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Sunnier Skies for Virginia Solar
Thanks to a new law making it easier for non-utilities to sell solar electricity, backers of solar power are viewing the future with cautious optimism.
By Andrew Jenner
Virginia gets enough sunshine, relative to other states, to give it better-than-average potential for solar energy development. A 2012 study by the National Renewable Energy Laboratory estimated its potential solar energy generation capacity at 1.9 million gigawatt hours – about 17 times the state’s total annual electricity consumption.
This potential is far from reality, however. With just 10 MW of installed solar photovoltaic generation capacity, the largest being a new 2.1-MW array at the Norfolk Naval Station, Virginia ranks far behind other eastern states with more progressive solar energy policy. (New Jersey alone had 955 MW installed by the end of 2012.)
One major reason is that the state has no mandatory Renewable Portfolio Standard (RPS), due both to the considerable lobbying efforts of the state’s powerful electric utilities and a political climate generally unfavorable to new regulatory mandates. Since Virginia adopted a voluntary RPS program in 2007, the utility lobby snuffed out legislative attempts to set mandatory RPS goals and to allow renewable energy companies to sell power directly to individual customers from behind-the-meter wind or solar installations.
Over the past two years, Dominion, the state’s largest investor-owned utility, also has blocked several solar projects financed with power purchase agreements, or PPAs, arguing that the arrangement infringes on its exclusive right to sell power in its franchise territory. The PPA model, which allows nonprofit entities to capture important federal tax benefits through a for-profit energy company, has been key to development of the solar industry in other states.
In January, however, renewable energy advocates were pleasantly surprised when Dominion reversed course and put its considerable weight behind legislation that allows for limited use of PPAs in the state. In March Governor Bob McDonnell signed the bills, which creates a pilot program for solar and wind energy projects in Dominion’s franchise territory that are financed through third-party PPAs,
Solar energy advocates in Virginia are hopeful that the industry soon will make up lost ground. “[This program] is a great opportunity for Virginia customers to be able to finally take advantage of the financing model that is driving most new solar installations nationwide,” said Ivy Main, the vice-chair of the Sierra Club’s Virginia Chapter.
Solar developers within the state also are excited about the future. Mike Healy, a national board member of the Solar Energy Industry Association, called PPAs “critically important” mechanisms for stimulating private investment into the solar market, and applauded the pending change in Virginia as precedent-setting within the state.
“The outlook for this year is a really good one,” said Tony Smith, president and CEO of Secure Futures, a Virginia company that designs, finances and installs solar arrays for universities and other tax-exempt institutions and organizations.
Dominion’s support for the PPA model came as both a surprise and a relief to Smith and other solar supporters, given the utility’s recent actions to block these very same PPAs. Over the past two years, Secure Futures has been at the forefront of this conflict in Virginia, and has played an unexpected role of energy policy activist as it has struggled to find ways to bring projects online without using PPA financing.
Secure Futures’ first scrape with Dominion began in 2011, after Secure Futures had entered a PPA with Washington and Lee University to build what was then the state’s biggest solar array, at 444 KW. After construction began, Dominion challenged the legality of the PPA, saying it infringed on the utility’s exclusive right to sell power to the university. Although Smith and his colleagues believed they had a very strong case -- there is some ambiguity in the law -- the potential expense of fighting Dominion in court prompted them to refinance the Washington and Lee project through a lease agreement, on considerably less favorable terms.
Dianne Corsello, Dominion’s manager of customer solutions, said the utility did not object to the PPA agreement because Dominion opposes renewable energy development. “A third party was selling electricity to [our] customer. It was only the arrangement that we objected to,” she said.
Later that year, members of Park View Mennonite Church in Harrisonburg entered a PPA with a different company to build a small rooftop solar array. Again, after construction had already begun, the church was surprised to discover that the Harrisonburg Electric Commission (HEC), the city’s municipal utility, wouldn’t enter a net-metering agreement. After meeting with HEC officials, the church learned that the municipal utility had signed a new contract with Dominion that obligated the HEC to purchase all of its electricity from Dominion, and included specific language to block PPAs.
As had happened at Washington and Lee, the church refinanced the solar system through a lease agreement. (Given the specific grants the church had secured, it ended up converting to a lease for the same price, although doing so required an individual member to float the project for months by taking out a personal loan.)
Regardless, the new legislation will restore the PPA as an option for up to 50 MW of total capacity in Dominion’s direct service territory. With Dominion’s backing, the bill breezed through the state Senate unopposed, and passed the House by a 97-1 margin.
“We would have liked for it to have gone further, but we’re pleased we got something off the ground,” said Sen. John Edwards, D-Roanoke, the bill’s patron. “[The utilities] are the 800-pound gorilla in terms of legislation. If you can’t work with them, it’s very difficult to get things passed.”
Corsello said that Dominion is also looking forward to seeing solar generation “expand across the Commonwealth,” adding that the PPA pilot program will help the utility better understand the costs and benefits of distributed solar generation on its grid. The company also will begin a 30 MW solar partnership program this year, in which it will install company-owned solar arrays on roof space leased from large commercial customers.
Renewable energy advocates in the state, though, aren’t necessarily convinced that Dominion’s sudden support for the PPA pilot program represents a sea change in its outlook on renewable energy. The utility is one of the largest campaign contributors to prominent climate change skeptic Ken Cuccinelli, Virginia’s attorney general who is now running in a dead heat to become the next governor, and has often been seen as a foe by the state’s environmentalists.
“I think they’re doing as little as they can get away with,” said Main, of the state’s Sierra Club, speculating that part of the motivation behind the decision was the negative publicity Dominion received after blocking Secure Futures’ PPA with Washington and Lee. “I’m not seeing any big movement toward renewables on the part of the company.”
At the same time, a 50 MW PPA pilot program will be a lot better for Virginia’s solar industry than no PPAs at all, and in that, solar advocates are finding cautious optimism. “It’s a good start,” said Sen. Edwards. “If it works as well as I think it will, hopefully we can go forward.”
Andrew Jenner is a journalist who frequently writes about the environment and agriculture. He lives in Harrisonburg, Va., where he runs the blog Old South High, www.oldsouthhigh.com.