Tag Archives: Remington

McAuliffe rides to Dominion’s rescue on Remington solar plant

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photo credit Kanadaurlauber

photo credit Kanadaurlauber

Last October, Virginia’s State Corporation Commission turned down an application from Dominion Virginia Power to build a 20-megawatt solar facility on land it owns near Remington, Virginia. The SCC told Dominion it had failed to meet its statutory obligation to consider third-party market alternatives that could save ratepayers money.

Rather than going back to the drawing board, we learned today that Dominion has found another way to build the project. In what is being billed as a “public-private partnership,” Dominion will sell the power from the project to the state of Virginia, and then will sell the associated renewable energy certificates (RECs) to Microsoft to help it meet its renewable energy goals for its data centers.

Governor McAuliffe announced the deal today at an event in Richmond, touting its ability “to reduce Virginia’s carbon emissions and diversify our energy portfolio.”

The deal seems to offer a great outcome for Dominion and Microsoft. A Dominion spokesperson told me the company will have to file a new application with the SCC for a certificate of public convenience and necessity, which they anticipate doing in May. But with no ratepayer impact now, they don’t expect the SCC would deny it this time around.

In this way, Dominion avoids having to consider less expensive means of acquiring solar energy, such as power purchase agreements or bids from third party developers.

The announcement did not say whether the state would pay a premium for power generated at the Remington site. It is also not clear how the deal relates to Governor McAuliffe’s goal, announced last December 21, of having the state derive 8% of its electricity from solar energy within three years. Legally, if Microsoft buys the RECs from the Remington project, the state cannot claim to be purchasing solar energy. So we hope the Governor has not been misled into thinking the state is buying solar energy with this deal.

As a general matter, though, supporting a large solar project fits well within the Governor’s ambitious jobs agenda, and it may be money well spent if it leads to more projects and greater investment. Certainly it beats handing out tens of millions of dollars annually to an ever-shrinking coal industry, as Virginia still does.

But we should keep this 20 MW project in perspective. North Carolina installed 1,134 MW of solar in 2015 alone. And meanwhile over at the SCC, Dominion is awaiting approval of its latest natural gas plant, the 1,600-MW Greensville Power Station, which will increase Virginia’s CO2 emissions by much more than the Remington project could possibly reduce them.

Which is to say, the further we go, the behinder we get.

Getting the policy right could mean massive investments in solar for Virginia

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There’s more where this came from–but will it come to Virginia? Photo credit Christoffer Reimer/Wikimedia

Virginia is poised to see hundreds of megawatts of new solar built in 2016, an enormous acceleration from today’s 20-or-so. Some of this is the result of recent utility commitments, but the rest represents demand from the private market. And there’s a catch: many of these projects could be tripped up or squelched altogether by unnecessary policy barriers.

The list of projects shows just how broad the appeal of solar has become, and how all parts of the Commonwealth will benefit. On the utility side, Dominion Virginia Power’s solar plans include the 20 MW Remington project, another 56 MW from three projects it plans to buy from developers, and 47 MW worth of power purchase agreements with third-party developers.* Old Dominion Electric Cooperative is building two projects totaling 30 MW to serve its member cooperatives, and Appalachian Power has put out a request for proposals for 10 MW of solar.

Projects not initiated by utilities include Amazon’s 80 MW solar farm in Accomack County, which has now been purchased by Dominion’s parent company, Dominion Resources, along with with the contract for the sale of the power. (Dominion Resources will own the project through its “merchant” arm, so it will not come under the banner of Dominion Virginia Power.)

More recently, the Council of Independent Colleges of Virginia (CICV) issued a request for proposals for up to 38 MW of solar spread among its fourteen members statewide.

Beyond these projects, grid operator PJM Interconnection lists hundreds of MW of Virginia solar in its “queue”—projects mostly still on the drawing board, but reflecting the desire of developers to build and sell solar in Virginia.

The new-found popularity of Virginia solar is not limited to multi-megawatt projects like these. Residential solar is also growing rapidly, in part due to the discount “solarize” programs popping up all across the state. In addition, projects on low-income housing and on schools in Albermarle, Lexington, Arlington and elsewhere have turned civic leaders into proponents.

While customers like the social and environmental benefits of solar, virtue isn’t bankable; the real driving force here is economics. The price of solar panels has declined so much that Dominion Power touted savings on electric bills as the reason residents should support its plans for a Louisa County solar farm.

Yet what’s holding back the market is a list of policies in place because Virginia utilities opposed the growth of solar for so long. At first utilities said they wanted to protect the grid from the unknown effects of intermittent generation. Now, having gotten into the act themselves, they are more concerned with protecting their monopolies from the known effects of competition. The result is years of projects going to other states, and a very damaging level of market uncertainty today.

For example, some of the CICV members won’t be able to proceed unless the State Corporation Commission rejects the utilities’ contention that third party power purchase agreements (PPAs) violate Virginia law outside the narrow confines of a pilot project Dominion negotiated in 2013, or the General Assembly acts to bring clarity to the law. And all of the colleges are constrained by legal limits on the size of the projects they can install.

In addition, Virginia limits the size of net-metered renewable energy projects to 1 megawatt (up from 500 kilowatts last year, but still below the 2 MW limit that the industry sought), and places an overall cap on these projects of 1% of a utility’s overall sales. Residential projects are limited to 20 kilowatts, with systems sized between 10 and 20 kW subject to punitive standby charges. Commercial and residential projects are limited to just the size required to meet a customer’s demand based on the previous year’s electricity usage, unfairly constraining customers who plan to expand or buy electric vehicles.

With so much interest in the Virginia solar market, these barriers only hurt the state in its efforts to attract new businesses and development. Even two years ago, more than 60% of Fortune 100 companies had adopted renewable energy procurement and greenhouse gas reduction goals. Household names like Walmart, Johnson & Johnson, Proctor & Gamble and Goldman Sachs have pledged to source 100% of their electricity from renewable energy. More companies are expected to join them, creating opportunities in states that want to accommodate them.

Yet the only reason Amazon could proceed with its Virginia project was because the developer arranged to sell the power into the grid in Maryland, beyond Dominion’s reach. The fact that Dominion’s parent corporation then bought the project and the PPA for its own investment portfolio underscores the hypocrisy of our utilities in opposing other companies’ right to enter PPAs.

Writing last week, energy consultant and developer Francis Hodsoll argues that Dominion Virginia Power actually needs a thriving private market to help it establish the market price of solar, which it can use to justify its own projects to regulators.

Utility-owned solar and private investments are not an either/or proposition. Virginia is at the bare beginning of the clean energy transition, and there are plenty of opportunities for all—if our leaders will take down the walls.

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*The State Corporation Commission’s rejection of Dominion’s plan to build and own the Remington plant means a cloud still hangs over plans for that project as well as the three projects making up the 56 MW package. But apparently the clever legal minds at Dominion have a plan. The gist of it is that they will use pricing from the 47 MW of PPA solar to demonstrate the company isn’t overspending, which will meet the requirement that the company consider market alternatives. Now all that remains is to get the blessing of the IRS to allow them to use the federal tax credits as effectively as a third-party developer could.

I seem to be the only one to regard that last detail as a hitch. Other than that, though, I’m impressed. Dominion ratepayers can be proud that their money pays the salaries of people so skilled in manipulating energy laws and tax codes. Just imagine what could be achieved if all that talent were put to work improving Dominion’s abysmal record on energy efficiency and renewable energy.

 

 

Virginia regulators rain on Dominion’s solar parade; 76 MW in doubt

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A tough stance from the SCC means delays for Dominion's solar plans. Photo by Activ Solar via Wikimedia Commons.

A tough stance from the SCC means delays for Dominion’s solar plans. Photo by Activ Solar via Wikimedia Commons.

Last week Virginia’s State Corporation Commission rejected Dominion Virginia Power’s proposed 20-MW solar facility in Remington, Virginia, citing the company’s failure to evaluate third-party market alternatives. Although the solar industry had urged this result, the ruling throws the Remington project into limbo—and with it, three other solar projects Dominion has in the works. Moreover, the language in the order has many advocates concerned the SCC may be setting a higher bar for solar projects than for fossil fuel projects.

The ruling that utilities must consider market alternatives to a self-build project is a win for Virginia’s solar industry, which argued that ratepayers would be better served if Dominion let the industry build and operate the Remington project through a third-party power purchase agreement (PPA). That approach would take advantage of third-party developers’ access to more favorable treatment under the federal tax code. Ratepayers would also benefit from the slimmer profit margins of private sector companies compared to the 10% return-on-investment guaranteed to Virginia utilities.

I made the same argument in this space back in June, and lamented the fact that Dominion’s greed put an otherwise good project in jeopardy. As indeed it has: there is no certainty now that Dominion’s first utility-scale solar facility will get built before the federal investment tax credit (ITC) for commercial and utility solar projects drops to 10% from its current 30% at the end of 2016. Without the higher ITC, the project will become more expensive for ratepayers, and surely make it even more difficult to get approved.

In theory, Dominion can respond to the SCC ruling by converting the Remington project from a self-build to a PPA, allowing developers to bid. Then the utility would recalculate the cost to ratepayers, offer up the savings, and renew its application to the SCC. Given the time crunch, the SCC might allow the current case to be reopened instead of starting from scratch. There might not be time for a perfect competitive bidding process this time around, but arguably it is more important to get the additional 20% savings from the ITC than it is to have a picture-perfect bidding process that causes the project to miss the 2016 tax-credit deadline.

For Dominion, though, going back to the SCC with a better deal for ratepayers would mean admitting its first application wasn’t good enough. And the utility is showing no taste for humble pie. Immediately following the decision, Dominion lobbyist Dan Weekly sent a letter to every member of Virginia’s General Assembly complaining that “we are puzzled by and very much disagree with the findings in this decision.”

If the puzzlement persists, Dominion might file a motion asking the SCC to reconsider its ruling, instead of working on a fix. Perhaps Dominion could persuade the SCC to let the utility proceed with the Remington plant as proposed, given the tight timeline, in exchange for Dominion’s agreement that future solar projects will follow a fully transparent RFP process.

However, there is more at stake here for Dominion than just Remington. This summer the utility put out a Request for Proposals (RFP) for additional solar projects. On October 1, it announced it had selected three projects totaling 56 MW, all of which it expected to be operational by December 2016 in time to earn the 30% tax credit. But instead of using PPAs and buying the power, Dominion planned to buy the projects from the developers straight off, once again giving up the tax advantages of the PPA approach. It’s not at all clear how Dominion will proceed with these projects now.

On a brighter note, Dominion’s press release also stated it is considering buying some solar power through PPAs. Four weeks ago this mention read almost like an afterthought, but these projects now may offer the most promising way forward.

But Dominion faces another problem with its regulator: the SCC hasn’t actually pledged to approve a new-and-better deal if the utility offers one. The Order merely states that “Dominion is free to refile an application that meets all statutory requirements, including the Code’s requirement regarding third-party market alternatives, and that establishes the reasonableness and prudence of any costs proposed for recovery from consumers.”

Note that word “and.” The SCC clearly remains deeply skeptical of solar’s value. Never mind that the plummeting cost of solar has made it the fastest-growing energy source in the country today, that it offers advantages in price stability and carbon reductions that fossil fuels can’t match, and that Virginia legislators and citizens are clamoring for more of it.

I have trouble believing the SCC would actually reject a utility solar PPA that emerged from a transparent bidding process. It wasn’t solar that doomed this application, it was Dominion’s greed and over-reach.

That said, surely there is a whiff of unfairness here. As the SCC concedes, Virginia law pronounces solar “in the public interest.” That’s a seal of approval that has never been accorded natural gas. Yet the SCC hasn’t put gas plant proposals through the same hoops it now insists on for solar.

The SCC will soon take up Dominion’s latest gas plant proposal, a $1.3 billion, 1,600-MW behemoth to go up in Greensville County, Virginia. When that happens, we’ll be watching to see how much “prudence” really matters to the SCC.

As for solar, Dominion has got itself into a pickle, but there should still be time to correct its mistakes and get these projects up and running by the end of 2016. Meanwhile, the General Assembly should hedge its bets by freeing up the private market for solar, clearing away the barriers that hold back solar investments by businesses, local governments and individuals.

The SCC has this much right: competition is good. Competition that helps us transition to a clean energy economy is even better.

NOTE: An earlier version of this article took the SCC to task for overruling a hearing examiner who recommended in a 2013 case that Dominion be required to look at market alternatives to its Brunswick natural gas generating plant. A reader noted that the law specifically requiring the consideration of market alternatives had not taken effect at the time and so was not binding on the SCC. I regret the error.

 

 

 

Dominion makes a play for utility-scale solar, but Amazon steals the show

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As_solar_firmengebaude.Christoffer.ReimerThis winter Dominion Virginia Power promised Governor Terry McAuliffe it would build 400-500 megawatts (MW) of utility-scale solar power in Virginia by 2020, part of the deal it cut to gain the governor’s support for a bill shielding it from rate reviews through the end of the decade. The company also took a welcome first step by announcing a proposed 20-MW solar farm near Remington, Virginia.

The applause had hardly died down, though, when Amazon Web Services announced it would be building a solar project in Accomack County, Virginia, that will be four times the size of Dominion’s, at a per-megawatt cost that’s 25% less.

Why such a big difference in cost? The way Dominion chose to structure the Remington project, building and owning it directly, makes it cost more than it would if a third party developed the project, as will be he case for the Accomack project. That means Dominion is leaving money on the table—ratepayers’ money.

There is nothing wrong with the Remington project otherwise. The site seems to be good, local leaders are happy, and solar as a technology has now reached the point where it makes sense both economically and as a complement to Dominion’s other generation. But by insisting on building the project itself, and incurring unnecessary costs, Dominion risks having the State Corporation Commission (SCC) reject what would otherwise be a great first step into solar.

And that’s a crying shame, because solar really is a great deal for consumers these days. Utilities now regularly sign contracts to buy solar for between 4.5 and 7.5 cents per kilowatt-hour. Compare that to the 9.3 cents/kWh cost of electricity produced by Dominion’s newest coal plant in Virginia City, and it’s no wonder that solar is the fastest growing energy source in the country.

Utilities get those rates by buying solar energy from solar developers, not by playing developer themselves. From the ratepayer’s point of view, developers have three advantages over utilities: they are experts at what they’re doing, they work on slimmer profit margins, and they get better tax treatment. Dominion loses all three advantages if it builds the Remington solar farm itself.

Dominion has already demonstrated its lack of solar knowhow. In a May 7, 2015 filing with the SCC (case PUE-2011-0017), it admitted its “Solar Partnership Program,” which puts solar on commercial rooftops, is a year behind schedule and will total less than 20 MW of the 30 MW legislators wanted. Previously the company had told stakeholders it would likely hit its $80 million budget limit with only 13-14 MW installed.

As for profit margins, Dominion gets a guaranteed 10% return on its investments. This explains its desire to build solar itself, but it’s hard to justify charging ratepayers a 10% premium when there are cheaper alternatives courtesy of the free market. Unlike Dominion, solar developers have to compete against each other, so they accept much slimmer profit margins.

And then there are the tax implications. A third-party developer can claim the federal 30% tax credit immediately, and can take accelerated depreciation on the cost of the facility over five years. A utility has to take both the tax credit and the depreciation over the expected life of the facility, 20 years or more.

These three factors—knowhow, free-market cost competition, and tax implications—add up to huge savings for consumers when a project is put out to bid by third-party developers.

Just how big the savings could be is clear from a comparison of Dominion’s solar farm with Amazon’s project, to be built by a third-party developer. Dominion says Remington will cost $47 million for 20 MW, or $2.35 million/MW. Amazon’s project is reported to cost $150 million for 80 MW, or $1.875 million/MW. That is a difference of about 25%.

Obviously, then, the better way to finance Remington is for Dominion to put the project out for competitive bid among solar developers. Dominion won’t make as much money for its shareholders, but it will save money for ratepayers. And really, as a member of the American Legislative Exchange Council (ALEC), Dominion ought to jump at the chance to live up to ALEC’s “free markets” mantra.

More to the point, keeping costs down this way will make it possible for the project to get SCC approval, opening the way to many more like it. With hundreds of megawatts still to go, Dominion needs to show it can do solar right.

In fact, Dominion should put out a request for proposals for the full 400 MW it says it plans to build. This could include revisiting its refusal to buy power from another proposed solar farm that went nowhere. That solar facility in Clarke County, proposed by OCI Solar Power six months ago, would have added another 20 MW to the grid. With only a year and a half to go before the 30% federal tax credit drops to 10%, Virginia ratepayers have a right to expect many more solar farms, and soon.

Frustration over Dominion’s slow pace is widespread among solar advocates. Cale Jaffe, Director of the Southern Environmental Law Center’s Virginia office, noted, “Last General Assembly session, Dominion committed to building 400 megawatts of utility-scale solar projects in Virginia by 2020.  The General Assembly then passed, at Dominion’s urging, legislation declaring up to 500 megawatts of new solar projects to be in the public interest. But, unfortunately, Dominion appears to be getting out of the blocks very slowly when it comes to solar power.  I’m concerned that the company is not currently on pace to live up to its pledge.” SELC has intervened in the Remington case on behalf of environmental groups Appalachian Voices and Chesapeake Climate Action Network.

Of course, we also need solar from all sources, not just our utilities. Homeowners, small businesses, nonprofits, and big industrial customers—all should be encouraged to build solar as a matter of the public interest. Solar diversifies our energy base, creates local jobs, strengthens the electricity grid, and will help Virginia meet the EPA’s Clean Power Plan.

Even 500 MW of solar pales compared to the 4,300 MW of new natural gas plants Dominion expects to have built by 2020. When you adjust for capacity factors, in 2020 solar will make up less than five percent of Dominion’s power generation from new projects, and barely a blip on the radar screen of total generation.

While sad, this is hardly news. Virginia famously lags behind neighboring states in developing solar resources. Maryland had 242 MW of solar installed at the end of 2014 and expects to meet its goal of 1,250 MW by the end of 2015. North Carolina has over 1,000 MW and counting. The same source puts Virginia at a grand total of 14 MW.

(In fairness I think our total has to be a little better than that, but when your state’s total looks like some other state’s rounding error, who really stops to crunch the numbers?)

Getting serious about solar means opening our market to competition. Attracting more projects like Amazon’s will require the General Assembly to pass legislation removing all barriers to third-party power purchase agreements. Amazon’s solar farm has the advantage of being located on the Maryland border. It will feed into power lines owned by Delmarva Power, and then into the PJM transmission grid serving the multistate region that includes Virginia. It will not serve Amazon’s data centers in Virginia directly, but will simply offset their power demand. If Amazon or anyone else wanted to put in a similar solar farm elsewhere in Virginia, they would run into restrictions on third-party power purchase agreements and the absurd terms and conditions imposed by our utilities even on large corporate customers.

Tearing down the barriers that prevent the private market from building solar is critical to closing this gap. Dominion made a half-hearted effort to serve big customers, in the form of its cumbersome “RG tariff.” The fact that no one has used it, and Amazon has done an end-run around it, proves how worthless it is. Virginia should put an end to utility red tape, open the market to competition, and let the sunshine in.

The State Corporation Commission will hear arguments on the Remington proposal starting at 10 a.m. on July 16, 2015 at its offices in Richmond. The case is PUE-2015-00006.