RPS Report Card: And How to Fix it - How Virginia's Renewable Portfolio Standard Rewards Utilities for a ailing Performance - Chesapeake Climate ...
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RPS Report Card:
How Virginia’s Renewable Portfolio Standard
Rewards Utilities for a F ailing Performance
F
And How to Fix it
F
December 2012
Written By:
Beth Kemler
Virginia State Director, Chesapeake Climate Action Network
beth@chesapeakeclimate.org
804-335-0915
http://www.chesapeakeclimate.org
EXECUTIVE SUMMARY
Should we give a bonus to a utility for continuing to operate a hydro-dam that’s been churning out power since 1904?
Under a 2007 law to encourage the development of new renewable energy sources in Virginia, the state is forcing
consumers to do just that.
While almost thirty states have enacted laws that require utilities to generate a certain
percentage of their energy from renewable sources1, Virginia offers our utilities
financial bonuses for meeting voluntary goals, which are weaker than many of the
Approximate 2011-12 RPS
mandatory standards set by other states. Under the Renewable Energy Portfolio bonuses for meeting 2010 goal:
Standard (RPS) law (§ 56-585.2) passed in 2007, the companies that meet Virginia’s Dominion-$77 million
renewable energy goals are eligible to receive big bonuses, awarded through higher
rates charged to customers. APCo-$15 million
The RPS was intended to spur the growth of renewable energy in Virginia in order to lower our emissions of greenhouse
gases and other pollution while sparking a homegrown clean energy industry.
UTILITIES REWARDED FOR A FAILING PERFORMANCE
In this report, we analyze the data from the companies’ annual RPS reports,2 submitted to the State Corporation
Commission in November of 2012, to see if the utilities’ performance is living up to the intended purpose of the RPS law.
Below is a summary of what we found: a failing performance. Although the companies met the RPS goals in 2011 working
within the framework of the law and are therefore eligible for financial rewards, the results do not come anywhere close to
meeting the intention of the law.
Dominion Power Appalachian Power
RPS Transparency
Did the utilities disclose substantive information about A D
their 2011 RPS performance in their 2012 reports?
Energy from New Facilities
Did the energy that utilities stand to be rewarded for come F 0% F 0.2%
from facilities built after the rewards were offered?
Wind and Solar Energy
Did the energy that utilities stand to be rewarded for come F 0% F 0.2%
from the most modern, pollution-free technologies?
Virginia-Made Energy
Did the energy that utilities stand to be rewarded for by F 19% F 19%
Virginians come from facilities in Virginia?
1
Renewable Portfolio Standard Policies. Database of State Incentives for Renewables & Efficiency:
http://www.dsireusa.org/documents/summarymaps/RPS_map.pdf
2
Virginia utility annual RPS reports can be found on the Virginia State Corporation Commission’s website at
http://www.scc.virginia.gov/pue/renew.aspx.
1
By far, the biggest failing is the lack of energy from new facilities (ones that went online after the RPS was created). Virginia
offered the utilities financial rewards as an incentive to spur the growth of a renewable energy industry in Virginia.
Unfortunately, without specific requirements for modern technology, the utilities are able to qualify for the rewards with a
portfolio of energy that mostly consists of hydropower dams built before World War II.
BREAKING DOWN THE FACTS: Figures of Interest
The only power that was credited to the RPS in 2011 that came from new facilities (ones that went online after the
law was created in 2007) came from Appalachian Power. Wind farms in Indiana and Illinois provided 1,508 MWh,
enough to power about 100 homes. This comprised 0.04% of all of the energy counted toward the RPS in 2011 and
also accounted for the only wind power used toward the RPS by either utility.
The average facility providing power for the RPS in 2011 went online in 1945—the year World War II ended. If it
were a person, it would be eligible for Social Security.
If Dominion Power had developed enough wind and solar power to generate 1.7 million MWh (its yearly RPS goal
for 2010-2015) instead of developing more fossil fuel generation, the resulting reduction in greenhouse gas
emissions would be like taking 125,000 cars off the road.
The majority of Virginia’s 2011 RPS energy—54%—was purchased as Renewable Energy Certificates (RECs) from our
neighbors in Maryland.
While the RPS end goal is portrayed as “15% in 2025,” Dominion Power’s 2025 goal equates to only 6% of its 2025
load forecast and Appalachian Power’s 2025 goal equates to only 10% of its 2025 forecast.
LESSONS LEARNED: How the RPS Ends Up Rewarding a Failing Performance
Without tight standards for what meets the RPS goals, we end up rewarding energy that would have been
generated even if no reward were offered. It seems unlikely that the members of the General Assembly were
envisioning utilities getting credit for a hydropower dam that has been generating power since before World War II
when they created renewable energy rewards.
Extra credit for certain technologies is a poor substitute for a tiered system. Most states put priority on the
cleanest technologies by creating a tiered system. They say that a certain portion of the energy for the RPS has to
come from “tier 1” sources, like wind and solar power, and the rest can come from “tier 2” sources. In Virginia, the
RPS instead offers 200-300% credit for certain technologies. This extra credit clearly isn’t doing its job, since only a
tiny fraction of the energy that was credited to the RPS in 2011 came from wind. If we want the companies to
invest in the cleanest, most modern technologies, we need to make that a requirement to meet the goals and
qualify for the bonus.
A voluntary RPS that offers rewards should be in-state only. While allowing utilities to count energy from a large
geographic region might make sense for a mandatory RPS, it doesn’t for renewable energy goals that offer big,
customer-funded rewards. If Virginians are paying the bonus, we should reap the rewards—cleaner air and jobs.
We’ve set a very low bar for high rewards. Because of the way the goals are calculated, Dominion’s 2025 “15
percent” goal amounts to only 6% of the amount of energy the company is forecasting it will sell in 2025. APCo’s
“15 percent” goal amounts to 10% of its 2025 load forecast.
2 The law allows other activities to count as generating energy, which only further weakens the goals. Allowing
utilities to count research and development of renewable energy for up to 20% of any given year’s goal and to
count an unlimited amount of “thermal energy” means that they can meet the goals and get rewarded with even
less actual renewable energy.
The RPS law, as written, unintentionally allows a single MWh of renewable energy to be counted by two
different companies. A 2011 ruling by the State Corporation Commission found that, while likely not the intent of
the General Assembly, the RPS law includes a loophole that allows double-counting of a single MWh of energy.
TOP LESSON LEARNED: How to Create a Winning Performance
In order to ensure that our RPS creates a winning performance—spurring new investment in a renewable energy industry in
Virginia—Chesapeake Climate Action Network’s top policy recommendation is that the General Assembly:
Replace the 200-300% credit that solar and wind power currently receive toward the goals with a minimum
amount of energy that must come from wind and solar power to meet the goals.
Only allow energy from facilities in Virginia to count toward the RPS.
Since Virginia has no utility-scale wind or solar power facilities, these two provisions, in concert with each other, will ensure
that new renewable energy goes onto the grid locally to meet the RPS goals.
3BACKGROUND
WHAT IS A RENEWABLE PORTFOLIO STANDARD (RPS)?
A state Renewable Portfolio Standard (RPS)
requires utilities to use or procure renewable
energy or renewable energy certificates (RECs)3
to account for a certain portion of their retail
electricity sales.
RPS laws have been enacted by 29 states—from
North Carolina to Texas to Montana—and the
District of Columbia. 4 These laws have resulted
in cleaner air, economic development and
lowered greenhouse gas pollution.
WHAT MAKES VIRGINIA’S RPS DIFFERENT? It’s a Goal, Not a Standard
Though Virginia’s law to encourage the
development of renewable energy (§ 56-585.2)
is commonly referred to as a Renewable
Portfolio Standard, it is technically a goal, not a
standard, because it is voluntary for utilities to
participate. Seven other states have adopted
voluntary goals for renewable energy.
Virginia’s goals apply only to our two Investor-
Owned Utilities—Dominion Power and
Appalachian Power Company (APCo)—not to
electric cooperatives or municipal utilities. Both
Dominion and APCo are currently participating in
the goals and “meeting” them.
3
See “What is a Renewable Energy Certificate?” later in the report.
4
Renewable Portfolio Standard Policies. Database of State Incentives for Renewables & Efficiency:
http://www.dsireusa.org/documents/summarymaps/RPS_map.pdf
4WHAT MAKES VIRGINIA’S RPS DIFFERENT? Utilities Get Financial Rewards
Virginia is one of only two states that offer
utilities financial rewards for meeting renewable
energy goals.
The rates that Dominion and APCo customers
pay are determined through a complex state
regulatory process that is based on laws passed
by the General Assembly.
As a reward for meeting RPS goals, a Virginia
utility can get a reward of 50 extra “basis
points,” equivalent to .5% of its “rate base,” as
part of the rates that are approved by the State
Corporation Commission.
Dominion and APCo both received approval to
include RPS bonuses in their 2011-2012 rates (based on meeting the 2010 RPS goal).
For Dominion Virginia Power, this will mean earning approximately $77 million extra
Approximate 2011-12 RPS
from customers over two years and for Appalachian Power, it will mean earning
approximately $15 million extra. For more detail about how the bonuses are paid, bonuses for meeting 2010 goal:
please see Report of the Office of the Attorney General on Return-on-Equity Dominion-$77 million
Enhancement Adders of the 2007 Virginia Electric Utility Regulation Act, released in
November 2012.
APCo-$15 million
WHAT DO UTILITIES HAVE TO DO TO GET REWARDED?
Utilities have to meet specific numeric goals for specific time periods, which can be fulfilled with a combination of
megawatt-hours (MWh) of renewable energy and/or Renewable Energy Certificates (RECs).
Dominion and APCo RPS Goals (MWhs/RECs)
Time Period 2010 2011-2015 2016 2017-2021 2022 2023-2024 2025
Dominion Goal 1,732,746 1,732,746 3,032,305 3,032,305 5,198,238 5,198,238 6,497,797
APCo Goal 578,120 578,120 1,011,710 1,011,710 1,734,360 1,734,360 2,167,950
For more details about what each company’s goals are based on, see the “The Devil’s In the Details” section of the report.
5WHY WAS THE RPS CREATED? To Spur New Renewable Energy in Virginia
Virginia’s RPS was created in 2007 as part of the reregulation of our investor-owned electric utilities. The RPS was intended
to spur the development of new renewable energy facilities in Virginia, contributing to:
Healthy Families: The more clean renewable energy that goes online, the less mercury, soot and other toxins that
are released by dirty old power plants.
A Healthy Climate: Putting more renewable energy online also avoids emissions of greenhouse gases, which
contribute to climate change, leading to sea level rise and other problems.
A Healthy Economy: Growing a renewable energy industry in the commonwealth would create new, home-grown
jobs.
Unfortunately, the following pages will show that the results of the RPS are not matching the General Assembly’s
intentions. The companies are meeting the goals almost entirely with power generated at facilities that were already built
before the RPS was created. Some of the facilities are more than 100 years old, most of them are outside of Virginia and
virtually none produce the cleanest forms of energy—wind and solar power.
6THE GRADES: Utilities Rewarded for a Failing Performance
GRADING PERFORMANCE: Annual RPS Reports Provide Insight
The original RPS law passed in 2007 included no requirement for utilities to report on their efforts to meet the RPS goals
outside of documents filed with the State Corporation Commission in biennial rate review cases. In 2008, the General
Assembly approved a bill proposed by Senator Linda Toddy Puller that included this reporting requirement:
H. Each investor-owned incumbent electric utility shall report to the Commission annually by November 1 on (i) its
efforts, if any, to meet the RPS Goals, (ii) its overall generation of renewable energy, and (iii) advances in renewable
generation technology that affect activities described in clauses (i) and (ii).
While the requirement to file a report annually was an improvement, the new provision lacked specifics and so did the
resulting reports filed by utilities. In 2012, the General Assembly passed a bill introduced by Senator Donald McEachin and
Delegate Jennifer McClellan that added specifics on which utilities must now report.
H. Each investor-owned incumbent electric utility shall report to the Commission annually by November 1
identifying:
1. The utility's efforts, if any, to meet the RPS Goals, specifically identifying:
a. A list of all states where the purchased or owned renewable energy was generated, specifying the number
of megawatt hours or renewable energy certificates originating from each state;
b. A list of the decades in which the purchased or owned renewable energy generating units were placed in
service, specifying the number of megawatt hours or renewable energy certificates originating from those
units; and
c. A list of fuel types used to generate the purchased or owned renewable energy, specifying the number of
megawatt hours or renewable energy certificates originating from each fuel type;
Using the reports that Dominion and APCo submitted to the State Corporation Commission in November of 2012, which
provide data for 2011, we have analyzed the utilities’ RPS performance.
“PURCHASED OR OWNED RENEWABLE ENERGY”: A Note on “Banking”
As you can see above, the utilities are required to report each year on “purchased or owned renewable energy.” What
exactly does that mean?
Energy counted toward the RPS goal for any given year doesn’t have to be generated in that year. In a given year, a
company can generate or purchase more renewable energy toward the RPS than it needs for the current goal and save the
extra amount for future goals. It’s sort of like each company has a bank account where it deposits all of its RPS energy and
each year it withdraws just the amount needed for that year. So when the utilities are required to report on their
“purchased or owned renewable energy,” that includes all of the energy that the company put in its account that year,
including what it banked for the future.
7TRANSPARENCY: Public Disclosure of What’s Being Rewarded
DID THE UTILITIES DISCLOSE SUBSTANTIVE INFORMATION ABOUT THEIR RPS PERFORMANCE IN THEIR 2012 REPORTS?
Dominion APCo
RPS Transparency A D
Dominion’s 2012 RPS report earned an A for transparency. The company filed its report on time and provided all of the
information required by law.
Dominion’s report included all of its figures broken down by the ultimate fate of each MWh or REC. The figures were
broken into three categories:
Applied: This is the energy Dominion is applying to the 2011 RPS goal.
Banked: This is the energy that was deposited in Dominion’s metaphorical RPS “account” in 2011 but that the
company does not need to use toward the year’s goal. Dominion has “banked” the energy for use toward future
years’ goals.
Optimized: This is the renewable energy that Dominion generated in 2011 but that the company did not deposit in
its RPS account. Instead, the company sold the RECs for the optimized energy to other companies.
APCo’s 2012 RPS report earned a D for transparency. For its report, the company originally submitted a letter stating that
it had met the 2011 RPS goal without providing any of the specifics required by law. After the State Corporation
Commission pointed out that the company had not met the reporting requirements, APCo sent in an expanded report.
APCo’s final report omitted information about the in-service decades of the facilities that provided 62% of its 2011 RPS
energy. This is completely insufficient. Given the RPS was created to incentivize the development of new renewable
energy, the age of the facilities providing power is a crucial piece of information for analyzing performance.
In addition, APCo’s final report only included total figures for energy that it deposited in its RPS account in 2011. The
company did not provide any specifics for energy applied vs. banked. While the law doesn’t specify that this information
must be included, APCo should take a cue from Dominion and include it for the sake of transparency. Since specific
financial rewards are linked to meeting the RPS goals in specific years (e.g. utilities are being rewarded in 2011-2012 for
meeting the 2010 goal), it is only logical that consumers should be able access precise figures for what they’re rewarding.
RPS ENERGY “DEPOSITED” IN 2011: A Note on the Following Numbers
Because APCo only provided figures for all of the energy it “deposited” in its RPS “account” in 2011, without providing
figures for energy specifically applied to the 2011 goal(“withdrawn”), the “deposited” numbers serve as the basis for all of
the following performance comparisons.
8FAILING PERFORMANCE: Rewards for Energy from Facilities that Have
Been Online for Decades
WHY SHOULD THE RPS ENERGY COME FROM FACILITIES BUILT
AFTER 2007? The only power from new
The RPS was created in 2007 and its essential purpose is to spur facilities that was credited toward the
the growth of new renewable energy. Power generated at
facilities that went online before 2007 does not satisfy the intent
RPS in 2011 was APCo’s- 1,508 MWh
of the RPS. from wind farms in Indiana & Illinois. That’s
DID THE ENERGY THAT UTILITIES STAND TO BE REWARDED FOR enough to power approximately
COME FROM FACILITIES BUILT AFTER THE REWARDS WERE
OFFERED?
100 homes.
Both utilities failed to utilize new energy facilities for a substantial
portion of their RPS energy in 2011.
Dominion’s 2011 RPS energy didn’t include any power from facilities that went online after the RPS rewards were offered.
APCo’s 2011 RPS energy included a tiny fraction from new facilities. These facilities, Camp Grove wind farm in Illinois
(which began operations in November of 2007) and Fowler Ridge wind farm in Indiana (which began operations in 2008)
provided enough energy toward the RPS in 2011 to power about 100 homes.5
Dominion APCo
New Facilities F F
(2007+) 0% 0.2%
2000-2006 0% 12%
1990s 18% 0%
1980s 6% 0%
1970s 0% 0%
1960s 6% 8%
1950s 4% 0%
1940s 0.2% 0%
1930s 1% 15%
1920s 58% 0%
1910s 7% 2%
1900s 0% 1%
Undisclosed 0% 62%
5
Based on average consumption of 14.2 MWh by an APCo residential customer in Virginia in 2011.
9LESSON LEARNED: WITH NO TIERS OR RESTRICTIONS ON AGE OF FACILITIES, WE END UP REWARDING ENERGY THAT
WOULD HAVE BEEN GENERATED EVEN IF NO REWARD WERE OFFERED
The fact that utilities can gain RPS rewards for energy from facilities that have
been generating power for up to 100 years or more is a glaring example of how
the details of the RPS law have not lived up to its intent. Creating a requirement The average facility
that a certain portion of the energy come from modern technology (or “tier 1”), providing power for the RPS in
in partnership with requiring that the energy come from Virginia, would mean
that new renewable energy would have to be built in Virginia in order for the
2011 went online in 1945- the
RPS goals to be met. year WWII ended. If it were a
person, it would be eligible for
Social Security.
10FAILING PERFORMANCE: RPS Not Growing Wind & Solar Power Industries
WHY SHOULD RPS ENERGY INCLUDE WIND AND SOLAR
POWER?
When we hear that utilities are being offered rewards for If Dominion had developed wind &
meeting “renewable energy goals,” most of us envision
the companies building wind farms and solar arrays solar power to meet the beginning RPS goals,
across the state. In fact, when CCAN polled Virginians
about how they would like to see companies fulfill the
instead of bringing more fossil fuels online, it would
renewable energy goals, wind power and solar power have been the greenhouse gas equivalent of
were the two top answers.6
taking 125,000 cars off the road.
Pollution-Free: One of the top reasons the RPS was
created is to lower greenhouse gas emissions for a
healthy climate and lower other air pollution from power plants for healthy families. Therefore, utilities should be utilizing
the cleanest technologies to help meet their goals.
Modern: Wind and solar power are the modern technologies of today and they have much more potential to create local
jobs than old technologies like hydropower. Virginia is home to a number of businesses that install solar panels but,
unfortunately, many of them do a lot of their business in other states that have a better regulatory climate for solar.
Because wind turbines are so large and it’s costly to transport them for long distances, wind power has the potential to
create not only direct installation jobs but also local manufacturing jobs.
DID THE ENERGY THAT UTILITIES STAND TO BE REWARDED FOR COME FROM THE MOST MODERN, POLLUTION-FREE
TECHNOLOGIES?
Both utilities failed to utilize wind or solar power for a substantial portion of their 2011 RPS energy. Neither took advantage
of our solar resource and only APCo brought in a tiny portion of wind power. This small amount of power was generated at
wind farms in Indiana and Illinois.
Dominion APCo
F F
Wind & Solar Power
0% 0.2%
Wind 0% 0.2%
Solar 0% 0%
Hydro 78% 99.8%
Municipal Solid
22% 0%
Waste
Landfill Gas 0.2% 0%
6
See We Ask America Poll Results at http://www.chesapeakeclimate.org/file-uploads/kelly-
trout/VA_Renewable_Energy_Poll_Results_2012.pdf.
11LESSON LEARNED: EXTRA CREDIT FOR CERTAIN TECHNOLOGIES IS A POOR SUBSTITUTE FOR TIERS
Most states put priority on the cleanest technologies by creating
a tiered system. They say that a certain portion of the energy for
the RPS has to come from “tier 1” sources, like wind and solar
power, and the rest can come from “tier 2” sources. In Virginia,
the RPS instead offers 200% credit for solar power and onshore
wind and 300% credit for offshore wind power—meaning that a
utility could knock out 200,000 MWh of its goal with only
100,000 MWh of actual solar power.
This extra credit clearly isn’t doing its job, since only a tiny
fraction of the energy that was credited to the RPS in 2011 came
from one of these technologies.
If we want the companies to invest in the cleanest, most modern
technologies, we need to make that a requirement to meet the
goals and qualify for the bonus.
How should Virginia’s RPS tiers be divided?
TIER 1 TIER 2
Modern, pollution-free technologies that involve no Technologies that pollute by burning a fuel
combustion Biomass (Waste Wood): Though conventional wisdom in the past
Wind Power: Wind turbines release no pollution. has been that burning waste wood was “carbon neutral,” scientists
Wind power also has the potential to spur local are now taking a second look. The common conception used to be
manufacturing jobs, since large turbine parts can’t that if waste wood were left in the forest, it would eventually
be economically transported over long distances. decompose, releasing its carbon, so burning it would be carbon
neutral in the long run. But it would normally decompose over the
Solar Power: Solar panels release no pollution. Plus course of decades, not burn up in minutes. So the short-term
solar arrays tend to be erected by local installers, carbon impact of burning wood for electricity can actually be higher
adding to the potential to keep the associated jobs than fossil fuels like coal. Since climate change is happening rapidly
in-state. before our eyes, experts are starting to think that we may want to
pull back the reigns on the construction of biomass facilities.
Geothermal, Tidal & Wave Energy: Though these
technologies are not currently viable for utility-scale Municipal Solid Waste: As one would expect, burning trash for
use, they are all pollution-free. energy creates quite a bit of pollution, including greenhouse gases.
Animal Waste: Burning animal waste for energy is a matter of trying
to solve a water pollution problem (run-off from farms) by trading it
for an air pollution problem.
Landfill Gas: A landfill gas facility creates energy by trapping
methane as trash decomposes and burning it. This, too, creates
pollution.
Technologies that are out of date
Hydropower: Though hydropower is certainly clean, it is not exactly
a modern technology. Including it in our top tier would not help to
spur the development of new renewable energy sources in Virginia.
12FAILING PERFORMANCE: Virginians Rewarding Power from Other States
WHY SHOULD RPS ENERGY COME FROM VIRGINIA?
The majority of the 2011
If Virginians are providing the utilities with financial rewards for meeting the RPS, then
Virginians should retain the benefits—cleaner air for healthy families and jobs for a RPS energy-54%-came
healthy economy. from our neighbors in
DID THE ENERGY THAT UTILITIES STAND TO BE REWARDED FOR BY VIRGINIANS COME Maryland.
FROM VIRGINIA?
Both utilities failed to generate or purchase a substantial portion of their RPS energy from Virginia facilities in 2011.
LESSON LEARNED: A VOLUNTARY RPS WITH REWARDS SHOULD BE IN-STATE ONLY
The RPS law allows utilities to count renewable energy from anywhere within the PJM interconnection region, which
reaches as far as Illinois, and to also count energy from facilities that the utility owns in neighboring states. While this
geography might make sense for a mandatory RPS, for voluntary goals with big rewards, it only makes sense to keep the
benefits in-state.
Energy Generated in: Dominion APCo
F F
Virginia
19% 19%
Maryland 57% 42%
Pennsylvania 14% 21%
North Carolina 9%
New Jersey 1%
West Virginia 18%
Indiana 0.09%
Illinois 0.09%
13TOP LESSON LEARNED: How to Ensure a Winning Performance
In order to ensure that our RPS creates a winning performance—spurring new investment in a renewable energy industry in
Virginia—Chesapeake Climate Action Network’s top policy recommendation is that the General Assembly:
Replace the 200-300% credit that solar and wind power currently receive toward the goals with a minimum
amount of energy that must come from wind and solar power to meet the goals.
Only allow energy from facilities in Virginia to count toward the RPS.
Since Virginia has no utility-scale wind or solar power facilities, these two provisions, in concert with each other, will ensure
that new renewable energy goes onto the grid locally to meet the RPS goals.
It should be noted that neither of these provisions will have as much of an impact on its own as they will have together.
If you just create a tiered system, there’s no guarantee that we won’t end up with all our tier 1 power coming from states
that are further along in developing their renewable energy industries, like Pennsylvania and Illinois. On the other hand, if
you just add a provision that the power has to come from Virginia without creating a tiered system, you still won’t be
sparking much new development.
For instance, if the General Assembly added a provision to the law stating that all of the energy to meet the goals must
come from Virginia starting in 2016 (the first year that the goal amount increases) without also adding a wind and solar
tier, Dominion could meet the goals through 2020 without investing in any new energy beyond what’s already online or
planned. This is the case, in part, because Dominion already has a substantial amount of VA-generated energy from old
facilities banked and could save up even more before 2016. Plus, if the company took advantage of its option to use
research and development for 20% of each year’s goals, then it could meet the goals without any new energy for an
additional two years—through 2022—just three years before the end of the 15-year RPS program.
14THE DEVIL’S IN THE DETAILS: Further Lessons Learned
BACKGROUND INFO: What is a renewable energy certificate (REC)?
In order to understand the ins and outs of how
renewable energy laws operate, it is important to
understand how renewable attributes are
accounted for and traded.
A Renewable Energy Certificate (REC) is a tradable
commodity that represents the environmental
attributes of 1 megawatt-hour (MWh) of renewable
energy. When a company generates a MWh of
electricity from a renewable energy resource, it can
sell the power onto the grid and also sell a REC for
that power, either to the same buyer or a different
one.
While the original concept of a REC was to account
for a MWh of renewable energy being put on the
grid, the concept has been expanded to include
certificates for other activities in some states. For
instance, in Virginia, the law now includes a calculation to convert BTUs of thermal energy into a number of RECs.
RPS SETS A LOW BAR FOR HIGH REWARDS
Each utility has specific numerical goals for each year of the RPS, which ramp up to larger amounts over time. For instance,
Dominion’s 2025 RPS goal is 6,497,797 MWhs (or RECs). The numbers signify a combination of megawatt-hours (MWh) of
renewable energy going onto the grid and/or Renewable Energy Certificates (RECs). A REC originally signified that 1 MWh
of renewable energy went onto the grid but the definition has since been expanded to include certificates for other
activities, such as spending money on Research and Development. You will find more on what qualifies for Virginia’s RPS in
the next section.
Many states have set up their RPS calculations in a simple manner. For instance, Maryland’s RPS requires that in 2022,
utilities show renewable energy or RECs amounting to 20% of that year’s sales. North Carolina’s RPS requires that in 2021,
utilities show renewable energy or RECs amounting to 12.5% of 2020 sales.
Virginia’s RPS goals, on the other hand, are based on a complex calculation that lowers the bar for utilities and also makes
the goals sound bigger than they truly are. The calculation of each utility’s goals starts with determining “total electric
energy sold in the base year,” commonly referred to as “base year sales.”
"Total electric energy sold in the base year" means total electric energy sold to Virginia jurisdictional retail
customers by a participating utility in calendar year 2007, excluding an amount equivalent to the average of the
15annual percentages of the electric energy that was supplied to such customers from nuclear generating plants for
the calendar years 2004 through 2006.
Base Year Sales Calculation
Dominion APCo
2007 Sales 64,621,534 15,586,000
- Nuclear Generation (2004-2006 Avg) 21,302,885 1,133,000
= "Base Year Sales" 43,318,649 14,453,000
Once the base year sales are determined, the RPS goals are determined as percentages, starting at 4% in 2010 and stepping
up every few years to eventually reach 15% in 2025.
Dominion and APCo RPS Goals
Time Period 2010 2011-2015 2016 2017-2021 2022 2023-2024 2025
12%
Percent 4% 4% Average 7% 7% Average 12% Average 15%
Dominion Goal 1,732,746 1,732,746 3,032,305 3,032,305 5,198,238 5,198,238 6,497,797
APCo Goal 578,120 578,120 1,011,710 1,011,710 1,734,360 1,734,360 2,167,950
Between basing the future goals on sales figures from the past and subtracting
nuclear generation from the base year sales, the utilities’ goals end up much lower
than the portrayed percentages. If we compare each utility’s end 2025 goal to the While the RPS end goal is
amount of energy it has forecasted it will need in 2025, we see just how much portrayed as “15% in 2025,”
lower the bar really is.
Dominion’s 2025 goal equates
Comparison of 2025 Goals to 2025 Load Forecasts to only 6% of its 2025 load
Dominion APCo
2025 Goal - 15% of Base Year Sales 6,497,797 2,167,950
forecast.
7
÷ 2025 Load Forecast 104,533,000 20,802,000
= 2025 "15%" Goal as % of 2025 Load Forecast 6% 10%
7
Source: Dominion and APCo’s 2011 Virginia Integrated Resource Plans, submitted to the State Corporation Commission
16COUNTING R&D AND THERMAL ENERGY FURTHER WEAKENS GOALS
Although the RPS was created to promote the growth of renewable electricity in Virginia, the statute has been expanded to
include other sources that companies can use to qualify for the bonus. Allowing other activities to be counted as though a
company was putting renewable energy onto the grid does not help us get steel in the ground.
What Can Utilities Count Toward the RPS?
Type Definition Notes
Renewable Energy energy derived from sunlight, wind, This includes:
(only type falling water, biomass, energy from company-generated electric energy
included in waste, landfill gas, municipal solid electric energy purchased from another
original RPS) waste, wave motion, tides, and company
geothermal power RECs purchased from another company
Renewable thermal energy output from a A combined heat and power facility is basically an
Thermal Energy renewable-fueled combined heat and industrial facility that uses its steam energy more
(REC amounts power generation facility that is efficiently. “Thermal energy” is not electricity. During
determined (i) constructed, or renovated and the 2012 General Assembly session, environmentalists
improved, after January 1, 2012, (ii) and consumers objected strongly to the bill creating a
through a
located in the Commonwealth, and (iii) system to issue RECs for thermal energy and count
calculation based
utilized in industrial processes other them toward the RPS, arguing that combined heat and
on number of than the combined heat and power power should be incentivized but not through the RPS.
BTUs) generation facility Unfortunately, legislators passed the bill anyway,
many of them believing the rhetoric that it would help
advance renewable energy in Virginia. They heard
that argument from lobbyists for MeadWestVaco,
which already had plans underway to build a
combined heat and power facility in Virginia.
Research & an expense incurred by a utility in During the 2012 General Assembly session,
Development conducting research and development environmentalists and consumers also objected to the
Investment activities related to renewable or bill creating a system to issue RECs for research and
(REC amounts alternative energy sources; can be used development of renewable energy and count them
for up to 20% of any year’s goal toward the RPS. Again, R & D of renewable energy is
determined
something we may want to incentivize but the RPS is
through a
not the appropriate venue. The G.A. also passed this
calculation based bill, hearing strong support from lobbyists for
on dollars spent) Virginia’s universities, which would stand to benefit
from it.
17EXTRA CREDIT LOOPHOLE: 200-300% Credit Further Weakens Goals
Many states’ RPS laws show preference for certain types of renewable energy over others. Most of them accomplish this
by creating tiered systems and/or carve-outs. In a tiered system, a certain set of energy types must comprise a certain
portion of a company’s RPS energy. In a carve-out system, a certain portion of the energy must come from one specific
energy type. For example, in Maryland, 10% of the end goal of the RPS must come from solar power.
Some RPS laws put a thumb on the scale for certain energy types by giving them a little extra credit over other sources. For
instance, Maryland’s RPS offered 120% credit for wind power for its 2005 goal and 110% in 2006-2008. Virginia’s RPS law,
rather than putting a thumb on the scale for certain energy types, steps on the scale. Our RPS offers 200-300% extra credit
for the sources shown below. This means that a goal that has already been weakened by circuitous calculations based on
2007 sales can be lowered even further. The amount required can become half or a third of what it was.
While the utilities have barely been taking advantage of these extra credits, they have the potential, if utilized, to
substantially lower the bar for utilities.
Extra Credit Loophole Can Lower The Bar Even Further
A Goal of 15%
Renewable
Credit
Type Energy Could
Amount
Be Satisfied
With Only…
Hydro 100%
Biomass 100%
Energy from Waste 100%
Landfill Gas 100%
Regular Credit
Municipal Solid Waste 100%
Wave Motion 100%
Tides 100%
Geothermal 100%
Solar 200% 7.5%
Onshore Wind 200% 7.5%
Extra Credit
Animal Waste in Virginia 200% 7.5%
Offshore Wind 300% 5%
18DOUBLE-COUNTING LOOPHOLE: One MWh can be counted by two companies
A 2011 ruling by the State Corporation Commission8 found that, under the RPS law as written, a single MWh of renewable
energy can be claimed by two different companies.
For instance, Dominion purchases energy from a trash incinerator in Alexandria that is owned by a company called Covanta.
Dominion’s contract with Covanta to buy the power does not state that Dominion is purchasing the renewable energy
attributes of the power—only the power itself. In most states, the fact that Dominion is not specifically purchasing the
RECs associated with the power would mean that it couldn’t be counted toward the RPS.
According to the SCC’s ruling, the wording of Virginia’s RPS law allows Dominion to count each MWh of that power toward
the RPS while Covanta can also legally sell a REC for each MWh to another company. The purchasing company can then
count that REC toward an RPS goal—in Virginia or in another state.
This type of loophole further
undermines the efficacy of the RPS and
was clearly not what the General
Assembly intended. The loophole
caused by this wording problem must
be fixed in order to strengthen
Virginia’s RPS.
8
Commonwealth of Virginia State Corporation Commission. (June 17, 2011). Order on Petition – Case No. PUE-2010-00132 – Petition of
Dominion Virginia Power for a declaratory judgment.
19POLICY RECOMMENDATIONS: How to Fix Virginia’s RPS
for Healthy Families, a Healthy Economy & a Healthy Climate
TOP LESSON LEARNED: How to Ensure a Winning Performance
In order to ensure that our RPS creates a winning performance—spurring new investment in a renewable energy industry in
Virginia—Chesapeake Climate Action Network’s top policy recommendation is that the General Assembly:
Replace the 200-300% credit that solar and wind power currently receive toward the goals with a minimum
amount of energy that must come from wind and solar power to meet the goals.
Only allow energy from facilities in Virginia to count toward the RPS.
Since Virginia has no utility-scale wind or solar power facilities, these two provisions, in concert with each other, will ensure
that new renewable energy goes onto the grid locally to meet the RPS goals.
ADDITIONAL POLICY RECOMMENDATIONS
Close the Double-Counting Loophole: Require that renewable energy credited toward the RPS be only counted
once by a single company.
Make it Mandatory: Rather than offering utilities financial rewards, we should follow the lead of the majority of
states and make our RPS mandatory.
Eliminate the Nuclear Exclusion: Eliminate the provision that excludes nuclear power from the utilities’ base year
sales, which only weakens the RPS goals.
Eliminate Credit for Research and Development: The RPS was created to get steel in the ground for a renewable
energy industry in Virginia. Giving utilities credit for researching renewable energy as though they were generating
power is simply preposterous. If you offered a neighborhood kid $20 for mowing your lawn, would you still pay
him the full amount if he left 20% of the lawn untouched and instead spent that time researching lawn mowers,
even though yours worked perfectly?
Eliminate or Limit “Banking”: Limit the number of years that a company can “roll over” a given megawatt-hour of
renewable energy before counting it toward an RPS goal. We should not allow a company to credit energy
generated in 2010 to its 2025 goal.
20FOR MORE INFORMATION
To find out more or get involved with work to fix the RPS, contact the appropriate Chesapeake Climate Action Network staff
person.
General Assembly Members & Other Policymakers: Dawone Robinson, Virginia Policy Coordinator, 804-767-8983,
dawone@chesapeakeclimate.org
Concerned Citizens: Keith Thirion, Virginia Field Director, 703-579-6645, keitht@chesapeakeclimate.org
Media: Beth Kemler, Virginia State Director, 804-335-0915, beth@chesapeakeclimate.org
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