Virginia Clean Economy Act Promises to Increase Development of Distributed Renewables

July 1, 2020

Virginia’s energy policy shifted significantly with Gov. Ralph Northam’s signature of the Virginia Clean Economy Act (VCEA), legislation passed by the Virginia General Assembly that became effective July 1, 2020.

The most high-profile portion of the legislation is the requirement for Virginia’s investor-owned electric utilities to be 100 percent carbon-free by 2050. The VCEA includes a number of other provisions supporting the overall carbon-free goal, including new legislation to help increase the amount of distributed generation from renewable sources.

This alert highlights a few of the VCEA’s key features related to renewable distributed generation — the small-scale generation of renewable energy at or near where it will be used. Please consult McGuireWoods’ prior alert “Virginia’s New Solar Project Development Laws Offer Opportunities and Potential Risks” and a recording of a previous webinar “Virginia’s New Laws Impacting Solar Development” for more on the VCEA and other legislation regarding renewable energy.

Increase of New Metering Cap

The VCEA increased the amount of permissible net metering — the concept of allowing unused electricity generated by a customer to be fed back to the electric grid and purchased by electric distribution company. Prior to the VCEA, Virginia law permitted net metering, but the aggregate generating capacity of net-metered facilities in each of Virginia’s investor-owned electric utility’s service area was capped at 1 percent of the peak-load forecast for the previous year. Now, with the VCEA in effect, that cap has increased to 6 percent and is subject to the possibility of future increases by the Virginia State Corporation Commission.

Expansion of Third-Party PPA Pilot Program

In its 2013 session, the Virginia General Assembly passed legislation permitting third parties to own and operate solar and wind generation facilities, located on the property of and providing power to, customers of Virginia’s investor-owned electric utilities (the pilot program). The VCEA expands the pilot program in several respects, including (i) the aggregate amount of generation capacity allowed under the pilot program, and (ii) the permissible size of generation facilities that can participate in the pilot program.

The VCEA multiplied the aggregate generation capacity of the pilot program. Previously, the program was capped at an aggregate of 57 megawatts of generation capacity. The new limit is an aggregate of 1,080 megawatts, with portions of the capacity cap allocated to specific classes of customers.

Lastly, the VCEA increased the permissible size of each participating facility. Before the VCEA, facilities larger than 1 megawatt were ineligible for participation in the pilot program. The VCEA tripled the cap on the size of participating facilities, which is now 3 megawatts. Additionally, while the lower limit of facility size for pilot program partition is unchanged at 50 kilowatts, the VCEA added an exception for any person whose income is no more than 80 percent of the median income in such person’s locality. Thus, the pilot program is available to “low-income utility customers” even if the facility is less than 50 kilowatts.

On May 29, 2020, the Virginia State Corporation Commission, which administers the pilot program, issued an order updating the program guidelines to conform with the VCEA’s new requirements. As with the VCEA, those updated guidelines are effective July 1, 2020. While the VCEA’s changes regarding net metering and the pilot program apply only to investor-owned utilities, legislation enacted by the General Assembly in 2019 provides a parallel framework applicable to Virginia’s electric cooperatives.

The VCEA announced a significant shift in Virginia’s energy policy, and the impact of that shift likely will shape Virginia’s energy industry for years to come. Please contact any of the authors to learn more about the VCEA or its impact on development of distributed renewable energy generation facilities.