The N.C. Court of Appeals has affirmed state regulators’ ruling against a proposed solar energy plant for North Carolina. Appellate judges accepted regulators’ argument that the plant would have forced overly costly upgrades to the state’s electric grid.

“North Carolina has made significant strides in generating and employing
alternatives to carbon-emitting fuels,” wrote Judge Lucy Inman for the three-judge panel’s majority. Inman is a Democratic candidate for an open seat on the N.C. Supreme Court this year.

“We rank fourth in the nation in solar installations, with solar making up nearly eight percent of our state’s electricity,” Inman added. “Our legislature has enacted clean energy goals including a 70 percent reduction in carbon emissions by the year 2030 and carbon neutrality by 2050. The southeastern region of the state, in particular, has attracted several solar energy facilities. But growing production has strained the region’s existing electric grid. A dispute over the cost and timing of upgrading the grid gives rise to this appeal.”

New solar energy plants require government permission, Inman noted. “Energy plants cannot spring up like many restaurants, fitness centers, or dry cleaners, even if consumer demand would support the increased supply,” she wrote. “In this way, government regulation influences the energy market.”

An independent energy company called Friesian Holdings sought a permit from the N.C. Utilities Commission to build a solar plant and to use the existing electrical grid. “Citing the cost of upgrading the region’s electric grid to accommodate additional transmission, the Commission denied Friesian’s application,” Inman wrote. The Utilities Commission made that decision in June 2020.

Friesian’s appeal argued that the decision “unfairly favors larger energy utilities and squelches competition, to the detriment of consumers.”

The Appeals Court rejected all three of Friesian’s arguments: that federal law preempted the Utilities Commission’s action, that the commission used “arbitrary and capricious” cost analysis, and that the commission made a mistake in ruling there was no demonstrated need for the new solar plant.

The electrical grid upgrade associated with the project would have cost close to $250 million, according to the court opinion. Federal policy would have prompted Duke Energy to pass along those costs through “higher rates charged to its wholesale and North Carolina retail customers.”

“Witnesses for the [Utilities Commission] Public Staff testified, and one of Friesian’s witnesses conceded, that the facility would do little to supplement Duke’s solar energy supply during the peak winter season, and that Duke had not previously identified the transmission lines in question as needing upgrades due to reliability issues,” Inman’s opinion continued.

The commission ended up determining that the costs were “unreasonably high.” “[T]he Commission compared the unprecedented magnitude of upgrade costs to
be borne by ratepayers to accommodate Friesian’s proposed facility with the facility’s expected output, and concluded they were too burdensome to be in the public convenience,” Inman wrote.

Judge Toby Hampson concurred with Inman’s opinion. Judge Hunter Murphy agreed with the result but wrote separately.

“While I have surmised potential winning arguments for [Friesian] Appellants, such arguments were not made by them and have not been made a part of this adversarial proceeding,” Murphy wrote. “I would not consider our opinion today to foreclose future litigants from making additional or refined arguments on the issues presented by this case.”

Without a dissent in the case, the N.C. Supreme Court would face no obligation to take an appeal.