Virginia Clean Energy Act (VCEA) and Its Impact on Major Local Utilities

In April 2020, the Virginia General Assembly instituted a mandatory Renewable Energy Portfolio Standard program, also known as Virginia Clean Economy Act (VCEA). The new regulation mandates utilities to generate 73% or more of electricity from clean energy resources by 2035 and 100% by 2050.

Eligible generation resources include solar, onshore/offshore wind energy generation, energy efficiency, demand response, and other in-state renewable technologies.

Dominion Energy Virginia and American Electric Power are the two biggest utilities in Virginia, serving approximately 80% of local consumers. As part of regulatory compliance, these two utilities are required to file an Integrated Resource Plan (IRP) every three years outlining their plans towards generating electricity from 100% renewable sources. In order to achieve the decarbonization target, both utilities will have to retire their coal-fired energy generating plants and replace them by constructing, acquiring, or entering into agreements to purchase renewable energy generating capacity located in the state. If utilities fail to meet the goals, they must either pay a specified deficiency payment or buy Renewable Energy Certificates (RECs).

Both utilities have submitted a blueprint on how they plan to comply with VCEA regulations and achieve their clean energy generation targets by 2050. Dominion Energy outlined four planning scenarios in its first IRP. Each scenario includes over 5,000 MW of offshore wind and between 16,000 to 18,800 MW of new solar during the 15-year planning period. Unlike Dominion Energy, American Electric Power’s subsidiary, Appalachian Power, plans to meet the VCEA targets primarily through future investments in solar, wind, energy storage, and energy efficiency measures. Appalachian Power intends to acquire or contract 210 MW of solar resources and 200 MW of wind over the next five years in Virginia and continue to add 3,400 MW of solar, 2,200 MW of onshore wind, and 400 MW of energy storage to its current portfolio of wind and hydro resources by 2025.

Meanwhile, Virginia’s State Corporation Commission continues to address concerns associated with resource reliability and intermittency issues. In December 2020, it adopted new rules to increase the deployment of energy storage capacity in the state. These rules require Dominion and Appalachian Power to propose 250 MW and 25 MW of storage resources, respectively, by the end of 2025, and an addition of 2700 MW from Dominion and 400 MW from Appalachian Power of storage resources by 2035.

If utilities fail to implement rapid renewable generation expansion as planned on time, they must utilize other channels to achieve the overall decarbonization goal. Thus, it is possible to see a significant increase of demand in RECs in both Virginia and the PJM interconnection, a regional grid operating and electric transmission system, when utilities decide to purchase RECs to avoid deficiency payments. The increase in demand will inevitably increase RECs prices across the market.

Besides specific rules for utility generation mix discussed above, VCEA also lays out measurements to help households and businesses reduce energy waste, save money, and spur the state’s economic growth through strategic investments in Virginia’s energy efficiency, rooftop solar, and offshore wind projects. These investments are expected to create 13,000 new jobs in Virginia’s clean energy industry and generating up to $80 billion net benefits for Virginians.


Gouri Ganbavale