by Julian Spector
March 18, 2020

Virginia, as it stands today, can hardly be called an energy storage market. But its legislature just passed a clean-energy omnibus bill so comprehensive and thorough that, almost overnight, it converted the state into a storage market to watch.

Richmond’s entry sets a new standard for ambitious clean energy policy. Not only does it call for closing fossil-fueled plants by midcentury, but it also introduces energy-efficiency savings targets for the first time in the state’s history, ramps onshore renewables by 16 gigawatts, targets 5.2 gigawatts of offshore wind by 2034, lifts caps on distributed generation, and commits the state to joining the Regional Greenhouse Gas Initiative.

Gov. Ralph Northam still needs to sign the Virginia Clean Economy Act, but he effectively asked for it in an executive order last year.

“The Commonwealth is open for business,” said clean energy policy expert Katherine Hamilton, chair of 38 North Solutions and a lifelong Virginian. “There are a lot of companies that have been wanting to do business in the Commonwealth, and now they’re going to be able to.”

But it’s the energy storage-specific points that we’ll focus on because they make Virginia the next emerging East Coast market to watch. The specifics still have to be worked out, but one thing is clear: The state will have to buy massive amounts of batteries as well as long-duration storage in the next 15 years to obey the law and balance the influx of renewables.

The bill sets a storage procurement mandate of 2.7 gigawatts by 2035 for Dominion Energy, the state’s largest investor-owned utility. Appalachian Power Co. must obtain 400 megawatts. And regulators will pick interim targets to ensure that the long-term target has real teeth and gets things moving right away.

Virginia’s leaders grappled with how to push the clean energy agenda forward without subjecting ratepayers to undue costs. One method for maintaining that balance was requiring at least 35 percent of storage capacity to be third-party-owned, ensuring market-based competition to keep prices reasonable.

Also notable: The bill directs State Corporation Commission regulators to include the social cost of carbon in their weighing of options. This adjustment could become especially impactful when larger battery plants start to compete with gas plants for the crucial peak capacity role. Storage plants will still have to make sense on their own terms, but this language could give some storage plants an edge in otherwise close calls.

“This is a huge step forward for how we as a state evaluate and approve the addition of new power plants,” said Rachel Smucker, Virginia policy and development manager for solar industry group MDV-SEIA.

Radical acceptance in just a year

If this all seems a bit dizzying, that’s because it is.

A year ago, Virginia was nowhere near the top of the list for promising energy storage markets. Dominion Energy, to be sure, operated the truly massive Bath County pumped hydro storage facility. But that 3,003-megawatt system opened for business in 1985.

As for new and exciting developments, Dominion proposed a four-battery pilot project in 2019, with the goal of studying the basic functions of modern battery technology over the next five years. That proposal just won official approval in February, so the four systems aren’t expected in service until early 2021.

“Last year, we were talking about pilots; this year, we’re talking about 2.7 gigawatts of storage,” said Dominion energy storage specialist Ricky Elder III, who manages business development in the Regulated Power Generation team.

Storage isn’t the only area where Dominion’s outlook has evolved.

In December 2018, the regulators at the State Corporation Commission took the unprecedented step of rejecting Dominion’s integrated resource plan. The plan’s projected demand levels outpaced those of the PJM Interconnect, the grid operator for much of Virginia, and called for several gigawatts of new gas combustion turbines to meet the peaks. Fast-forward a year, and Dominion pledged net-zero emissions by 2050 across its 18-state operations.

That declaration came as the Clean Economy Act was working its way to a final vote. Sweeping energy system overhauls become increasingly achievable when a state’s premier utility enthusiastically commits to the vision.

“We look at it as a giant leap forward for Virginia,” Elder said of the legislation. “With the passing of the Virginia Clean Economy Act, we are now going to be a leader in the energy future of the country.”

Projects still need to pass muster with the SCC as good deals for ratepayers. But, instead of politically fraught gas expansion, the utilities can build out a massive amount of renewables and earn their regulated rate of return, with clear political and regulatory cover.

Achieving the onshore and offshore renewables targets in the law will make storage essential, Elder noted.

Since the law requires phasing out gas plants in the next three decades, Virginia could start swapping its gas peaker pipeline for lithium-ion peaker plants, of the sort under development in New York and the Western U.S.

“We firmly believe that storage solutions can do the same job [as gas peakers] with [lower] emissions and now for lower cost,” said Ray Hohenstein, market applications director at Virginia-based storage supplier Fluence. “Now we have a chance to really make that happen in Virginia.”

Dominion is taking a broad view of storage technologies (the legislation kept things technology-agnostic).

Besides the lithium-ion batteries underway in the pilots, the company is developing a pumped hydro storage facility in southwestern Tazewell County. That one is geared for 800 megawatts of capacity, with 10 hours of storage duration. But it will take a decade to develop, which is why you don’t see many new pumped hydro units coming online.

Until recently, Virginia wasn’t on the radar for startups developing long-duration alternatives to lithium-ion, such as flow batteries. But Elder is digging into those, too, because his grid system will need some in the next 15 years.

“We are actively reviewing and pinging the market on technologies that are not necessarily just lithium-ion-based technologies,” Elder said.

Next up: Working through the details

The first milestone in the law’s adoption after the governor signs it will be Dominion’s integrated resource plan filing in May. The utility will take an initial stab at thinking through how the law’s requirements translate into resource procurement for the coming years.

Then the action moves to the State Corporation Commission, which has until New Year’s Day 2021 to incorporate the energy storage components of the new law into the state’s regulatory code. That means deciding interim targets and weaving storage into existing utility planning and procurement protocols.

The law also stipulates: “The regulations shall include programs and mechanisms to deploy energy storage, including competitive solicitations, behind-the-meter incentives, non-wires alternatives programs, and peak demand reduction programs.”

If that doesn’t get your storage policy salivary glands a-pumping, then go get your taste buds checked out. This provision means that, in less than a year, Virginia must lay out a veritable feast of cutting-edge storage policies, the sort of things other states took much longer to deliberate about and eventually enact.

This includes the promise of behind-the-meter incentives, which could borrow the “bring your own device” framework that has gained momentum in New England, paying homeowners for letting a utility tap their battery to reduce demand during peak times. Then again, Dominion may be a better fit for the utility-driven virtual power plant that Vermont’s Green Mountain Power set up: The utility owns and controls batteries in rural homes that suffer from blackouts; the batteries keep the homes online in an outage but also help the utility reduce peak demand.

New York famously developed the non-wires alternative framework, which lets utilities earn money for offsetting a more expensive grid upgrade with a series of distributed energy assets on customer sites in the affected area. Con Ed did that with the Brooklyn Queens Demand Management program, although it’s harder to find evidence of this approach proliferating organically across the state. Even if it hasn’t become a bustling market yet, New York’s work on the concept has already inspired similar approaches elsewhere in the country.

Additional regulatory work needs to happen outside of Virginia’s borders, Hohenstein added.

“PJM is the wholesale market that operates the bulk of Virginia, and it is not currently well suited to recognize the capacity value of energy storage,” he said. “We’re hopeful that within the next year or so the rules will be updated.”

"Elections matter"

Most states have yet to adopt ambitious clean energy overhauls, so advocates elsewhere could learn from Virginia’s example.

“To me, it says elections matter,” said Hamilton. “We elected people who really care about the future of Virginia and the climate. If you had not had the General Assembly change parties, this would not have happened.”

Beyond the changing political tides in Richmond, where Democrats took control of the legislature last November, the bill’s passage attests to what happens when clean energy trade groups and environmental advocates team up.

“This shows the power of a new coalition to advance really interesting energy and climate legislation in the Commonwealth,” said Harry Godfrey, executive director of the Virginia chapter of the Advanced Energy Economy industry group.

By uniting those two contingents, the bill didn’t just say no to something (fossil-fueled power); rather, it suggested a desirable alternative. It’s not unlike what happened in Oxnard, California when local activists fighting a new gas plant received a boost from the maturing storage industry and its ability to deliver real capacity alternatives to gas-fired plants.

Virginia has other, regionally specific reasons to care about the grid overhaul, Godfrey noted. Fossil-fueled climate change threatens the state’s ample shorelines, naval bases and maritime industry. And its national defense corridor and dense concentrations of internet facilities also ascribe a concrete value to electrical resilience.

A new template for energy storage policy formation

Finally, for all those states that have yet to embark on their journey of energy storage discovery, Virginia proffers a new template for policy formation.

New York and Massachusetts chose the studious route of calculating the value of storage and using executive leadership to craft several interlocking energy and environmental policies to bring storage to life. Nevada, and arguably Arizona, became notable storage markets without completing any arduous policy crafting; their geographical and market dynamics made the technology inherently valuable enough that the utilities wanted it on their own terms.

Virginia’s policy establishment had yet to sink its teeth into storage, and the utilities hadn’t pushed massive adoption previously. Instead, stakeholders used legislation to break the inertia and set a clear agenda for storage market development.