Solar Energy and Change in Virginia
There is a quiet, but significant, revolution occurring in our energy sector, driven by dramatic declines in the cost of solar energy and exponential improvements in the technology that undergirds this section of the economy. For Virginians, the question is whether we have the policies in place to allow this sector to grow, creating economic opportunity and jobs for our citizens, producing revenue for our communities and the Commonwealth, and generating energy savings for businesses and consumers, all the while helping reduce the amount of CO2 entering the atmosphere.
There are now more than 208,000 solar energy employees in the United States, in jobs ranging from design to sales to installation. In fact, the solar industry has added 115,000 new jobs since 2010, with 35,000 of those in the last year alone. By contrast, oil and gas firms slashed nearly 17,000 extraction jobs in 2015. Today the solar industry workforce is larger than that of the entire coal extraction industry. Wages in the solar industry are higher than the U.S. median wage, ranging from $18 per hour to nearly $30 per hour. And the cost of solar is dropping fast. From 2009 to 2014, the average cost of solar panels dropped by 73 percent. In the first half of 2015, consumers could build rooftop solar at a cost of $3.79 per watt and were not projected to receive a return on their investment for over ten years. In Charlottesville today, residential systems can be built for $2.70 per watt and the expected time for a return on the investment has been lowered to about 7.5 years. In other places, costs are now close to $2.50 per watt. It took forty years for the United States to hit the 1 millionth solar installation mark. The next million installations will occur in the next two years; we call that exponential growth. And while we typically think of these as rooftop residential systems, perhaps even more significant growth has occurred in the so-called “utility scale” systems installed by the Walmarts, Ikeas, and Amazons of the world, where costs are falling even faster; there were none of these as recently as 2007.
While solar is expanding in Virginia, it has been barely noticeable compared to other states. As of the end of 2015, we had about 22 megawatts of solar generation (1 megawatt can power between 150-180 homes) in our portfolio; by contrast, North Carolina already had over 2,000 megawatts of solar in its portfolio, and many independent studies place Virginia low in ranking of states for solar market penetration. There are a number of reasons for this, but one lies in the policy arena, where Virginia has lagged far behind its competitors.
Some Change in Virginia
The pace of Virginia change has been slow, but it is occurring nonetheless, and could be accelerated with some minor changes in policy. In 2015, we were able to pass a law stating that 500 megawatts of solar energy was “in the public interest,” a signal to a sometimes reluctant State Corporation Commission (SCC) that it should approve some solar projects, even if they might cause a very small increase in utility rates for consumers (the building of all new power plants, regardless of energy source, causes an increase in rates to enable a utility to recover its capital costs). Dominion Power, as part of its pledge to build 400 megawatts of solar by 2020, won SCC approval for three solar farms, one of which will be built in partnership with a company headquartered in Charlottesville, Coronal Development. These three projects will produce 56 megawatts of power and support 800 construction jobs. In August 2016, Dominion was granted approval for a $35 million project in Buckingham County that will generate 19.8 megawatts, enough to provide electricity to 3,500 homes, and the state recently announced an agreement whereby Dominion Power would build and own a 21 megawatt facility – enough to power 4,400 homes – at Naval Air Station Oceana in exchange for the Commonwealth purchasing the generated power. The Governor has pledged that state buildings will derive 8 percent of their electricity from solar by 2019. Electric cooperatives are also getting into the act; the Central Virginia Electric Cooperative is working with Coronal on two 5 megawatt facilities expected to service 1,200 homes, and Old Dominion and A&N Electric Cooperatives just announced a partnership with Hecate Energy, LLC, to build a 20 megawatt solar farm in Northhampton County designed to provide power to 3,000 homes. Locally, Secure Futures, a Harrisonburg firm, is building a 1 megawatt capacity system at Albemarle High School, a system designed to meet 14 percent of the school’s electricity needs. These recent developments, while productive, are just scratching the surface of solar possibilities.
Policy Initiatives for Virginia
In Virginia, we lag behind for a number of reasons. We have no mandatory Renewable Energy Portfolio Standard (RPS), a requirement that has spurred investment in renewables in other states. While we provide huge tax credits to coal companies who are failing to increase jobs, we have no solar tax credit – none. We impose artificially low limits on “net metering” arrangements by which residential consumers can sell their excess energy to the utilities. We even have prohibitions about how much energy individual solar power generators can put onto the grid at any one time.
To accelerate change in this market, we should consider the following changes in Virginia policy:
- Increase the size of the caps on net metering systems.
- Protect the rights of individuals and groups generating solar energy to be fairly compensated and allow them the flexibility to enter into Power Purchase Agreements with third party operators and consumers of solar power.
- Pass a state solar credit.
- Modify the 2015 bill to quadruple the amount of solar that the SCC considers to be “in the public interest.”
- Allow for more distributive power and community net metering, including incentives for utilities to invest in these innovative approaches.
- Change the coal tax credit into grants designed to “solarize” portions of Southwest Virginia, creating jobs and saving energy in the process.
A Coming “Disruption” for Utilities?
Many argue that the utilities will oppose these changes because they threaten their bottom line. There is some truth to this, as witnessed by the efforts nationally by these companies to roll back “net metering” policies that require them to purchase excess power from residential solar generators at retail price. But there is little doubt that change is coming, and regulators in several states have studies underway to determine how to grapple with this major transformation. Some analysts, including Silicon Valley entrepreneur Tony Seba in his book, Clean Disruption, go so far as to argue that the dramatic decline in solar energy prices threatens to throw utilities into a “death spiral” unless they embrace an entirely new business model. At present, this is difficult to see because the energy from the sun is now only usable during daylight hours. That could all change when technological advances permit large scale energy storage at reasonable cost. But for now, getting to a renewable energy future with the utilities is easier than without them; there is simply too much infrastructure and business acumen embedded in these companies upon which we must rely. Electrons, whether green or brown, must be transmitted and distributed. And, at present, our utilities are the only ones who can do this.
In the short run, then, policymakers face a choice. Will we take advantage of improving market conditions and accelerate changes to help our constituents and the environment? Or we will remain on the sideline, losing benefits that are now available while ignoring changes in the industry that may disrupt our utility companies and affect energy distribution in unpredictable ways? The solar market is changing and the revolution is coming; Virginians would benefit by us becoming more proactively engaged in the process.