Virginia Clean Economy Act Faces Critical Test in Dominion RPS Filing

Posted by Harry Godfrey on Feb 18, 2021 11:30:00 AM

VA Dominion Renewable Procurement

A little less than a year ago, Virginia made history by passing the Virginia Clean Economy Act (VCEA) and becoming the first Southern state to establish a 100% clean energy standard. Today, the VCEA faces one of its first critical tests, as the State Corporation Commission (SCC) considers Dominion’s 2020 Renewable Portfolio Standard (RPS) filing – the utility’s first under the law’s new binding standard. Will the Commission find in favor of the utility, ruling only on the basis of the projects Dominion proposes to build and contract for? Or will the Commission consider the utility’s proposal within the broader context of the law, which pushes utilities to meet their RPS requirements through a variety of means to ensure lowest cost, as AEE and a number of other intervenors propose? It is our hope that the Commission will look at the forest, not just the trees – and set Dominion on the right clean-energy course for Virginia’s families and businesses.

The VCEA fundamentally reset Virginia energy policy. It prioritized affordable, demand-side resources through the Commonwealth’s first mandatory energy efficiency standard, unlocked rooftop solar via a slew of long-overdue legal revisions and, set binding retirement dates for large fossil-fired power plants in Virginia. But a core tenet of the law, and the means by which the VCEA drives Virginia’s investor-owned utilities (IOUs) to a 100% clean grid, is the RPS (Subsection C in the law).

Unlike standards in some other states, Virginia’s RPS is relatively open or “flat.” Aside from a carveout that recognizes the unique ability of distributed energy resources to create a more diversified, flexible, and resilient grid, there aren’t tiers or set-asides for particular technologies. The RPS is nested in a broader clean energy standard, which recognizes the role that other zero-emission resources, like nuclear, play in decarbonizing the grid without treating them as renewables. There are guardrails to ensure that older resources (which don’t need policy support) or those that are less than truly renewable don’t flood Virginia’s market and discourage development of the resources envisioned by the Act. Apart from that, all renewable resources can compete in a single Renewable Energy Credit (REC) market.

This open market design should allow Virginia’s IOUs to meet their annual RPS targets through a flexible, affordable portfolio that employs RECs from utility-owned projects, third-party projects under long-term contract, and those on the open market.

To complement the RPS, the VCEA also included procurement goals for the IOUs every three to five years. These provisions (Subsection D) help the utilities meet their RPS targets by laying a path for new utility projects, subject to SCC review and approval. The central requirement of the VCEA, however, remains the RPS, which the IOUs must meet with RECs every year, which can be procured through a wide variety of channels (i.e. the portfolio approach).  

Now Dominion is before the SCC with its first RPS filing under the VCEA. In it, Dominion asks the SCC to approve approximately 80 MW of new solar projects the utility will own and roughly 400 MW of capacity provided through power purchase agreements (PPAs) for solar from third-party developers. In and of itself, that’s good news. The utility is embracing advanced energy, especially via PPAs that encourage competition and ensure lowest costs.

Here’s the bad news: Rather than demonstrate how these projects will efficiently and cost-effectively meet its RPS targets, which are designed to allow for efficient, least-cost compliance, Dominion asks the Commission to focus only on the specific goals under Subsection D. Questions of RPS compliance and cost-effectiveness, the utility argues, should be relegated to other proceedings.

We disagree. To do so would miss the very point of this proceeding, which is to determine whether the utility has put forward a plan to fully, efficiently, and cost-effectively satisfy the RPS requirements.

The RPS is the key dynamo transforming the power grid Virginia has today into a 100% clean grid by mid-century. Its annual targets and open structure create a fluid market for RECs from a range of renewable resources owned by a variety of parties. That allows lots of entities – from utilities, to entrepreneurs, to individual families and small businesses – to play a role in transforming Virginia’s energy system. Just because the utility is building and buying projects doesn’t prove it is in compliance with the RPS, let alone moving toward a 100% clean grid at lowest cost to Virginia businesses and households paying electric bills.

AEE is urging the SCC to consider Dominion’s proposal in the broader context of the VCEA. As written, a utility’s binding, annual, RPS targets in Subsection C logically – and literally – precede its procurement goals in Subsection D – a clear sign that latter serves as a means of meeting the former, not an end in and of itself. Until the utility acknowledges the two are tied together and specifically articulates how its procurement proposal optimizes RPS compliance, the Commission should decline to approve it.  

In the long term, utility procurement plans and RPS compliance should interface with the Integrated Resource Planning (IRP) process. The IRP provides a way for utilities and regulators to consider various pathways to the 100% clean grid required by the VCEA, using supply- and demand-side resources, and identifying the most cost-effective course. Specific proposals to build or contract for new renewable resources should flow from approved resource plans, ensuring they’re part of a cost-effective approach. Those projects, combined with RECs from the open market, will allow IOUs to meet their annual RPS obligations cost-effectively.

It will take a few years to develop that rhythm. Dominion’s 2020 IRP failed to identify a least-cost pathway to VCEA compliance, as we called out and the Commission noted in its recent ruling. Toward that end, the Commission can establish good precedents now to drive Virginia’s investor-owned utilities toward a holistic, cost-effective approach to achieving a 100% carbon-free electric power system for Virginia. There’s no better time to start than now.  

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Topics: State Policy, PUCs, Virginia