Local Government:Arlington County, Virginia
Project:Amazon-Arlington Solar Farm Virginia
Category:Partnerships and Collaborations, Virtual PPA
To purchase 38 megawatts (MW) of renewable energy for County government electric operations by partnering with another large regional energy buyer.
As a small locality (just 26 square miles) with some energy-intensive operations, Arlington County grappled with the fact that most of its government facilities and sites do not meet the scale (i.e., roof size) necessary for self-sufficiency using on-site renewables. The County knew that if it was going to take ambitious action on clean energy, it was going to require more than simply setting on-site solar and energy efficiency goals.
As the County developed its 2019 Community Energy Plan, Amazon announced its decision to site the corporation’s “second headquarters” in Arlington County, bringing with it a corporate culture for advanced climate action and sustainability. While Arlington County had considered working with its incumbent utility, Dominion Energy, to secure renewable energy resources, previous proposals could not match competitive pricing with the County’s demand for new installations that met its baseline requirement for additionality.
By becoming mutual customers to the same solar farm through a virtual power purchase agreement (VPPA)—with Arlington County purchasing about one-third of the output (38 MW) and Amazon purchasing the remainder—working with Dominion to get renewable power suddenly became a viable option. For Amazon, the deal gave the company an opportunity to engage with and have positive impact on its new community and to anchor its strong sustainability and climate goals with a new, major corporate presence.
Construction on Dominion Energy’s 120-megawatt, 1,500-acre solar farm in Pittsylvania County, which will help advance Arlington County’s and Amazon’s clean energy goals, is underway and the facility is expected to become operational in spring 2022.
How was this deal structured?
The deal is structured as a Contract for Differences, or VPPA—a financial contract where the solar energy produced will be sold and delivered into the local wholesale market at the variable hourly price, instead of directly powering any Arlington County or Amazon facilities. This type of financial contract enables Amazon and Arlington County to sign solar contracts at wholesale power prices, which are generally lower than retail prices.
While Amazon’s contractual terms with Dominion Energy are confidential, under its separate contract, Arlington County will receive a competitive hourly wholesale price as well as Renewable Energy Credits (RECs) associated with that solar production. The County’s rate is fixed, so that if the wholesale market price should rise above Arlington County’s contractual rate, the County will receive the benefit of the difference. Conversely, if wholesale market prices fall below the contractual rate, the County bears responsibility for the difference. To reduce the risk associated with market fluctuations, the County engaged a third-party wholesale market analyst to project the market over the contract’s 17-1/2 term and negotiated a fixed rate throughout the full term. The financial analysis completed by the County predicts that its participation in the solar installation should be cost-neutral or even potentially reduce overall electricity costs.
What were Arlington County’s biggest challenges in setting up this project?
Coming to agreement on terms that suited both parties: Arlington County sought a fair deal with Dominion, one that protected its financial interests while achieving important public policy goals. The County and Dominion negotiated in good faith, understanding the risks the project posed to both parties. The County understood Dominion was serving as the de facto energy broker for this transaction, and Dominion bears the costs of having the transaction built into the monthly electricity bills at sites and facilities designated solely by the County. It was also important to Arlington County that the transaction be as transparent as possible in accordance with good governance and Virginia law pertaining to public bodies.
Ensuring satisfactory land use for the project: One of the County’s imperatives was to coordinate its renewable energy goals with its other overarching sustainability principles, including those related to conservation and preservation of natural assets, such as trees and forests. Like other locations that Dominion Energy develops for renewable energy projects, the Pittsylvania County site had been historically used for agriculture and farming so tree colonies located on the property were scarce (only about 15% of the project site has trees in it). Ultimately, the amount of land that needed to be cleared for this project was minimal, and the rent that was offered to farmers for the use of their land for the project was compelling. Rural Pittsylvania County has made solar energy farms an important part of its economic development policy.
What advice would Arlington County give other local governments as they pursue climate action projects?
Consider entering a contract with another experienced customer: Amazon was the anchor customer on this project and had already done several renewables deals elsewhere, so Arlington County had the assurance that this project had passed Amazon’s muster as an experienced customer. This provided the county with the confidence that the transaction was likely to actually make it to the finish line.
How does this project fit into Arlington County’s broader climate and community goals?
Arlington County adopted an updated Community Energy Plan in 2019 with a goal to source 100% of electricity needed for County government operations from renewable sources by 2025. This transaction helps the County move significantly toward that goal. The solar facility will generate about 79,000 megawatt-hours of electricity annually, bringing the total share of renewable energy for government electric operations (including buildings, streetlights, signalization, water pumping, and wastewater treatment) to roughly 80%, up from 17%-20% prior to the County’s transaction. Arlington County is the first locality in the nation to enter into a VPPA for off-site renewable energy with an investor-owned utility company.
In addition to this VPPA, Arlington County is simultaneously pursuing other efforts to advance its climate action goals. The County’s Water Pollution Control Plant currently delivers alternative energy to the grid and is working with its incumbent gas utility, Washington Gas, to assess the potential for larger-scale biomethane generation, which could provide renewable gas sufficient to power up to half of its compressed natural gas-powered public bus transit fleet.
Additional Information and Resources
- Authorization to enter into a Power Purchase Agreement with Dominion Energy Virginia (Arlington County Board Agenda Item – Meeting of January 25, 2020)
- Power Purchase Agreement for Electricity Use by County Government Operations (Arlington County project overview)
- Community Energy Plan (Arlington County plan)
- Virginia Solar Projects (Dominion Energy website)
- New Amazon-Arlington solar farm to fulfill most of county’s renewable pledges (News article)
- Arlington County Partners with Dominion Energy to Help Achieve Energy Goals (Arlington County press release)
- Contract for Differences or Virtual Power Purchase Agreement (Definition)
- Additionality (Concept overview)
Arlington County received technical assistance from the American Cities Climate Challenge Renewables Accelerator through its cohort programming. This project was included on the Renewables Accelerator’s list: 10 of the Most Noteworthy Local Government Renewables Deals of 2020.