An overview of the Virginia Clean Energy Act (VCEA)

Virginia may not seem like one of the best states to go solar in, but that’s all about to change: thanks to the Virginia Clean Economy Act (VCEA), Old Dominion is poised to become one of the most advanced (and financially advantageous!) solar markets in the country.

The VCEA is a piece of clean energy legislation that Governor Ralph Northam signed into law on April 11th, 2020. The Act is designed to spur clean energy job creation and reduce the state's carbon emissions primarily by expanding wind and solar power.

One of the most important parts of the Act is the establishment of a mandatory renewable portfolio standard (RPS), which sets Virginia on a path to reach 100 percent clean electricity by 2050. Virginia is by no means the first state to pass an ambitious clean energy target, but they are the first southern state to do so.

VCEA includes more than just clean energy targets, but some details are very technical and difficult to unpack. In addition to a mandatory RPS, here are a few key initiatives included in the bill:

• Dominion Energy and Appalachian Power, two large investor-owned utility companies in the state, must retire their carbon-emitting electrical generation facilities. The dates by which they need to do so depend on the type of plant (i.e., whether they burn coal, natural gas or oil) and the size of the facility.

• The net metering cap for residential customers jumped from 20 kW to 25 kW; residential Dominion customers can also size their system to meet up to 150 percent of their annual electricity demand.

• The bill established specific megawatt (MW) targets for offshore wind, solar, and energy storage.

• There are new energy efficiency standards for utilities, including programs to support low-income populations.

• The RPS includes a solar carve-out for Dominion, mandating that at least one percent of its renewable energy generation must come from distributed solar panel systems less than one MW in size.

VCEA went into effect on July 1st, 2020.

VCEA has positive implications for anyone considering going solar in Virginia:

New solar incentives

As mentioned above, Virginia's new mandatory RPS includes a solar carve-out, which mandates that at least one percent of Dominion Energy's renewable electricity generation must come from solar. Importantly, the carve-out excludes solar panel systems that are more than 1 MW large, meaning this requirement largely relates to residential and commercial solar panel systems rather than large-scale utility solar projects. If Dominion Energy does not meet this requirement, they have to pay a compliance payment, which paved the way for a new incentive offering in VA: solar renewable energy certificates (SRECs).

SRECs are a solar incentive that provides people with extra income for generating solar power;  you can generate 1 SREC for every 1,000 kilowatt-hours (kWh) of solar electricity production. Utilities (like Dominion) will then purchase your SRECs to meet their solar generation requirements (and avoid paying non-compliance penalties).

The value of an SREC largely depends on supply and demand in a state's market. This variation plays out in the SREC markets of Virginia's neighbors: as of May 2020, people in D.C. can sell their SRECs for more than $400, while prices in Maryland are closer to $70.

Virginia's SREC market is relatively new, but so far, SRECs are selling for between $30 and $70 per certificate. The average 10 kW solar panel system comes out to an extra $5,000 to $12,000 over 15 years, depending on supply and demand in the SREC market and how much energy your solar panel system generates.

Larger solar panel installations

Regarding solar panel system sizing, most people install a system that can meet as close to 100 percent of their electricity needs as possible. However, if you plan on increasing your electricity usage in the future–whether because you want to purchase an EV, install a hot tub, or switch to air source heat pumps– you may want to install more solar panels than you currently need to save yourself the hassle of expanding your system in the future. This hasn't been possible for Dominion customers in the past, but now is thanks to the passing of VCEA.

If you're a customer of Dominion Energy, you can now install a system sized to meet up to 150 percent of your annual electricity usage. While installing a larger system will likely cost more money upfront, it can help you save more over the system's lifetime–and will help you earn more in VA's future SREC market!

You can read more about the pros and cons of installing more solar panels than you need here.

Protection against standby fees

Utility fees can dramatically impact your potential solar savings; fortunately, VCEA adds an extra layer of protection for homeowners going solar.

The bill mandates that Dominion cannot charge standby fees for their solar customers with systems less than 15 kW, raising that from the previous limit of 10 kW. VCEA also removes these fees entirely for Appalachian Power customers, regardless of system size.

Thanks to VCEA, declining solar prices, and the soon-to-expire federal solar tax credit, there’s never been a better time to go solar in VA. Want to see how much you can save with solar? Sign up on the EnergySage Marketplace to receive custom solar quotes to compare. If you’d like to start with a quick estimate of solar costs and savings, try our Solar Calculator.