In late June as the legislative session was winding down the North Carolina General Assembly approved a major energy bill that will fundamentally alter the renewable energy market in North Carolina.
The bill, House Bill 589, Competitive Energy Solutions for NC, was the product of a lengthy stakeholder negotiation process between utility representatives, solar developers, and multiple other organizations.
House Bill 589 includes a number of policy provisions, but at its core modifies how North Carolina will implement the Public Utility Regulatory Policies Act (PURPA)—a federal law passed in 1978 that was intended to spur the growth of small power producers. Even with these changes, PURPA still applies: it created and encouraged a market for power from non-utility power producers; required utilities to take power from qualifying facilities (QFs) of 80 MW or less; and those QFs are paid for their power at avoided cost. Implementation of PURPA was left to the states, and the North Carolina Utilities Commission had chosen to implement PURPA with conditions, including a standardized contract for installations up to five megawatts, that helped utility-scale solar generation thrive in our state. North Carolina is now second only to California in the amount of installed solar capacity.
The policy changes made by House Bill 589 are in part a reaction to how fast the solar market has grown in North Carolina over the last decade. Among the modifications in the PURPA framework are requirements for projects to be smaller in order to qualify for the standard contract and for the standard contract to be of shorter duration. In addition, the law creates a solar market over the next few years through a new competitive procurement process that requires over 2000 new megawatts of solar, as well as a community solar program and additional solar capacity for the University of North Carolina system and military installations in the state. In total, solar generation capacity will almost be doubled in the state in the next five years.
While the new law resets some of the rules of the game, solar’s long-term outlook in North Carolina is still closely linked to the ability to finance projects into the future.
In late 2016, the UNC Center for Climate, Energy, Environment, and Economics (CE3), held a forum entitled, “Law, Policy, and the Future of Solar Financing.” The forum was designed to examine the current state of solar financing and discuss legal opportunities, barriers, and proposals for increasing financing opportunities.
Throughout the discussion at the forum a number of issues were identified as critical to address those objectives, including:
- Uncertainty and complexity surrounding terms of prices paid for solar power is a major barrier to more solar financing and deployment of solar energy.
- Varying and changing state policies in different areas such as, environmental protection and economic incentives, may be uncoordinated and create uncertainty in rate of return calculations.
- The development of large scale solar projects versus residential solar should be accounted for separately during policy discussions.
One of the outcomes of the forum was a list of recommendations to enhance the financing of solar projects. House Bill 589 addressed some of those recommendations, but also left some issues unresolved.
The procurement requirements for solar projects set out in House Bill 589 ensure that North Carolina’s solar market will continue to grow in the next few years. Nevertheless, the long-term uncertainty and the prospects for solar development in the state, and around the country, are still an open question.
As such, CE3 is committed to serving as a broker for continuing discussions on these topics. For example, CE3 will be hosting a webinar to educate stakeholders about House Bill 589 on September 8th. More information and registration for the webinar can be found at: http://bit.ly/2iAr8Z1.
House Bill 589 addresses some factors that will streamline renewable energy development in the state, such as the competitive bid process and third party leasing, and provides a roadmap for increasing solar installations for the next few years.
The longer-term growth and viability of the clean energy industry in the state is an uncertain question, and will rest on many factors: federal and state tax policy, land use decisions, and federal and state energy and environmental policies, to name a few. All these will impact whether solar continues to thrive in North Carolina.