Are Utilities About To Kill Solar Energy’s Future In North Carolina?

July 23rd, 2014 by Silvio Marcacci

North Carolina has become one of the hottest states in America for solar power, ranking third in the nation for new photovoltaic installations in fourth quarter 2013 and first quarter 2014. But a regulatory fight pitting solar industry against big utilities is underway, and it could effectively end new utility-scale solar additions.

Every two years, the North Carolina Utilities Commission reviews how it calculates the “avoided costs” (the amount utilities would have to pay to generate or buy electricity elsewhere) of clean energy.

This time though, regulators are reviewing both avoided costs and the maximum size of renewable generation systems eligible for standard pricing – a regulatory process that could “have the effect of significantly reducing, if not eliminating” new solar installations in North Carolina.

Solar Energy Project Prices, Size At Risk

The value of avoided costs has dictated standard prices North Carolina utilities pay to renewable energy projects through power purchase agreements (PPA) – a big deal for renewable energy projects in a monopoly electricity market where just a few utilities are guaranteed a majority of power customers and renewable developers must go through individual utilities to sell electricity on the state’s grid.

By establishing standard prices for long-term PPAs, developers can avoid long negotiations that may derail potential solar projects, and are given leverage with the much larger utilities. Long-term PPAs (North Carolina requires 15-year standard contracts) are contracts widely used in the power industry to lock in pricing so solar developers can know their payback terms and secure financing for new projects.

Without them, utilities could theoretically lower the price they pay for power, leaving developers owing money to lenders, and gaining monopoly control over solar development. State utilities advocate for cutting contracts to 10 years, while the solar industry is pushing for regulators to extend contracts to 20 years.

But in addition to reconsidering avoided costs, North Carolina regulators are also reviewing project size limits for “qualifying facilities.” Currently installations of up to five-megawatt (MW) capacity are covered – enough for a large, commercial-scale installation.

State utilities are pushing to lower that limit a shocking 98%, to just 100 kilowatts – roughly 10,000 square feet of solar panels and far too small for most commercial developments – while solar industry advocates are pushing for the size limit to be increased to 10MW. The Utility Commission’s Public Staff, representing consumers, doesn’t advocate changing the current 5MW size limit.

Why Idle A Green Economic Engine?

These two potential regulatory changes mean stakes are high for state regulators and the future of renewable energy in North Carolina. The solar industry has become an economic engine with 137 companies employing 3,100 workers statewide, generating $787 million in 2013 investments while solar PV system prices fell 8% in the past year.

Even in a fossil-fuel heavy energy market, solar has grown fast in North Carolina. The Tarheel State had 592MW installed solar capacity at the end of 2013, fourth-most in America. 335MW of that total was installed in 2013 – enough to power 31,809 homes. As a result, voters support clean energy development across the state.

High Stakes For North Carolina (And Maybe America)

But all that progress would be lost if the utilities get their way. “Changes proposed by the utilities would have the effect of significantly reducing, if not eliminating, the development of solar,” said Zoe Gamble Hanes of FLS Energy. “The industry is maturing in North Carolina and technological breakthroughs related to storage are imminent.”

Ironically the former CEO of Duke Energy, North Carolina’s largest utility, recently came out in support of more distributed energy and urged the energy industry to “run to the challenge and embrace the change.”

State regulators aren’t expected to issue a decision until this fall, but the battle lines have been drawn. On one side, the solar industry wants to continue growing green jobs and distributed clean electricity. On the other side, utilities want to squash solar power (says advocacy group NC WARN) in a move that could expand the battlefield in fossil fuel funded fights against renewables across America.











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