Workers prepare solar panels for installation on Huguenot High School in Richmond
From an Article by Sarah Vogelsong, Virginia Mercury, December 2, 2020
For many years, that notion would have been unthinkable in Virginia, where fairly competitive electric rates, a lack of incentives and what one solar developer described as “extreme utility control of the legislature” made most companies think twice before putting down stakes.
“We fondly referred to Virginia as the dark state,” said the same developer, Tony Smith of Staunton-based solar company Secure Futures Solar. “We always thought if we could succeed in Virginia, we could succeed anywhere.”
Now, however, that’s all changed. A flood of legislation easing barriers for residents to put solar on their own roofs and in their own backyard has led to what installers, developers and trade organizations describe as a sudden rush of interest in the commonwealth.
“Virginia is kind of like the Wild West,” said Nolie Diakoulas of Virginia Beach-based installation company Convert Solar, which has been in business since 2012. Now national companies, he added, are “coming in and knocking on the doors and spreading the good word of solar.”
However, David Murray, executive director of the Maryland-DC-Delaware-Virginia Solar Energy Industries Association, a leading industry group, said that despite the uptick in interest, new laws encouraging solar development “didn’t exactly turn Virginia into a California or New England market,” he said.
“Other markets have historically had much more robust incentives for solar,” he said. “I think part of the advantage Virginia has is it’s been untapped for a little bit. It’s had such a tough market, especially for distributed generation.”
While the massive utility-scale farms cropping up in the state’s more rural areas might be the most visible aspect of Virginia’s shift to solar, new state laws have carved out a special role in Virginia’s clean energy transition for a different application of the technology.
“Distributed generation” is the term used by industry players to refer to any kind of electric power that’s produced outside of large traditional plants. But while the definition applies as much to the propane-fueled backup generators used by businesses as it does to renewables, in Virginia energy policy right now, it means one thing: rooftop solar.
Solar panels designed to be mounted on a single-family residence’s roof have been around for decades. As technology has improved and prices have dropped, however, rooftop solar has increasingly come to be seen as a disruptive influence. When it comes to the electric grid, wind and utility-scale solar fill a similar space as gas and coal plants: large hubs where energy is produced at a central location and then sent down transmission lines to substations and eventually people’s homes.
Rooftop solar, though, offers a fundamentally new framework for power generation, one in which thousands of locations are producing energy at any given moment. In this more decentralized vision of the electric grid, large-scale power plants don’t disappear, but their importance is tempered.
For utilities like Dominion Energy and Appalachian Power Company, which long balked at the idea of widespread distributed solar, the rise of this form of energy will require close examination of the distribution and transmission systems that carry power around the state.
“If the distribution system’s not working, the rest of the stuff isn’t working either,” said Dominion Senior Vice President of Corporate Affairs and Communications Bill Murray. But it will also raise important questions for policymakers grappling with what a 21st century electric grid should look like.
Gov. Ralph Northam’s September 2019 executive order committing Virginia to a carbon-free electric grid by 2050 laid down a firm target, but “what does that mean?” asked Aaron Sutch, the Virginia program director for solar advocacy nonprofit Solar United Neighbors. “Does that mean that big utilities and big-scale utility solar and wind do that transition? Or does it put the power, as it were, in people’s hands?”
More simply, he asked, “If it’s all large-scale centralized, are those benefits really going to trickle down to the community?”
Peeling back State-wide policy barriers
Exactly how much distributed generation should be allowed onto Virginia’s grid was a hotly debated issue during the 2020 General Assembly session. Of the 16.7 gigawatts of solar the legislature signed off on, 10 percent will be required to be distributed.
Getting to that goal, though, required major changes. One of the biggest battles that unfolded was over a provision in the Virginia Clean Economy Act that set a cap on how much energy could be net metered — that is, produced by individuals to be fed back into the grid and credited against their electric consumption.
Previously, the cap, which Sutch called “the engine that spurs distributed solar,” was set at 1 percent of each utility’s generating capacity. Rooftop solar developers said that was too low for any meaningful growth, and that it showed a lack of commitment to the technology’s development, causing uncertainty within the market about whether companies and residents should invest in rooftop systems.
There were other barriers as well. Residential solar systems were limited to 20 kilowatts, and commercial ones to one megawatt. Consumers had to pay a demand charge if their system exceeded 10 kilowatts, an unexpected fee that soured some residents new to rooftop solar on the technology.
Another restriction limited solar arrays to only producing enough energy to provide 100 percent of a customer’s average annual usage, causing heartburn among residents interested in electric cars who couldn’t install systems large enough to accommodate that future purchase. Still another put a low ceiling on the power purchase agreements nonprofits and public entities like schools and local governments could enter into with non-utility companies to install solar panels on their buildings.
Taken as a whole, “we didn’t do much work in Virginia up until about two years ago,” said Geoff Mirkin of Solar Energy World, an installer headquartered in Elkridge, Md., that works in five East Coast states and the District of Columbia.
The VCEA changed all that by “peeling back some of the policy barriers that have been in place for years,” according to Rachel Smucker of MDV-SEIA. Aided by a push from progressive Democrats in the House of Delegates, the net metering cap was raised to 6 percent, with 1 percent of that allocation required to come from systems serving low-income customers. Both residential and commercial size limits were increased. The demand charge was eliminated in Appalachian Power’s territory and raised to 15 kilowatts in Dominion’s; in the latter, the 100 percent energy threshold was also upped to 150 percent. In both, the caps on power purchase agreements also saw large bumps.
At the same time, long-sought “solar freedom” laws allowing customers in Dominion territory who live in condos or apartment buildings to access solar also cleared the General Assembly. These community solar provisions opened the door to an arrangement that advocates say is important for areas with higher population density and more low-income residents who could benefit from lower power bills.
A prior community solar pilot created by Dominion in 2018 that would have charged the average participant an extra $20 per month was ultimately never rolled out, although this November the utility announced it would embark on a new effort in partnership with Harrisonburg Electric Commission.
Eric Hurlocker, an attorney with Virginia energy law firm GreeneHurlocker, said that in his practice, “community solar has kind of sparked the most interest.” Also, he said, “There’s been a lot of out-of-state entities that have done community solar elsewhere that are taking a hard and long look at Virginia now.”
Despite the pandemic, Virginia sees a spike in solar jobs
Despite the COVID-19 pandemic, numerous solar installers across the commonwealth reported the same experience: a big uptick in business.
“I think there has definitely been inquiries and demand that is due directly to the new laws that went into effect this year,” said Patrick Feucht, operations manager with Baseline Solar, a Blacksburg-based company that has been active in Virginia since 2008. The lifting of the power purchase agreement cap in particular, he said, has driven a fresh wave of interest.
“We’re getting calls from developers more frequently than in the past and looking at projects more frequently than we have in the past because PPAs are now allowed,” he said.
Charlottesville-based Sun Tribe Solar, which primarily develops solar for public sector entities like school districts and local governments, described a similar experience: “Since the passing of the VCEA, we’ve been receiving inbound calls from local governments and school systems just about every week,” said vice president of development Rich Allevi. Straitened economic circumstances may play a role: “Budgets,” said Allevi, “are the number one reason why public sector institutions embrace renewable energy.”
Many of the calls reported by solar developers are translating into new work. Compared to 16 solar deals Convert Solar made in all of April 2019, Diakoulas told the Mercury on Oct. 13, “Today, just today, we’ve sold 10 projects.”
Along with the growing market for rooftop solar is a growing market for jobs. A report from Virginia Commonwealth University’s Center for Urban and Regional Analysis found that in 2019, distributed generation accounted for 64 percent of all solar jobs in Virginia. Both Diakoulas and Feucht said their companies had recently increased their staff, with Diakoulas saying Convert Solar “would triple our workforce right away if someone told us the floodgates were fully opened.”
Compared to utility-scale solar, distributed generation “generally has greater job impact in the communities where these projects are located, in terms of employing local engineers, electricians, installers, crane operators, all the skillsets required to install a solar array,” said Smith of Secure Futures Solar.
“It’s a smaller piece of the pie in terms of what’s been carved out in the Clean Economy Act, but it has much more bang for the buck in terms of contributing to the state’s economy on a per kilowatt basis,” he said. “These decisions are made by many, many, many people on what we call Main Street. Whereas utility-scale solar, those decisions are made at Wall Street.”
Legislative fights become regulatory ones
Against this backdrop of growth, however, disagreements have broken out over how Virginia will finally roll out its community solar programs.
With legislative fights on pause, the debate has moved to the State Corporation Commission, which has been charged with drafting regulations for how community solar will work in practice. But when commission staff released proposed regulations for shared solar and multifamily shared solar this October that virtually duplicated Dominion recommendations, clean energy groups and businesses reacted with dismay.
“These programs really are about equity and access,” said Smucker of MDV-SEIA. The rules as currently written, she argued, would hamper savings from being passed on to customers and make projects “highly unfinanceable.”
The biggest problems for solar advocates were administrative charges the utilities would be allowed to levy on customers, customer definitions that would exclude residents of duplexes from participating in shared solar programs, limits on how many months bill credits could carry over, and wording that would allow utility affiliates to participate in utility-managed programs.
Several state bodies also weighed in, including the Department of Mines, Minerals and Energy, which said it had “identified a number of issues that may not align with the goals of the legislature.” A sternly worded letter from six Democratic lawmakers, including the VCEA sponsors, described the multifamily program drafted by regulators as “unnecessarily onerous.” The broader shared solar regulations, they wrote, would “delay the construction of projects and institute ambiguous, unsubstantiated costs that would significantly impact the ability to participate in the program until 2025.”
Dominion defended the rules, saying they would make distributed generation available to customers “in a way that minimizes cost-shifting and subsidization by non-participants.”
In response to the pushback, commission staff in late November issued an amended version of the rules that resolved some of the non-utility groups’ complaints, including the duplex issue and the restrictions on bill credits. But staff defended other recommendations, such as the strict licensing requirements for multifamily programs, noting concerns that there would be “a flurry of small projects with no experience to provide electricity service to vulnerable customers.”
The final decision lies in the three-person commission’s hands, and the clock is ticking: regulators have until Jan. 1 to finalize the new programs’ rules. “They have a lot they have to accomplish before Jan. 1, 2021,” said Smucker, “but there’s a lot at stake for these programs.”
*** — Third in a five-part series on the commonwealth’s transition to a carbon-free electric grid. Tomorrow: Energy storage. — ***
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