By Steve Haner

Virginia Governor Glenn Youngkin (R) in his State of the Commonwealth Address last week described the Virginia Clean Economy Act as a “quagmire.” Later that same day, the director of his Department of Energy warned that the state’s premier electric utility might soon begin making “deficiency payments,” in effect paying fines for failing to comply with VCEA.  

In testimony to a Virginia Senate committee, Director Glenn Davis claimed Dominion Energy Virginia has “budgeted” up to $450 million to make such deficiency payments for 2025 and also forecasts deficiency payments in 2026 and 2027. Should such payments be made, the utility would just pass the cost along to its ratepayers.

Deficiency payments in these earliest years of VCEA were not anticipated, but it may be true they are about to start. A deep dive into the company’s October 2024 VCEA compliance filing, pending at the State Corporation Commission, failed to turn up that specific number of $450 million. (Not all of the many hundreds of pages were examined.) However, there was this in one Dominion executive’s testimony:

…it is possible the Company will have to start paying the deficiency payment as early as next year (2025) to satisfy its compliance for calendar year 2024.  The Company is currently one of the largest purchasers of RECs (renewable energy certificates) in PJM where the demand for RECs continues to increase. While the Company’s VCEA requirements are contributing to the increasing demand, REC supply is not increasing at the same pace.

As a result, REC prices in PJM continue to increase and are currently $39 per REC for PJM Tier I. Further, beginning in 2025, 75% of the RECs the Company retires for RPS Program compliance must come from sources within the Commonwealth, which will greatly restrict the Company’s supply.

Indeed, 2025 will be a key and difficult year for Dominion in seeking to comply with the 2020 green energy mandates, first because of the move to requiring 75% of RECs be from Virginia energy sources but also because the required target for using non-carbon emitting energy sources jumps to 26%. It could also be a year when energy demand exceeds the forecasts because of this cold winter and because of the exponential data center growth. 

In another part of the SCC testimony, Dominion projected forward on how it would comply with VCEA in coming years and again, actual deficiency payments were indicated (but no dollar amounts). Even more expensive for future ratepayers, massive amounts of purchased RECs would be required, on average 20% of the required RECs. In the later years, that’s a huge amount. Dominion does not expect to be able to meet the VCEA green energy mandate with RECs from its own or from its leased power plants.

Yet another indicator of the challenge Dominion faces is that it had to use banked RECs from prior years to comply with the VCEA’s target for 2023 (11.1 million RECs) and had only about that many RECs still in the bank as of September 2024 to meet 2024’s goals. This could be the year it falls short and needs to pay cash, again, largely because this is the year the RECs have to be mostly from Virginia.

The VCEA sets two deficiency payment amounts. In most cases, the fine will be $45 per megawatt-hour of shortfall below the VCEA target. For small distributed solar installations, the fine could be $75 per megawatt-hour of shortfall.

Director Davis was testifying in favor of a bill to basically eliminate the deficiency payment provision of the VCEA, which bill was promptly shot down by the Democrats in the majority on the Senate Commerce and Labor Committee. It was just one of several bills pending that would radically change the VCEA. Its opponents quickly went to the podium and stated the deficiency payments were essential to VCEA. A day spent reading that current SCC application certainly confirms that.

A renewable energy certificate is an intangible asset. It heats no houses and runs no factories. The value of the REC, or the cost to somebody who buys it, is in addition to the actual energy produced. The entire renewable energy industry is financially dependent on the extra, non-energy revenue produced by RECs and huge fortunes are built on the secondary market which trades them.

Any renewable energy certificate generated by a solar field or a wind turbine is based on the actual energy produced, not the energy that is deemed possible by the facility’s claimed value in megawatts. If the nameplate value of a plant is 100 megawatts per hour but it produces only 50% of the time, only 50 RECs are created. And with wind and solar energy, the nameplate value is a meaningless intentional misdirection. “This will power 150,000 homes!” No, no it won’t, and they know it.

Again, the proof is in the Dominion RPS filing, which reports on three years of performance by its existing fleet of solar facilities. Only a couple of them have achieved even a 25% capacity factor, and never for more than a single year. Several produce electricity as seldom as 15 to 17% of the time. Nothing has changed since this report almost six years ago. Solar power in Virginia is just not very good, compared to sunnier locales closer to the Equator.

One set of statewide headlines and televised reports on these embarrassing solar results would do the VCEA and the solar-wind-industrial complex a great deal of damage with the public. Thus, you will never see them except by looking here. Too many people are getting too rich off installing them and then selling the RECs they actually accrue. This would include the utilities themselves, who profit off major capital expenditures.

Even more detailed data on their individual performance was also in the file but of course was redacted from the public SCC file. They don’t want you to know. Dominion may build thousands and thousands more megawatts of solar or wind, but it will never power its customers 100%. Ratepayers will also be forced to pay to cover deficiency payments in cash or to buy millions of outside RECs year after year. Both are money for nothing.

This was known and understood by some when the VCEA passed in 2020. They just didn’t tell you. A quagmire indeed.

The SCC filing is ripe with unreported stories. Stand by for additional columns.