RALEIGH – Newly proposed changes to expand options for developing solar and alternative energy projects in North Carolina are in the final phase of negotiations and expected to be introduced in time for this year’s session.

The pending shift in state energy policy, the result of months of work by a broad stakeholder group of solar industry leaders, power producers, environmental groups and others, would be among the most significant changes in a decade and could resolve several policy conflicts between major energy producers and the state’s growing green-energy sector.

North Carolina now ranks second in the nation, behind California, in solar capacity, but proponents and their backers in the legislature are worried that without substantive changes to existing regulations the state could see that growth fizzle out. They’re also wary of increasing competition from neighboring states. Both Georgia and South Carolina have recently changed regulations to boost solar investment.

So far, the changes proposed for North Carolina are still in draft form. The stakeholder group, which was due to report in early March, failed to reach an agreement on some of the key issues. Since then, the task of coming up with a bill has been up to legislative staffers who worked with the group.

News of the new legislation came earlier this month in a speech by Rep. Chuck McGrady, R-Henderson, at the Clean Tech Summit in Chapel Hill, sponsored by UNC’s Institute for the Environment.

McGrady outlined the challenges of drafting a bill to move forward after years of debate and disagreement on several key issues.

Early last year, solar and wind energy proponents asked for McGrady’s help in setting up the stakeholder group to resolve some of conflicts, he said. House Speaker Tim Moore, R-Cleveland, agreed to convene a group that included staffers and representatives of the stakeholders, but not legislators, McGrady said.

According to McGrady and others, the new legislation being prepared would open the door to third-party sales for solar, community solar and more flexibility for leasing programs. Each of these are policies that power producers, including Duke Energy and the state’s electric cooperatives, have opposed in the past.

The proposals would also seek to resolve a longstanding fight in the legislature over the state’s Renewable Energy Portfolio Standards (REPS), which require producers use renewable sources for 12.5 percent of output by 2021. Lawmakers passed the original legislation setting the standard 10 years ago. REPS has been an ongoing focus of heated debate, most recently within the legislature’s Republican caucus.

“Energy policy divides Democrats and Republicans,” McGrady said in his speech, “but it is also highly divisive within the majority party in the legislature.”

An initial draft of the bill released earlier this month included a rollback of the REPS requirements, but McGrady said he didn’t think the final version of the bill would include a reduction in the REPS targets.

Lawmakers haven’t yet resolved disagreements over tax credits and property tax abatement for renewable energy projects to resolve, McGrady said.

The legislature allowed a 35 percent tax credit for solar facilities to expire at the end of 2015. The credit, which helped drive the surge in solar construction, was in a way a victim of its own success. Opponents of extending the credit argued that the solar industry was doing so well, the credits were no longer needed.

McGrady said in addition to the new policy legislation, the legislature is also looking at plans for modernization of the state’s electric grid, but he acknowledged that questions remain about who pays for it and how long.

Rep. John Szoka, R-Cumberland, who also is backing the legislation that came out of the stakeholder group, acknowledged the difficulty of putting together such a large deal. He said he expects many of the stakeholder will find parts of it they don’t like.

“I think probably the proof that it’s a good agreement is that nobody will like the bill,” he said in a recent interview.

Still, Szoka, who once opposed REPS but now counts himself among renewable-energy supporters, said he is cautiously optimistic.

WNC solar outlook

“I think everybody involved in the process got some good, open, honest conversation about all the issues they’ve been discussing and I think that they can come to an agreement.”

Julie Mayfield, co-director of Mountain True, said the benefits of the changes could be felt very quickly in the state’s western region. She said there is a backlog of groups that would like to install rooftop solar, but are hindered by the state’s prohibition on third-party sales. That would allow solar companies to work with property owners to install systems with little or no upfront cost.

“I think there are a number of entities that would take advantage of that to get solar on their rooftops, particularly churches,” Mayfield said. Mountain True’s Creation Care Alliance works with dozens of churches that focus on climate change and clean energy who would like to use solar but can’t afford the upfront cost.

Schools and municipalities would also be more likely to initiate solar projects should the changes go through, Mayfield said. “While WNC has a growing solar industry, she said, the changes proposed would ensure that it would not only thrive, but keep expanding.

“I think we could see a real resurgence in solar in Western North Carolina,” she said.

But Mayfield cautioned that details in the pending legislation will need to be studied carefully.

“We’re very supportive of third-party sales specifically, keeping the REPS intact and basically any other policies that continue to expand and encourage the solar industry and renewable industry in North Carolina,” she said. “There are likely to be some tradeoffs in a big package like this. We’ll just have see those.”

The push also has growing support in the business community. Tuesday, a coalition of businesses interested in expanding their use of renewables, including Asheville’s New Belgium Brewing, sent a letter to House and Senate leaders calling for more clean energy in the state.

“New Belgium is committed to being a great place to work and a sustainable business — and our Asheville brewery is no exception,” said Jenn Vervier, director of strategy and sustainability at New Belgium Brewing Co.

“Forward-looking clean energy policies help companies like ours access cost-competitive renewable energy while creating certainty for businesses looking to make new investments here in North Carolina.”