Corporate renewables buyers just got a new option in Virginia, but the state remains a battleground for corporate renewables policy.
State regulators recently approved a green tariff proposed by Dominion Energy, and the state's Supreme Court backed the rejection of Walmart's bid to purchase electricity elsewhere. The green tariff gives Dominion, the state's largest utility, untrammeled access to customers with load below 5 megawatts, a group that includes many companies hungry for more renewable power.
Virginia has become an unlikely epicenter of the policy battles around U.S. corporate energy procurement. The state's relatively cheap electricity and position within the territory of the PJM Interconnection has made it attractive to data center operators and other big commercial buyers, many of which have aggressive renewables targets.
Until now, many large corporate customers were able to purchase electricity from competitive service providers (CSPs) or sign power-purchase agreements on their own. Virginia law allows CSPs to sell 100 percent renewable energy to buyers as long as that same offering isn’t available from the regulated utility. But Dominion’s new green tariff means those CSPs will be shut out of much of the market.
Dominion’s interest in controlling the growing corporate market for renewable energy is not unique among utilities. Environmental groups and corporations contend that Dominion's control over the market may hamper corporate renewables buying in the state, even as Virginia works to achieve 100 percent carbon-free energy by 2045. Corporate renewables accounted for nearly one-fifth of U.S. large-scale solar procurement in 2019.
The ins and outs of Dominion’s green tariff
Dominion has embraced renewable energy enthusiastically of late, in something of an about-face. Virginia's Clean Economy Act, passed in March, requires Dominion to reach 30 percent renewables by 2030 and close all carbon-emitting power plants by 2045. Right now, renewables make up just about 5 percent of the power Dominion delivers to two-thirds of Virginia’s electricity customers.
Dominion plans to grow its renewables portfolio tenfold in the next 15 years, spokesperson Samantha Moore told Greentech Media. Its recently filed integrated resource plan includes 16 gigawatts of solar and 2.7 gigawatts of storage in that timeframe. Dominion is currently testing a pilot offshore wind farm in partnership with Ørsted, and it plans to follow that installation with another 2.6 gigawatts of offshore wind by the end of 2026.
Earlier this month, Dominion’s parent company sold off its natural-gas assets and canceled the controversial Atlantic Coast Pipeline, which it was building in partnership with Duke Energy.
Within that context, the green tariff may seem to be a natural part of Dominion's wider renewables ambitions. The utility says the State Corporation Commission (SCC) ruling is “great news” for Virginia customers who want an option to buy renewables.
Still, groups that have long criticized Dominion’s reliance on fossil fuels and its utility monopoly remain wary. Last year, Walton Shepherd, the Virginia policy director of the Natural Resource Defense Council’s climate and clean energy program, wrote that the structure of Dominion’s green tariff was “blowing a significant opportunity to do right by Virginians and to do right by the environment.”
While Dominion will provide electricity from solar and hydropower through the tariff, the utility also plans to use facilities that burn biomass. It proposed including one biomass facility that also burns coal, though the SCC ultimately removed that facility from the tariff portfolio. Dominion does not plan to add new renewables to provide power under the tariff.
Dominion's green tariff disallows other renewables service providers from selling electricity to commercial customers with load below 5 megawatts, drawing criticism from companies including Target, Salesforce and Kaiser Permanente.
Bryn Baker, director of policy innovation at the Renewable Energy Buyers Alliance, argued in the case that the tariff does not “provide adequate service to corporate customers seeking 100 percent renewable energy.” No company supported Dominion’s petition for the tariff, and several corporations, including Costco and Target, had previously requested to leave the utility’s service and buy power elsewhere.
Direct Energy, a CSP operating in Virginia with approximately 1 gigawatt of load, has expressed concern that Dominion won’t be able to sign up a significant number of customers due to lack of support.
“In the past, Dominion has put up these strawman proposals to help advantage it in the market without really intending to get a lot of customers,” said Jesse Dickerman, a Direct Energy spokesperson.
Dominion told GTM it could initially enroll about 45,000 residential and commercial customers in the tariff program; they will pay a premium for renewable power above the standard residential rate. The utility may expand the program in the future based on demand. Appalachian Power, a subsidiary of AEP and the state's other investor-owned utility, has also approved a green tariff.
Tussles over corporate power
Numerous companies have made bids to leave Dominion’s service, seeking to buy higher proportions of renewables or purchase cheaper power on the open market. Because Virginia is located within the territory of the PJM Interconnection, cheap wholesale power is easy to find. Prices have dropped further during the pandemic.
“What makes Virginia interesting...to renewable energy developers and to retailers is that it’s in a competitive wholesale market. The largest competitive wholesale market,” said Direct Energy's Dickerman. “So we can source renewable supply from a lot of different places.”
Some companies that have sought to leave Dominion's service have been successful in their bids, although the utility declined to name them.
The rejection of Walmart’s bid to leave Dominion’s service may not ultimately matter much: A state law passed this year lets some companies, including Walmart, Target and Costco, aggregate their load up to 200 megawatts in a retail competition “pilot program.” However, the legislation only allows aggregation for companies that had requested to do so prior to February 2019.
Steve Chriss, Walmart’s director of energy services, told Greentech Media in a statement that the company would “continue to look for opportunities” to manage its energy needs at a low cost. The company said it was “evaluating” its participation in the pilot aggregation program.
Last year, after rejecting Walmart's and Costco's attempts to buy electricity elsewhere, regulators suggested that companies take their plight to lawmakers. And while legislators considered bills in 2019 and 2020 that would allow competitive renewable choice, none of them have been enacted.
With CSPs' disappointing verdict from the SCC, Dickerman at Direct Energy expects these providers to take their fight to the state capital. “There may be some things we can do around the SCC, but I think this puts us back into Richmond in January,” said Dickerman.