RPS Report Card How VA RPS Rewards Utilities Failing Performance

7/30/2019 RPS Report Card How VA RPS Rewards Utilities Failing Performance

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Written By:

Beth Kemler

Virginia State Director, Chesapeake Climate Action [email protected]

8043350915

http://www.chesapeakeclimate.org
mailto:[email protected]:[email protected]://www.chesapeakeclimate.org/http://www.chesapeakeclimate.org/mailto:[email protected]://www.chesapeakeclimate.org/


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Approximate 2011-12 RPS

bonuses for meeting 2010 goal:

Dominion-$77 million

APCo-$15 million

Should we give a bonus to a utility for continuing to operate a hydrodam thats 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 voluntarygoals, which are weaker than many of the

mandatory standards set by other states. Under the Renewable Energy Portfolio

Standard (RPS) law ( 56585.2) passed in 2007, the companies that meet Virginias

renewable energy goals are eligible to receive big bonuses, awarded through higher

rates charged to customers.

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.

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 ifthe 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

A DDid the utilities disclose substantive information abouttheir 2011 RPS performance in their 2012 reports?Energy from New Facilities

F 0% F 0.2Did the energy that utilities stand to be rewarded for comefrom facilities built after the rewards were offered?

Wind and Solar EnergyF 0% F 0.2Did the energy that utilities stand to be rewarded for come

from the most modern, pollutionfree technologies?

VirginiaMade Energy F 19% F 19Did the energy that utilities stand to be rewarded for byVirginians come from facilities in Virginia?

1Renewable Portfolio Standard Policies. Database of State Incentives for Renewables & Efficiency:

http://www.dsireusa.org/documents/summarymaps/RPS_map.pdf2Virginia utility annual RPS reports can be found on the Virginia State Corporation Commissions website at

http://www.scc.virginia.gov/pue/renew.aspx.
http://www.dsireusa.org/documents/summarymaps/RPS_map.pdfhttp://www.dsireusa.org/documents/summarymaps/RPS_map.pdfhttp://www.scc.virginia.gov/pue/renew.aspxhttp://www.scc.virginia.gov/pue/renew.aspxhttp://www.dsireusa.org/documents/summarymaps/RPS_map.pdfhttp://www.scc.virginia.gov/pue/renew.aspx


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By far, the biggest failing is the lack of energy from new facilities (ones that went online after the RPS was created). Virgin

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.

The only power that was credited to the RPS in 2011 that came from new facilities (ones that went online after thelaw 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 an

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 1945the year World War II ended. If itwere 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 goalfor 20102015) 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 Virginias 2011 RPS energy54%was purchased as Renewable Energy Certificates (RECs) from oneighbors in Maryland.

While the RPS end goal is portrayed as 15% in 2025, Dominion Powers 2025 goal equates to only 6% of its 2025load forecast and Appalachian Powers 2025 goal equates to only 10% of its 2025 forecast.

Without tight standards for what meets the RPS goals, we end up rewarding energy that would have beengenerated even if no reward were offered. It seems unlikely that the members of the General Assembly wereenvisioning utilities getting credit for a hydropower dam that has been generating power since before World War

when they created renewable energy rewards.

Extra credit for certain technologies is a poor substitute for a tiered system. Most states put priority on thecleanest 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, th

RPS instead offers 200300% credit for certain technologies. This extra credit clearly isnt 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 instate only. While allowing utilities to count energy from a largegeographic region might make sense for a mandatory RPS, it doesnt for renewable energy goals that offer big,

customerfunded rewards. If Virginians are paying the bonus, we should reap the rewardscleaner air and jobs.

Weve set a very low bar for high rewards. Because of the way the goals are calculated, Dominions 2025 15percent goal amounts to only 6% of the amount of energy the company is forecasting it will sell in 2025. APCos

15 percent goal amounts to 10% of its 2025 load forecast.


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The law allows other activities to count as generating energy, which only further weakens the goals. Allowingutilities to count research and development of renewable energy for up to 20% of any given years goal and to

count an unlimited amount of thermal energy means that they can meet the goals and get rewarded witheven

less actual renewable energy.

The RPS law, as written, unintentionally allows a single MWh of renewable energy to be counted by twodifferent 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 doublecounting of a single MWh of energy.

In order to ensure that our RPS creates a winning performancespurring new investment in a renewable energy industry

VirginiaChesapeake Climate Action Networks top policy recommendation is that the General Assembly:

Replace the 200300% credit that solar and wind power currently receive with a tier 1. Only allow energy from facilities in Virginia to count toward the RPS.

Since Virginia has no utilityscale wind or solar power facilities, these two provisions, in concert with each other, will ensur

that new renewable energy goes onto the grid locally to meet the RPS goals.


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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 statesfrom

North Carolina to Texas to Montanaand the

District of Columbia. 4 These laws have resulted

in cleaner air, economic development and

lowered greenhouse gas pollution.

Though Virginias law to encourage the

development of renewable energy ( 56585.2)

is commonly referred to as a Renewable

Portfolio Standard, it is technically a goal, not astandard, because it is voluntary for utilities to

participate. Seven other states have adopted

voluntary goals for renewable energy.

Virginias goals apply only to our two Investor

Owned UtilitiesDominion 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.

3See What is a Renewable Energy Certificate? later in the report.

4Renewable Portfolio Standard Policies. Database of State Incentives for Renewables & Efficiency:

http://www.dsireusa.org/documents/summarymaps/RPS_map.pdf
http://www.dsireusa.org/documents/summarymaps/RPS_map.pdfhttp://www.dsireusa.org/documents/summarymaps/RPS_map.pdfhttp://www.dsireusa.org/documents/summarymaps/RPS_map.pdf


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Approximate 2011-12 RPS

bonuses for meeting 2010 goal:

Dominion-$77 million

APCo-$15 million

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 20112012 rates (based on meeting the 2010 RPS goal).For Dominion Virginia Power, this will mean earning approximately $77 million extra

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,

please seeReport of the Office of the Attorney General on ReturnonEquity

Enhancement Adders of the 2007 Virginia Electric Utility Regulation Act, released in

November 2012.

Utilities have to meet specific numeric goals for specific time periods, which can be fulfilled with a combination of

megawatthours (MWh) of renewable energy and/or Renewable Energy Certificates (RECs).

Dominion and APCo RPS Goals (MWhs/RECs)

Time Period 2010 20112015 2016 20172021 2022 20232024 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 companys goals are based on, see the The Devils In the Details section of the report.
http://www.ag.virginia.gov/Media%20and%20News%20Releases/News_Releases/Cuccinelli/AG%20Report%20on%20Statutory%20ROE%20Adders.pdfhttp://www.ag.virginia.gov/Media%20and%20News%20Releases/News_Releases/Cuccinelli/AG%20Report%20on%20Statutory%20ROE%20Adders.pdfhttp://www.ag.virginia.gov/Media%20and%20News%20Releases/News_Releases/Cuccinelli/AG%20Report%20on%20Statutory%20ROE%20Adders.pdfhttp://www.ag.virginia.gov/Media%20and%20News%20Releases/News_Releases/Cuccinelli/AG%20Report%20on%20Statutory%20ROE%20Adders.pdfhttp://www.ag.virginia.gov/Media%20and%20News%20Releases/News_Releases/Cuccinelli/AG%20Report%20on%20Statutory%20ROE%20Adders.pdfhttp://www.ag.virginia.gov/Media%20and%20News%20Releases/News_Releases/Cuccinelli/AG%20Report%20on%20Statutory%20ROE%20Adders.pdf


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Virginias RPS was created in 2007 as part of the reregulation of our investorowned 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 thatare released by dirty old power plants.

A Healthy Climate: Putting more renewable energy online also avoids emissions of greenhouse gases, whichcontribute 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, homegrownjobs.

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 energywind and solar power.


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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 investorowned 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 renewabl

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 investorowned 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 numb

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.

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 doesnt 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. Its sort of like each company has a bank account where it deposits all of its RPS energ y 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.


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DID THE UTILITIES DISCLOSE SUBSTANTIVE INFORMATION ABOUT THEIR RPS PERFORMANCE IN THEIR 2012 REPORTS?

Dominion APCo

RPS Transparency A D

Dominions 2012 RPS report earned an A for transparency. The company filed its report on time and provided all of the

information required by law.

Dominions 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 Dominions metaphorical RPS account in 2011 but that the

company does not need to use toward the years 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 inits RPS account. Instead, the company sold the RECs for the optimized energy to other companies.

APCos 2012 RPS report earned a D for transparency. For its report, the company originally submitted a letter stating tha

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.

APCos final report omitted information about the inservice 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, APCos 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 doesnt 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 20112012 for

meeting the 2010 goal), it is only logical that consumers should be able access precise figures for what theyre rewarding.

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.


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WHY SHOULD THE RPS ENERGY COME FROM FACILITIES BUILT

AFTER 2007?

The RPS was created in 2007 and its essential purpose is to spur

the growth ofnewrenewable energy. Power generated atfacilities that went online before 2007 does not satisfy the intent

of the RPS.

DID THE ENERGY THAT UTILITIES STAND TO BE REWARDED FOR

COME FROM FACILITIES BUILT AFTER THE REWARDS WERE

OFFERED?Both utilities failed to utilize new energy facilities for a substantial

portion of their RPS energy in 2011.

Dominions 2011 RPS energy didnt include any power from facilities that went online after the RPS rewards were offered.

APCos 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

5Based on average consumption of 14.2 MWh by an APCo residential customer in Virginia in 2011.

Dominion APCo

New Facilities(2007+)

F F

0% 0.2%

20002006 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%

The only power from new

facilities that was credited toward the

RPS in 2011 was APCos- 1,508 MWh

from wind farms in Indiana & Illinois. Thats

enough to power approximately

100 homes.


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LESSON 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

that a certain portion of the energy come from modern technology (or tier 1),

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 theRPS goals to be met.

The average facility

providing power for the RPS in

2011 went online in 1945- theyear WWII ended. If it were a

person, it would be eligible for

Social Security.


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If Dominion had developed wind &

solar power to meet the beginning RPS goals,instead of bringing more fossil fuels online, it would

have been the greenhouse gas equivalent of

taking 125,000 cars off the road.

WHY SHOULD RPS ENERGY INCLUDE WIND AND SOLAR

POWER?

When we hear that utilities are being offered rewards for

meeting renewable energy goals, most of us envision

the companies building wind farms and solar arrays

across the state. In fact, when CCAN polled Virginians

about how they would like to see companies fulfill the

renewable energy goals, wind power and solar power

were the two top answers.6

PollutionFree: 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 localjobs 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 its 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, POLLUTIONFREE

TECHNOLOGIES?

Both utilities failed to utilize wind or solar power for a substantial portion of their 2011 RPS energy. Neither took advantag

of our solar resource and only APCo brought in a tiny portion of wind power. This small amount of power was generated a

wind farms in Indiana and Illinois.

Dominion APCo

Wind & Solar PowerF F

0% 0.2%

Wind 0% 0.2%

Solar 0% 0%

Hydro 78% 99.8%Municipal SolidWaste

22% 0%

Landfill Gas 0.2% 0%

6See We Ask America Poll Results athttp://www.chesapeakeclimate.org/fileuploads/kelly

trout/VA_Renewable_Energy_Poll_Results_2012.pdf.
http://www.chesapeakeclimate.org/file-uploads/kelly-trout/VA_Renewable_Energy_Poll_Results_2012.pdfhttp://www.chesapeakeclimate.org/file-uploads/kelly-trout/VA_Renewable_Energy_Poll_Results_2012.pdfhttp://www.chesapeakeclimate.org/file-uploads/kelly-trout/VA_Renewable_Energy_Poll_Results_2012.pdfhttp://www.chesapeakeclimate.org/file-uploads/kelly-trout/VA_Renewable_Energy_Poll_Results_2012.pdfhttp://www.chesapeakeclimate.org/file-uploads/kelly-trout/VA_Renewable_Energy_Poll_Results_2012.pdfhttp://www.chesapeakeclimate.org/file-uploads/kelly-trout/VA_Renewable_Energy_Poll_Results_2012.pdf


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LESSON 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 powermeaning that a

utility could knock out 200,000 MWh of its goal with only100,000 MWh of actual solar power.

This extra credit clearly isnt 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 Virginias RPS tiers be divided?TIER 1 TIER 2

Modern, pollutionfree technologies that involve no

combustion

Wind Power: Wind turbines release no pollution.

Wind power also has the potential to spur local

manufacturing jobs, since large turbine parts cant

be economically transported over long distances.

Solar Power: Solar panels release no pollution. Plus

solar arrays tend to be erected by local installers,

adding to the potential to keep the associated jobs

instate.

Geothermal, Tidal & Wave Energy: Though these

technologies are not currently viable for utilityscale

use, they are all pollutionfree.

Technologies that pollute by burning a fuel

Biomass (Waste Wood): Though conventional wisdom in the past

has been that burning waste wood was carbon neutral, scientists

are now taking a second look. The common conception used to be

that if waste wood were left in the forest, it would eventually

decompose, releasing its carbon, so burning it would be carbon

neutral in the long run. But it would normally decompose over thecourse of decades, not burn up in minutes. So the shortterm

carbon impact of burning wood for electricity can actually be highe

than fossil fuels like coal. Since climate change is happening rapid

before our eyes, experts are starting to think that we may want to

pull back the reigns on the construction of biomass facilities.

Municipal Solid Waste: As one would expect, burning trash for

energy creates quite a bit of pollution, including greenhouse gases

Animal Waste: Burning animal waste for energy is a matter of tryin

to solve a water pollution problem (runoff from farms) by trading 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 exactl

a modern technology. Including it in our top tier would not help to

spur the development of new renewable energy sources in Virginia


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WHY SHOULD RPS ENERGY COME FROM VIRGINIA?

If Virginians are providing the utilities with financial rewards for meeting the RPS, then

Virginians should retain the benefitscleaner air for healthy families and jobs for a

healthy economy.

DID THE ENERGY THAT UTILITIES STAND TO BE REWARDED FOR BY VIRGINIANS COME

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 INSTATE 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 instate.

Energy Generated in: Dominion APCo

VirginiaF F

19% 19%

Maryland 57% 42%

Pennsylvania 14% 21%

North Carolina 9%

New Jersey 1%West Virginia 18%

Indiana 0.09%

Illinois 0.09%

The majority of the 2011

RPS energy-54%-came

from our neighbors in

Maryland.


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In order to understand the ins and outs of how

renewable energy laws operate, it is important to

understand how renewable attributes areaccounted for and traded.

A Renewable Energy Certificate (REC) is a tradable

commodity that represents the environmental

attributes of 1 megawatthour (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.

Each utility has specific numerical goals for each year of the RPS, which ramp up to larger amounts over time. For instance

Dominions 2025 RPS goal is 6,497,797 MWhs (or RECs). The numbers signify a combination of megawatthours (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 Virginias RPS

the next section.

Many states have set up their RPS calculations in a simple manner. For instance, Marylands RPS requires that in 2022,

utilities show renewable energy or RECs amounting to 20% ofthat years sales. North Carolinas RPS requires that in 2021

utilities show renewable energy or RECs amounting to 12.5% of 2020 sales.

Virginias 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 utilitys 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


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While the RPS end goal is

portrayed as 15% in 2025,

Dominions 2025 goal equates

to only 6% of its 2025 load

forecast.

annual 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 (20042006 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 steppin

up every few years to eventually reach 15% in 2025.

Dominion and APCo RPS Goals

Time Period 2010 20112015 2016 20172021 2022 20232024 2025

Percent 4% 4% Average 7% 7% Average 12%

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 utilitys end 2025 goal to the

amount of energy it has forecasted it will need in 2025, we see just how much

lower the bar really is.

Comparison of 2025 Goals to 2025 Load Forecasts

Dominion APCo

2025 Goal 15% of Base Year Sales 6,497,797 2,167,950

2025 Load Forecast7 109,131,000 20,802,000

= 2025 "15%" Goal as % of 2025 Load Forecast 6% 10%

7Source: Dominion and APCos 2011 Virginia Integrated Resource Plans, submitted to the State Corporation Commission


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Although the RPS was created to promote the growth of renewable electricity in Virginia, the statute has been expanded t

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

(only type

included in

original RPS)

energy derived from sunlight, wind,

falling water, biomass, energy from

waste, landfill gas, municipal solid

waste, wave motion, tides, and

geothermal power

This includes:

companygenerated electric energy electric energy purchased from another

company

RECs purchased from another companyRenewable

Thermal Energy

(REC amounts

determined

through a

calculation based

on number of

BTUs)

thermal energy output from a

renewablefueled combined heat and

power generation facility that is

(i) constructed, or renovated and

improved, after January 1, 2012, (ii)located in the Commonwealth, and (iii)

utilized in industrial processes other

than the combined heat and power

generation facility

A combined heat and power facility is basically an

industrial facility that uses its steam energy more

efficiently. Thermal energy is not electricity. During

the 2012 General Assembly session, environmentalists

and consumers objected strongly to the bill creating asystem to issue RECs for thermal energy and count

them toward the RPS, arguing that combined heat and

power should be incentivized but not through the RPS

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 &Development

Investment

(REC amounts

determined

through a

calculation based

on dollars spent)

an expense incurred by a utility inconducting research and development

activities related to renewable or

alternative energy sources; can be used

for up to 20% of any years goal

During the 2012 General Assembly session,environmentalists and consumers also objected to the

bill creating a system to issue RECs for research and

development of renewable energy and count them

toward the RPS. Again, R & D of renewable energy is

something we may want to incentivize but the RPS is

not the appropriate venue. The G.A. also passed this

bill, hearing strong support from lobbyists for

Virginias universities, which would stand to benefit

from it.


21/2418

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 carveouts. In a tiered system, a certain set of energy types must comprise a certain

portion of a companys RPS energy. In a carveout 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. Fo

instance, Marylands RPS offered 120% credit for wind power for its 2005 goal and 110% in 20062008. Virginias RPS law,rather than putting a thumb on the scale for certain energy types, steps on the scale. Our RPS offers 200300% extra cred

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

Type CreditAmount

A Goal of 15%

Renewable

Energy CouldBe Satisfied

With Only

Regular Credit

Hydro 100%

Biomass 100%

Energy from Waste 100%

Landfill Gas 100%

Municipal Solid Waste 100%

Wave Motion 100%

Tides 100%

Geothermal 100%

Extra Credit

Solar 200% 7.5%

Onshore Wind 200% 7.5%

Animal Waste in Virginia 200% 7.5%

Offshore Wind 300% 5%


22/2419

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 Covant

Dominions contract with Covanta to buy the power does not state that Dominion is purchasing the renewable energy

attributes of the poweronly the power itself. In most states, the fact that Dominion is not specifically purchasing the

RECs associated with the power would mean that it couldnt be counted toward the RPS.

According to the SCCs ruling, the wording of Virginias 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 goalin 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 loopholecaused by this wording problem must

be fixed in order to strengthen

Virginias RPS.

8Commonwealth of Virginia State Corporation Commission. (June 17, 2011). Order on Petition Case No. PUE201000132 Petition o

Dominion Virginia Power for a declaratory judgment.


23/2420

In order to ensure that our RPS creates a winning performancespurring new investment in a renewable energy industry

VirginiaChesapeake Climate Action Networks top policy recommendation is that the General Assembly:

Replace the 200300% credit that solar and wind power currently receive with a tier 1. Only allow energy from facilities in Virginia to count toward the RPS.

Since Virginia has no utilityscale wind or solar power facilities, these two provisions, in concert with each other, will ensur

that new renewable energy goes onto the grid locally to meet the RPS goals.

Close the DoubleCounting Loophole: Require that renewable energy credited toward the RPS be only countedonce by a single company.

Make it Mandatory: Rather than offering utilities financial rewards, we should follow the lead of the majority ofstates and make our RPS mandatory.

Eliminate the Nuclear Exclusion:Eliminate the provision that excludes nuclear power from the utilities base yearsales, which only weakens the RPS goals.

Eliminate Credit for Research and Development: The RPS was created to get steel in the ground for a renewableenergy industry in Virginia. Giving utilities credit for researching renewable energy as though they were generatin

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 megawatthour ofrenewable energy before counting it toward an RPS goal. We should not allow a company to credit energy

generated in 2010 to its 2025 goal.


24/24

To find out more or get involved with work to fix the RPS, contact the appropriate Chesapeake Climate Action Network sta

person.

General Assembly Members & Other Policymakers: Dawone Robinson, Virginia Policy Coordinator, 8047678983,

[email protected]

Concerned Citizens: Keith Thirion, Virginia Field Director, 7035796645, [email protected]

Media: Beth Kemler, Virginia State Director, 8043350915, [email protected]

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RPS Report Card How VA RPS Rewards Utilities Failing Performance

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