Source: Dominion Resources, Inc. 

Dominion Resources (NYSE:D) isn't your average solar stock. It's considered by most to be a natural gas, pipeline, or dividend stock investment. But Dominion Resources is diversifying, and solar is taking a sizable piece of Dominion's portfolio pie. Here's what you need to know.

The solar situation
Dominion Resources announced earlier this month that it's allocating $700 million to build several utility-scale solar projects in Virginia totaling 400 MW of electricity. In the announcement, Dominion Chairman, President, and CEO Thomas Farrell stated:

Our commitment to solar energy is an important part of the immediate future of our state. We appreciate the governor's efforts to promote renewable energy in our Commonwealth. Technology has evolved in such a way that we see a long-term benefit for our customers and will work to lead the way in solar generation. 

Fanning's statements point to two clear trends that have advanced solar opportunities: political and technological.

On the political front, it turns out Virginia is for solar lovers. In the same statement announcing Dominion's solar intentions, the utility noted that Virginia House of Delegates member David Yancey is sponsoring legislation to support utility-scale solar in his state. The state's renewable portfolio standard law incentives utilities like Dominion to add more renewable energy to their power portfolios -- 7% by 2016, 12% by 2022, and 15% by 2025. Federal initiatives like the EPA's Clean Power Plan are also pushing political agendas on Dominion, giving the thumbs down to dirty coal and the thumbs up to renewable projects. 

Technologically, solar power is soaring. Worldwide, costs have come down considerably. In states like Hawaii, where oil imports keep electricity expensive more expensive than any other state, NextEra Energy (NYSE:NEE) and SolarCity Corporation (NASDAQ:SCTY.DL) are teaming up to triple the amount of rooftop solar power. But utility-scale solar plants offer sizable economies of scale, making them commercially viable across more states. First Solar (NASDAQ:FSLR) estimates that its larger plants are already on par or cheaper than most power producers around the globe. The latest recorded residential electricity costs for Virginia put power at 11.5 cents/kWh, well within First Solar's 7-15 cents/kWh range.

Source: First Solar; vertical axis is $/kWh. 

One additional factor that Fanning failed to mention are the financial innovations that have accompanied solar's rise. On the residential front, solar leases from installers like SolarCity have made it possible for "zero money down" rooftop solar panel kits. For utilities, power purchase agreements allow for predictable and steady sales for anywhere between 10 and 25 years. Some publicly traded companies are even taking advantage of cleverly constructed "Yield Co" companies to shield renewable projects from taxes. NRG Energy created NRG Yield in 2013, NextEra Energy spun off NextEra Energy Partners, LP last year, and Dominion Resources may explore similar options as its renewable portfolio expands in the years to come.

The state of solar?
Dominion currently has 744 MW of solar projects under development, under construction, or in operation across seven states. But in Virginia, the utility has just 1.4 MW of operational solar power. This latest announcement sets up the state for enough electricity to power 100,000 additional homes by 2020. For any investor that wants a piece of sweet southern solar pie, Dominion just offered up a tasty delight.