Lawmakers expanded school districts’ ability to go solar. But in Southwest Virginia, a utility contract is getting in the way.

With school districts bracing for slashed budgets as the COVID-19 pandemic drags beyond its sixth month, there’s one bright spot on the horizon: the sun.

No, literally, the sun. 

In Virginia, 2020 has been a banner year for school solar. The commonwealth broke into the top 10 ranking of states with the most solar installed on schools, and agreements brokered through the Clean Economy Act significantly expanded the opportunity for districts in Dominion Energy territory to install solar panels on their buildings. As of the beginning of the year, Virginia schools were producing more than 20 megawatts of power at some 89 different facilities. 

Still, the progress has been uneven.

“All of that growth was in Dominion territory,” said Tish Tablan of Generation180, a pro-clean energy nonprofit that along with the Solar Energy Industries Association and the Solar Foundation authors the yearly rankings of states’ progress toward putting solar in schools. “Appalachian Power territory is getting left behind.”

According to Generation180’s data, as of January, 99.9 percent of the solar capacity installed at Virginia K-12 schools was found outside Appalachian Power’s Southwest Virginia territory. In areas served by other electric utilities such as Dominion and the state’s many cooperatives, 20,192 kilowatts of solar could be found at 83 schools. In Appalachian’s service area, the total was 22 kilowatts at six schools. 

Laws encourage solar growth, but a contract poses a barrier

Why the disparity? The problem stems from the contract that Appalachian Power signs every three years with public authorities in its territory, which are represented by a steering committee convened by the Virginia Municipal League and the Virginia Association of Counties. 

That contract, which expired this summer and is now being re-negotiated, blocks public entities like schools from using a financing tool known as the power purchase agreement.

Under a PPA, a customer strikes a deal with a developer to install solar panels on their property without buying them. The customer then buys the resulting energy from the developer under a long-term contract, usually at a lower cost than that offered by the incumbent utility.

Schools have been particularly eager to sign solar PPAs because of the savings they offer. As tax-exempt entities, schools are unable to take advantage of federal tax credits for solar. The solar PPA lets them sidestep that problem, not only avoiding the expense of buying panels but also bringing down energy costs significantly. In Virginia, Middlesex County Public Schools last winter estimated converting to solar had saved about $50,000 in the first year of use.

Utilities, however, have in many places resisted the technology, arguing that when schools and local governments depart their captive customer pools, other customers have to pick up the tab.

Whether cost shifting does result from solar PPAs is disputed: attorney Will Cleveland of the Southern Environmental Law Center said that while “it’s a talking point that sounds plausible on its face … I’ve never seen it backed up by data to show that there’s a cost shift or that it’s a burden that gets borne by others.” 

In Virginia, legislators have slowly embraced solar PPAs, creating a pilot program for Dominion in 2013, expanding it to Appalachian territory in 2017 and then, in response to soaring demand in Dominion territory, significantly raising the caps on participation. 

The rising demand in Dominion’s territory was partly the product of that utility’s contract with public authorities in its service area, which allowed school districts to participate in the state’s pilot program.  

That hasn’t been the case with Appalachian Power, whose current agreement with public authorities includes two major roadblocks to solar adoption.

First, it limits net metering — an arrangement with a utility that lets a customer generate their own energy while still being connected to the grid — to three megawatts. Second, language included in the agreement requires a public authority who participates in net metering to “own and operate” their generating system, a restriction that bars them from entering into PPAs.

“There’s schools in far Southwest Virginia that are very interested in the potential for cost savings, especially now,” said Chelsea Barnes of Appalachian Voices, a consumer and environmental advocacy group that has been closely involved in efforts to allow schools to use solar PPAs. 

Roanoke City Public Schools is one such district. District spokesperson Justin McLeod said in an email the district “is actively pursuing solar arrays(,) either ground or roof mounted systems,” at four schools. 

McLeod said RCPS had been able to find enough kilowatts in the existing contract with Appalachian Power to move ahead with its plans for one elementary school, but “the others are dependent on the new contract.” 

A new contract?

As negotiations begin between the public authorities and Appalachian Power, the ability for schools to enter into solar PPAs is one of the key issues on the table. 

The public authorities represented by the VML/VACo steering committee that negotiates their contract with Appalachian are hoping to see both the net metering provisions of the current contract and its limits on generation lifted. 

“The membership sees a need for drastic increases in the net metering allowances,” said James Ervin, town manager of Rocky Mount and chair of the steering committee. “It sees the need for reduced restrictions on financing, on how they go about local origination contracts, and we want to see an agreement that whatever changes are made at the General Assembly are rolled in as we go forward.” 

“Schools and public authorities have to be freed up to pursue what’s in their perceived best interest and what’s in their perceived environmental interest regardless of their (geography),” he said.

Other advocates like Barnes, of Appalachian Voices, contend more flexible contracts would benefit taxpayers who pay for school districts’ energy costs.

“In the short term we need the contracts to clearly allow for PPAs and to expand the net metering cap,” she said. “I do think there’s some questions that should be asked about whether this is the right system for setting rates that are ultimately taxpayer-paid rates and whether the counties have the support they need to be able to negotiate a fair contract.” 

Appalachian Power spokesperson Teresa Hall said in an email that the utility had “recently extended an offer that addresses the current cap and are awaiting a response to our proposal” but added it would be “inappropriate” to share further details of the negotiations because they are still underway.

Hall said there was no sense of when the new contract would be finalized, but several people involved with the issue said it wasn’t expected to be resolved until after a decision on Appalachian Power’s current rate increase request. State regulators must rule on that case by Nov. 30. 

Ervin, while forthright about the steering committee’s desire for change on solar PPAs, also expressed sympathy for Appalachian. The utility, he said, faces a harder path than Dominion in allowing PPAs because of a lack of economic growth in the region that could help Appalachian make up for the lost demand of schools that begin getting their power from third-party solar. 

“If you look at the socioeconomics, Dominion’s territory are school districts that are blessed on a number of fronts,” he said. “In (Appalachian Power) service territory where you have somewhat lower per capita funding levels and counties that would more benefit from PPAs, you do have the barriers.” 

If solar begins to be adopted widely in counties like Giles, he asked, would those losses “be absorbed by normal growth and demand?”

He quickly answered his own question: “The reality is, in some of these counties and areas, the answer is no.” 

Other experts, however, say that isn’t the whole picture. Tony Smith, CEO of solar developer Secure Futures and a long-time advocate for loosening solar PPA restrictions in Virginia, said utilities like Appalachian need to be seeing solar as an opportunity rather than an enemy.

“Solar is here. And it’s going to be an increasing part of the generation mix, and those utilities that embrace it are going to survive, and those that don’t are going to wither away,” he said. “The opportunity for utilities, and Dominion is making great steps forward on this, is to reframe the role of the utility company as one which is not just purely focused on generation, but one focused on providing smart services.”

Smith said a broader embrace of solar could actually be beneficial for Appalachian Power, whose demand peaks in the winter. With temperatures rising due to climate change, he said, adding solar to Appalachian’s grid could open up opportunities for the utility to sell excess energy to summer-peaking utilities in warmer areas. 

The COVID-19 pandemic has only increased many school districts’ interest in solar as budgets tighten. Southwest Virginia, already facing the decline of the coal industry, has been one of the state’s most economically precarious regions in recent years and has thinner cushions than districts in more densely populated and affluent areas. 

That bottom line may prove the most persuasive argument in the short term. 

“The school districts down in APCo’s territory are pretty strapped for cash,” said Cleveland of the Southern Environmental Law Center. “This is 100 percent a way for them to reduce their costs.” 

This story has been corrected to note that Roanoke City, not Roanoke County, Public Schools are pursuing solar.