Recommendation to deny Dominion renewables projects highlights challenges of meeting VCEA goal

Every year, Dominion submits regulators a suite of renewable energy projects that it proposes to undertake in order to comply with the mandates of the Virginia Clean Economy Act, a 2020 state law that seeks to decarbonize the electric grid by midcentury.

This year, high-level staff at the State Corporation Commission are recommending the body deny Dominion permission to carry out two of those projects based on cost concerns. 

“While all of the proposed projects Dominion would own are economically challenged — even with the benefit of the federal Inflation Reduction Act — the two projects I recommend be denied are significantly uneconomic for Dominion’s ratepayers in all of the economic analyses in this case,” wrote Hearing Examiner D. Mathias Roussy. “Put simply, the record demonstrates that Dominion’s ratepayers would be far better off if Dominion pursued alternative options.” 

Roussy’s recommendation is not binding: The State Corporation Commission has the final say, with a decision due April 14. But if the body follows his recommendations, the denial of the projects would be the first under the rules of the VCEA, which deems most renewables projects “in the public interest,” a legal term designed to nearly guarantee approvals.

One of the projects in question is an energy storage project, while the other would build a small-scale version of solar known as distributed generation. Distributed generation, or DG, projects generate 3 megawatts of electricity or less.

A regulatory denial of the distributed generated project in particular would highlight the potential challenge facing Dominion, Virginia’s largest electric utility, in meeting the Virginia Clean Economy Act’s requirement that it develop 1,100 megawatts of distributed generation in the form of either solar or onshore wind by 2035. Onshore wind has largely not been pursued, as Dominion has claimed the state has a limited number of suitable sites along ridgetops, meaning a large amount of Dominion’s distributed generation projects are expected to come from solar.

Electric regulatory attorney Will Reisinger said the 1,100 megawatt requirement for smaller projects is intended to spur economic development throughout the state by forcing projects to be more spread out from each other. Generating one megawatt of solar power typically requires just under 10 acres. In contrast, much larger utility-scale projects can take up large swathes of land. 

Reisinger said the distributed generation requirement is “achievable, but it’s definitely ambitious.” 

“It’s a lot of projects in a short amount of time,” he said. “We’re already in 2023.”

Dominion declined to provide comment to the Mercury on the case, but in filings with the SCC, Elaine Ryan, an attorney representing Dominion, stated in response to Roussy’s report that all  the proposals “are needed and represent the best projects available to meet the significant development targets established by the VCEA.”

“The General Assembly recognized the value of distributed solar resources by specifically carving out a target of 1,100 MW of distributed solar resources by 2035,” Ryan wrote. “The Petition meets all statutory and regulatory requirements as supported by the evidentiary record and should be approved in full as reasonable and prudent.”

As Dominion works toward that statutory requirement, attorney Jeanne Armstrong with the Solar Energy Industries Association has argued in filings that the utility should improve its process for seeking proposals from other companies to meet its legislative mandates.

Under the VCEA, Dominion must get 35% of its renewable energy from third-party sources through arrangements known as power purchase agreements, or PPAs. Under these agreements, a solar or wind developer builds the photovoltaic panels or wind turbines and sells the electricity they generate to Dominion. In order to strike those agreements with third-party sources, Dominion issues a request for proposals. 

Armstrong, however, said the current process for distributed generation has problems, pointing to the fact that Dominion’s last RFP sought proposals for up to 175 megawatts but only resulted in 22 megawatts of projects.

“The low success rate for these small systems is in part an indication that project developers are having a difficult time navigating the RFP process and successfully signing contracts with Dominion,” wrote Armstrong. “This is a concern as the VCEA clearly embodies the recognition of the importance of distributed generation.”

Environmental and solar groups are also debating with Dominion about whether the 35% third-party requirement in the VCEA is a floor, a ceiling or neither. Southern Environmental Law Center Senior Attorney Nate Benforado has argued it’s a minimum, meaning Dominion could enter into agreements to acquire more than 35% of new renewable energy from other companies. 

Dominion did not select numerous PPA bids “because doing so would have put them over the utility’s artificially set 35% limit for PPAs,” Benforado wrote in filings to the commission. “Not only were these other PPAs lower cost, but PPAs are also lower risk to customers and can even be converted to company-owned resources when it makes sense to do so.”

Dominion, however, argues that the 35% is a target, “not floor or a ceiling,” and has said it has terminated some agreements with other companies because developers were unable to complete the projects. The utility also argues that the RFP process it follows complies with the statutory requirements.

A different proposal to increase oversight of the RFP process came from Gov. Glenn Youngkin this spring, in an amendment to a bill on offshore wind. That amendment would have set up a council including the Virginia Department of Energy and Virginia Economic Development Partnership to review RFPs from Dominion. However, the proposal — which would have applied only to offshore wind — was struck down by Senate Democrats

Environmental groups and Reisinger lauded the amendment, saying it would help protect ratepayers from high project costs.

“There’s nothing that would prevent the commission from exercising its oversight now,” Reisinger said. “People have asked the commission to exercise more oversight, but they’ve just refused to do that.”

When asked after the veto session why the amendment was rejected, Sen. Mamie Locke, D-Hampton, the bill’s patron, said “that wasn’t my bill,” adding she wanted to move up the deadline for offshore wind development to be completed to 2032, not 2034.

In a statement issued Wednesday evening in response to the veto session, Youngkin said he was “shocked” by Senate Democrats’ rejection of the amendment.

“We will continue to fight for legislation that … shields Virginia residents and businesses from soaring offshore wind costs,” the statement read.