Governor McAuliffe Issues Public-Private Partnership Request

While Virginia historically has not offered robust clean energy incentives and programs, Governor Terry McAuliffe appears determined to reverse the trend. On January 16, 2015, the Governor’s office released a request for information (RFI) seeking data on potential public-private partnerships (P3s) for solar energy development in and around state owned property. The RFI is directed towards experienced individuals, firms, teams, and organizations that can help in development, financing, design, or building of P3 solar projects above 100kW. Responses are due by March 13, 2015.

Dominion Power Proposed Solar Facility

Four days after this announcement, Dominion Virginia Power filed a request with the Virginia State Corporation Committee (SCC) to build what reportedly would be the largest solar facility in the Commonwealth. Dominion proposes to build the 20 MW facility near its Remington Power Station in Fauquier County on a 125-acre plot owned by the company. Dominion’s experience in solar energy includes 334 megawatts of solar generating capacity in six states outside of Virginia. The new solar array will be capable of powering around 5,000 homes at peak productivity, estimated by Governor McAuliffe to nearly double Virginia’s production of solar energy. Dominion Virginia Power is currently evaluating three fixed-price bids and will make a decision on contracting by April 1. The project targeted to be in service by October 2016.

Thoughts for Solar Developers and Investors

The recent actions by Dominion Power and Governor McAuliffe support the Governor’s statement that “Virginia is serious about enhancing its solar energy industry.” Last year the Virginia Office of Transportation Public Private Partnerships (OTP3) issued a project screening report that gave guidelines of suitability for public-private partnerships and identified hindrances to rapid solar energy uptake in Virginia. Among the challenges to development is Virginia’s voluntary Renewable Portfolio Standard (RPS), as opposed to the mandatory structure successfully adopted by twenty-nine states. Another obstacle noted is the lack of state tax incentives for private developers, causing project sponsors to rely solely on national tax incentives such as the Investment Tax Credit (ITCs), which will only apply to systems in service by the end of 2016 unless extended by Congress.

While the current RFI focuses on government support for leveraging state-owned sites, the P3 approach will bring private development and investment into the mix. The Governor’s stated objective is that with continued government support the market will take note of Virginia’s major untapped solar potential. The state has become haven for large commercial and industrial facilities, including data centers and manufacturing, which require high loads of power and may act as reliable off-takers for renewable generation. However, as was the case with Ikea, companies may choose to own their systems and possibly monetize the Renewable Energy Credits (RECs) in the nearby Pennsylvania market. Prospects for increased solar development and investment would be heightened by a mandatory and stable Virginia REC market. But this would require action by the Virginia General Assembly, which thus far has acted more as an obstacle for renewable advancement. The big question for the next couple of years is whether the substantial economic benefits called out by these kinds of projects will be able to overcome legislative inertia and opposition.

Investors and developers should stay tuned. As in certain other states in the Southeast, including Louisiana, Georgia and South Carolina, solar looks to be on the upswing in Virginia. Policy changes and projects such as these may unlock major new opportunities.

Special thanks to Morgan Gerard and Emma Spath who assisted in the preparation of this post.