In this op-ed for pv magazine, Ivy Main looks at new legislation to remove barriers and allow Virginia to develop its distributed solar potential.
At first glance, Virginia looks like it should be a new boom market for solar. In 2018 the General Assembly passed legislation putting 5,500 megawatts (MW) of solar and wind “in the public interest,” a magic phrase that eases the approval process at the State Corporation Commission, which regulates Virginia utilities.
The state’s largest utility, Dominion Energy Virginia, has scuttled plans to build new combined-cycle gas plants in favor of a buildout of solar farms coupled with gas peaker plants. (The utility, whose parent company is heavily invested in gas transmission and storage, has been slow to embrace storage technologies in place of gas peakers.)
Corporate America has also discovered the value of Virginia solar for producing energy to offset the demand of energy-hogging data centers. Most of Virginia’s estimated 656 MW of solar installed to date (based on SEIA numbers) or under development represents large (20 MW up to 500 MW) utility-scale installations that will primarily serve tech titans like Amazon, Microsoft and Facebook.
But where does that leave distributed generation like rooftop solar? The 2018 legislation promoted only utility-owned or controlled solar, leaving customer-owned solar in the same fix it has always been. Virginia lacks a mandatory renewable portfolio standard and offers no rebates or tax credits to incentivize private investment in customer-sited solar. That leaves retail net metering as the only state support for solar customers.
In most states, residential and commercial solar installations have outpaced utility-scale solar. In Virginia, it is the other way around. Looking on the bright side, that means a huge opportunity should await us as solar prices continue their historic plunge.
Rooftops, parking lots, closed landfills, airports and other spaces can be put to work providing our communities with clean energy. Building this distributed solar means saving money for taxpayers, creating jobs and economic development, lowering our carbon footprint, and making our communities more resilient in the face of climate change and threats to the grid.
Unlike large solar farms that utilities build and control, distributed solar is mostly built by and for customers, usually with private investment dollars. This presents an important economic growth opportunity for Virginia, especially because distributed solar creates more jobs than utility solar, and these jobs tend to be filled by local residents.
Unfortunately, Dominion and other utilities have succeeded in imposing a host of barriers that limit the use of net metering and of financing approaches that would let more of their customers generate their own electricity from solar. The barriers range from project size caps to punitive charges imposed on larger residential systems. Constraints on third-party power purchase agreements (PPAs) make that financing mechanism available to only certain customers in certain parts of the state, and subject to strict limits and conditions. And perhaps most problematically, net metering faces a cutoff when the total capacity reaches just 1 percent of a utility’s peak load.
For several years the solar industry has struggled to lower these barriers, proposing legislation that would open the market for customer solar without new subsidies or mandates. Utilities have beat back reforms year after year, killing bills in utility-friendly committees so they never get floor votes.
With the urgency mounting, this year solar companies worked with local governments, consumer groups and the environmental community to put forward a comprehensive reform bill removing policy barriers to private investment in distributed solar. “Solar Freedom” legislation has been filed in both the Virginia House, as HB 2329 (Keam) and Senate, as SB 1456 (McClellan and Edwards).
Solar Freedom consists of these “Easy 8” reforms:
1. Remove the 1% cap on net metered solar
- Installers warn this cap on the total amount of solar that can be net metered in a utility territory threatens their livelihood, and is not needed for grid stability.
- Many solar projects require months of planning. The existence of the cap creates uncertainty about projects, which affects customers’ ability to secure financing.
2. Confirm the legality of third-party financing through power purchase agreements (PPAs) for customer-sited solar
- Under a third-party PPA, a solar developer owns and operates a solar facility on a customer’s property and sells the electrical output to the customer. This allows the customer to get solar energy at no upfront cost. The developer takes advantage of the Federal investment tax credit and depreciation rules and passes along the savings to the customer—an important feature for tax-exempt entities like local government and non-profits.
- Third-party PPAs are responsible for most of the commercial installations in the U.S., but are constrained to severely limited “pilot programs” in Virginia.
- Solar Freedom would recognize PPAs as private contracts exempt from regulation as retail sales of electricity.
3. Allow local governments to install solar facilities of up to 5 MW on government-owned property and use the electricity for nearby government-owned buildings
- This would allow a local government to credit the output of a solar array located on government-owned property where there is no electric load (e.g., a closed landfill) to load on other government-owned properties within the jurisdiction, such as schools and municipal buildings. Current law limits the output of a solar facility to on-site use.
- This would allow the efficient use of government property and result in taxpayer savings.
- Many local government sites could host arrays above 1 MW (the current limit for net metered projects).
4. Allow a customer to attribute the output of a single renewable energy facility to more than one meter on the customer’s property or on adjacent property owned by the same customer
- Some farm customers are permitted to aggregate their meters under the term “agricultural net metering.” Other customers should have this option.
- Currently customers must use the output of a solar array on the same property (or for farmers, on contiguous property). All customers should be allowed to use the output of their solar array on buildings they own that are located on the same or adjacent property.
- The proximity requirement means this change would not open the door for large corporate customers to install a single array to serve distant properties.
5. Allow the owner of a multi-family residential building to install a solar facility on the building or surrounding property and sell the output to the tenants
- This would open opportunities for apartments and condominiums, including buildings that serve low and moderate-income residents.
6. Remove restrictions on customers installing a net-metered solar facility larger than required to meet their previous 12 months’ demand
- The limit prevents customers from sizing a solar facility to accommodate future needs such as the purchase of an electric vehicle or an addition to a home or business.
- Customers who produce more electricity than they consume over a year would not be able sell the excess at retail, so there is no economic incentive for a customer to install “too much” solar, and no legitimate reason for the utilities to oppose a customer’s preference for the size of their solar array.
7. Raise the project size cap for net-metered non-residential projects from 1 MW to 2 MW
8. Remove the standby charges on residential solar facilities between 10 and 20 kW
- Larger residential systems are becoming more popular with the adoption of electric vehicles. Standby charges act like a tax on larger systems, making them economically prohibitive and effectively limiting homes to 10 kW. This harms all ratepayers by restricting the addition of privately-funded, clean peak power to the grid.
Finally, Solar Freedom would also amend the Commonwealth Energy Policy to declare it the policy of the Commonwealth to support distributed generation through the addition of three important goals:
- Encourage private sector investments in distributed renewable energy;
- Increase the security of the electricity grid by supporting distributed renewable energy projects with the potential to supply electric energy to critical facilities during a widespread power outage; and
- Augment the exercise of private property rights by landowners desiring to generate their own energy from renewable energy sources on their property.
Solar Freedom will face its first test in a subcommittee of the House Commerce and Labor Committee on the afternoon of Thursday, January 24. It has not yet been docketed in Senate Commerce and Labor.