March 7, 2016

Virginia Lawmakers Punt on a Suite of Renewable Energy Bills

Legislation on community solar, net metering and third-party-owned solar was “carried over to 2017.”

Virginia lags well behind its neighboring states on renewable energy. With no tax credits or renewable energy certificate market to drive development, Virginia has yet to erect a wind farm, and the growing interest in solar has not translated into significant megawatts.

Legislators assure renewable energy industry members and advocates they are determined to make progress. But though the 2016 legislative session is not over yet, it appears there will be no policy reforms this year -- at least not on legislation championed by advocates of customer-owned and distributed renewable energy projects.

More than a dozen clean energy bills were introduced in Virginia this year, including on community solar, renewable energy tax credits and third-party ownership. Yet nearly every bill designed to create new market opportunities for wind and solar was recently tabled or “carried over to 2017.”

Among the bills up for consideration was HB 480, which would have established a 35 percent tax credit for renewable energy property, to be claimed over five years, with a $5 million program cap. The credit would apply not just to wind and solar but also to some biomass, combined heat and power, geothermal and hydro systems.

SB 142 would have established a tax credit of up to 30 percent for solar thermal systems used for water heating or space heating and cooling.

HB 941 would have expanded the authorization for property-assessed clean energy (PACE) programs to include residential and condominium projects. This would allow localities to offer low-interest financing to homeowners for both energy efficiency and renewable energy investments.

SB 140 sought to eliminate standby charges for some residential and agricultural net energy metering  customers.

SB 139 sought to extend net metering to a subset of agricultural customers.

HB 618 would have required the State Corporation Commission to adopt rules for community solar gardens. HB 1285 would have authorized, but not required, investor-owned utilities and co-ops to establish community energy programs.

HB 452 and SB 403 would have created the Virginia Energy Storage Consortium to promote research, development, commercialization, manufacturing and deployment of energy storage. HB 1137 directed the State Corporation Commission to develop a program to enable commercial and industrial customers to sell battery storage services to the grid.

SB 571 and HB 351 would have directed the Virginia governor to join the Regional Greenhouse Gas Initiative, the cap-and-trade program that has successfully ratcheted down carbon emissions in the Northeastern states. Funds generated by auction allowances would fund sea-level rise adaptation in coastal areas, economic transition efforts for southwest Virginia, energy efficiency for low-income families, and distributed renewable energy programs.

HB 1286 is a bill that the solar industry had pinned its hopes on that would have stripped away impediments to private investments in renewable energy. As introduced, the legislation would have confirmed the legality of third-party power-purchase agreements (PPAs) for facilities located on a customer’s property, lifted the current 1 percent cap on net metering programs relative to total utility sales, removed the authorization for standby charges on residential and agricultural facilities, removed constraints on system sizes based on historical demand, and authorized community net metering programs, among other provisions.

All of these bills and several others were left in committee or “carried over,” having been assigned to a not-yet-existent subcommittee that will consider the bills sometime later in the year.
Meanwhile, Dominion Virginia Power’s bill (HB 1305) that offers an 80 percent tax exclusion for utility-scale solar projects continues to work its way through the legislature.

Legislation gone comatose

Dominion’s plans currently call for the company to build or buy as much as 500 megawatts of solar in Virginia by 2020. A 2015 law declared its plans to be “in the public interest.”

Advocates of customer-owned and distributed renewable energy projects hoped it might be their turn this year. Given the continuing cost declines in wind and solar, industry members believe they are finally poised to make significant gains in Virginia even without incentives -- if the General Assembly simply removes existing barriers to access.

Although it was only one item on a long wish list, the PPA issue was in many ways central. The solar industry sees third-party ownership as one of the few big growth opportunities in Virginia. Many legal experts believe Virginia law already permits PPAs, but the utilities read the law differently, and legal uncertainty is bad for business. In 2013 the solar industry and Dominion agreed to a law limiting PPAs in Dominion territory to a small pilot program, with residential systems excluded. The state’s other public utility, Appalachian Power, refused to participate. Currently, the issue of PPA legality is before the State Corporation Commission; the arguments have been briefed, and the parties await a ruling.

HB 1286 represented an opportunity for compromise. After weeks of negotiations and concessions between Dominion lobbyists and a renewable energy industry coalition, the bill was reduced to a single paragraph ensuring the legality of third-party PPAs statewide, with all sides in agreement.

Then, two days before the House subcommittee hearing, Dominion produced substitute language eliminating authority for all but an additional 10 megawatts’ worth of PPAs at private colleges and universities in Appalachian Power territory. In addition to making all other PPAs illegal, the language sunsetted one of the bases for the solar industry’s legal claims before the State Corporation Commission.

At the same time, Dominion’s substitute contained new language adding standby charges on small commercial customers who install renewable energy systems, a provision entirely separate from the PPA issue and a subject that had not been raised during negotiations. For the solar industry, the standby charges were a poison pill.

Rather than vote down all of the solar industry’s bills in full view of the public and press, House Commerce and Labor Chairman Terry Kilgore, and his counterpart on the Senate Commerce and Labor Committee, Frank Wagner, hit on a solution: they would have their committees “carry over” all the renewable energy bills to 2017, a maneuver that technically leaves the legislation alive, but comatose.

Wagner said he would name a small subcommittee to meet over the summer, review the bills, and make recommendations for next year.

Kilgore promptly adopted the idea, too. “We do need to get moving on these solar bills faster than we have been going,” he told committee members, in explaining why they would not get moving on any solar bills this year.

Dominion spokesperson Robert Richardson told GTM that the utility plans to take part in the dialogue.

“The Commerce and Labor committees determined that multiple bills dealing with renewable energy policy should be examined in more detail by various stakeholders once the general assembly session concludes,” he said. “We look forward to participating in these discussions.”

Pessimistic renewable energy proponents will notice that the carry-over means that most of Virginia's clean energy bills are effectively dead for the year. They will also have doubts about the likelihood of this subcommittee delivering results favorable to solar and wind advocates, given that lawmakers are under intense pressure to support utility interests.

Optimists, however, will respond with hope that this subcommittee will compel utilities to accept at least some legislative reforms in the service of the public good. Optimists will also point out that legislators’ unwillingness to simply kill bills at the utilities’ behest is progress in itself, driven by an outpouring of constituent support for renewable energy and backed by new lobbying firepower.

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