13 Oct 2014

Virginia Utilities’ Withdrawal from Collaboration Casts Doubt About Their Intentions to Value Solar

Written by Jim Pierobon

The withdrawal by utilities in Virginia which had been collaborating with local governments, solar stakeholders and academic researchers to agree on a methodology for valuing small solar energy systems is raising doubts about their intentions and the impact of the state-directed effort.

Central to many skeptics’ thinking is whether the utilities joined the effort only to learn how to debunk it before the state’s utility commission and when the Virginia General Assembly begins its 2015 session in early January.

The so-called “Solar Stakeholder Group” (SSG) — short for the Distributed Generation and Net Metering Solar Stakeholder Group coordinated by Virginia’s Department of Mines, Minerals and Energy (DMME) and the Department of Environmental Quality (DEQ) — had been meeting monthly since April. The meetings were led by Damian Pitt, an assistant professor at Virginia Commonwealth University (VCU) and a Steering Committee representing investor-owned, rural cooperative and municipal utilities, solar installers/developers, solar system owners, consultants, non-profits and clean energy advocates.

Without the utilities’ participation at the conclusion of the Group’s work September 29, it’s an open question what weight, if any, the Working Group’s solar methodology will have with Senate Rules Committee.  It was Senate Rules Committee Chairman, Democrat John Edwards of Roanoke, who asked for a report with recommendations on how to value solar-generated electricity.  Since the Committee began its work, control of the Senate has switched to Republicans; the Rules Committee is now chaired by Republican Ryan McDougle of Ashland (photo).

The value of a rooftop solar system is drawing increasing interest from advocates and a lot scrutiny from utilities since Minnesota became the first U.S. state in March to officially set a value on solar-generated electricity.  That value, in the form of a tariff, is a kilowatt hour payment that Minnesota utilities may opt to pay as an alternative to the state’s policy for crediting excess generation of electricity on a monthly or annual basis – known as net metering – at the retail rate paid by homeowners and most businesses.

Home solar system CREDIT SolarCity

Rooftop solar systems such as this one would benefit from a formula that values solar energy many attributes, including its ability to produce power during peak demand days and for the harmful carbon emissions it would help reduce. CREDIT: SolarCity

Minnesota’s valuation was the result of a lengthy process based in part on the Federal government’s calculation of the social cost of fossil-fuel sources of power and their carbon emissions.  Tariff’s are unique to each utility. Analysts estimate tariffs in Minnesota are likely to range between 12 and 14 cents per kilowatt hour. The higher the value, the higher revenue drain that such a determination poses for utilities which make money simply by selling more electricity. There is long-running debate in regulatory circles about how to “decouple” utility profits from pure sales.

As a member of the general Group — but not the Steering Committee which held the drafting process close to the vest — I tracked down the latest draft of the report examining various costs and benefits associated with solar energy. It recommends three methods for calculating the value of small solar systems: narrow, intermediate and broad. While the Group did consider the current policy context in conducting its research, no policy recommendations should be expected in the final report.

David Botkins, a spokesperson for Dominion Virginia Power, said after providing “feedback” to a draft report by the Group, it determined “the group has migrated into issues that are more appropriate for the SCC (State Corporation Commission) and General Assembly to consider.”

When asked why Dominion did not assume, from the beginning, that a report from the Group was destined for the Senate, Botkins added, with “the report nearly complete (it has been through several drafts) it seemed an appropriate time to discontinue our participation.”

Susan Rubin, Vice President-Legislative Affairs of the Virginia, Maryland and Delaware Association of Electric Cooperatives informed DMME and DEQ of their withdrawal saying ”We began the process hoping, in the end, the work product would be the result of collaboration.  Following the last meeting (in August), it became clear that we must remove ourselves from the list of participating stakeholders as we cannot be associated with the final report this group will issue.”

Pitt of VCU, the Group’s meeting leader, said, “Basically the utilities all said that the report was heading in a direction that they wouldn’t be able to support.” He added, they “wouldn’t say anything specific about what parts of the report they disagreed with.”

The withdrawal is leading several solar advocates to conclude that the utilities opined the valuation methodology headed would set too high a value for solar, setting the stage for a debate, and perhaps legislation, they might have a difficult time controlling. Several long-time observers have long doubted this study would have much, if any, impact because Republicans control the House of Delegates, as well as, the Senate. Neither body has demonstrated interest in enabling markets for cleaner energy in Virginia, even as the economy needs to replace tens of thousands of jobs lost to cut backs in defense contracting.

Some of that control sought by utilities might have been provided by the Department of Environmental Quality’s coordinator of the working group, Carol Wampler. Wampler is a former lobbyist for the Virginia Manufacturers Association whom the utilities trusted to help steer the Group deliberations in a direction they could live with.

But Wampler retired at the end of August. On September 5, the utilities notified various offices of the state government of their withdrawal.  Some seasoned political observers familiar with the significant influence Dominion exerts on the General Assembly, agreed that the combination of a report leading to a formal valuation of rooftop solar systems and Wampler’s retirement was too much for them to stomach. Wampler would not comment for this column.

“It looks like the utilities didn’t like what the study is finding, and they are hoping that walking out of the room will make it go away,” said Ivy Main, a prominent blogger about clean energy in Virginia and a participant in the Group. Main has been a vocal critic of in-state utilities’ intransigence about any policy enabling a significant market for solar energy in their service territories.

Utilities have complained that net metering amounts to an unfair subsidy for customers that own solar panels at the expense of those who don’t. Solar advocates counter that the retail rate underestimates the value of solar panels to the grid and society, taking into account the health and environmental impacts of harmful greenhouse gas emissions.

Monique Hanis, of Falls Church, VA, a member of the Group’s Steering Committee representing solar system owners and who formerly was senior manager of the national Solar Energy Industries Association, said she was “excited about the possibilities of working together with utilities, companies, municipal leaders and conservation groups, not just on this report, but on expanding options for customers to ‘go solar,’ creating more jobs and driving innovation across the state.”

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Republican Ryan McDougle, Chairman of the Virginia Senate Rules Committee. He may determine the fate of efforts to value home solar systems. CREDIT: @ryanmcdougle on Twitter

The Working Group met September 29 and opted to issue the report by the November 1, 2014 deadline as it existed before the utilities withdrew, according to two group participants. It may, or may not, carry comments or feedback — contemplated at the outset of the Group’s work — by the National Renewable Energy Laboratory in Golden, CO.

Not only is it unclear what weight, if any, the report will carry for policy or regulatory purposes; it’s not clear what organization (state, academic, group collaboration, or other) will actually issue the report e.g. under whose letterhead.

“What the utilities lost by this clever maneuver,” said Main in a recent post on her blog, “is the trust of the rest of the group. The SSG  . . .  provided a forum for discussion among the many different parties with an interest in distributed solar. It is incredibly important in a forum like the SSG that people trust each other to act in good faith. Otherwise, 49 people are wasting their time.

“The utilities’ decision to sacrifice this trust strikes me as both stupid and unnecessary,” Main continued. “Many of us expected that the utilities’ lobbyists would quietly tell their friends in the legislature to ignore the Value of Solar study, that they participated just to be nice guys. Openly thumbing their noses at the study did nothing except prove they aren’t nice guys and cannot be trusted.

“The rural electric cooperatives will have to answer to their members, who admittedly don’t seem to pay much attention. But Dominion Virginia Power and Appalachian Power are public utilities. They hold their monopolies by the grace of the people of Virginia, and are expected to act in the interest of the people they serve. In this case, they have manifestly failed to do so,” concluded Main.

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