Virginia Mercury: October 30, 2019

Dominion’s green energy package comes with a catch: coal. Businesses aren’t happy.

By Sarah Vogelsong, Virginia Mercury

Dominion Energy’s newest plan for a renewable energy package that environmentally conscious customers can buy is causing some big businesses, including Walmart, to push back against what they call “an unattractive offering.”

Why? Companies and an industry group that represents some of Virginia’s and the nation’s largest employers have two complaints. First, the portfolio of renewable energy resources assembled by Dominion includes numerous carbon-emitting facilities, some decades old, including one in Southwest Virginia that derives 93 percent of its energy from coal and is listed by Dominion on its website as a coal asset.

Second, if the utility succeeds in winning approval for its plan, that will deal a blow to the state’s fledgling renewable energy market, leaving nowhere else for most customers in the commonwealth to turn if they want to buy renewables.

“Now is the time to foster innovation and development of renewable energy options, not stifle it,” Lisa Perry, Walmart’s senior manager of energy services, wrote in testimony filed this October with the State Corporation Commission, the regulatory body that will weigh the merits of Dominion’s proposal later this fall.

This isn’t the first time Dominion, which, as Virginia’s largest utility, controls about two-thirds of the state’s electric customers, has proposed a renewable energy package for customers. (In Virginia, the offering is formally called a “renewable energy tariff,” and Dominion has labeled this particular plan Rider TRG, short for “Total Renewable Generation.”) The utility also floated plans for two green offerings in 2017. One was denied by the SCC, while the other was withdrawn by Dominion after the commission approved a package proposed by the state’s other major utility, Appalachian Power Company.

Unlike Dominion’s current proposal, however, the 2017 plans didn’t specify exactly where the renewable energy bought by customers would come from. Under the first, the company would have bought renewable energy through power purchase agreements with “existing or new facilities” while also developing its own fleet of renewables. Under the second, the company intended to craft a portfolio made up of “a combination of hydroelectric, wind and new solar (i.e., constructed after 2017) resources.”

The utility’s most recent proposal diverges from that approach, identifying a portfolio of 14 specific facilities that will supply program customers with renewable energy. Eight are solar, either owned by Dominion outright or with which the utility has a contract to purchase power. Two others — the Roanoke Rapids and Gaston power stations, which began operations in 1955 and 1963, respectively — are hydroelectric.

And four, the most controversial of the bunch, are associated with biomass. Besides the AltavistaHopewell and Southampton stations, which began burning coal in 1992 and were converted to burn biomass in 2013, the portfolio includes the Virginia City Hybrid Energy Center in Wise County, which started operations in 2012 and can produce a maximum of 20 percent of its energy from biomass (with the other 80 percent generated by coal).

Technically, under Virginia law, all of these sources are considered renewable. The state’s definition of renewable energy is expansive, including energy derived from biomass, “sustainable or otherwise,” even if it is produced at a facility that also burns fossil fuels like coal.

But while opponents of Dominion’s renewable energy plan acknowledge that its portfolio is in line with the letter of the law, they argue in SCC filings that the proposal’s mismatch with state goals of encouraging development in renewables means that it falls well short of what customers seeking to buy clean energy are looking for.

Virginia’s changing definition of renewable energy

2007: “Renewable energy” means energy derived from sunlight, wind, falling water, sustainable biomass, energy from waste, wave motion, tides, and geothermal power, and does not include energy derived from coal, oil, natural gas or nuclear power.

2008: “Renewable energy” means energy derived from sunlight, wind, falling water, sustainable biomass, energy from waste, municipal solid waste, wave motion, tides, and geothermal power, and does not include energy derived from coal, oil, natural gas or nuclear power.

2009 (current definition): “Renewable energy” means energy derived from sunlight, wind, falling water, sustainable biomasssustainable or otherwise, (the definitions of which shall be liberally construed), energy from waste, municipal solid waste, wave motion, tides, and geothermal power, and does not include energy derived from coal, oil, natural gas or nuclear power. Renewable energy shall also include the proportion of the thermal or electric energy from a facility that results from the co-firing of biomass. 

“Customers are participating in utility programs to drive additional renewable energy deployment, to lower emissions, and to demonstrate leadership,” wrote Caitlin Marquis, a director of energy industry trade association Advanced Energy Economy, in testimony opposing Dominion’s proposal to the SCC. “Providing financial support to existing projects that are more than 15 years old and to emitting resources — including a seven-year-old coal plant co-fired with biomass — is inconsistent with customers’ motivation and objectives.”

Of the case’s players, none have taken as firm a stance as Walmart, which Perry says will not participate in Dominion’s program if approved by the SCC, even though the retailer has set an ambitious target of supplying 50 percent of its energy needs from renewables by 2025.

“The program fails to meet our expectations as a customer because it offers a product that only results in additional costs to Walmart and does not allow Walmart to realize the benefits (or the costs) of opting to be served by renewable resources,” she wrote.

Just what do businesses want out of a renewable energy program? Bryn Baker, director of policy innovation for the Renewable Energy Buyers Alliance, an industry group that counts leaders from corporate titans like General Motors, Google and Amazon on its board of directors and is opposing Dominion’s proposal, pointed to the Corporate Renewable Energy Buyers’ Principles as a guide.

First formulated in 2014, these principles include such goals as “greater choice in procurement options” and “access to new projects that reduce emissions beyond business as usual.” And, according to Baker’s testimony, Dominion’s renewable energy proposal isn’t in line with them.

Key among her criticisms are that the plan relies on facilities that already exist — and in some cases have been operating for decades — rather than incentivizing the development of new renewable facilities, and that it relies on the largely coal-fired Virginia City plant.

That facility, SCC filings show, has never operated without burning coal.

A filing from the State Corporation Case considering Dominion Energy’s proposed 100 percent renewable energy tariff, including a question by Appalachian Voices and a response by Dominion.

“There is not a single second where [Virginia City] operates 100% on biomass feedstocks; whenever electric power flows out of [the facility], it is necessarily combusting coal,” argued William Cox, CEO of energy policy analysis firm Greenlink Analytics in testimony for Appalachian Voices, which is also opposing Dominion’s application.

On financial grounds, too, opponents argued that Dominion’s plan — which charges a premium of about 3.6 percent above the typical cost of service — also falls short.
“The costs of renewable technologies have dropped dramatically and zero-emission resources like wind and solar operate are now cost-competitive with existing fossil-based supply,” testified Travis Wright, vice president of energy and sustainability for data center developer QTS Realty Trust, on behalf of REBA. “In these economic conditions, rational commercial consumers are no longer willing to pay a premium cost for renewable energy without receiving a premium level of benefit.”

A Dominion spokesman did not respond to a request for comment for this story. Spokespeople have previously said that they have a policy of not speaking with the Virginia Mercury.

Closing the Renewable Energy Market?

As the case rolls toward its Nov. 21 hearing, stakes are high. Renewable energy is increasingly big business in the U.S., and Virginia, with its burgeoning pool of data centers hungry for energy and close proximity to the nation’s capital, is a desirable market.

But the state’s uniquely complex regulatory structure has complicated development. As a semi-regulated state, Virginia allows few opportunities for businesses that are neither recognized monopolies nor electric cooperatives to sell energy within the commonwealth. One such exception is “100 percent renewable energy”: since 2007, licensed non-utilities have been permitted to sell such energy to customers as long as the monopoly utility isn’t also offering such a product.

There is, however, a catch: As soon as the utility receives approval to sell its own 100 percent renewable energy package, the market is closed, and no more non-utilities can begin offering such a product. Those that are already active can continue to serve their customers for the duration of their contract but can’t enroll anyone new.

It’s a scenario that played out recently in Appalachian Power Company’s service territory, where competition has been halted by the SCC’s approval of the monopoly’s own 100 percent renewable energy plan. And it’s one that the parties opposing Dominion’s tariff fear will come to pass in that utility’s territory, which has recently seen three non-utilities — known in this context as competitive service providers — begin offering renewable energy alternatives to customers.

Dominion has vigorously fought the advance of these companies and sought in the present case to speed up the commission’s proceedings, a move interpreted by competitive service provider Direct Energy, along with Costco and Advanced Energy Economy, as an effort to curtail CSPs’ enrollment of additional customers. Dominion argued that such arguments “lack merit” and that it would benefit the public interest to have the matter decided as quickly as possible; nevertheless, the State Corporation Commission denied the utility’s request to accelerate its deliberative process.

Although the window for competitive service providers to operate in Virginia remains open, further development would be stymied by commission approval of Dominion’s plan, Cox fretted in his testimony for Appalachian Voices: “Some opportunities to increase Virginia’s reliance on clean energy will be set back from day one by eliminating an option that competitively provide[s] 100% renewable energy to participating customers and replacing it with a utility construct that does nothing of the sort,” he contended.

Frank Lacey, a consultant for Direct Energy, also complained about the outcome that would result from commission approval of the utility’s tariff.

“Unfortunately,” he wrote, “the proposed tariff provides customers with only one option for a certain renewable energy service, taking away many other customer options.”

Other things to know about Dominion’s proposed renewable energy package

  • Dominion’s proposal, known as Rider TRG, is explicitly modeled on the 100 percent renewable energy tariff proposed earlier this year by Appalachian Power Company and approved by the State Corporation Commission.
  • The portfolio the utility has assembled is expected to meet “the capacity and energy requirements of approximately 50,000 residential customers or their commercial equivalent.”
  • Customers will pay a premium “based on the prevailing market value of retail renewable energy” equal to about $4.21 per megawatt-hour. They will also pay a “balancing charge” designed to hold non-participating customers “substantially harmless.”
  • The typical residential customer using 1,000 kilowatt-hours of energy who signs up to get 100 percent renewable energy from Dominion would see an average monthly bill increase of $4.21.
  • Customers who do not elect to participate in Dominion’s renewable energy program will see no increases in either rates or bills.
  • A hearing on the application will be held before a hearing examiner at the State Corporation Commission Nov. 21.