Comments on VA Energy Plan 2022
September 6, 2022
Secure Futures, LLC appreciates this opportunity to provide comments for the Virginia Energy Department.
We have organized this material in an annotated list of suggestions in the first several pages, and exhibits in the remaining back pages, as follows:
Exhibit A: On the anti-competitive actions by Dominion Energy (similar information could be provided regarding APCo and the Co-ops)
Exhibit B: On the opportunity for mobile storage to address the capacity challenges of a fast-growing electricity market in Virginia.
The 2022 Virginia Energy Plan can transform the current system by fostering customer and third party owned generation from renewable Distributed Energy Resources (DERs) to complement utility generation of utility-owned renewable and traditional hydrocarbon and nuclear sources. Key factors in 2022 leading to transformative change include:
These tectonic events will result in an accelerating growth in solar in Virginia, on top of the VCEA legislation of 2020.
The already heated DER market in Virginia will place new strains, and severe conflicts and protracted legislative and regulatory barriers between utilities and DER providers unless and until parties recognize the need for and support of transformative change and that we can no longer afford to do business as usual.
Virginia needs to take its fair share of tax credits. Virginia should avoid subsidizing NC, GA, MD, etc. The IRA helps tax exempt entities that previously had to use third parties to do installations—the tax-exempt entities can now get direct payments. The IRA provides a springboard to take full advantage of tax credits.
Further, we suggest that by leveling the playing field by re-imagining the economic incentives for utilities, we can unleash the creative power of private sector investment to truly put the wealth into the Commonwealth. DER customers and third party providers would be incented to invest in new generation, and such election lowers a utility’s load burden and enhances local reliability. The 2022 Virginia Energy Plan can foster this consumer-oriented, reliability-enhancing, and cost reducing approach to electric supply by taking several key steps.
Meanwhile utilities still want ratepayers to pay more than they should, as shown in the RTD article about Dominion’s offshore wind which Dominion projects to cost $10B and in reality could cost $20B with ratepayers taking all the performance risk. Dominion projects consistently have huge cost overruns.
VDOE could take the lead regarding best practices. The social contract with utilities established years ago to provide reliability in exchange for a guaranteed rate of return on generation, distribution, and transmission doesn’t make sense anymore when generation is increasingly supplied by consumers, businesses, and schools. This means incentives should be changed.
Specific and Measurable Recommendations for the VA Energy Plan
The IRA contains certain bonus tax incentives in the form of “adders” for federal investment tax investment for solar facilities developed in Energy Communities and/or Low to Moderate Income Communities. Much of this information would be more easily available from the state data.
We suggest developing a user-friendly web-based user interface by census tract, with a facility address look-up function, much like USDA provides for determining eligibility for grants for rural communities (see https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do) or that CDFI Fund provides for eligibility for NMTC (see https://www.cdfifund.gov/cims3).
To support the stated goals of the 2022 Energy Plan, the Virginia Department of Energy would partner with PJM to initiate a study on the overall value of:
At both the wholesale and retail level, such joint study should also account for value associated with:
This study should include an analysis of the corresponding economic and utility rate benefits available under the recently passed Inflation Reduction Act (IRA). The goals of the 2022 Energy Plan are directly supported and enhanced by comparable provisions in the IRA – coal-field development, coal region economically challenged regions, made in America provisions, prevailing wage provisions and apprenticeship requirements. The value of solar is greatly enhanced by the long-term investments that the IRA looks to promote.
*See sources re peak demand benefits of distributed solar:
Darghouth, N.R., Barbose, G., Zuboy, J., Gagnon, P.J., Mills, A.D., Bird, L. (2020). Demand charge savings from solar PV and energy storage. Energy Policy, 146(111766). https://doi.org/10.1016/j.enpol.2020.111766
Jansson, P.M. (2016) Net Metering PV Distributed Resources Benefits All Stakeholderson PJM. ASES National Solar Conference Proceedings. https://bit.ly/3wzFRGf
Perez, R., Hoff, T., Herig, C., and Shah, J., (2003). Maximizing PV peak shaving with solar load control: validation of a web-based economic evaluation tool. Solar Energy, 74 (2003) 409-415. https://bit.ly/37FAA7u
Smith, A.E., (2015). A Net Metered Solar Project Benefits ALL Ratepayers. Solar Today, May-June 2015, 22-25. https://bit.ly/3LUYc6L
Smith, A.E., and Eanes, A. (2022). Virtual Solar Storage Benefits All Ratepayers and Utilities. Solar Today, Summer 2022.
State and federal programs are currently incentivizing public schools to purchase EV Buses and charging equipment. While the technology is still emerging, many if not most of this EV equipment will soon have bi-directional charging functionality. Bi-directional charging is required for these EV buses and vans to be able to help reduce capacity demands on the utility infrastructure and to contribute to reduction in electricity costs for schools.
In addition, such capabilities would enhance the resiliency of communities in times of emergency, and to enable communities to establish critical infrastructure community hubs.
The VA Energy Plan should consider a range of incentives for public schools to install bi-directional chargers and procure bi-directional EV buses or vans that can offer Vehicle to Building (V to B) charging for times when vehicles are not used for transport (particularly summer months), as well as Vehicle to Grid (V to G). In aggregate, these are referred to as Vehicle to Everything (V to E). Such a program would greatly benefit schools by lowering their electricity and transportation costs, while creating a healthier transportation mode for students.
Below please find recommendations the 2022 Virginia Energy Plan could endorse for providing a more competitive, level playing field.
Short term fixes:
be treated as a floor, not a ceiling.
Long term fix:
Conduct a Virginia Energy staff review of best practices for transforming the economic incentive for Virginia electric utility companies, such as increasing economic returns for smart, distribution services, and lowering returns for building and owning generation capacity. Consult with utility and DER stakeholders, but the report findings should not attempt to portray a consensus. Disseminate present preliminary findings and conduct town hall meetings across the state to solicit public input.
On the anti-competitive actions by Dominion Energy (similar information could be provided regarding APCo and the Co-ops)
Preface: The anti-competitive behavior of electric utilities, as described below, is a rational response to economic incentives established by the state legislature, starting with the Reregulation Act of 2007, and since amended to effectively increase anti-competitive behavior. The utilities are in fact corporate entities while enjoying the rights as individuals per numerous legislative precedents and court rulings, most recently the Supreme Court ruling of Citizen United in 2010, and can thus justify operating in a fiduciary role to their shareholders as Homo Economicus, that is, acting as a rational person who pursues wealth for his own self-interest. Our comments thus do not judge the utilities as being inherently malicious or evil, simply they are responding the economic incentives that govern their behavior.
For years, electric utilities like Dominion Energy Virginia have piled on multiple rate adjustment clauses while relatively low costs for electricity generation from natural gas helped temper the ever increasing electric utility rates. See news article of August 26, 2022 from the Richmond Times Dispatch Dominion riders bring 15% boost to bills this year. This era is now over. Natural gas costs now exacerbate rather than temper the electric rates of Virginia utilities.
Dominion sought to hide this reality in its recent fuel factor proceeding by spreading the recovery of fuel costs over three years and by timing its fuel factor proceeding to coincide with selected, one-off reductions in certain rate adjustment clause. What Dominion failed to mention is that a number of ongoing increases in other rate adjustment clauses were on the near horizon, including the rate adjustment clause for its $21.5 billion offshore wind facility.
Then Dominion compounded the injury.
First, Dominion sought to increase the fuel costs imposed on its ratepayers by entering into a stipulation that would impose carrying charges on its ratepayers, in violation of a long-standing practice of charging for fuel without mark-up.
Next, Dominion sought to build its offshore wind facility in a manner that imposed the maximum risk on ratepayers. Rather than contracting with an experienced wind developer to build the offshore wind turbines, Dominion insisted on building the turbines itself and earning its guaranteed rate of return. Dominion persisted in using this approach despite objections that when a third party develops a facility like this, the contract typically imposes a performance obligation on the third party developer. When the State Corporation Commission ameliorated the ratepayer impact by imposing a performance obligation on Dominion shareholders rather than Dominion ratepayers, Dominion objected, filing a petition objecting to shareholders bearing any of this burden.
The fuel factor proceeding and the offshore wind proceeding demonstrate that Dominion consistently uses its monopoly position to look out for the interests of its shareholders at the expense of its ratepayers. This behavior is especially galling when Dominion has sought at every turn to stifle competition that would provide a relief valve for its customers. Dominion fashioned a 100% renewable energy tariff called Rider TRG that offers its customers no new renewable energy but merely reallocates its existing energy mix. Why bother to offer such a tariff? Because Rider TRG eliminates the only opportunity offered under Virginia law for all Dominion ratepayers to access supply from competitive service providers under Va. Code § 56-577 A 5. Similarly, Dominion endorses having the “at least 35 percent” requirement in Va. Code § 56-585.1:4 G for third party energy storage be treated as a cap rather than a floor. And Dominion insists on imposing minimum charges on shared solar customers that are so high they will eviscerate the shared solar options for customers.
Then Dominion suggested that its opposition to competitive supply is justified by its desire to ensure reliable electricity supply.
There are two clear rebukes to this.
The first rebuke is that competitive supply is reliable. The intermittency of solar resources is now mitigated by combining storage with solar. The troubles in Texas have nothing to do with either renewable or competitive supply being unreliable. Natural gas and coal plants failed along with wind turbines in the extreme cold, and the lack of a wholesale capacity market is a problem unique to Texas which has no bearing in Virginia.
The second rebuke is that Dominion has proved itself to be unreliable in a spectacularly dramatic fashion. After touting for years the benefits of having high load factor data centers in its load mix, Dominion is now scrambling to cobble together a plan to meet data center load requirements that have been known for a considerable time. It is ironic that a utility which falsely accuses competitive supply of being unreliable has failed so drastically in a core utility function: meeting forecasted load obligations.
All these circumstances point to electricity policies in the Commonwealth that are badly in need of repair.
The same could be said of the anti-competitive behavior of the electric Co-ops, APCo and ODP, but we believe the above examples for Dominion sufficiently make the point that these corporate entities are behaving rationally as Homo Economicus in response to economic incentives established by the state legislature.
On the opportunity for mobile storage to help address the capacity challenges for a fast-growing electricity market in Virginia
Within a day of each other, two news stories told a tale of two energy paths, one about distributed mobile storage for a municipal E-bus program in Beverly, Massachusetts, and one about Dominion’s proposed offshore wind project. It would appear that the mobile storage project is 1.5X more cost effective, more distributed, and at far lower performance risk in providing resilient capacity during peak requirements.
Beverly E-buses provide 10 MWh to offset electricity consumption for 600 Massachusetts homes (at 500 kWh/mo average) or 17 kWh per day— or the equivalent of 300 Virginia homes at 1,000 kWh/mo or 33 kWh per day average — in July 2022 from two E-buses, so 300 homes in Virginia. Estimated investment per E-bus: $300k.
Estimated capacity to serve average Virginia home: $1,000
Across the U.S. this summer, as temperatures soared nearly every afternoon, air conditioners clicked on again and again, sending electricity demand through the roof. Just north of Boston, the normally temperate coastal city of Beverly was no exception. Since the Fourth of July, the city has experienced nearly 20 days when temperatures crested 90 degrees Fahrenheit, 10 degrees above the average high.
When electricity demand surged, the city’s small fleet of electric school buses sprang to life, sending electricity stored in their massive batteries back into the grid to prevent brownouts and blackouts. So far, the buses have contributed 10 MWh of electricity on 30 separate occasions to National Grid, the regional utility, according to Highland Electric Fleets, which supplies and manages the buses.
DeChant, Tim. August 25, 2022. Electrification is poised to turn school buses into money-making arbitrage assets. TechCrunch.
Using the above math on capacity to provide average Virginia home consumption, using wind turbines….dependent on intermittent resource with high performance risk.
Estimated capacity to serve average Virginia home: $1,500
It will cost some $9.8 billion to erect 176 giant wind turbines in the ocean, 27 miles off Virginia Beach, where Dominion says they’ll generate enough power for 660,000 homes when all are spinning at their peak performance levels – as well as the wires to bring the power to a substation several miles inland.
Ress, Dave, Aug 26, 2022. Dominion riders bring 15% boost to bills this year. Richmond Times-Dispatch