Secure State Energy Actions 2010 UPDATE

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1 Clean and Secure State Energy Actions 2010 UPDATE

2 The National Governors Association (NGA), founded in 1908, is the instrument through which the nation s governors collectively influence the development and implementation of national policy and apply creative leadership to state issues. Its members are the governors of the 50 states, three territories and two commonwealths. The NGA Center for Best Practices is the nation s only dedicated consulting firm for governors and their key policy staff. The NGA Center s mission is to develop and implement innovative solutions to public policy challenges. Through the staff of the NGA Center, governors and their policy advisors can: Quickly learn about what works, what doesn t and what lessons can be learned from other governors grappling with the same problems; Obtain specialized assistance in designing and implementing new programs or improving the effectiveness of current programs; Receive up-to-date, comprehensive information about what is happening in other state capitals and in Washington, D.C., so governors are aware of cutting-edge policies; and Learn about emerging national trends and their implications for states, so governors can prepare to meet future demands. For more information about NGA and the Center for Best Practices, please visit ACKNOWLEDGEMENTS This report was authored by Rachel Escobar and Sue Gander of the National Governors Association Center for Best Practices (NGA Center), with writing and research assistance from Greg Dierkers, Devashree Saha, Andrew Kambour, and Katherine George, also of the NGA Center.

3 Energy Efficiency Building Energy Codes Utility Demand-Side-Management Utility Rate Realignment Energy Savings Targets/Energy Efficiency Resource Standards Residential: 2006 IECC, mandatory statewide Commercial: 2006 IECC with reference to ASHRAE , mandatory statewide Scheduled to adopt the 2009 IECC code for residential and ASHRAEI for commercial Electric utilities are allowed cost recovery of demand side management (DSM) through a separate rate rider; they are developing and submitting programs for approval Utilities are required to update their Integrated Resource Plans (IRP) every two years to meet supply and reliability requirements Dominion and two electric cooperatives are implementing smart grid programs to enhance the utilities ability to efficiently manage their distribution grids and provide an infrastructure to support customers DSM actions Virginia General Assembly in 2008 passed the Natural Gas Conservation and Ratemaking Efficiency Act intended to encourage natural gas utilities to file conservation programs tied to alternative (decoupled) rate designs, and to reward utilities that assist customers in reducing energy consumption and energy bills Virginia Natural Gas implemented its energy conservation plan and a natural gas decoupling mechanism (Revenue Normalization Adjustment Rider) Columbia Gas of Virginia followed in April 2010 The Virginia General Assembly set a target that 10% of electric base year (2006) use should be reduced by conservation and efficiency by 2022 Five-year Virginia Energy Sense consumer education and outreach program, under the guidance of the State Corporation Commission, to encourage electric energy efficiency and conservation Allows a four-day sales tax exemption on ENERGY STAR and Water Sense qualified products of $2,500 or less per product, purchased for non-commercial home or personal use; localities may provide a property tax exemption for buildings with efficiency at least 30% higher than code, or that meet LEED, ENERGY STAR, or Green Globe certifications, or for buildings with green roofs. Allows for Property Assessed Clean Energy (PACE) financing (SB 110) Financial Incentives Loans, Rebates, Taxes, Bonds, Etc. $7.5 million in ARRA funds are being used for a rebate program for certain ENERGY STAR qualified appliances $15 million in ARRA funds are being used for a rebate program for energy efficiency retrofits to homes and commercial properties Localities may make gifts and donations to any nonprofit organization that is engaged in providing energy efficiency services or promoting energy efficiency within or without the boundaries of the locality The Virginia Resource Authority is authorized to issue bonds for local government energy efficiency programs Clean Electricity Renewable/Alternative Energy Portfolio Standards and Goals Established voluntary, incentive-based renewable energy portfolio standard with the following goals (base year is 2007): 4% of base year sales by 2010; 7% of base year sales by 2016; 12% of base year sales by 2022; and 15% of base year sales by 2025 Provides that an investor-owned electric utility will receive double credit toward meeting the goals of the renewable energy portfolio standard program for energy derived from onshore wind or solar and triple credit from offshore wind 2010 UPDATE 157

4 Net Metering and Interconnection Standards Advanced Coal and Clean Coal Net metering is available on a first-come, first-served basis until the rated generating capacity owned and operated by customer-generators in Virginia reaches 1% of each electric distribution company s peak load for the previous year - this includes residential systems up to 10 kw and commercial systems of up to 500 kw; customer-generators must notify the electric distribution company and the energy service provider prior to interconnecting Utilities may approve a higher capacity limit at their discretion; renewable energy certificates (RECs) are owned by the customer-generators The customer-generator has a one-time option to sell RECs to the utility upon entering into the power purchasing agreement Excess electricity produced can be sold under a voluntary agreement at any time Virginia provides a permit-by-rule for renewable projects less than 100 MW in size (20 MW for biomass and waste to energy) and exempts such projects from State Corporation Commission approval Promotes gasification research in state Energy Plan; A new coal/coal waste/ biomass advanced fluid bed generation plant is under construction in Wise County; conducting research on carbon sequestration in unmineable coal seams The Virginia Coal and Energy Commission will study legal issues on indemnification of land owners on property used for carbon sequestration Localities may exempt or partially exempt solar energy equipment or recycling equipment from local property taxes; electric utilities may receive up to 200 basis point extra return for direct investments in electricity generation (renewable, nuclear, carbon capture compatible clean coal) that lessen or eliminate emissions State law requires the Southeastern Public Service Authority to entertain and negotiate any and all reasonable landfill gas-to-fuel or gas-to-electricity contract offers Financial Incentives Loans, Rebates, Taxes, Bonds, Etc. The Virginia Offshore Wind Development Authority created to support the development of the offshore wind industry and wind-powered electric energy facilities located off the coast of the Commonwealth Allows for Property Assessed Clean Energy (PACE) financing (SB 110) Virginia offers the Solar Photovoltaic Manufacturing Incentive Grant Program to encourage the manufacture of solar photovoltaic panels in the state $15 million in ARRA funds are being used for a rebate program for certain solar thermal heating, residential solar PV and small residential wind systems (up to 10 kw) Alternative Fuels & Vehicles Consumption Targets/Renewable Fuel Standards The Department of General Services is required to establish the conditions under which state public bodies may procure diesel fuel containing, at a minimum, 2% by volume biodiesel fuel or green diesel fuel for use in on-road internal combustion engines 158 Clean and Secure State Energy Actions

5 School systems may use funding from the Literary Loan program to convert school buses to alternative fuels or construct alternative fuel refueling stations Provides grants and an income tax credit to producers of biofuels, specifically ethanol, biodiesel, and green diesel. A higher per gallon grant is available for biofuels produced from advanced feedstocks Financial Incentives Loans, Rebates, Taxes, Bonds, Etc. Businesses involved with the manufacture of AFVs, AFV conversions, or the production or storage of dispensing hydrogen are provided a job creation tax credit; localities may exempt or partially exempt AFVs from personal property taxes Grants are available for alternative fuel infrastructure at retail gas stations Localities may give preferential treatment to electric vehicles when establishing rates of taxation on personal property Use of HOV lanes by clean special fuel vehicles, regardless of the number of occupants Lead By Example Appliance/Equipment Efficiency Building Efficiency Green Power Purchasing Alternative Fuel and Vehicle Fleets Requires Virginia agencies and institutions to purchase or lease ENERGY STARrated appliances and equipment for all classifications for which an ENERGY STAR designation is available Guidelines are being developed for executive branch agencies to reduce energy consumption and water use, promote waste reduction, and reduce travel Requires state agencies to reduce the annual cost of non-renewable energy purchases by at least 20% of fiscal year 2006 expenditures by fiscal year 2010; state agencies and institutions use energy saving performance contracting and internal funding to reduce energy use and participate in the PJM Demand Response program to reduce peak electric demands; the Commonwealth purchases natural gas to optimize use of natural gas storage and financial hedging instruments State agencies and institutions required to reduce energy use by 5% below base line use by 2012, in addition to the previous 15% to 20% savings targets All construction and renovation of buildings for the executive branch agencies and institutions should meet LEED-Silver or Green Globes two-globe standards The Commonwealth has funded equipment changes to use switchgrass and wood fuels for various state-owned boiler plants, and provides a central, all public body contract for purchase of fuel oils, including bio-based heating oil The Department of General Services is required to establish the conditions under which state public bodies may procure diesel fuel containing, at a minimum, 2% by volume, biodiesel fuel or green diesel fuel, for use in onroad internal combustion engines Agencies and institutions are to purchase and lease the most fuel-efficient vehicle that meet operational needs Procurement of diesel fuel containing at least 2% biodiesel fuel or green diesel fuel, will be required for all agencies except public safety agencies GHG Emissions GHG Policies Virginia exempts certain pollution control equipment and facilities from local property taxes 2010 UPDATE 159

6 Clean Energy RD&D Partnerships, Grants, Awards, and Dedicated Funding $1.6 million in new state general funding is being added to a previous $1.5 million state general funding appropriation, to be matched 50/50 with private funds, for the Virginal Coastal Energy Research Consortium; $2 million is being appropriated for competitive R&D grants under the Commonwealth Technology Research Program, with energy as one of three priority areas; ongoing appropriations provided to the Virginia Center for Coal and Energy Research, helping support carbon sequestration in unmineable coal seam research; 10 state universities support energy R&D with internal and external fund sources Established, under Governor McDonnell s 2010 energy legislative package, the Universities Clean Energy Development and economic Stimulus Foundation Requires that any royalties from offshore oil and gas leasing and production be distributed to transportation, local infrastructure, and the Virginia Coastal Energy Research Consortium The Virginia Tobacco Indemnification and Community Revitalization Commission has funded five energy research and development facilities and made up to $100 million available for energy research and development Broadened the responsibilities of the Coastal Energy Research Consortium to include studies on all domestic forms of coastal energy State research institutions have also allocated internal funds to provide energy research and development in areas such as offshore wind, fuel cells, materials research, building efficiency, and other topics Green Economic Development The Virginia Community College System offers green job training across the community college system New or expanded programs are being implemented in wind turbine service, HVAC systems, and other areas Numerous community-based organizations are providing green jobs training including groups such as the Community Housing Partnership, Dan River Region Collaborative, Shenandoah Valley Workforce Investment Board, and Green Jobs Alliance Task Force, Workforce Development, Incentives, Analysis, Etc. Grants to accelerate development of Virginia energy production from renewable biomass and waste streams Funds to support new or grow existing energy efficiency or renewable energy businesses and manufacturers Governor Bob McDonnell s legislation to establish a $2500 per green job tax credit (over five years) for green jobs paying an annual salary in excess of $50,000 This credit will be available for green jobs created The taxpayer is allowed a credit for up to 350 new green jobs Provides a tax credit for job creation in the fields of cellulosic ethanol production, vehicle conversion to ethanol, and manufacturing of vehicle parts for conversion 160 Clean and Secure State Energy Actions

7 Other Virginia Energy Plan Offshore Energy Production State Telework and Alternate Work Schedule Policy The Virginia Energy Plan established a comprehensive energy policy and energy policy objectives in the Code of Virginia The Department of Mines, Minerals and Energy is charged with drafting a new plan every four years to reflect each new governor s policy initiatives Virginia policy supporting oil and natural gas exploration, development, and production 50 miles or more off Virginia s coast, taking into account the impact on affected localities, armed forces, and the mid-atlantic regional spaceport Two wind power developers have submitted lease offers to the federal Minerals Management Service for federal waters off of Virginia s coast MMS is working with the Commonwealth on leasing offshore waters for wind power projects The Secretary of Administration is required to establish a comprehensive statewide telecommuting and alternative work schedule policy Consistent with this policy, agencies have a goal that 20% of employees in eligible positions are to telework and 25% of its employees in eligible positions are to use alternate work schedules 2010 UPDATE 161

8 NGA Center Divisions The NGA Center is organized into five divisions with some collaborative projects across all divisions. Economic, Human Services & Workforce focuses on best practices, policy options, and service delivery improvements across a range of current and emerging issues, including economic development and innovation, workforce development, employment services, research and development policies, and human services for children, youth, low-income families, and people with disabilities. Education provides information on best practices in early childhood, elementary, secondary, and postsecondary education. Specific issues include common core state standards and assessments; teacher effectiveness; high school redesign; science, technology, engineering and math (STEM) education; postsecondary education attainment, productivity, and accountability; extra learning opportunities; and school readiness. Environment, Energy & Transportation identifies best practices and provides technical assistance on issues including clean energy for the electricity and transportation sectors, energy and infrastructure financing, green economic development, transportation and land use planning, and clean up and stewardship of nuclear weapons sites. Health covers a broad range of health financing, service delivery, and coverage issues, including implementation of federal health reforms, quality initiatives, cost-containment policies, health information technology, state public health initiatives, and Medicaid. Homeland Security & Public Safety supports governors homeland security and criminal justice policy advisors. This work includes supporting the Governors Homeland Security Advisors Council (GHSAC) and providing technical assistance to a network of governors criminal justice policy advisors. Issues include emergency preparedness, interoperability, cyber-crime and cyber-security, intelligence coordination, emergency management, sentencing and corrections, forensics, and justice information technology.

9 John Thomasian, Director NGA Center for Best Practices 444 N. Capitol Street, Suite 267 Washington, DC