In a closely-watched order, the Virginia State Corporation Commission rejected Dominion Virginia Power’s proposal to build, on its own, the first large-scale solar energy facility in its monopoly service territory. The commission ruled the utility must seek third-party alternatives and ordered it to request bids.
In its initial proposal, Dominion stated it would build a 20 megawatt facility near Remington, Virginia, at a cost of $2,350 per kilowatt with an average operating time of 22 percent. A new state law requires Dominion to provide evidence about whether lower-cost alternatives exist. Seeing none, the commissioners voted to issue the order, making it public earlier this week.
The order expressly leaves open the possibility that, if selected, a third party could own a system and sell the power to Dominion. That would be a first in Virginia.
During recent legislative sessions, solar energy companies and clean energy advocates have appealed to state lawmakers for the opportunity to compete to build solar projects in Virginia. State law now gives them that chance.
“The comparatively high cost to consumers and low capacity factor (operating time),” the SCC wrote, “underscore that serious and credible efforts, as required by the General Assembly, must be made to determine whether lower-cost alternatives for obtaining renewable power are available in the market from third parties.”
The commission’s order further stated it was not be in the public interest for Dominion to build solar projects “at any price, no matter how burdensome to consumers.”
“We are disappointed in this setback in our efforts to add renewable energy,” Dominion said in a statement. “We are evaluating our options regarding this project.”
Dominion pledged to build 56 megawatts of solar capacity in the Commonwealth by year-end 2016 and a total of 500 megawatts by 2020. The 20-megawatt Remington project would provide enough power for roughly 5,000 homes at peak generation.
In written testimony filed in June, Francis Hodsoll, who leads the Virginia Chapter of the regional solar energy industries association, stated: “Only competitive transparent procurement processes can determine whether [Dominion] received the most competitive capital costs.” The market for solar, he added, “is very competitive” and “should provide lower cost electricity than the [Dominion] monopoly.”
A key issue is the ability of third-party projects to draw on financing, with tax incentives, that can make third-party solar less expensive than what Dominion wants to charge and recover in its rates.
In summarizing testimony given during a hearing this past summer, Hodsoll wrote: “The competitive market has a lower cost of financing, lower overhead costs, and can more efficiently pass through the tax benefits to the electricity consumer. Further, Dominion’s failure to deploy any significant amounts of solar despite years of trying harms Virginia’s electricity customers by squandering federal support set to expire at the end of 2016. Finally, Dominion’s approach places unnecessary performance and market price risks on their customers.”
Dominion still has the option to pursue the Remington project on its own. But its proposal will now have to beat any responses by third parties as measured by the system’s cost and operating time. Whether a solar developer can offer a better combination of the two in a state without a renewable energy requirement and companion renewable energy credits, nor net-metering credits on large solar system, remains to be seen.