Earlier this month, Virginia Gov. Terry McAuliffe announced that the state will purchase 100 percent of the electricity generated from a new 20 megawatt (MW) solar project that Dominion Virginia Power will construct. The proposed project between the state and utility will generate enough clean energy to power the equivalent of 5,000 U.S. homes, making progress toward the utility's goal of building 400 MW of renewable energy projects by 2020.
But the deal wouldn’t have happened without one crucial third party—Microsoft.
An Innovative Public-Private Partnership
Microsoft committed to buy the project’s renewable energy certificates through a long-term, 25-year agreement; the state will buy the electricity generated over the same term (though only Microsoft will get credit for using the solar power, following industry best practices to avoid double-counting among energy consumers). This investment makes the project feasible by reducing the overall cost of its energy for the Commonwealth, saving taxpayers $1 million off the state’s electricity bill over the life of the agreement.
“We are excited that through this project we have created a viable new public-private partnership model for the company and look forward to expanding on this new approach,” said Rob Bernard, chief environmental and cities strategist.
A Win-Win Solution
It’s not just Virginia who benefits from the deal—it’s a win for all involved.
Corporate energy buyers, like Microsoft, are setting increasingly ambitious sustainability goals, which requires access to new, grid-connected renewable energy at scale. Microsoft, having committed to be a carbon-neutral company, has long been investing in large renewable energy projects across the country. What makes this deal unique, and a first for the company, is that they have been able to partner directly with a local utility. By collaborating with Dominion Virginia Power and the Commonwealth of Virginia, Microsoft is able to bring new renewable energy directly to the grid that serves its Virginia data center. Dominion Virginia Power benefits from this agreement because it provides a more cost-effective pathway for building Virginia’s first large solar farm at no cost to other ratepayers. Dominion had proposed building this facility last year, paid for by average ratepayers, but state regulators rejected it as being too costly. The regulators’ concerns should be addressed with the involvement of Microsoft, a large, credit-worthy customer, as well as from the state buying the power.
"This forward-looking partnership will assist us in our continued commitment to increase the renewable energy available to serve our customers in Virginia," said Thomas F. Farrell, II, chairman, president and CEO of Dominion Resources, Inc. "Microsoft and the Commonwealth play key roles in making this large-scale solar project possible, and we look forward to working with them."
Bringing Innovative Solutions to the Table
The public-private partnership between Microsoft, the Commonwealth and Dominion Virginia Power embodies the type of innovative solution that can speed the transition to a clean energy future. To create these win-win deals, utilities and their large, corporate customers must collaborate to develop new ways to purchase renewable energy through the grid. The development of this deal was supported, in part, by a series of problem-solving workshops called the Utility Leadership Forums that WRI facilitates, with support from the World Wildlife Fund.
These discussions between utility executives and some of their largest energy customers explore innovative arrangements to deliver the renewable energy big companies are looking for while providing value to the grid, under structures that regulators can approve. Microsoft, among other large energy customers, participated in a Utility Leadership Forum with Dominion Virginia Power, where they discussed the idea for the structure of the solar project. Microsoft and Dominion went on to turn the idea into reality.
As large energy buyers continue to set more ambitious sustainability goals, scalable and replicable grid-connected renewable energy products provide a real opportunity for utilities to meet the evolving needs of their customers. More than 50 large energy customers have joined the Renewable Energy Buyers’ Principles, making clear their willingness to collaborate with utilities to bring more renewable energy to the grid. WRI is working with a number of these proactive traditional utilities across the United States, and 2016 promises to be a year that brings many more partnerships and solutions to the table.
EDITOR'S NOTE, 3/31/16: A previous version of this blog post stated that it was Virginia's goal to build 400 MW of renewable energy projects by 2020. It is actually Dominion Virginia Power's goal. We have since corrected the error.