, sustainable or otherwise (the definitions of which shall be liberally construed).”

Dominion’s filing comes scarcely one month after an SCC decision confirmed the right of independent renewable energy provider Direct Energy to offer its products to Dominion customers, but only so long as Dominion lacks its own green tariff for those customers. The SCC order (explained here) made clear that under Virginia law, a competitor like Direct Energy would be blocked from taking on new customers once Dominion has an approved tariff.

Dominion’s filing looks suspiciously like an effort to cut Direct Energy off at the knees. If the upstart competitor follows through with its plans to offer Virginia residents a renewable energy option, Dominion will surely propose a residential renewable energy tariff. SCC approval of Dominion’s tariff would shut out Direct Energy, which is targeting only residential consumers for its product. Under the language of the Code, it does not appear to matter whether a competitor can offer a better product, or a better price.

For the moment, Direct Energy is not backing down. The company has set up a web page to gauge the interest of residential consumers while it deliberates its next move. Ron Cerniglia, Director of Corporate and Regulatory Affairs for the Mid-Atlantic Region, told me he thinks the timing of Dominion’s filing is “curious,” given that “Dominion has had ten years to file a renewable energy tariff and hasn’t. We’re concerned about the implications of limiting choice for consumers. We don’t know if the move will actually offer a choice consumers want, or if it is just closing doors on others.”

Indeed, ten years have passed since Virginia enacted its current utility law, which includes the right of a customer to “purchase electric energy provided 100 percent from renewable energy” from another supplier if its own utility isn’t offering it. During most of that time, Dominion has sold Renewable Energy Certificates to customers under its “Green Power Program,” but it has never offered residential customers an opportunity to buy actual renewable energy. (See “Is a Green Power program worth your money?”)

This is slated to change as the utility works with the solar industry on implementing a new solar option under legislation passed this year. However, the new law specifies that the solar option will not count as a tariff for “electric energy provided 100 percent from renewable energy,” so it does not block competitive offerings like Direct Energy’s.

Dominion was agreeable to excluding the solar program because it interprets the Code’s reference to “electric energy provided 100% from renewable electricity” to mean the electricity must come from renewables 100% of the time, an interpretation almost no one else shares.

This seems to be the reason Dominion intends to include carbon-emitting sources into its renewable energy offering, even though it’s safe to say there are no customers clamoring to get their electricity from garbage or the clear-cutting of forests. It also means the new tariff will likely be priced higher than one that included only solar, because electricity from biomass is more expensive today than harvesting the sun. (No word from Dominion on why it doesn’t just assign a portion of its pumped storage capacity to serve an all-wind-and-solar product.)

But if customers want only wind and solar, they are also likely to be disappointed in Direct Energy’s product. Cerniglia says his company includes baseload sources like “cleaner biomass” in its renewable energy product to provide 24/7 power. He estimated that the initial mixture would consist of “50% to 60% municipal waste biomass (Pennsylvania and Virginia sourced) and 40% to 50% wind (Pennsylvania sourced) . . . We are also committing to not utilize virgin wood / clear cut wood biomass in our product mix at any time.”

Direct Energy also has not determined the pricing of its product yet, but Cerniglia said it would be “equal to or lower than what Dominion Virginia Power residential customers pay for ‘brown’ power.”

Perhaps most importantly, he noted, “The benefit of a competitive market is that customers can leave us at any time. They’re not captive.”

 

Update: On June 21, a Hearing Examiner for the SCC recommended rejection of a similar application for a renewable energy tariff filed last year by Appalachian Power. See my discussion here for how this may affect Dominion’s application. 

Direct Energy wins right to sell renewable energy in Virginia, but there’s a catch

Direct Energy may have just won a Pyrrhic victory in its bid to sell renewable energy to Virginia residents. The State Corporation Commission ruled last week that the company can market 100% renewable electricity to Virginia customers of Dominion Virginia Power and Appalachian Power, but only as long as the utilities aren’t offering it themselves. Once they do, Direct Energy can continue to serve existing customers but won’t be able to sign up new ones.

The ruling makes it harder for Direct Energy to enter the residential market in Virginia. On the other hand, Direct Energy appears to have won a round on a second issue involving sales to large (over 5 megawatts in demand) commercial and industrial customers. The SCC ruled that these customers don’t have to give five years’ notice before they can switch back to their utility from a renewable energy provider like Direct Energy, as they would have to do if they were not buying renewable energy.

This is a significant win for Direct Energy’s ability to offer renewable energy to large customers, since Dominion’s position on the five-year notice requirement could scare off customers worried about being left without a supplier if Direct Energy were to leave the market. However, that part of the SCC’s order is under review in response to a motion for reconsideration filed by Dominion on Tuesday, so I won’t address that further here.

Direct Energy is a Delaware-based company currently licensed to sell natural gas in Virginia as a competitive service provider. Last August the company filed a petition for declaratory judgment (PUE-2016-00094) asking the SCC to clarify its rights under Virginia law to sell renewable energy to customers of Dominion Virginia Power. The SCC brought in Dominion and Appalachian Power, and Southern Environmental Law Center (SELC) intervened on behalf of environmental groups Appalachian Voices and Chesapeake Climate Action Network.

Section 56-577 (A)(5) of the Virginia Code explicitly allows sellers of 100% renewable energy into the territories of the state’s monopoly utilities if those utilities themselves aren’t offering renewable energy to their customers. Currently, neither Dominion nor Appalachian Power offer a tariff for renewable energy. That means the door is wide open for anyone else to do so.

But that open door is merely a tease, as the Commission’s order just confirmed. All Dominion or APCo has to do is jump in with its own product, and the door shuts in the face of the interloper. Once the SCC approves a utility’s program, Direct Energy can continue selling to any customers it has already signed up, but it won’t be able to sign up any new customers.

It can take months or years of marketing for a third-party supplier to build up enough of a customer base to make the whole effort worthwhile, so the SCC’s ruling makes the Virginia residential market much less attractive.

Direct Energy and the environmental groups had argued that once a competitive service provider got approval to sell 100% renewable electricity in Virginia, it ought to be able to continue signing up new customers, even once the SCC had approved a competing product from the incumbent utility. As the company explained in its Petition:

It would be illogical for the Virginia General Assembly to prohibit Direct Energy or any competitive service provider from continuing to market and serve additional customers once Dominion Virginia Power begins to offer a 100% renewable energy tariff. No retail business can survive if it cannot do business with new customers. This is certainly true in the retail energy market, in which customers move on and off a system with regularity, reacting to price signals and relocating in and out of utility service territories. Consequently, it is most reasonable to interpret Virginia Code § 56-577 (A) (5) (b) to allow Direct Energy to continue to serve additional customers to the class of customers to which it is marketing at the time that the Commission approves a Dominion Virginia Power 100% renewable energy tariff.

Unfortunately for Direct Energy, the Code was written to protect Virginia utilities from competition to the greatest extent possible consistent with also making them look good. What is logical and reasonable to anyone running a business doesn’t enter into it; nor, for that matter, does the best interest of the buying public.

The SCC’s order is a win for Dominion and APCo, but a loss for customers who have waited ten years for their utilities to offer them renewable energy. Both Dominion and APCo offer what they call “green power” but are simply sales of renewable energy certificates as an add-on to regular “brown” power.* Even if the utilities now gin up a their own renewable energy product, consumers would be better off having choices.

After all, the Virginia Code doesn’t say a utility program has to be better or cheaper than the one offered by a competitive service provider like Direct Energy. Indeed, some consumers have already expressed concern Dominion might close the door on Direct Energy with a product that meets the Virginia Code’s broad definition of renewable energy but is distinctly inferior.

“My worry is that Dominion will offer a “100% renewable” program that is biomass, hydro and other things that aren’t really zero carbon, but still slide by,” says Ruth Amundsen, a solar advocate in Norfolk. “And then Direct Energy would be out.”


*Legislation passed this year will allow customers to buy electricity generated from solar facilities from their utilities. The program is styled “community solar,” but it looks like it would satisfy the statutory definition of a sale of electricity generated from 100% renewable energy. However, a provision of the bill, added at the behest of SELC, states that it will not be considered such a product.

Why, you might ask, would Dominion agree to a provision that says their solar option isn’t a tariff for 100% renewable energy, especially with the Direct Energy petition outstanding? I have an answer, but first a word of caution: you are now getting deep in the weeds. Carry tick repellant.

Recall that the fight over third party power-purchase agreements (PPAs) involves two provisions of the Virginia code, including § 56-577 (A) (5)—the one we’re talking about here. Companies that want to help customers install on-site solar facilities by using PPAs have argued that this section clearly permits customers to buy solar electricity from third party suppliers when their utility doesn’t offer a renewable energy tariff. No green tariff, no bar to a PPA.

But the utilities argue that this kind of electricity sale doesn’t meet the statutory requirement, because although a solar facility is 100% renewable, it does not serve 100% of the customer’s load. A strange reading, yes; and wrong, too, according to an SCC hearing examiner who looked at the question back when APCo put together its own renewable energy product. APCo decided to withdraw its product rather than risk the SCC confirming the hearing examiner’s reading. That action meant the utilities could keep their reading of the statute as a live threat against any company that wants to offer a PPA under terms that don’t meet the terms of the pilot program Dominion negotiated a few years ago.

Apparently, preserving that argument mattered more to Dominion than chasing off would-be competitors like Direct Energy. The gamble will have paid off if Direct Energy drops its Virginia effort in light of the SCC’s ruling last week.

 

Update, April 7. Ron Cerniglia, Director of Corporate & Regulatory Affairs for Direct Energy, provided the company’s view of the SCC’s ruling for us. His note reads:

In its ruling on Direct Energy’s Petition for Declaratory Judgment, the State Corporation Commission (SCC) agreed with Direct Energy on two of the three major points on which Direct Energy sought clarification.  The SCC did not agree that a retailer could continue to provide 100% renewable service to residential and small (<5 MW) individual customers, including new customers, after the utility (e.g., APCo or Virginia Electric and Power Company) receives approval of their own 100% renewable tariff.  However, residential customers and individualized non-residential customers who sign-up with a retailer do not immediately return to utility service when and if a utility receives approval of their 100% renewable tariff.  Instead, the customer remains with the retailer for the term of the customer agreement.  
The SCC agreed with Direct Energy that a retailer may continue to offer 100% renewable service to large customers (>5 MW) or to customers aggregating to >5 MW even if such sales are no longer permitted because the utility  is offering its own 100% renewable tariff.  The SCC also agreed with Direct Energy that if a retailer is providing 100% renewable service to a large customer that several  conditions and limitation  do not apply.  That includes the requirement of  that 5 year advance notice must be given before a retailer’s customer can return to the utility for service.  It is on this last point that Dominion has filed a Petition for Reconsideration.  This week, the SCC granted Dominion’s petition without ruling up or down on its substance. 
We do not believe that Dominion has raised any issue that the SCC has not already considered. We are very appreciative of the SSC’s actions to date and are hopeful that it will make short work of the petition, and quickly enter another Order denying Dominion the relief it is requesting.  Direct Energy is excited to open up the Virginia market to competition with a 100% renewable product. Once the uncertainty has been addressed, we believe that Virginians will have the choice to choose a renewable power supply solution.
Update May 12. On April 26, the SCC issued an Order on Reconsideration confirming its earlier ruling that the five year advance notice requirement did not apply to large customers (over 5 MW) who return to the utility following cancellation of a renewable energy supply contract with a competitive service provider.
On May 9, 2017 Dominion filed with the SCC its own plan for a renewable energy tariff for large users.  (PUR-2017-00060.) The filing notes that Dominion intends to follow this with a residential green tariff.