Virginia legislative session wraps up with action on solar, coal ash, and pumped storage

Next year I'm bringing him to lobby with me. Photo credit: Sierra Club

Next year I’m bringing him to lobby with me. Photo credit: Sierra Club

The Virginia General Assembly wraps up its 2017 session on Saturday, February 25. As usual, the results are a mixed bag for energy. On the plus side is the promise of a new solar purchase option for customers. On the downside, utility opposition to energy efficiency and distributed generation meant a lot of worthwhile initiatives never made it out of subcommittee.

Putting it into perspective, it could have been worse. For clean energy advocates in Virginia, that’s what we call a success!

Governor Terry McAuliffe has already acted on some of the bills that passed and will have until March 27 to act on the remaining bills. Under Virginia law, the governor can sign, veto, or amend the bills for legislators’ consideration.

“Rubin Group” bills move renewable energy forward—and back.

Negotiations between utilities, the solar industry trade association MDV-SEIA, and the group Powered by Facts produced three pieces of legislation that appear likely to become law (and all of which I’ve discussed previously). The most significant of these “Rubin Group” bills (named for facilitator Mark Rubin) is SB 1393 (Wagner), the so-called “community solar” bill, which is designed to launch a utility-controlled and administered solar option for customers. The utilities will contract for the output of solar facilities to be built in Virginia and will sell the electricity to subscribers under programs to be approved by the State Corporation Commission. Critical details such as the price of the offering will be determined during a proceeding before the State Corporation Commission.

This was the only one of the Rubin Group bills that had participation from members of the environmental community (Southern Environmental Law Center and Virginia League of Conservation Voters), and it received widespread (though not unanimous) support from advocates.

Broader legislation that would have enabled true community solar programs did not move forward. SB 1208 (Wexton) and HB 2112 (Keam and Villanueva), modeled on programs in other states, had the backing of the Distributed Solar Collaborative, a stakeholder group composed of everyone but utilities. In the Senate, Wexton’s bill was “rolled into” Wagner’s bill, but only her name, not the provisions of her bill, carried over.

SB 1395 (Wagner), a second Rubin Group bill, increases from 100 MW to 150 MW the size of solar or wind projects eligible to use the state’s Permit by Rule process, which is overseen by the Department of Environmental Quality. The legislation also allows utilities to use the PBR process for their projects instead of seeking a permit from the SCC, if the projects are not being built to serve their regulated ratepayers.

The third Rubin Group bill establishes a buy-all, sell-all program for agricultural generators of renewable energy. Although supported by MDV-SEIA as part of the package deal, passage of SB 1394 (Wagner) and HB 2303 (Minchew) should be considered a loss for solar. The program replaces existing agricultural net metering rules for members of rural cooperatives and could lead these coops to reach their 1% net metering cap prematurely, blocking other customers from being able to use net metering. And while negotiators say the program should be economically beneficial to participants, it appears to offer generators no options they don’t already have under existing federal PURPA law.

The governor has until March 27 to act on these bills.

Appalachian Power PPAs for private colleges only

Under HB 2390 (Kilgore), the existing pilot program that allows some third-party power purchase agreements (PPAs) in Dominion Power territory will be extended to Appalachian Power territory, but only for the private colleges and universities who could afford to hire a lobbyist to negotiate the special favor, and only up to a 7 MW program cap. APCo is expected to use passage of the bill to assert that PPAs for all other customers are now illegal. The governor has not indicated whether he will sign the bill.

Intellectual property

SB 1226 (Edwards, D-Roanoke) allows solar developers to keep confidential certain proprietary information that would otherwise be subject to disclosure under the state’s Freedom of Information Act (FOIA). It resolves a problem that has held up a solar project on the Berglund Center, a public building in Roanoke.

Storage, pumped or otherwise

HB 1760 (Kilgore) and SB 1418 (Chafin) allow Dominion Power to seek rate recovery for a scheme to use abandoned coal mines for pumped storage facilities. If you think this sounds weird and possibly dangerous, you are not alone. Usually the idea is to keep water out of coal mines to avoid the leaching of toxic chemicals into groundwater. Apparently no one has ever used coal mines for pumped storage before, and neither the company that would construct the project, nor the sites under consideration, nor the technology to be used, have been revealed.

SB 1258 (Ebbin) adds storage to the mandate of the Virginia Solar Energy Development Authority.

Dominion’s nuclear costs, and the politics of the “rate freeze”

HB 2291 (Kilgore) allows Dominion to charge ratepayers for the costs of upgrading its nuclear facilities. Because the charges will appear as a rider on top of base rates, consumers would not be protected by the “rate freeze” Dominion pushed through in 2015’s SB 1349.

That 2015 legislation, of course, was supposedly designed to shield customers from the impact of the EPA’s Clean Power Plan, a ruse that has been since laid bare. Instead, it will allow Dominion to keep an estimated billion dollars of customers’ money it would otherwise have had to refund or forego. This year, with the CPP on death row under Trump, Senator Chap Petersen introduced SB 1095, which would repeal the rate freeze. His bill was promptly killed in committee, but continues to gain support everywhere outside the General Assembly. Governor McAuliffe belatedly announced his support for Petersen’s bill, but did not use his authority to resurrect it.

Petersen is encouraging the Governor to offer an amendment to Kilgore’s HB 2291 that would repeal the rate freeze, an option allowed by Virginia’s legislative procedure since both provisions affect the same provision of the Code.

Dominion, of course, says the CPP isn’t actually dead and buried just yet, and Republicans seem to fear its resurrection. HB 1974 (O’Quinn) requires the Department of Environmental Quality to submit any Clean Power Plan implementation plan to the General Assembly for approval, so they can stab it with their steely knives.  The governor is expected to veto the bill.

State’s failures on energy efficiency will now be tracked

SB 990 (Dance) requires the Department of Mines, Minerals and Energy to track and report on the state’s progress towards meeting its energy efficiency goals. Or in Virginia’s case, its lack of progress.

HB 1712 (Minchew) expands the provisions of state law that allow public entities to use energy performance-based contracting.

That’s it for energy efficiency legislation this year. Several good bills were offered but killed off in the House Energy Subcommittee, notably HB 1703 (Sullivan), which would have required electric utilities to meet efficiency goals, and HB 1636 (Sullivan again), which would have changed how the SCC evaluates energy efficiency programs. Delegate Sullivan, by the way, introduced a companion bill to SB 990, but his was killed in that same House subcommittee, all on the same day.

Coal ash legislation watered down but passes

SB1398 (Surovell) will require Dominion Power to monitor pollution and study options for the closure of its coal ash impoundments, including removal of the ash to secure, lined landfills. Unfortunately amendments in the House will allow Dominion to proceed with capping the waste in unlined pits while it completes the study. As one editorial put it, “Why not do it right the first time?” The editorial—along with a lot of people who have to live near the coal ash dumps—would like to see the governor offer amendments to the bill, but we’ve heard nothing from the governor’s office on that yet.

Republicans keep trying to throw taxpayer money down a rathole; Governor vetoes

Governor McAuliffe has already vetoed HB 2198 (Kilgore), which would reinstate the coal employment and production incentive tax credit and extend the allowance of the coalfield employment enhancement tax credit. SB 1470 (Chafin) is identical to HB 2198 and so likely faces a veto as well.

Renewable energy bills begin an uncertain journey through Virginia’s general assembly

VA capital Corrina BeallThree Senate Republicans and one Democrat met on Thursday to consider the fate of many of this year’s renewable energy bills. Reported out were two bills introduced by Frank Wagner that were crafted by utilities, the solar industry trade association MDV-SEIA, and Powered by Facts (a group currently focused on farms).

Other bills were not as lucky as these two. In theory all bills get another bite at the apple in the full Senate Commerce and Labor Committee, where they are on the docket for Monday afternoon. However, expectations are that the bills voted down in subcommittee will meet the same fate in full committee.

Wagner, the chairman of the Senate committee, named himself to his subcommittee along with fellow Republicans Ben Chafin and Glen Sturtevant, and Democrat Rosalyn Dance. So it was not surprising that this hand-picked group supported his bills. More disappointing was the solid opposition to anyone else’s proposals, including ones with even better potential to improve the solar market. That opposition came not only from the Wagner, Chafin and Sturtevant, but also from MDV-SEIA.

The two Wagner bills reported out are SB 1393 (the so-called community solar program) and SB 1394 (small agricultural generators). The bills have undergone some more recent changes, which I will get to in a bit.

The committee voted down Edwards’ SB 917 (containing minor fixes to the agricultural net metering law), Edwards’ SB 918 (expanding authorized uses of third party power purchase agreements), and Wexton’s SB 1208 (a more expansive community solar bill). Following a common practice in the General Assembly, SB 1208 was “rolled into” SB 1393, which is simply a polite way of extinguishing a bill. Similarly, SB 917 was rolled into SB 1394, even though the two are only vaguely related.

Over in House Commerce and Labor, several renewable energy bills will be heard by the energy subcommittee when it meets Tuesday afternoon. These include Keam’s HB 2112, the companion to Wexton’s SB 1208, and Minchew’s HB 2303, the companion to Wagner’s SB 1394. (The text of some House bills has not yet been updated to conform to changes in the Senate bills, but this seems likely to happen.)

Two new bills on third-party power purchase agreements have been added since my initial roundup. Chairman Kilgore introduced HB 2390, a bill that would, for a narrow class of privileged customers, extend to Appalachian Power territory the PPA pilot program currently running in Dominion territory. The pilot program specifically allows certain third-party power purchase agreements while forbidding all others. In Dominion territory the program is capped at 50 MW; the bill would place a 10 MW cap on the APCo program.

The PPA pilot program has allowed customers like Albermarle County Public Schools and the University of Richmond to install solar cost-effectively, and APCo customers have been itching to join it.

But Kilgore’s bill contains a limitation that is really pretty offensive. Unlike the pilot project in Dominion territory, where participants may include any non-profit of any size, as well as commercial customers with facilities of over 50 kW, Kilgore’s bill would allow only private colleges and universities to compete for the 10 MW in APCo territory. No public colleges, no churches, no community centers or town buildings. For a guy with a folksy demeanor, Kilgore seems to be one heck of an elitist.

A better PPA bill is Toscano’s HB 1800, stating that nonresidential and agricultural customers have the right to contract with other people to own and operate renewable energy facilities on the customer’s premises. Although a hearing examiner recently agreed with the solar industry and environmentalists that this right already exists in the Virginia Code, utilities have blocked on-site PPAs. Toscano’s bill would put an end to this harassment, while giving up on residential consumer PPAs. (The concession sounds bad but isn’t; residential customers can use leases to achieve the same result that PPAs afford.)

Other House bills. Also up in the House subcommittee on Tuesday will be the three worthy energy efficiency bills from Delegate Sullivan. In addition, Villanueva’s Alternative Energy and Coastal Protection Act is back for a third year as HB 2018. It would provide money for renewables and efficiency as well as badly-needed funds to help communities adapt to consequences of climate change such as sea level rise.

Now, about those Wagner bill changes:

Following revisions, “community” solar still looks like a winner, except for the community part. SB 1393 met with support from all corners of the room at the Senate subcommittee meeting on Thursday. Everyone, it seems, wants more solar options for consumers and is excited that the utilities seem willing to move forward to meet this growing demand.

Just don’t expect community solar. As now drafted, utilities control every aspect of the program. Although third-party developers would build the solar projects, the utilities can choose to buy the electricity through a PPA or buy and own the project themselves. Also, the project size limit of 2 MW, which has a community-scale feel to it, does not apply if a utility is simply designating 2 MW of a larger project to this program. In effect, if the utility contracts for a number of large projects across the state (which Dominion is indeed doing), it can simply designate parts of each as “community solar,” and fill the program that way.

That doesn’t make it a bad bill, just not a community solar bill. And while it looks like a tariff for the sale of renewable energy to participating customers, the bill continues to state that it is not a tariff for the supply of 100% renewable electricity—language that supposedly dodges the fight about under what circumstances third parties can legally sell renewable energy in Virginia.

Even with changes, agricultural RE bill’s possible benefits for some come at a cost to others. SB 1394 was reported unanimously from the Senate subcommittee Thursday, but drew opposition from both the Sierra Club and the solar consumer group VA-SUN. The current language of the bill contains improvements over the original (discussed here), but however well intentioned, it remains a bad bill.

The legislation establishes a pilot program that allows farmers to use a portion of their land for solar and enter a buy-all, sell-all contract with the utility. They will buy their power at retail and sell at a price that might not be much more than wholesale, so whether the program pencils out for farmers is uncertain. But that’s not my beef with it.

The problem is that this program is offered as a replacement to an entirely different program, one that allows farms to attribute the power output of a single solar array or wind turbine to all the various meters on the farm under the net metering statute. That’s a valuable option for farmers who want to meet their electric needs with renewable energy. Removing this option is a backwards step for wineries, breweries, organic farms, and any other farmer for whom solar power is an important part of their branding and marketing. (Consider that this bill applies to wind as well as solar; a small farmer would likely have only one wind turbine to serve the whole farm. You can’t put a little wind turbine on every building with an electric meter.)

The date at which agricultural generators can no longer opt to use the agricultural net metering provisions has been moved to 2019 (from 2018 in the original draft legislation), and the termination of the net metering option now applies only to coop members, not customers of Dominion and APCo. Existing agricultural net metering customers can continue to use the net metering provisions for 25 years, up from 20. These are all incremental improvements but don’t change the fundamental problem that the legislation trades away the rights of some customers in an effort to help others.

There is another problem. Projects developed under the buy-all, sell-all program would count against the 1% cap on the total amount of electricity produced by net metering in a utility’s service territory. This is wrong as a matter of principle (if they aren’t net metering, it shouldn’t count against a net metering limit) and also because a few large farmers using the buy-all, sell-all program would max out the 1% and leave nothing for homeowners or other coop customers.

From the coops point of view, that’s not a bug, that’s a feature; killing net metering is precisely their goal. That’s why the buy-all, sell-all program is not being offered as an option, which would be fine, but as a replacement, which is not.

I asked Dana Sleeper, Director of MDV-SEIA, why her organization was supporting the bill. She responded:

We felt that with the changes made in committee, it was more additive (creating options) then limiting. We had some models made in order to confirm that the proposed legislation would be a viable path for businesses to pursue, and my intent is to make those models publicly available so they may be helpful to those interested in pursuing the AgGEN option, should the bill pass. 

As for why MDV-SEIA opposed other pro-solar bills like Wexton’s and Edwards’, she answered:

MDV-SEIA was a participant in the Rubin stakeholder group process over the course of many months and, along with the other stakeholders, agreed to support a slate of bills that moved the needle on solar issues in VA. As part of the group, we included professional lobbyists in order to ensure that political perspective was built in. One of the recommendations from the lobbyists was to draw clear lines around those bills coming out of our stakeholder process versus those put forward by other groups, as it would cause confusion among legislators who have a lot on their plates during a short session. 

For that reason, any bills that were seen by legislators as being duplicative were folded into the Rubin group bills. That’s not to say we don’t see the merit of them, it’s simply that there were many concerns about those proposals which were addressed by the Rubin bills. Our lobbyist, when asked, noted that while we appreciated the thought and effort put into the legislation, we recommended folding them into our bill. There were some bills that did not cover the same topics as those discussed in the working group (for example, the tax credit bill), and we supported them wholeheartedly. 

Lobby efforts underway. MDV-SEIA is inviting supporters to its second Clean Energy Lobby Day on Tuesday; register here.

Separately, Secure Futures LLC and other solar industry members are also encouraging advocates of distributed generation to attend the House subcommittee meeting on Tuesday. They urge support for HB 1800 and HB 2112, and opposition to HB 2303 and HB 2390. (Opposition to HB 2303 puts them at odds with MDV-SEIA on the agricultural solar issue.)

Virginia General Assembly session opens. What can we expect?

Photo credit: Corrina Beall

Photo credit: Corrina Beall

The General Assembly failed to act on clean energy bills in 2016, but as the 2017 legislative session gets underway, advocates hope the delay will have only increased pressure for progress this year.

New energy legislation includes the four bills negotiated over the summer by the utilities and the solar industry promoting utility, community-scale, and agricultural renewable energy projects. The “Rubin Group” (named for facilitator Mark Rubin) brought together utilities, the solar industry trade group MDV-SEIA, and a group called Powered by Facts, but largely excluded environmental and consumer interests. Not surprisingly, the resulting bills are heavily weighted towards utility-scale solar, and utility control of solar in general.

But if the chairmen of House and Senate Commerce and Labor thought the Rubin Group’s work would mean no one else would float new renewable energy bills, they were certainly wrong.

Community-scale solar. I’ve previously addressed the Rubin Group’s legislation that enables a utility-administered, community-scale program to sell solar to participants on a voluntary basis. I see Senator Wagner will be carrying the bill in the Senate, now designated SB 1393. I haven’t had time to compare the current bill to the draft previously shared with stakeholders, but I’m cautiously optimistic that it will produce a viable solar option for consumers. Even better would be HB 2112 from Delgate Keam and SB 1208 from Senator Wexton, which authorize a broader set of community solar models. Delegate Krizek’s solar gardens bill, HB 618, also authorizes shared solar.

Utility-scale solar. Another bill from the Rubin Group, SB 1395 (Wagner), would raise from 100 MW to 150 MW the size of wind and solar projects that qualify as “small renewable energy projects” subject to Permit By Rule (PBR) permitting by DEQ, and allowing utilities to use that process for facilities that won’t be rate-based. In contrast, Senator Deeds’ SB 1197 would undo much of the streamlining gained by the PBR process, sending projects to the SCC if they either disturb an area of 100 acres or more or are within five miles of a boundary between political subdivisions.

The third Rubin Group bill, Wagner’s SB 1388, would allow utilities to earn a margin when they obtain solar energy via power purchase agreements with (lower cost) third-party developers rather than building projects themselves.

Senator Marsden’s SB 813 exempts investor-owned utilities from the requirement that they consider alternative options, including third-party market alternatives, when building solar facilities that have been declared in the public interest. This is surely an attempt to smooth the way for utility-owned solar at the SCC. However, if you’re trying to get utilities to keep costs down by using third-party installers, this is the wrong incentive.

Agricultural net metering. The last bill from the Rubin Group, Senator Wagner’s SB 1394, would revoke the recently enacted code provisions that allow agricultural customers to attribute electricity from a renewable energy facility to more than one meter on their property for the purposes of net metering. The proposed legislation would terminate this provision in 2018 (grandfathering existing net metering customers for 20 years) and instead offer farmers a buy-all, sell-all option for their renewable production.

Under the proposed bill, negotiated between the utilities and Powered by Facts, farmers would have to buy all their (dirty) power from their utility at retail, and sell their renewable power to the utility at the utility’s avoided cost—essentially wholesale. This doesn’t sound like a good deal for the farmers, but we’re told it more or less pencils out. On the plus side, the bill would allow farmers to build up to 1.5 megawatts of renewable capacity on up to 25% of their land, or up to 150% of the amount of electricity they use, whichever is less, which is more than they can under today’s rules. (But since federal law allows anyone to sell power they produce from a qualifying facility into the grid at avoided cost, even this part of the bill is of dubious added benefit.)

Regardless, removing the net metering option seems both unnecessary and unwise; many farmers specifically want to run their farms on solar, for marketing reasons or otherwise, and taking away their ability to aggregate meters and use net metering will be viewed as a serious setback.

The first draft of this bill that I had seen contained a provision that projects under the new program would apply against the state’s 1% cap on total net metering output, even though the projects would not be net metered. Fortunately, I don’t see that in the current version. [Update: this provision does appear in the version of the bill reported out of the Senate subcommittee on January 27, presenting a reason sufficient in itself to oppose the legislation.]

An agricultural bill that is more readily supportable is Senator Edwards’ SB 917, which eases the rules for agricultural customer-generators and increases the size of projects that can qualify for meter aggregation under the net metering statute. It also extends the law to include small hydro projects.

PPAs. Two bills attempt to resolve the ongoing dispute over customers’ rights to use third-party power purchase agreements for their on-site renewable facilities. Delegate Toscano’s HB 1800 essentially reiterates what solar advocates believe to be existing law allowing on-site PPAs, but—as a peace offering to utilities—narrows it to exclude residential customers. Senator Edwards’ SB 918 takes a different approach, replacing the Dominion PPA pilot program with a permanent statewide program to be designed by the State Corporation Commission.

Tax credits. Delegate Hugo’s HB 1891 provides a tax credit for residents who install geothermal heat pumps—a nice idea, but it will face tough sledding in a tight budget year. That budget reality could also doom Delegate Sullivan’s HB 1632, offering a broader renewable energy property tax credit (it would include geothermal heat pumps).

In spite of the current budget deficit, Republicans are making a new attempt to reinstate taxpayer subsidies for coal mining companies (Delegate Kilgore’s HB 2198). Delegate Morefield’s HB 1917 takes a better approach, offering a new tax credit for “capital investment in an energy production facility in the coalfield region.” This is worth watching, as it is not limited to coal facilities but applies to any facility that has “the primary purpose of producing energy for sale.”

Climate. Republicans seem inclined to make a renewed attack on the EPA’s Clean Power Plan (Delegate O’Quinn’s HB 1974), even though Trump’s election seems likely to send it to an early grave. This probable fate inspired Senator Petersen’s SB 1095, which says that if and when the Clean Power Plan is really declared dead, then the notorious “rate-freeze” imposed two years ago will end. As readers know, that law (Wagner’s SB 1349 from the 2015 session), will allow Dominion to keep an estimated $1 billion in excess revenues; at the time, Dominion said the law was needed to protect its customers from rate hikes required by compliance with the Clean Power Plan. Unfortunately the condition in Petersen’s bill doesn’t seem likely to kick in for at least a year or two, and possibly more; we’d prefer to see the legislation revoke the freeze immediately, and put the ill-gotten gains to use as a massive stimulus package supporting clean energy jobs.

On the flip side, Delegate Villanueva is gamely making another run at getting Virginia to join the Regional Greenhouse Gas Initiative (HB 2018) as a way to change utility incentives and raise money for climate adaptation and clean energy.

Nuclear. Delegate Kilgore has introduced HB 2291, a bill to make it easier for Dominion Virginia Power to stick ratepayers with the costs of any upgrades it makes to its nuclear power plants. The bill further attacks and undermines the SCC’s authority to determine whether expenses are reasonable, the sort of favor to Dominion that has become a theme in recent years. Kilgore doesn’t even represent any Dominion customers; he’s in APCo territory. I guess that’s why he’s okay with raising rates for Dominion customers.

Energy efficiency. Efficiency bills suffered the same fate as renewable energy bills last year; many were offered, but few were chosen. (Actually, it might have been none. We don’t do much energy efficiency in Virginia.)

Delegate Sullivan is trying again to set energy efficiency goals with HB 1703, or at the very least to have government track our progress towards meeting (or rather, not meeting) the state’s existing goal, with HB 1465. He is also trying again to change how the SCC evaluates energy efficiency programs to make them easier to implement (HB 1636). Senator Dance’s SB 990 also sets an energy consumption reduction goal.

Delegate Krizek’s HJ 575 would authorize a study of infrastructure investments that yield energy savings. Delegate Minchew’s HB 1712 authorizes energy performance-based contracting for public bodies.

Miscellaneous. Delegate Kilgore’s HB 1760 supports a new pumped storage facility in the Coalfields region (news to me). Senator Ebbin’s SB 1258 would add energy storage to the work of the Virginia Solar Development Authority, which seems eminently sensible.

More bills are likely to be filed in the coming days, and I would promise to update you on them if I weren’t marking Trump’s inauguration by leaving the country for a week. Serious advocates should peruse the LIS website and perhaps sign up for the bill tracking service “Lobbyist in a Box.” Also watch for a clean energy lobby day that MDV-SEIA will organize, likely on the yet-to-be-announced day the House Commerce and Labor Subcommittee on Energy meets, usually in early February.

This year’s legislative session lasts a mere 45 days, weekends included. Cynics say the tight schedule limits the damage politicians can do, but in reality it just means lawmakers have to lean heavily on lobbyists and constituents—and as the lobbyists are on hand, and the constituents are at home, the schedule favors the lobbyists. So if you want to make your voice heard, now’s the time.

Even Appalachian Power doesn’t like its third-party solar option

Colleges in APCo territory want to use PPAs to install solar facilities like the one recently installed at the University of Richmond, in Dominion territory.

Colleges in APCo territory want to use PPAs to install solar facilities like the one recently installed at the University of Richmond, in Dominion territory.

Facing a withering report from a Virginia hearing examiner recommending denial of its request for a renewable energy “Rider RGP,” Appalachian Power Company (APCo) has responded with a simple message to the State Corporation Commission: um, never mind.

APCo proposed Rider RGP as an alternative to third-party power purchase agreements (PPAs) for customers wanting to install rooftop solar. The proposal would have put APCo in the middle of the deal and created a buy-all, sell-all scheme. But the proposal was roundly criticized at last year’s hearing and in witness statements as convoluted and expensive.

On September 19 APCo asked to withdraw its application, citing changed circumstances. In reality, of course, nothing has changed since the Hearing Examiner’s August 31 report, other than APCo learning it was about to lose.

The company probably doesn’t mind being rejected for a program that witnesses said no one would sign up for. The much bigger issue for the company is that if the SCC adopts the hearing examiner’s view, APCo could lose its battle to block PPAs in its service territory.

For those of you just coming to the story, here’s the Cliff Notes version (this earlier post has the unabridged telling): APCo’s customers want the ability to install solar on their property through PPAs, a financing arrangement in which a solar developer installs and owns the panels, selling the electricity that’s generated to the customer. Often this means the customer can reduce its electricity bills without incurring an up-front cost. For tax-exempt institutions like colleges that can’t take advantage of the federal 30% tax credit for solar, the PPA model means the developer can take the tax credit and pass along the savings.

Virginia utilities say this arrangement violates their monopoly on the sale of electricity. Customers point to two statutory provisions that make PPAs legal. One provision allows customers to buy renewable energy from third parties if their utility doesn’t offer it. (No utility in Virginia does.) The other provision defines a net metering customer to include one who contracts with someone else to install and operate a solar facility on the customer’s property—an apt description of a PPA arrangement. Customers would seem to have the better of the argument, surely, but no bank will finance a PPA when a deep-pocketed utility is threatening to sue.

Dominion temporarily settled the issue in its territory with a pilot program that allows some PPAs, but APCo declined to participate. Under pressure from educational institutions that want solar, APCo proposed Rider RGP as an alternative for its territory. Customers and solar advocates seized the opportunity to seek a clear ruling from the SCC on the legality of PPAs. They argued, and the Hearing Examiner agreed, that Rider RGP wasn’t just badly designed, but unnecessary, given the provisions of the statute that already allow PPAs.

APCo doesn’t want the SCC commissioners to confirm this conclusion. It hopes that by withdrawing Rider RGP, the SCC will dismiss the case and not reach the merits of the argument on PPA legality. It is urging the SCC not to consider the point at all, or if it does so, not to take it up until it considers APCo’s plan, announced in April, to offer a green tariff to customers.

That green tariff is the “changed circumstances” APCo says makes Rider RGP unnecessary. If the SCC approves the green tariff, APCo will offer to sell real renewable energy to customers who want it. APCo clearly believes that having that tariff available to customers closes off the statutory provision that allows customers to go to third-party sellers if their own utility doesn’t offer renewable energy.

The green tariff would not, however, affect the legality of PPAs under the other statutory provision, the one that defines net metering customers to include those who have renewable energy facilities located on their property but owned and operated by someone else. Nor does the offer of a green tariff seem likely to satisfy customer demand for PPAs; buying electricity from a utility through a green tariff is a very different animal from having solar panels on your own roof.

The SCC is considering APCo’s request to withdraw its proposal for Rider RGP. It issued an order asking the parties to the case to comment by September 26. Advocates are expected to oppose APCo’s request and to ask the SCC to rule definitively on the legality of PPAs. By doing so, the Commission would finally bring legal clarity to an issue that has been holding back solar development in Virginia.


Update: September 26, Dominion Virginia Power filed a motion to intervene out of time, with a brief begging the SCC not to even look at the legality of PPAs, or if it did, to reject the hearing examiner’s reading of the statute on the grounds that her opinion disagrees with Dominion’s.  Dominion’s brief notes that it wrote its own opinion into a tariff, which the SCC approved, and therefore that ought to be more important than whatever the General Assembly actually said.

On October 7, the SCC allowed APCo to withdraw its proposal, ducking the issue of PPA legality and ensuring that more time and money will be wasted on future proceedings.

Your 2016 guide to Virginia wind and solar policy

Photo credit: Sierra Club

Photo credit: Sierra Club

I could make short work of this year’s update by saying that not much has changed in the way of Virginia renewable energy policy in the past year. The General Assembly punted on almost all of the relevant bills that were presented this winter, and a subcommittee that was formed to review those bills has taken no action to date.

But if the policies haven’t changed, the landscape has. While our legislators sat on their hands, everyone else embarked on what, for Virginia, amounts to a solar binge. Dominion Virginia Power began making good on a pledge to install 400 megawatts (MW) of solar in state by the end of the decade. The Governor has taken the first steps to fulfill a pledge to have state agencies meet 8% of their electric demand with solar. Large corporations suddenly want to take advantage of low solar prices and favorable tax policies to do deals in Virginia. Residents are flocking to bulk purchasing cooperatives for rooftop solar. A few universities and schools are using third-party power purchase agreements (PPAs) to install solar under the limited provisions of Dominion Power’s pilot program.

Very little of this is reflected in the statistics—yet. According to the Solar Energy Industries Association, Virginia increased its total renewable energy capacity from 14 MW at the end of 2014 to 22 MW at the end of 2015. A few years ago, an increase of more than 50% would have been amazing. Today we just have to point out that 22 MW is how much solar capacity North Carolina installs on average every single week.

  1. The further we go, the behinder we get
Maryland North Carolina W. Virginia Tennessee Virginia
Solar* 465 2,294 3.4 132 22
Wind** 190 0 583 29 0
Total 655 2,294 586 161 22

Installed capacity measured in megawatts (MW) at the end of 2015. One megawatt is equal to 1,000 kilowatts (kW).

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

This year we will show real progress. Based on the projects announced to date, Virginia will likely have more than 200 MW of solar online by the end of 2016, with more projects in the queue for 2017. So we are headed in the right direction, but these numbers still represent only a tiny fraction of what we could see if we removed the barriers currently holding back private investment in the solar industry and pushed our utilities to make renewables central to their planning.

Moreover, we still have no wind farms in the state, and neither of our investor-owned utilities included Virginia wind in their latest Integrated Resource Plans (with the exception of Dominion Power’s two pilot offshore wind turbines, which probably won’t get built). The one bright spot on wind energy is that Apex Clean Energy continues to move forward with its Rocky Forge wind farm, scheduled for completion next year.

We also have to view Virginia’s progress on solar in the broader context of energy development. Dominion Virginia Power will have built 4,300 MW of new natural gas generation by the end of the decade and has indicated its interest in building far more. The company will add this to a portfolio that’s already 96% fossil fuel and nuclear. This summer two more companies announced plans to build natural gas plants in Virginia, aiming to burn some of the fracked gas that Dominion plans to bring through the Atlantic Coast Pipeline. When the state’s dominant utility is all-in on natural gas, it’s hard for a different energy model to find elbow room.

But we do have good solar and wind resources, and plenty of demand. What we need are policies that welcome participants to the market.

  1. Virginia utilities won’t sell wind or solar to customers*

(*except those with billions of dollars and famous CEOs—see section 14)

Currently, the average Virginia resident can’t pick up the phone and call their utility to buy electricity generated by wind and solar farms. Worse, they can’t buy renewable energy elsewhere, either.

This wasn’t supposed to happen. 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, Virginia utilities have not done this, except in very tiny amounts. Instead, 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, which is not what they want.

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 have no effect on the power mix in Virginia. For a fuller discussion of the Dominion Green Power Program, see What’s wrong with Dominion’s Green Power Program.

Appalachian Power’s “green pricing” program is even worse, offering RECs from an 80 MW hydroelectric dam in West Virginia. No wind, and no solar.

Other REC programs are available to Virginia consumers. If you’re considering this route, read this post first.

The State Corporation Commission has ruled that REC-based programs do not qualify as selling renewable energy, so 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.”

So you should be able to go elsewhere to buy wind and solar—say, from a solar facility on someone else’s land, or even from a facility on your own rooftop that someone else owns and operates for you. (For more on that, see section 10 on third-party power purchase agreements.) But Virginia utilities claim that the statute’s words mean that not only must another licensed supplier provide 100% renewable energy, it must 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.

On August 31, however, a hearing examiner for the SCC rejected this reading. If the SCC agrees, Virginia residents might have new options.

Anticipating the possibility of an adverse ruling from the SCC, this spring APCo filed a proposal with the SCC for a new tariff under of §56-577(A)(6). Instead of RECs, APCo now proposes to offer real green power, combining wind, solar and hydro. None of the power will come from new projects; partly as a result, the tariff will cost more. The SCC will hold a hearing on the proposal this fall. If approved, APCo customers would finally be able to order renewable energy from their utility. But it would also likely close off customers’ ability under the statute to turn to other suppliers of renewable energy.

Dominion has not yet followed APCo’s lead on this one. If the SCC rules that the statute means what it says, we would expect Dominion to offer a green power program consisting of true renewable energy. Indeed, Dominion seems to be working on a green tariff this fall that it is calling “community solar” (see next session). Its real interest may well be the same as APCo’s.

We hope the SCC will require both APCo and Dominion to follow best practices recommended by groups like Advanced Energy Economy Institute: “Utility renewable energy tariff programs must require that utilities build, purchase or contract for a portfolio of renewable energy through a competitive process, and charge customers according to the actual cost of the portfolio, whether that be a net premium or net savings for customers.”

  1. Community solar? Not hardly

Last year Dominion received SCC approval for a program it billed as an offer to sell electricity from solar panels. Notwithstanding its name, however, the “Dominion Community Solar” program is not an offer to sell electricity generated from solar energy, and reading the details, one can only conclude it would attract customers only to the extent they were deceived about it. Perhaps someone within Dominion pointed out to the brass how close this looks to consumer fraud; at any rate, a year has passed and the company still hasn’t launched it.

As for true community solar, only one Virginia utility offers it: a member-owned rural electric cooperative in southwestern Virginia called BARC. The rest of you are out of luck at the moment. Every year for the past several years, legislation has been introduced to support community solar, and every year it has died in the face of utility opposition.

A few bills this year would have enabled community solar, but they were “carried over to 2017”—i.e., killed. A small working group put together by the solar industry association and the utilities is currently trying to come up with a program that utilities will find acceptable. The group has issued a “Request for Information,” available online, and is holding public meetings this fall to get input on a proposal that looks much more like a green tariff than like community solar. (Clearly Dominion likes the name “community solar”–just not, you know, actual community solar.) Another group, the Distributed Solar Collaborative, which includes all stakeholders except utilities, is also evaluating models from other states and plans to put forward a true community solar alternative.

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

Many advocates focus on an RPS as a vehicle for inducing demand. In Virginia, that’s a mistake. Virginia has only a voluntary RPS, which means utilities have the option of participating but don’t have to. Any costs they incur in meeting the goals can be charged to ratepayers. Until a few years ago, utilities even got to collect bonus money as a reward for virtue, until it became clear that there was nothing very virtuous going on.

Making our RPS mandatory rather than voluntary would do nothing for wind and solar in Virginia without a complete overhaul. 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 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%.

The RPS is as impotent in practice as it is in theory. In the case of Dominion Virginia Power, the RPS has been met largely with old hydro projects built prior to World War II, trash incinerators, and wood burning, plus a small amount of landfill gas and—a Virginia peculiarity—RECs representing R&D rather than electric generation.

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 or 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: for most, the only game in town

Given the lack of wind or solar options from utilities, people who want renewable energy generally have to build it themselves. A federal 30% tax credit makes it cost-effective for those with cash or access to low-cost financing, and bulk purchasing through nonprofits VA-SUN and LEAP makes the process easier and reduces costs.

Last year 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. A bill to extend PACE authorization to residential customers did not get out of committee this year.

Virginia offers no cash incentives or tax credits for wind or solar. The Virginia legislature passed a bill in 2014 that would offer an incentive, initially as a tax credit and then as a grant program, but it did not receive funding. The same bill, reintroduced in 2015, died in a subcommittee.

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 (as of now only Pennsylvania) or to brokers who sell to voluntary purchasers.

  1. Limits to net metering hamper growth

Section 56-594 of the Virginia code allows utility customers with wind and solar projects to net energy meter. 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.

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 closer to 12 cents. This effectively stops most people from installing larger systems than they can use themselves.

Legislation passed in 2015 makes it less likely that new solar owners will have any surplus. At Dominion’s insistence, the definition of “eligible customer-generator” was amended 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 solar trade association MDV-SEIA continues to work towards a solution to that problem.

The new limitation is a problem for other reasons as well. Some solar customers want to install larger systems than they previously needed because their business is expanding or they plan to buy an electric car. 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 into the grid at the wholesale power price, why would you stop them from performing this service to society? I can understand that the paperwork isn’t worth the hassle for very small amounts of excess electricity, but if there isn’t an app for that yet, I bet some Virginia Tech students could make one.

  1. Aggregated net metering allowed for farms only

Under a bill introduced by Delegate Randy Minchew (R-Leesburg) and 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 (the farmhouse and other outbuildings). This is referred to as “agricultural net metering.” Efforts to expand aggregated net metering beyond farms have not succeeded.

  1. Standby charges hobble the market for larger home systems and electric cars

Dominion Power and Appalachian Power are at the forefront of a national pushback against policies like net metering that facilitate customer-owned generation.

The current system capacity limit for net-metered solar installations is 1 MW for commercial, 20 kW for residential. 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.

Seizing the opportunity, Dominion won the right to impose a standby charge of up to about $60 per month on these larger systems, eviscerating the market for them just as electric cars were increasing interest in larger systems. (SCC case PUE- 2011-00088.) Legislative efforts to roll back the standby charges were unsuccessful, and more recently, Appalachian Power instituted even more extreme standby charges. (PUE-2014-00026.)

The standby charges supposedly represent the extra costs to the grid for transmission and distribution, though there is a great deal of disagreement on that score, and a lot of suspicion that utilities’ real concern is that they will make less money as demand for their dirty energy product falls.

In the summer of 2013, in a filing with the SCC (PUE-2012-00064, Virginia Electric and Power Company’s Net Metering Generation Impacts Report), Dominion claimed it could also justify standby charges for its generation costs, and indicated it expected to seek them after a year of operating its Solar Purchase Program (see discussion below). As far as I can tell, it hasn’t carried out this threat yet, and it would likely need legislation to do so.

  1. Good news for residential solar: homeowner association bans are largely a thing of the past

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. Virginia utilities continue their fight against PPAs; now a losing battle?

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. . . “

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.

After a long and very public fight in the legislature and the press, 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 is a lousy program and because she, too, reads the Code to allow PPAs currently, making a utility alternative unnecessary. If the commissioners agree with her, this would be a victory for the solar industry and customers. How useful it will be depends on the scope of the final order, however, and on how they view APCo’s effort to close off the opening afforded by §56-577(A)(6) by offering its own renewable energy product.

The problem cries out for a legislative fix. Advocates pushed hard for legislation this year that would open the Virginia market to private investment through third-party PPAs; but as previously noted, the Commerce and Labor committees ducked their responsibilities and failed to act on the bills.

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, and therefore should not trigger a challenge from Appalachian Power or other utilities. 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 proves a market driver

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 “Solar Partnership” Program encounters limited success

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 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 program has resulted in several commercial-scale projects on university campuses and corporate buildings. Unfortunately, it has also been plagued by delays and over-spending.

The program was supposed to proceed in two phases, with 10 MW in place by the end of 2013, and another 20 MW by December 31, 2015. However, the program got off to a very slow start. In August of 2014 the company acknowledged it was behind schedule and would likely not achieve more than 13 or 14 MW of the 30 MW authorized before it ran out of money. On May 7, 2015 Dominion filed a notice with the SCC that it needed to extend the phase 2 end date to December 31, 2016, and confirmed that it would install less than 20 MW altogether.

Although Dominion’s web page suggests that it is still taking applications, I’m doubtful.

  1. Dominion’s Solar Purchase Program: bad for sellers, bad for buyers, and not popular with anyone

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 turned out to be 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 an enormous markup.

I ripped this program from the perspective of the Green Power Program buyers, but the program is also a bad deal for most sellers. Some installers who have looked at it say it’s not worth the hassle given the costs involved and the likelihood that the payments represent taxable income to the homeowner. There is also a possibility that selling the electricity may make homeowners ineligible for the 30% federal tax credit on the purchase of their system. Sellers beware.

And then there’s the problem that selling the solar power means you aren’t powering your home or business with solar—which is the whole point of installing it, right?

  1. Dominion’s Renewable Generation tariff for large users of energy finds no takers; Amazon forces a change, with a new tariff in the works that will be available to others

Currently non-utility renewable energy facilities are subject to a size limit of 1 MW for net-metered projects. These limitations constrain universities, corporations, data centers, and other large users of energy that might want to run on wind or solar. On top of this, the utilities’ interpretation of Virginia law prohibits a developer from building a wind farm or a solar array and selling the power directly to users under a power purchase agreement.

In 2013, Dominion Power rolled out a Renewable Generation Tariff (PUE-2012-00142) to allow customers to buy larger amounts of renewable power from providers, with the utility acting as a go-between and collecting a monthly administrative fee.

From the start the program appeared cumbersome and bureaucratic, and Dominion confirmed to me this summer that they have never had any takers. Then suddenly last year, Amazon Web Services made Dominion’s 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 (an 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 proposes to offer to customers with a peak demand of 5 MW or more, with a program cap of 200 MW. A hearing examiner at the SCC has recommended approval of the special rate.

Dominion used a different model for its deal this year 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 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 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.

  1. Dominion moves into utility-scale solar

Well 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, at the utility’s behest, 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’s first solar project will be a 20 MW solar farm in Remington, Virginia; however, the SCC rejected the company’s plan to charge ratepayers for the project 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. Meanwhile, Dominion had also solicited bids for additional projects. To date, three have been announced, totaling 56 MW.

Although Dominion will be able to charge ratepayers for these projects, the SCC insists 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. The result is that Dominion still won’t have any solar in its fuel mix. That’s the weird world of RECs for you.

  1. Governor McAuliffe promises the state will 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.)

  1. Will a Solar Development Authority help?

One of the MacAuliffe Administration’s initiatives last year was a bill to establish the Virginia Solar Development Authority. The Authority is explicitly tasked with helping utilities find financing for solar projects; there is no similar language about supporting customer-owned solar. So far, nothing seems to have come of it.

  1. Any wind energy yet? Nope, still waiting

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. Now it just says 247 MW are “being evaluated.” That’s closer to reality, but they probably should put it in the past tense. There has been a lot of press about the standoff in Tazewell County, where supervisors blocked Dominion’s proposed wind farm. Today, Dominion’s advocacy for its project feels perfunctory. The company has signaled it prefers solar, and its 2016 IRP dismisses wind as too costly.

On the other hand, Appalachian Power’s 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 is in the development stages for the 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 is planned for 2017.

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 will begin generating electricity this fall in the waters off Rhode Island. In 2013 Dominion won the federal auction for the right to develop about 2,000 MW of wind power off Virginia Beach, and the company completed a Site Assessment Plan (SAP) this spring.

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 no interest in seeing the project through. Its 2016 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 the 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 this spring it could not commit to construction even by 2020, upon which DOE pulled funding. Dominion executives swear the project isn’t necessarily dead, but that puts me in mind of the “ex-parrot” in the Monty Python skit, still on its perch only because it’s been nailed there.

  1. The Clean Power Plan tries to make it better to switch than fight

On August 3, 2015, EPA issued the final rule known as the Clean Power Plan. Under the rule, states with existing fossil-fuel generating plants must develop plans to reduce total carbon pollution from power plants, which could include using renewable energy as an offset to fossil fuel. In Virginia, the task of developing a state implementation plan (SIP) falls to the Department of Environmental Quality. Earlier this year the Supreme Court stayed implementation of the EPA rule while a Circuit Court considers a challenge, following which Virginia Republicans pushed through a budget provision prohibiting DEQ from developing a SIP while the federal rule is stayed.

Assuming the Clean Power Plan survives challenge, it could help incentivize construction of wind and solar facilities. While Virginia’s goals under the plan are modest, the rule means the state, utilities and the SCC must for the first time take carbon emissions into account in their planning. The EPA has signaled a strong interest in seeing wind and solar deployed as solutions.

Virginia hearing examiner says renewable energy PPAs are legal, but will the ruling stick?

A third-party PPA made it possible to build this solar facility at the University of Richmond. Appalachian Power Company contends that a project like this would be illegal in its territory.

A third-party PPA made it possible to build this solar facility at the University of Richmond. Appalachian Power Company contends that a project like this would be illegal in its territory.

A hearing examiner for the Virginia State Corporation Commission recommended on August 31 that the SCC reject Appalachian Power Company’s proposed alternative to third-party power purchase agreements (PPAs) for renewable energy, concluding the program is not in the public interest. The parties will have three weeks to comment before the recommendation goes to the Commissioners for a final decision. The case is PUE-2015-00040.

The ruling against APCo’s proposed Rider RGP is less important to customers than the reasoning behind it. In addition to finding a myriad of faults with the proposal, the Hearing Examiner concluded it isn’t needed because PPAs are already legal under the Virginia Code. This is an outcome long sought by the solar industry and environmental groups, and one supported by the Attorney General’s Office of Consumer Counsel.

However, the Hearing Examiner’s report is merely a recommendation. Nothing is final until the Commissioners rule, and they could make a decision about Rider RGP without addressing the current legality of PPAs. Moreover, earlier this year, APCo proposed another program that it clearly hopes will nip in the bud any surge of PPA activity that might result from a decision in the present case. (I’ll get to that in a moment.)

The rejection of Rider RGP won’t disappoint any would-be customers. A long line of witnesses testified at the hearing on September 29, 2015 that APCo’s expensive and convoluted program would find no takers. As the Solar Research Institute summarized it, the proposed Rider RGP “would require a customer interested in a solar PPA to first pay for 100% of their service under the standard tariff, pay for 100% of the solar energy generated, pay a $30 program fee, and receive excess payments back through a Renewable Output Credit.” Oh, and they still wouldn’t be using renewable energy. (Note that although solar energy was the focus of the discussion for participants, the decision applies to other forms of renewable energy as well.)

The SCC staff made some suggestions to improve the program, but the hearing examiner, Deborah Ellenberg, concluded it was really beyond saving. Not only that, but the plain language of the Virginia Code makes third-party PPAs legal in the state already. Thus, there is no need for a utility-sponsored alternative.

Ellenberg pointed to two statutory provisions that support the legality of third-party PPAs. First, Virginia Code §56-577 A 5 provides that customers may purchase renewable energy from third-party sellers if their own utility does not offer a tariff for renewable energy. Specifically, customers may:

[P]urchase electric energy provided 100 percent from renewable energy from any supplier of electric energy licensed to sell retail electric energy within the Commonwealth . . . if the incumbent electric utility serving the exclusive service territory does not offer an approved tariff for electric energy provided 100 percent from renewable energy. . . .

Until now, APCo has offered only a green power program that sells RECs, which the SCC says doesn’t count.

The language of §56-577 sounds clear enough, but APCo and Dominion Power have maintained that this section only allows customers to go elsewhere if the other supplier can provide 100% of their electricity from renewable energy, something that can’t be done with a solar facility or a wind turbine.

This flimsy reading of the statute was the basis on which Dominion challenged a PPA at Washington and Lee University back in 2011. The issue was temporarily resolved two years later when Dominion and the solar industry agreed to a pilot program that now allows a limited number of PPAs in Dominion territory, under tight parameters that exclude residential customers. The program never applied in APCo territory, however—a sore point to customers there. APCo has clung to its reading of §56-577, regardless of the growing clamor for renewable energy in southwestern Virginia.

Ellenberg’s report flatly rejects the utility interpretation. If the SCC adopts her reading, any customer in APCo territory would be free to buy renewable energy from third-party suppliers, until APCo offers a qualifying program.

Ellenberg also cited Virginia’s net metering statute. Virginia Code §56-594 authorizes “customer generators” to enter into behind-the-meter PPAs with third parties that own and operate a renewable facility for the customer. Code §56-594 B defines an eligible customer generator for net metering purposes 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).

Interpreting this provision takes no special legal talent, surely. It would seem to cover residential and commercial facilities installed and owned by third-party developers, including the familiar no-money-down contract offered to residential customers by Solar City. But again, APCo and Dominion Virginia Power claim the Code doesn’t mean what it says. For more than five years they’ve backed up their position with threats of lawsuits, creating the kind of uncertainty that is toxic to development deals.

If the SCC’s final order endorses the hearing examiner’s finding that PPAs are currently legal, the result could be to open up the Virginia solar (and wind) market to large amounts of private investment statewide.

However, Ellenberg’s finding that PPAs are currently legal appears in her discussion but not in her recommendations to the commissioners; her recommendations are limited to the actions she proposes (rejecting or modifying the tariff). The SCC does not have to rule on the question of PPA legality in order to decide this case. Surely, though, it would be strange if it were to duck the opportunity now that the issue has been fully briefed. With solar a hot commodity across the state, the current legal limbo has become a significant economic drag that the SCC ought not to ignore.

As I mentioned, though, APCo still has one card up its sleeve. This spring it proposed a new tariff to offer its customers 100% renewable energy derived from existing wind, solar and hydro projects. The product appears to meet the condition of §56-577. If approved, it would slam shut the door that the Hearing Examiner just opened (or rather, that she said was open all along, if you had dared to go through it into the toxic miasma where gray-suited lawyers lay in wait). APCo’s request for approval of the tariff (PUE-2016-00051) is scheduled to be heard by the SCC on November 15, with comments due by November 8.

Solar advocates take a dim view of APCo’s move. The new tariff won’t build any new facilities; it simply shifts the burden of paying for existing renewable energy projects onto volunteers, at a significant premium. In today’s market, third-party developers can offer electricity generated by new solar projects at competitive prices. So APCo’s tariff looks less like an accommodation to its eco-conscious customers, and more like a maneuver to prevent anyone from building solar on its turf.

It’s high time the SCC put a stop to this anti-competitive behavior and let Virginians build solar projects with their own money. The Commissioners can follow the Hearing Examiner’s advice, or they can take a pragmatic approach and recognize that PPAs are really just a way to finance projects. They don’t turn solar developers into utilities, and APCo should stop wasting everyone’s time and money blocking private investment in a part of the Commonwealth that desperately needs it.

Charging green customers more without doing more: Appalachian Power discovers the beauty of market segmentation, and moves to block competition

This wind farm isn't in Virginia, and APCo's proposal doesn't include building any new wind. But the cows are cute. Photo credit: NREL

This wind farm isn’t in Virginia, and APCo’s proposal doesn’t include building any new wind. But the cows are cute. Photo credit: NREL

Appalachian Power Company has asked the State Corporation Commission to approve a 100% renewable energy product it wants to offer its environmentally-conscious electricity customers. These customers would pay about 18% more for a combination of wind and hydro than they currently do for “brown” power. But APCo doesn’t plan to build new facilities. It will simply segregate out some of its existing wind and hydro (none of it in Virginia) to package as a new, higher-priced product.[i] The case is PUE-2016-00051.

Since APCo currently sells the renewable energy certificates (RECs) associated with these wind and hydro projects to buyers elsewhere, the change means it would terminate those contracts and provide the RECs to its green energy customers along with the electricity. RECs represent the “renewable attributes” of the power (the bragging rights, if you will), so the electricity by itself doesn’t count as renewable if it doesn’t come with the RECs.

The price of RECs represents only a part of the 18% premium. RECs are really cheap nationally, because supply exceeds demand.[ii] Another driver of the premium is that wind energy was more expensive back in 2007-2010, when these projects were built. Falling wind prices and a natural gas glut have pushed overall energy prices down since then. APCo customers are still paying off the cost of its wind farms (or in the case of two of them, are still paying on power purchase contracts). APCo proposes to shift the burden of paying for those wind farms onto the customers it believes are willing to pay more. At least theoretically, this means it will also reduce the price it charges the rest of its customers, who (it assumes) don’t care where their power comes from.

APCo says if demand is high enough, it will invest in new renewable energy facilities to add supply, which might decrease the cost of the tariff in the future. Cost declines have made new wind competitive with fossil fuels, so a tariff based on new facilities would have lower pricing.

Page 37 of APCo’s filing shows the effect of the accounting change on a customer’s bill for a residential customer using 120 kWh/month:

100% RE: $160,  non-RE customers: $135

or an extra $25/month, $300/year

By my math that comes out to:

100% RE: 13.3 cents/kWh,   non-RE customers: 11.3 cents/kWh

No doubt APCo is responding to consumer demand in proposing this renewable energy tariff. Virginians have become much more vocal, and much less patient, about wanting their utilities to invest in clean energy. But APCo has less virtuous motives as well. Offering electricity generated by 100% renewable energy closes off one avenue under which solar developers currently argue that third-party power purchase agreements (PPAs) are legal. PPAs are a common tool for financing solar projects, and are the only way some customers can afford to buy renewable energy. They are not being used today in APCo territory because of the risk that the utility will sue, claiming a violation of its monopoly on electricity sales.

The Virginia Code contains an exception to utilities’ exclusive monopoly in their territory: if a utility doesn’t sell 100% renewable energy to its customers, anyone else can. The SCC previously ruled that selling RECs doesn’t count, so APCo and Dominion’s own green power programs (consisting mostly of overpriced RECs) do not close the loophole. I have always wondered why they didn’t just do what APCo now proposes, if for no other reason than to close the loophole. The Code says nothing about the green power having to be reasonably priced.

Recall that we are still waiting for the SCC to rule on APCo’s terrible PPA-alternative proposal. The solar industry and environmental groups opposed the proposal not just because it was expensive, convoluted and certain to fail, but also because the Code’s renewable energy exception appears to allow PPAs already, making the APCo program unnecessary.[iii]

APCo and Dominion argue that the Code exception applies only where the seller supplies 100% of the customer’s demand, 100% of the time, with 100% renewable energy. A single wind farm can’t guarantee around-the-clock output, so APCo has combined wind energy with some hydro. That’s something a wind or solar developer can’t do, especially when the developer is merely putting solar panels on a customer’s roof.

These are nice legal arguments guaranteed to keep lawyers employed and the market in limbo. From the public policy point of view, though, there is nothing to be gained by suppressing the renewable energy market. Why squelch private investment and deny customers the right to use a popular financing tool to install wind and solar? For customers willing to pay a premium, why limit them to APCo’s product? If a company wants only wind power or solar power, why not let them contract with any willing provider?

The SCC should definitively declare in favor of PPAs, open the market to competition, and let the free market get to work. If the SCC won’t do it, the legislature should. If customers want APCo’s renewable energy product, terrific. If they can do better elsewhere, let them. We all win by creating new clean energy jobs, having carbon-free electricity displace fossil fuels, and giving customers the products they want.


[i] Page 6 of APCo’s Petition states: “Initially, the Company will assign to Rider REO the output of its renewable generators that are currently under long-term Purchased Power Agreements (the ‘Renewable PPAs’): the Summerville hydro-electric facility, and the Camp Grove, Fowler Ridge, Beech Ridge, and Grand Ridge wind facilities.” The Summersville dam, in West Virginia, was built in 2001. The Camp Grove Wind farm is in Illinois and began operation in 2007. Fowler Ridge, in Indiana, was commissioned in 2008. Beech Ridge, in West Virginia, became operational in 2010. Grand Ridge, in Illinois, was built in 2009.

[ii] It appears from APCo’s filing that its wind RECs sell for $18/MWh, or 1.8 cents/kWh. I don’t see a price stated for hydro RECs in APCO’s filing, but they typically have little value.

[iii] A second basis for believing that PPAs are legal does not rely on the Code exception. Rulings from Iowa and New Hampshire have recognized that PPAs involving rooftop solar are not the kind of electricity sales covered by public utility regulations. APCo’s new offering does not undercut that argument.