Virginia Electric working on power purchase deals for 47 MW of solar

Virginia Electric and Power d/b/a Dominion Virginia Power, besides seeking Virginia State Corporation Commission approval for three solar projects, is also still negotiating three power purchase agreements for a total of 47 MW (ac) with winners out of a solar request for proposals issued this past summer.

This Dominion Resources (NYSE: D) subsidiary filed on Oct. 1 with the Virginia commission for certificates of public convenience and necessity (CPCNs) and associated rate recovery so that it can construct and operate:

  • Scott Solar – Dominion intends to purchase this project from Virginia Solar LLC. Virginia Solar is a Richmond-based independent developer of utility-scale solar projects in Virginia. The facility will produce about 17 MW (nominal ac). It would be located on 165 acres of land in Powhatan County, Va. 
  • Whitehouse Solar – This project would generate about 20 MW (nominal ac) and would be located in Louisa County, Va. It will be built on a 250-acre site.
  • Woodland Solar – Dominion intends to purchase this project from Coronal Development Services. Coronal Development, a division of Coronal Group, is a leading provider of solar development solutions. Coronal Group formed Coronal Development through the acquisition of the majority of the assets of Virginia-based HelioSage Energy in February 2015. The facility will produce about 19 MW (nominal ac) and will be located in Isle of Wight County, Va. The project will be constructed on approximately 200 acres.

They are collectively called for the purposes of the application the “2016 Solar Projects.” The company is asking for commission approval by July 1, 2016, in order to qualify for the existing 30% federal Investment Tax Credit (ITC), which calls for the projects to be completed and in commercial operation by Dec. 15, 2016.

“Development of these Projects in 2016 represents a reasonable and prudent step that aligns with the Company’s long-term resource planning strategy, and also takes a proactive step in response to the legislative, regulatory, and economic developments that have occurred in 2015,” the utility said. “Virginia-sited utility-scale solar has become an important resource option in the Company’s integrated resource planning (‘IRP’) process over the past few years, as the Company has strived to design cost-effective yet increasingly fuel-diverse integrated resource plans (‘Plans’) to meet customers’ electricity needs. For example, the Fuel Diversity Plan option in the Company’s 2014 Plan included 559 MW (nameplate) of new generic solar capacity by 2029 in addition to nuclear, onshore wind, offshore wind, and natural gas resources.

“In June 2014, two months before the Company’s 2014 Plan was released, the U.S. Environmental Protection Agency (‘EPA’) issued its draft Clean Power Plan (‘CPP’) rule, proposing to impose 38% reductions in carbon emissions rates for existing fossil-fired generating plants in Virginia from 2012 to 2030. The Fuel Diversity Plan in the Company’s 2014 Plan recognized that the proposed CPP rule, in conjunction with other recently-promulgated environmental regulations, would require the Company and the Commonwealth to pursue a balanced portfolio of generating resources and significantly reduce carbon intensity, while still assuring reliability and price stability for customers. The Company took a first step towards achieving this fuel-diverse, less carbon-intensive generating portfolio by proposing the Remington Solar Facility in January 2015, which is now pending before the Commission in Case No. PUE-2015-00006.

“In conjunction with the Company’s own on-going solar project development efforts. Dominion Virginia Power issued a request for proposals in July 2015 (the ‘2015 Solar RFP’) designed to support the Company’s evaluation of its Company-developed projects and to consider and weigh possible third-party market alternative solar projects. Specifically, the 2015 Solar RFP solicited third-party proposals for new utility-scale solar sited in the PJM Dominion Zone (‘DOM Zone’) that could be placed into commercial operation in the 2016 and 2017 timeframes, including development projects that the Company could acquire, as well as 20-year power purchase agreements (‘PPAs’) that the Company could execute.

“The Company segregated the RFP between projects that would achieve commercial operation in 2016 versus 2017, recognizing that the reduction of the federal ITC after 2016 from the current 30% to 10% has an impact on utility-scale solar projects. After a comprehensive evaluation and selection process, the 2015 Solar RFP yielded six 2016 projects as being in the best interests of customers. Three are development proposals (the 2016 Solar Projects, including the Scott Solar project bid into the RFP, plus the two Company development proposals – Whitehouse and Woodland – a collectively totaling 56 MW) and the three 2016 PPAs (totaling another 47 MW), which the Company is negotiating with third-party developers.”

Dominion also looking for EPC proposals for the solar projects

The 2016 Solar Projects will be comprised of ground-mounted, single-axis tracking solar panel arrays with an operating life of 35 years. Collectively, the 2016 Solar Projects are expected to provide approximately 124 GWh of energy production at an average capacity factor of approximately 25% in the first year of operation. Like the Remington Solar Facility, the Company does not plan to operate the 2016 Solar Projects as PJM Interconnection capacity resources, but will instead operate them as energy-contributing load reducers connected to the distribution system.

Separate from the 2015 Solar RFP, the company is also using a competitive process to select the engineering, procurement and construction (EPC) contractor(s) for the three self-build projects. Throughout the EPC process, the company is requesting the use of goods and services sourced in whole or in part from Virginia businesses.

Ted Fasea, the utility’s Manager of Generation System Planning, told the commission in supporting testimony that the company projects that the weather-normalized peak load for the DOM Zone will increase 4,580 MW (approximately a 1.5% growth rate) over the next 15 years (2016 to 2030). This load forecast uses the same methodology that has been found reasonable in prior company CPCN and IRP cases. This is comparable to PJM Interconnection’s 2015 forecast of a 1.5% annual average growth rate for the DOM Zone over the same period, which makes the company’s control zone the fastest growing load zone in PJM.

He noted that the utility is continuing to evaluate the final Clean Power Plan, and that there is uncertainty about its ultimate effects (and the ultimate path for compliance) until the Commonwealth of Virginia completes a state implementation plan to achieve the CPP’s targeted emissions reductions. However, the final rule does confirm that new sources of renewable generation – including new solar generation – can help the states to comply with the CPP. More specifically, the final rule puts great emphasis on reducing carbon emissions, including a 37% reduction by 2030 in Virginia where the proposed 2016 Solar Projects will be located. While the cost of renewable generation is higher than that of some non-renewable options, solar generation is a cost-effective renewable option to pursue for promoting fuel diversity and CPP compliance, he noted.

J. Scott Gaskill, the utility’s Director of Power Contracts, said that in the Solar RFP, proposals for a 2016 commercial operations date (COD) projects were due for submission by Aug. 24, and proposals for 2017 COD projects were due by Sept. 8. After completing a full review and evaluation of the 2016 proposals received, the company concluded the RFP evaluation for 2016 projects on Sept. 30. The RFP evaluation for 2017 projects is ongoing.

Gaskill said the company received a total of 28 proposals for 21 separate solar facilities totaling about 350 MW of solar capacity. Nine of these were development proposals and 19 were PPA proposals. Four bidders submitted both a development proposal and a PPA proposal for the same project. Collectively, these RFP responses represented a wide variety of solar photovoltaic projects, ranging from 3 MW to 80 MW in size and including both fixed-tilt and single-axis tracking systems.

After comprehensively evaluating the 2016 COD projects, the company identified six projects as being in the best interests of customers – three development projects (the 2016 Solar Projects) and three PPAs. As a result of the 2015 Solar RFP, the company is cunently in the process of pursuing three PPAs with third-party developers totaling approximately 47 MW (ac) of Virginia-based solar capacity for 2016.

Virginia Attorney General has issues with Remington Solar proposal

Incidentally, still pending with the commission is Dominion’s Jan. 20 application for a certificate of public convenience and necessity to build, own, and operate the 20-MW Remington Solar facility in Fauquier County, Va., and to recover $47 million in construction costs through a rate adjustment clause.

The Virginia Attorney General filed an Oct. 1 brief in that case finding a couple of major issues with the proposal.

  • First, the AG said the commission must consider whether Dominion adequately considered and weighed actual third-party alternatives to building Remington. “It is clear following the evidentiary hearing that the Company did not,” the AG said. “Dominion claims that it considered actual alternatives in two ways: (1) by evaluating a PJM market forecast, and (2) by comparing the estimated installed costs per kW of Remington to the installed costs of several existing solar projects already under contract in North Carolina that are much smaller in scale than Remington. Clearly, a PJM market forecast does not represent an actual price for solar energy output or an alternative to constructing the Remington facility. And examining the installed costs (i.e., not offer prices) of several existing smaller-scale solar facilities already under contract in North Carolina does not represent consideration of actual alternatives either.”
  • The second issue concerns cost recovery. Dominion asserts that the Remington facility is prudent in part because it is an essential component of the company’s Clean Power Plan compliance strategy. “Dominion admits that the Remington solar facility is more expensive than other generation sources,” said the AG. “Based on Dominion’s own representations at the hearing and in prefiled testimony, costs associated with this higher-cost resource will constitute CPP implementation expenses. The Company has also previously represented that the risk for CPP implementation costs will be assumed by the Company for the next five years. Therefore, if the Remington CPCN is granted, it would be more appropriate for Dominion to recover the costs through existing base rates than through a rate increase in a RAC.”

Dominion said in its own Oct. 1 filing that it supports the findings and recommendations contained in a chief hearing examiner’s report and requests that the commission issue an order granting a CPCN for the Remington Solar Facility and approve the related rate adjustment clause. As noted in the report, no party has asked the commission to actually deny the application, Dominion pointed out.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.