Virginia legislators look to tax breaks and barrier-busting to boost renewable energy

Virginia legislators look to tax breaks and barrier-busting to boost renewable energy


Cross posted from the excellent Power for the People VA, by the Virginia Sierra Club’s Ivy Main. 

Let's get these projects moo-ving. Photo credit NREL
Let’s get these projects moo-ving. Photo credit NREL
The orchestrated mayhem of the Virginia General Assembly session is well underway. Thirteen days are gone and only twenty-one days remain until what’s known as “Crossover,” after which any bill that hasn’t passed its own chamber is effectively dead. This year Crossover falls on February 16. After that, each chamber considers only bills already passed by the other.
By that measure, yours truly is one lazy blogger, because I’m only just getting to the renewable energy bills. On the other hand, bills were still being filed until Friday, and some bills are undergoing revisions before they are heard in committee. These are moving targets; advocates beware.
Removing barriers to investment 
Readers of this blog know that Virginia law is riddled with barriers that restrain the market for wind and solar in Virginia. This year several bills take aim at the policies holding us back.

HB 1286 (Randy Minchew, R-Leesburg, in Commerce and Labor) is barrier-busting legislation developed by the solar industry in consultation with the wind industry and solar advocates. It clarifies that renewable energy companies that sell to retail customers under power purchase agreements (PPAs) are not public utilities and don’t have to meet the statutory requirements for public utilities and suppliers. Customers can use third-party PPAs to purchase renewable energy electricity generated by facilities located on the customer’s property, everywhere in the state. The bill also lifts the one percent cap on net metering programs relative to total utility sales, and authorizes community net metering programs. It also expands the concept of “agricultural net metering” to cover other customers who want to attribute electricity from one facility to multiple meters on the customer’s property.

In addition, the bill amends the Commonwealth’s energy policy by adding the goals of encouraging private sector distributed renewable energy, increasing security of the electricity grid by supporting distributed renewable energy projects, and augmenting the exercise of private property rights by landowners desiring to generate their own energy from renewable energy sources on their lands. None of this language by itself forces action, but the State Corporation Commission takes note of energy policy in its decision-making.
SB 140 (John Edwards, D-Roanoke, in Commerce and Labor) attacks the standby charges that have been so controversial. It increases the size of electrical generating facilities operated by residential or agricultural net energy metering customers that are subject to a monthly standby charge from those with a capacity of 10 kilowatts to those with a capacity of 20 kilowatts. Since residential solar facilities that are net-metered are already limited to 20 kW, this would effectively repeal standby charges for residential net metering.
SB 139 (John Edwards, D-Roanoke, in Commerce and Labor) makes a small change to the existing agricultural net metering option.
SB 148 (John Edwards, D-Roanoke, in Commerce and Labor) replaces the pilot program enacted in 2013 that authorized a limited pilot program for third-party PPAs. generation facilities. The bill requires the State Corporation Commission to establish third-party power purchase agreement programs for each electric utility. The existing pilot program applies only to Dominion Virginia Power and sets the maximum size of a renewable generation facility at one megawatt; the programs authorized by SB 148 apply to all electric utilities and do not set limits on the size of facilities.
Although SB 148 is similar to HB 1286 in attempting to ensure the legality of third-party PPAs, solar advocates prefer HB 1286. Giving the State Corporation Commission authority here should not be necessary and might lead to higher costs and more regulations.
Community energy/solar gardens
It’s darned hard to buy renewable energy in Virginia if you are among the approximately 75% of residents who can’t put solar panels on your own roof or build a wind turbine out on the back forty. That’s an enormous untapped market.
SB 1286, above, contains a provision authorizing community energy programs In addition, HB 1285(Randy Minchew, R-Leesburg, in Commerce and Labor) is a stand-alone bill that authorizes (but does not require) investor-owned utilities and coops to establish community energy programs.
HB 618 (Paul Krizek, D-Alexandria, referred to Commerce and Labor) would require the State Corporation Commission to adopt rules for “community solar gardens” that would let customers subscribe to a portion of the output of a solar facility located elsewhere in their area. The solar electricity and the renewable energy credits (RECs) would be sold to the local utility, which would then credit the subscribers on their utility bills.
But whereas customers who have solar panels on their own roof get credited at full retail value and own the associated renewable energy credits, HB 618 allows the SCC to devise rules that could result in a much worse deal for solar garden subscribers, including allowing the utility to impose a “reasonable charge” to cover ill-defined costs.
That’s an unfortunate invitation to the utilities to pile on fees. Unless the utilities involved really want to make the program work for their customers, it’s hard to imagine this turning out well. We would not expect to see viable programs in Dominion or APCo territory if this passes. On the other hand, some municipal utilities have been more responsive to the interests of their customers, so it could work for them.
Tax credits and exemptions
An important tax bill to watch this year is HB 1305 (Jackson Miller, R-Manassas, referred to Finance), which changes the state and local tax treatment of solar and wind energy facilities. It exempts utility solar and wind from taxation, but lowers from 20 MW to 1 MW the size of other solar projects that are exempt from local machinery and tools tax (a kind of personal property tax; securing that exemption was a major win for the solar industry in 2014). The bill replaces the hard-won 100% exemption with an 80% exemption. The change is very nice for utilities (Virginia is always very nice to utilities), but it makes the economics worse for third-party owned facilities in the 1 MW to 20 MW range—exactly the ones the state should be trying to attract.
SB 743 (Frank Wagner, R-Virginia Beach, referred to Agriculture, Conservation and Natural Resources) helps solar projects below 5 MW qualify for the above-mentioned tax exemption passed in 2014. The bill makes the Department of Mines, Minerals and Energy the agency that certifies solar projects as “pollution control equipment and facilities,” eligible for exemption from state and local taxation. This exemption from state sales tax and local machinery and tools taxes is one of the few perks Virginia can offer commercial-scale solar developers here, where margins on projects are very thin compared with projects in North Carolina or Maryland with stronger incentives.
Tax credits are also on the agenda this year. Tax credits fell into disfavor in Virginia following an audit that revealed that many tax credits aren’t achieving their objectives (see: tax subsidies for coal mining). Senate Finance Committee members resolved to end them just about the same time the solar industry came asking for one themselves two years ago, with unhappy results for solar. But tax credits are legislative candy, and there’s no telling how long the diet will last. Hopeful persons may as well put out their own plate of chocolates. If the diet is off, then the main problem with this year’s bills, from the point of view of the Republicans who make up the majority of our legislature, is simply that they come from Democrats.
HB 480 (Rip Sullivan, D-Arlington, referred to Finance) establishes a 35% tax credit for renewable energy property, to be claimed over 5 years, with a $5 million program cap. The credit would apply not just to wind and solar but also some biomass, combined heat and power, geothermal and hydro systems.
SB 142 (John Edwards, D-Roanoke, referred to Finance) and HB 1050 (Sam Rasoul, D-Roanoke, referred to Finance) establish a tax credit of up to 30% for solar thermal systems used for water heating or space heating and cooling. Solar PV systems are not included in the bill.
State funding through carbon cap and trade
SB 571 (Donald McEachin, D-Richmond, referred to Agriculture, Conservation and Natuaral Resources) and HB 351 (Villanueva, R-Virginia Beach, referred to Commerce and Labor) would require the Governor to join the Regional Greenhouse Gas Initiative (RGGI), the cap-and-trade program that has successfully ratcheted down carbon emissions in the northeastern states. Funds generated by auction allowances would fund sea level rise adaptation in coastal areas, economic transition efforts for southwest Virginia, energy efficiency for low-income families, and distributed renewable energy programs.
HB 941 (David Toscano, D-Charlottesville, referred to Counties, Cities and Towns) expands the authorization for Property Assessed Clean Energy (PACE) programs to include residential and condominium projects. This would allow localities to offer low-interest financing to homeowners for both energy efficiency and renewable energy investments.
Utility cost recovery
HB 1220 (David Yancey, R-Newport News, referred to Commerce and Labor) is billed as a technical fix for language added to the Code last year that encourages utilities to invest in solar. The bill clarifies that a utility that purchases a solar facility is allowed cost recovery on the same favorable terms it would get by building the facility itself.
Energy storage
Energy storage is emerging as the hot new energy technology area, about where solar was five years ago. Interest in it has been driven by recent price declines as well as the success of wind and solar and the growing awareness that these carbon-free sources are likely to make up a significant portion of our electricity supply in coming years. So while the use of storage is by no means limited to renewable energy applications, I include it here because it will interest those who follow wind and solar policy.
HB 452 (Patrick Hope, D-Arlington, in Commerce and Labor) and SB 403 (Ebbin, D-Alexandria, in Commerce and Labor) create the Virginia Energy Storage Consortium to promote research, development, commercialization, manufacturing and deployment of energy storage. It’s a great idea.
HB 1137 (David Toscano, D-Charlottesville, in Commerce and Labor) directs the State Corporation Commission to develop a program to enable commercial and industrial customers to sell battery storage services to the grid. If you’ve heard of the concept known as “vehicle-to-grid” (using electric cars to put power back on the grid as well as drawing from it), you’ll understand what this is about. It would allow these and other “energy balancing devices” to provide value to the grid in the form of spinning reserves, frequency regulation, distribution system support, reactive power, demand response, or other electric grid services. It’s an idea whose time has come.
Wind and solar have several less popular relatives with more tenuous claims on the renewable energy family name. Virginia’s definition of “renewable” embraces them all, regardless of merit. It treats biomass to a special place of honor, including even the burning of trees that haven’t been harvested sustainably, and regardless of how much pollution gets spewed into the atmosphere.
SB 647 (Barbara Favola, D-Arlington, in Commerce and Labor) and HB 973 (Alfonso Lopez, D-Arlington, in Commerce and Labor) would change that to require that electricity from new biomass plants, to qualify as renewable energy, would have to meet a minimum efficiency level. Burning wood from trees would generally meet that standard only when it produces both electricity and heat (or, through the magic of science, cooling).
Consumer choice
HB 444 (Manoli Loupassi, R-Richmond, in Commerce and Labor) would expand the current requirement that utilities inform ratepayers about their options for purchasing renewable energy.
Which might lead you to ask, “what options?” since for most of us here in Virginia they are sadly lacking. But maybe this year’s session will start to change that.
A note about House Commerce and Labor: Bills noted above that have been assigned to the House Committee on Commerce and Labor have all been assigned to its Subcommittee on Energy. This powerful subcommittee typically meets only once or twice before Crossover. I’m told it will meet on the afternoon of Tuesday, February 9, likely continuing well into the evening due to the number of bills assigned.
February 9 is also Clean Energy Lobby Day, when members of the renewable energy and energy efficiency industries descend on Richmond to educate legislators about the need for sound reforms. This year the solar industry trade association MDV-SEIA is organizing the lobby day, which is free to participants.