Bacon's Rebellion

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State Solicits Input from Solar, Wind Stakeholders

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James A. Bacon
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A nonprofit company specializing in addressing complex public policy issues has begun holding a series of meetings to solicit input from solar and wind energy stakeholders that will be used to formulate the Northam administration’s update to the Virginia Energy Plan.

Discussion topics will address community solar, corporate procurement of clean energy, state/local barriers to the deployment of renewable energy projects, and net metering (connecting rooftop solar panels to the electric grid).

The nonprofit, Washington, D.C.-based Meridian Institute is organizing the sessions under contract with Dominion Energy, as provided for under the Grid Transformation and Security Act enacted earlier this year. Meridian will publish a compilation of comments around the end of August. The feedback from this and other stakeholder groups addressing energy efficiency, electric vehicles and battery storage will provide input into the Northam administration’s development of the state’s energy plan. The previous plan, written by the McAuliffe administration, was published in 2014.

The inaugural session was not organized to collect input on the designated topics but to discuss the way Meridian had organized and framed the issues. Stakeholders will have a chance to make specific comments in hearings scheduled in July and August.

Given the preliminary nature of discussions, no strong points of contention emerged at the meeting, which was held at Virginia Commonwealth University in Richmond earlier today.

A few members of the roughly 60 people in attendance did wonder if Meridian might suffer from a conflict of interest due to its engagement by Dominion. Tim Mealey, a Meridian managing director, responded that his group is committed to openness, transparency, and reflecting the voices of all stakeholders. Meridian will not be issuing a report or making policy recommendations — its work product will be a summary of the participants’ views. Dominion will not review or approve the summary.

Several others questioned the way Meridian framed issues relating to the siting of solar and wind projects: What is Virginia doing right regarding the siting of renewable energy projects, and do stakeholders believe there are impediments to siting renewable energy projects in the Commonwealth?

Adam Gillenwater with the American Battlefield Trust said members of his group do not see the preservation of battlefields as an “impediment” to solar farms but rather as a competing good to be taken into consideration in siting decisions.

Others noted that the problems encountered by utility-scale solar and wind projects are different from the obstacles experienced by small power producers generating electricity at the rooftop level. Perhaps Meridian would consider conducting separate discussions for utility-scale and rooftop-scale issues, suggested Katharine Bond, Dominion senior policy adviser.

Mealey did not indicate what changes he might make to the discussion format. It is a “very unusual arrangement” to have an electric utility pay and contract for policy discussions mandated by a piece of legislation, he said. But he did not see that as a problem. His charge is to address the topics enumerated in the Grid Transformation and Security Act without being “unduly constrained” by the wording of the act.

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17 responses to “State Solicits Input from Solar, Wind Stakeholders”

  1. Steve Haner Avatar
    Steve Haner

    Jim, was the State Corporation Commission represented? Anybody else with retail consumers and retail cost at the top of their agenda? I am curious how this will work along side the integrated resource planning (IRP) process which is now before the SCC and which clearly will overlap to some extent. Will they complement each other or will the processes lead to conflicting results? Many questions….

    1. James A. Bacon Avatar
      James A. Bacon

      No one from the SCC identified themselves as such during the meeting.

      Your comment does raise another point, which I neglected to include in my reporting: At least one person (perhaps two) did recommend that the definition of “stakeholders” be expanded to include consumers.

      I don’t think the input from these meetings are intended to influence the IRP process. The feedback will be consulted to formulate the Northam administration’s update to the Virginia Energy Plan.

  2. Jane Twitmyer Avatar
    Jane Twitmyer

    There are more peeps involved … DMME .. don’t know how they intersect ..
    “The 2018 Virginia Energy Plan is intended to provide a strategic vision for the energy policy of the Commonwealth over the next 10 years. This plan is being developed in accordance with Chapter 2 of Title 67 of the Code of Virginia. Per the statute, the Department of Mines, Minerals and Energy is tasked with submitting the Plan to the Governor, the State Corporation Commission and the General Assembly by October 1, 2018.”

    Required Under Va. Code § 67-201
    “The Plan is required to propose actions that are consistent with the Commonwealth’s Energy Objectives (Va. Code § 67-101) and that will implement the Commonwealth’s Energy Policy (Va. Code § 67-102). The Code also requires the Plan to include: ” a list of energy stuff …
    This too, like the IRP will have a public input time … Written Comment Period
    “A 60-day public comment period from June 25, 2018 to August 24, 2018 has been established to ensure citizens have a voice in the plan’s development. ”

    Just looked up the Institute … “Meridian’s expertise lies in helping diverse parties move past entrenched positions and toward mutually agreed-upon and effective solutions. We have convened and managed collaborative problem-solving processes on a wide array of natural resource topics, including forests, biodiversity, public lands, oceans, endangered species, wildlife management, and air quality, among many others.”
    They did an Oceans project … “A primary goal of the Joint Ocean Commission Initiative is to accelerate the pace of change that results in meaningful ocean policy reform”.
    It all sounds very bureaucratic – keeping everyone happy. Not sure this will move Dominion et al

    1. TBill Avatar
      TBill

      A few years back when Va. was giving rebates for purchase of energy efficient appliances, that was a DMME program. We got $350 off on our HE washing machine.

  3. TooManyTaxes Avatar
    TooManyTaxes

    I have no problem with Northam sitting down with renewable energy businesses and environmentalists so long as he also does the same with consumer representatives. I trust environmentalists no more than I trust Dominion.

  4. LarrytheG Avatar
    LarrytheG

    It’s a curious thing but in the SW US, solar is not ubiquitous at all… yes there are solar but they do not cover large swaths of land. The visitor center at Mesa Verde is LEED Platinum and has all the features one would expect in a building so certified including a small patch of solar panels on the side but the vast majority of places we see out here do not have much in the way of solar nor wind and wind in the arid/desert areas which ought to be ideal for solar, the wind is horrendous also… yet wind turbines are also not universal. They exist in some places like Tehacahpi but virtually non-existent in other places.

    If you don’t do solar and wind out west where there is LOTS of sun and wind… I’m starting to wonder a bit about it – and it sort of confirms my skepticism that few of the worlds major islands have switched from diesel generators to solar/wind and if islands can’t make it work…. geeze.

    1. TomH Avatar
      TomH

      Utilities in the SW have aggressively fought distributed solar, especially in Arizona and Nevada. It took a court fight to overturn a new law in Nevada that overturned the financial arrangements that applied existing solar units, which would become uneconomic with the new fees the utility wanted to apply.

      The new surcharges in Arizona the utility applied to net metering were punitive to customers with solar. Many once thriving solar businesses have either left the state or are barely hanging on.

      It is both a testament to the unwillingness to consider a way for the utilities to still prosper while creating a way for customers to save money and to the deeply rooted influence of crony capitalism. This must change in other states, as well as Virginia, or we are in for trouble (the utilities included).

  5. TooManyTaxes Avatar
    TooManyTaxes

    If the state and nation were honest and had the interests of ordinary citizens in mind, it would also look at the transfers of wealth implicit in changes in the energy market. The price paid by a utility mandated to accept power generated by consumers or other small sources is a cost of business that will be passed on to the ratepayers through the regulatory process. To the extent that such price exceeds incremental costs or provides some above-market value to the producer who likely has greater income than most of the other ratepayers, we are seeing a transfer of wealth to some from many.

    At an even higher level, I suspect those property owners who own land and improvements near the oceans and estuaries have higher incomes than people/companies that don’t own such property. To the extent government increases the cost of energy or imposes taxes to protect or remediate the former, we will see (IMO) a massive transfer of wealth to already wealthy people. Why isn’t this issue being discussed with the other material issues associated with energy policy and climate matters? Perhaps because most of the people pushing these changes are more likely than not to receive a transfer of wealth.

  6. TomH Avatar
    TomH

    TMT,

    I am not certain where the transfer of wealth from some to many is occurring in our present utility system. Most consumers see that our utility regulation in Virginia is a huge scheme to transfer wealth from many to one.

    By maintaining a vertically integrated utility rather than decoupling generation from retail sales as 40% of other states have done, customers are providing a massive subsidy to the utility and its parent company.

    The utility is currently paid a market price for the value of its generation by PJM, then they receive billions more in revenues by receiving a rate of return from ratepayers. This is the original double dip.

    The GA has dictated that most of the solar development in Virginia be accomplished by utilities. This new generation will be cheaper than even the most advanced gas-fired plants on the system, but the utility is allowed to recover in rates a much higher value from the 10+ year-old assumption for PJM power that is in the base rates. On top of this, the ratepayers will be asked to pay the company the cost of the new solar facilities, plus all financing costs, plus about two times the original investment in profits (depending on the rate of return in the RAC), plus about four times the cost of the transmission needed to connect the new utility scale solar plant to the grid.

    If the customer were to self generate some of their electricity with solar, they would receive that electricity at a cost that is less than what they would pay in retail rates to the utility. After 8-10 years of payments for the solar unit, the solar panels would continue to generate electricity at no cost for the remainder of the 30+ years of their useful life.

    If the customer’s solar panels generated more than what they could use at the moment, they would receive a credit for that power based on wholesale costs (in Virginia). It is true that the current net metering arrangement reduces the “wires” charges for customers with solar panels because their net usage is less. This is what many complain about as a subsidy for the customers with solar.

    A different approach called a Value of Solar tariff establishes the costs and benefits of locating distributed solar within various regions of a utility’s service territory. The cost of any grid improvements needed to accommodate the solar unit is identified and offset by the value of the distributed solar generation in reducing distribution and transmission congestion and adding to grid resilience and reliability. This results in its net “value” to the grid.

    In nearly all cases where this has been adopted, the customer-sited solar has a net benefit to the grid, from a little to a lot. Such an approach avoids subsidies, incentivizes customers to install distributed solar in areas where it does the most good and lowers the costs for all ratepayers.

    You are correct in saying that adding solar is mostly an option for people with money. But many innovative approaches are being developed to allow customers of all income levels greater access to lower cost electricity.

    In Virginia, we have passed laws greatly favoring the utilities that will raise our energy costs much higher than they need to be. New technologies are giving customers more choices about their energy usage. But we should not exchange a system that is unbalanced in favor of the utilities for one that is unbalanced in favor of customers. A monopoly requires a balanced approach to serve all interests. Unfortunately, our GA has forgotten that and families and businesses in Virginia, and ultimately the utilities will be harmed as a result.

    1. TooManyTaxes Avatar
      TooManyTaxes

      Tom – I am not arguing that today’s rules are good for today’s market or that there is not a transfer of wealth to Dominion above what is a fair price for electricity. Indeed, Dominion’s double-dipping by using customer refunds for grid upgrades that also go in the rate base is simply state-authorized theft.

      What I am saying is that I fully expect there to be significant unfairness to consumers and to people who don’t own expensive beach front property if and when we move to other electric service models and programs to preserve property that might otherwise be “under water” literally. I think this issue should be discussed openly now and not 10 years down the road.

      I am quite familiar with value of service pricing, which by definition contains subsidies. I don’t think value of service pricing is appropriate for solar or other renewable power sources. It should be cost of service pricing. If an electric customer still connected to the gird generates some of his/her own power, the utility need not do so. The appropriate price should be based on the utility’s avoided costs adjusted by any transaction costs, possibly a share of overheads and, if there is outflow to the utility of “excess power,” an appropriate allocation of distribution costs.

      If I have to pay distribution costs to get my Dominion-generated electricity I should have to pay some distribution costs to sell my electricity to Dominion. If I don’t have to pay the cost for delivering my power to Dominion, Dominion pays twice — once to get the power and a second time to deliver the power to another customer. And those costs are passed on to the second customer. Unless the total price of the solar-generated electricity plus distribution costs are less than the total price of the Dominion-generated electricity plus distribution costs, the consumer is worse off with Dominion’s purchase of solar-power. That’s a subsidy to the solar power producer.

      The issue needs be viewed from the perspective of the common ratepayer and not the solar producer. If independent and home- business-based solar producers can reduce the cost of Dominion’s ratepayers below today’s electric prices, they benefit customers. If not, they don’t.

  7. Acbar Avatar
    Acbar

    “Organizing the sessions under contract with Dominion Energy” is not a phrase I associate with obtaining a balanced, comprehensive set of recommendations as to what is in the “public interest” here. Dominion’s views should be considered, but should have no veto power over the report. Dominion’s interests are not necessarily aligned with those of its ratepayers, or of Virginians generally.

  8. TomH Avatar
    TomH

    TMT,

    I think we are both discussing a cost-based scheme.

    When a customer-sited solar unit sends its excess energy to the grid, there is no significant cost to Dominion. The power is absorbed in the distribution zone in which the generation is located. There are no significant line losses or any transmission costs as are associated with the large central station generators. The cost of the distribution system is fixed and that cost is allocated based on each customer’s usage of electricity. Customers pay their fair share for these wires based on the amount of electricity they use no matter where the energy is generated (in Virginia, or Pennsylvania, or by their neighbor’s solar panels).

    As you suggest, the cost paid for the electricity provided by the customer with the solar panels is based on avoided costs plus other related expenses (as reviewed by the SCC). As I understand it, it was developed to be a neutral expense to Dominion. No benefit, no loss. So there is no subsidy to the power producer for the energy.

    The question of a subsidy has applied to the fact that the customer’s solar output reduced their purchase of energy from the utility. Because the “wires” cost is allocated based on usage, the full value of the connection to the grid provided by the utility was no longer fully paid for by the customer. The other ratepayers would have to pick up the shortfall, creating a subsidy.

    The debate about adding fixed charges to net-metering customers deals with this issue. But it addresses only one side of the equation.

    What I was suggesting was that the costs to the grid of attaching a distributed solar unit to the grid should be assessed. This would include any shortfall in “wires” costs underpaid because of the on-site generation (avoiding subsidies). It would also include any grid improvements that might be required to monitor and maintain appropriate line voltage and frequency levels with the added local generation.

    It would also include a savings to the utility for avoiding investments in distribution or transmission improvements to relieve congestion in the system that are now avoided because of the presence of local generation. The value of added resilience and reliability because of the distributed solar can also be quantified.

    The costs and benefits of distributed energy resources can be calculated and averaged per kW or kWh over specific segments of the grid. This fairly pays the energy producer and the utility (and their other customers). Because peak energy usage is reduced and the need for more utility investment is avoided, the cost of energy is lowered for all customers.

    The difficulty is that reducing energy usage under a 100% cost-of-service regulatory scheme lowers utility revenues and profits. I have been warning that we must examine the appropriate regulatory scheme for the 21st century that will benefit both the utilities and the customers.

    The utilities have convinced the GA to give them an opportunity to greatly increase their revenues to deal with the shift in energy usage. But it will be at great expense to the ratepayers. It is unclear to me if the legislators understand the consequences this policy will have on their constituents and the state economy. There is a way to consider all interests, but we are not on that path.

    1. TooManyTaxes Avatar
      TooManyTaxes

      Tom -thanks again for your always thoughtful and informative comments.

      I’ve not done much work in the electric market but I’ve done telecom regulatory for more than 40 years. Yikes! I am old.

      Your statement about consumers paying for distribution costs based on usage is understandable and reasonable. Short of moving to cost recovery on a flat-rated charge per customer (like what has been done in the telephone industry for more than a decade) makes sense. (Earlier, costs of the customer’s local line or loop were recovered in part by local rates and part by inclusion in long distance rates. Over several decades the entire loop costs have been removed from long distance rates and paid by the end user customer).

      A good argument can be made that the electric industry should charge the same rate to recover fixed distribution costs to all customers. Customers with bigger connections or long distances from the source of energy might need to pay more. An automobile plant should pay higher fixed costs than a suburban homeowner.

      Based on your explanation, the electric customer who causes more electricity to be transmitted over his/her lines pays more but only when the electricity is moved towards the consumer. The consumer who is also a producer gets his/her outbound electricity moved for free over the distribution plant.

      Let’s assume A and B each consume 900 kWh each month. A purchases all electricity from the Power Company and pays for distribution based on 900 kWh. B has a solar panel system that generates 450 kWh and pays for distribution based on that consumption level. But B also uses the distribution facility for free to send power out. But for the distribution network B could not sell her power. She uses the distribution network for the transmission of 900 kWh just like A does but pays for only half. This is a subsidy.

      And I don’t buy the concept that Dominion’s purchase of power from a solar generator in your example is a “neutral cost.” Darn few things in utility economics are a neutral cost. What this tells me is the regulators are just ignoring the real economic cost issue.

      I see where use of homeowner-generated electricity is saving other consumers something but the generator recovers those savings by being paid the utility’s avoided costs plus other items you mentioned. Giving the generator more is a subsidy.

      I think the deck is being stacked against the consumers by environmentalists just like it is stacked against them by Dominion.

      1. TomH Avatar
        TomH

        TMT,

        Commercial and industrial users of electricity pay higher total amounts for their grid connections than do residential users, but less on a per kWh basis, just as they pay less per kWh for their electricity.

        In the example that I proposed, the customer with the solar unit would be charged the same as the customer that obtained all 900 kWh from the utility. The solar customer would pay for 450 kWh of “wires’ charges on their utility bill. The other 450 kWh of usage of the “wires” would be included in the “cost” portion of the Solar Tariff, so they would be on an equal footing with other customers that had a total consumption of 900 kWh. No subsidy would occur on the “wires” side for the solar customer in this example (it is not the same as the existing net metering arrangement).

        What I meant about the credit for the purchase of the customer’s solar energy being neutral for the utility, was that it was paid to the customer in the same way that power is purchased from PJM for all other customers (based on an annual average cost, I believe). The utility neither gains nor loses by purchasing power from the customer’s solar output, so other customers do not subsidize this transaction either. I am not familiar with the details of this, but this is how it was described to me by someone who helped develop the net metering tariff.

        People concerned about the environmental effects of generating electricity have been recommending more renewable energy for some time. However, Dominion is installing solar facilities because it is the cheapest source of generation available in Virginia today (except for energy efficiency) and the utility’s only source of new demand, the data centers, want to be served with solar energy. Dominion would rather build solar and earn a significant rate of return instead of having customers or third parties install solar that the utility would earn no return on.

        This is primarily an economic decision for Dominion now. Although it is also a hedge against future carbon or GHG requirements, such as RGGI requirements or PJM carbon pricing or whatever might come down the pike. What best serves the environment also best serves the customers now. And the utilities are trying to get legislation that gives them windfall profits from the trend (but raises customer prices compared to other ways of doing it).

        I always learn from your decades of experience in telecom regulation. Thanks for the input.

  9. Jane Twitmyer Avatar
    Jane Twitmyer

    Interesting but also complicated discussion. Maybe it will all be solved when he west coast price of storage reaches the east. The net metered calculation has been an issue and Mionnesota’s “value of solar”made a good stab at solving the fairness part.

    TMT … this environmentalist wants you to know that what we push can end up being cheaper than BAU, and please don’t blame subsidies as the $20Billion in annual fossil subsidies seems to be immovable. AND the sooner we stop polluting the easier and cheaper the consequences are.

    Here is the recent report on price effects of RGGI … “Results from the Regional Greenhouse Gas Initiative in New England cut carbon without raising prices or hurting the economy.
    • Between 2009 and 2013, 3.7 million households and 17,800 businesses in the RGGI have saved 3.8 million MW/hrs of electricity.
    • Utility costs are an operating expense. Those RGGI homes and businesses saved $395 million, monies that became available for other things.
    • The “RGGI states have experienced over a 40 percent reduction in power sector CO2 pollution” since 2005, while “the regional economy has grown eight percent (adjusted for inflation)”.
    • Cumulative proceeds from all RGGI CO2 allowance auctions total $2.2 billion. This year’s auction generated a total of more than $152 million.

  10. Jane Twitmyer Avatar
    Jane Twitmyer

    Just read this …
    And here is a Nobel economist backing me .. and The Children … up 🙂 … regarding the costs of a clean energy economy

    Nobel-Winning Economist to Testify in Children’s Climate Lawsuit

    Joseph Stiglitz, who was awarded the Nobel Memorial Prize for economics in 2001 and has written extensively about environmental economics and climate change, makes an economic case that the costs of maintaining a fossil fuel-based economy are “incalculable,” while transitioning to a lower-carbon system will cost far less.

  11. Rowinguy Avatar
    Rowinguy

    Jim, I believe the purpose of the meeting you report on was not to solicit input to formulate an update to the Virginia Energy Plan, although some of the comment may well be considered for that. Instead, this firm was hired by Dominion to fulfill the company’s responsibilities under Enacting Clause 17 of Senate Bill 966, set out below:

    17. That each Phase I Utility and each Phase II Utility, as such terms are defined in subdivision A 1 of § 56-585.1 of the Code of Virginia, shall investigate potential improvements to the net energy metering programs as provided under § 56-594 of the Code of Virginia, potential improvements to the pilot programs for community solar development as provided under § 56-585.1:3 of the Code of Virginia, expansion of options for customers with corporate clean energy procurement targets, and impediments to the siting of new renewable energy projects. Each such utility shall include interested stakeholders in the investigation of such issues and the development of proposed legislation and shall issue a report of its findings to the Governor, the State Corporation Commission, and the Chairmen of the House and Senate Committees on Commerce and Labor by November 1, 2018.

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