Tag Archives: SELC

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

by

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.

Virginia’s amazing year in energy: gas rises, coal falls, and solar shines (but it’s still not okay to say “climate change”)

by
Virginians rally in front of U.S. EPA Headquarters in Washington, DC in support of the Clean Power Plan

Virginians rally in front of U.S. EPA Headquarters in Washington, DC in support of the Clean Power Plan

Nobody laughed a few years ago when former governor Bob McDonnell dubbed Virginia the “Energy Capital of the East Coast”; we were all too astounded by the hyperbole. And today, even “Energy Suburb” still seems like a stretch. Yet, if you measure achievement by the sheer level of activity, Virginia is making a play for importance. The year’s top energy stories show us fully engaged in the worldwide battle between fossil fuels and renewable energy. Of course, while the smart money says renewables will dominate by mid-century, Virginia seems determined to drown rather than give up its fossil fuel addiction.

Coal falls hard; observers disagree on whether it bounces or goes splat. Nationwide, 2014 was a bad year for the coal industry. Coal stocks fell precipitously; mining jobs continued to decline; and the one thing electric utilities and the public found to agree on is that no one likes coal. Even in Virginia, with its long history of mining, coal had to play defense for what may have been the first time ever. So when Governor McAuliffe released the state’s latest energy plan in October, what was otherwise a paean to “All of the Above” omitted the stanza on coal. And this month, the governor proposed a rollback of the subsidies coal companies pocket by mining Virginia coal.

Of course, coal is not going quietly; Senator Charles Carrico (himself heavily subsidized by Alpha Natural Resources) has already responded with a bill to extend the subsidies to 2022.

EPA opens a door to a cleaner future, and Republicans try to brick it up. Speaking of hard times for coal, in June the EPA unveiled its proposal to lower carbon emissions from existing power plants 30% nationwide by 2030. Instead of targeting plants one-by-one, EPA proposed a systemic approach, offering a suite of options for states to reach their individualized targets.

The proposal drew widespread support from the public, but Virginia’s 38% reduction target set off howls of protest from defenders of the status quo. The staff of the State Corporation Commission claimed the rule was illegal and would cost ratepayers $6 billion. Republicans convened a special meeting of the House and Senate Energy and Commerce Committees, where they tried out a number of arguments, not all of which proved ready for prime time. The rule, they said, threatens Virginia with a loss of business to more favored states like—and I am not making this up—West Virginia. Also, Virginia should have received more credit for lowering its carbon emissions by building nuclear plants back in the 1970s when no one was thinking about carbon emissions.

Meanwhile, the Southern Environmental Law Center analyzed the rule and concluded that actually, compliance will not be hard. Virginia is already 80% of the way there, and achieving the rest will produce a burst of clean-energy jobs coupled with savings for consumers through energy efficiency.

Undaunted, Republicans have already introduced a thumb-your-nose-at-EPA bill developed by the fossil fuel champions at the American Legislative Exchange Council.

The “solarize” movement takes Virginia by storm. For the last few years, solar energy has been exploding in popularity across the U.S., but Virginia always seemed to be missing the party. So it surprised even advocates this year when pent-up consumer demand manifested itself in the blossoming of local solar buying cooperatives and other bulk-purchase arrangements. “Solarize Blacksburg” made its debut in March, going on to sign up hundreds of homeowners for solar installations. It was followed in quick succession by the launch of similar programs in Richmond, Charlottesville, Harrisonburg, Northern Virginia, Halifax, Floyd, and Hampton Roads.

The main reason for the solarize programs’ success was the steep decline in the cost of solar energy. 2014 saw the cost of residential installations in Virginia fall to record low prices, making the investment worthwhile to a broad swath of homeowners for the first time.

Utilities say maybe to solar, but only for themselves. Virginia still boasts no utility-scale solar, but utilities elsewhere signed long-term power purchase contracts for solar energy at prices that were sometimes below that of natural gas: under 6.5 cents/kilowatt-hour in Georgia, and under 5 cents in Texas. Compare that to the estimated 9.3 cents/kWh cost of power from Dominion Virginia Power’s newest and most up-to-date coal plant, the Virginia City Hybrid Energy Plant, and you’ll understand why Dominion has suddenly taken an interest in solar projects. Sadly, it’s own foray into rooftop solar so far stands as an example of what not to do, and a testament to why the private market should be allowed to compete.

Yet Virginia utilities continued their hostility to customer-owned solar. Dominion put the kibosh on a bill that would have expanded access to solar energy through community net-metering, while Appalachian Power matched Dominion’s earlier success in imposing punitive standby charges on owners of larger residential systems.

Fracking, pipelines, and gas plants, oh my! Renewable energy may be the future, but the present belongs to cheap natural gas. Yes, the fracking process is dirty, noisy and polluting, and yes, methane leakage around gas wells is exacerbating climate change. But did we mention gas is cheap?

2014 saw proposals to drill gas wells east of I-95, while the Virginia government began updating its regulations to govern fracking. Dominion Power started construction on a second new gas power plant, and talked up its plans for a third. The utility giant, a major player in the gas transmission business, also got approval to turn its liquefied natural gas import terminal in Cove Point, Maryland, into an export terminal. With visions of customers dancing in its head, it also announced plans for a major new pipeline to bring fracked gas from West Virginia through Virginia and into North Carolina—one of three proposed pipelines that would cut through the Virginia countryside and across natural treasures like the Appalachian Trail. The pipeline created an instant protest movement but gained the wholehearted approval of Governor McAuliffe.

Flooding in Hampton Roads becomes the new normal; it’s still not okay to ask what’s causing it. A cooler-than-normal year for the eastern United States gulled many landlubbers into believing that global warming was taking a breather, but meanwhile the ocean continued its inexorable rise along Virginia’s vulnerable coastline. It’s one thing to shrug off the occasional storm, said residents; it’s harder to ignore seawater that cuts off your parking lot at every high tide. 2014 will go down as the year everyone finally agreed we have a problem—even in the General Assembly, which passed legislation to develop a response to the “recurrent flooding.” But while the bill recognized that the problem will just get worse, it avoided noting why.

The public gets it, though. The Richmond Times-Dispatch reports that climate change was the number one topic of interest to writers of letters to the editor in 2014. And loud cheers greeted Governor McAuliffe’s announcement that he would reestablish the state’s commission on climate change, which Bob McDonnell had disbanded. As one environmental leader quipped, “People in Tidewater are tired of driving through tidal water.”

Public corruption: in Virginia, it’s not just for politicians. Everyone can agree that it was a really bad year for the Virginia Way, that gentlemanly notion that persons of good character don’t need no stinkin’ ethics laws. But we also saw plenty to prove the adage that the real scandal is what’s legal. As we learned, Virginia law allows unlimited corporate contributions to campaigns, and puts no limits on what campaigns can spend money on. So if some legislators act more like corporate employees than servants of the public, well, that’s how the system was set up to work.

But the system only works when corporations get their money’s worth from the politicians, and that quid pro quo usually comes at the public’s expense. For example, take Dominion Power’s North Anna 3 shenanigans (please). In an exceptionally bold exploitation of the Virginia Way, Dominion Power secured passage of legislation allowing it to bill customers for hundreds of millions of dollars it had spent towards a new nuclear plant that it is unlikely to build. (And the irony is that ratepayers will still be better off throwing the money down that rathole than they will be if Dominion does manage to build it.)

So as we look ahead to 2015’s energy battles, anyone wondering who the winners and losers will be needs only one piece of guidance: in Virginia, just follow the money.

Virginia’s SCC staff attacks EPA over the Clean Power Plan

by
Virginians rally in front of U.S. EPA Headquarters in Washington, DC in support of the Clean Power Plan

Virginians rally in front of U.S. EPA Headquarters in Washington, DC in support of the Clean Power Plan

In recent years paleontologists have come to believe that the dinosaurs did not go extinct; they evolved into today’s chickens and other birds. It turns out, however, that some of them did not evolve. Instead, they took jobs at Virginia’s State Corporation Commission.

Now they’ve put their DNA on full display with comments they filed on the EPA’s Clean Power Plan. The proposed EPA rules, under section 111(d) of the Clean Air Act, would require states to reduce the power plant CO2 emissions driving climate change. The staffers assert primly that they “take no position on the broad policy issues,” but that they feel “compelled” to point out all the ways the plan is “arbitrary, capricious, unsupported, and unlawful.” These mostly boil down to their claims that the plan will force coal plant closures, raise rates significantly and threaten service reliability—claims experts say are badly off-base.

Note that the commissioners themselves didn’t sign onto these comments. They come from the career staff at the Energy Regulatory Division, led by Bill Stevens, the Director, and Bill Chambliss, the General Counsel. This is pretty peculiar. I can’t think of a single other agency of government where the staff would file comments on a federal rulemaking without the oversight of their bosses.

Bill and Bill acknowledge in a footnote that the staff comments represent only their own views and not those of the commissioners. But that distinction has already been lost on at least one lawmaker. Today Speaker of the House William J. Howell released a statement declaring, “The independent, nonpartisan analysis of the State Corporation Commission confirms that President Obama’s environmental policies could devastate Virginia’s economy.”

And really, “devastate”? But that’s the kind of hysteria you hear from opponents of the Clean Power Plan. While the rest of us see healthier air, huge opportunities for job growth in the clean energy sector, and the chance to avoid the worst effects of climate disruption, the Friends of Coal see only devastation. And no wonder: Howell accepted $14,000 from the coal industry just this year alone.

But back to what the Bills over at the SCC think about the Clean Power Plan. How did they arrive at their conclusion that it would raise rates? According to Cale Jaffe, a lawyer with the Southern Environmental Law Center who practices extensively before the SCC, “Staff never did an analysis of an actual plan to comply with the Clean Power Plan, which has a lot of flexibility built into it. Instead, the Staff simply took Dominion Virginia Power’s last Integrated Resource Plan from 2013 and used it as a proxy for a compliance plan. That’s a significant flaw that skews the Staff’s analysis.  The Dominion plan, after all, was released nearly a year before the EPA even announced its rule.”

Compounding the error, says Jaffe, the staff “artificially inflated the cost by assuming that the only compliance strategy would be for Dominion to build a new nuclear reactor: the most expensive resource, which is not a required compliance option.”

We can all agree with the staff that nuclear plants are appallingly expensive. That may be why the EPA doesn’t assume most states will build them as part of their compliance strategy. To the contrary, the expectation is that states will respond with energy efficiency, wind and solar—all resources that are plentiful in Virginia but largely untapped so far.

As Jaffe notes, “an independent analysis of the actual Clean Power Plan itself shows that Virginia can achieve its goals at a fraction of the cost while lowering Virginians’ bills by 8%.”

We have seen time and again that the SCC staff has never been friendly to either renewable energy or energy efficiency, so it’s no surprise that their comments dismiss them as unworkable. Indeed, it is clear from the comments they filed that their real interest is promoting an anti-EPA, pro-coal agenda. Otherwise it would be hard to understand why they would stray so far from their own area of practice to attack the very legality of the Clean Power Plan.

Jaffe lists a number of other ways the SCC staff screwed up, but you get the picture: careful, reasoned analysis wasn’t the point. Still, you’d think that if agency staffers decide to go rogue like this, they would be careful to get the facts right.

———————————

Update: I have heard from some sources that the SCC staff had the blessing of at least one commissioner in putting forth their comments, and that all three commissioners may have known. If so, that’s even worse.