Energy policy changes get mixed reviews at state council meeting

Recently enacted North Carolina renewable energy regulations to control costs and help green energy flourish will be a model other states embrace. Or don’t.

Green energy leaders had differing levels of enthusiasm for House Bill 589 Wednesday during a North Carolina Energy Policy Council meeting chaired by Lt. Gov. Dan Forest. They all agreed, though, that lawmakers should revisit some of its energy policies, including a moratorium on wind energy projects.

Rep. John Szoka, R-Cumberland, a principal sponsor of that Competitive Energy Solutions for North Carolina bill, led a panel discussion about the renewable energy reform. He said the stakeholder-driven process — including representatives of utilities, energy producers, environmental groups, and business organizations — improved the legislation, but it’s far from perfect.

The most important — and challenging — piece of the legislation changed state rules for implementing the federal Public Utilities Regulatory Policies Act, Szoka said. The PURPA act requires public power plants to purchase electricity from renewable producers, but states have wide latitude in complying with the law.

North Carolina set up some of the nation’s most favorable terms for renewable companies, but those raised ratepayers’ costs, and posed other problems for electric utilities. North Carolina has 60 percent of the nation’s facilities that qualified for PURPA contracts, and more solar output from PURPA generators than 46 other states combined.

H.B. 589 was intended to scale back the state’s generous allowances under PURPA.

Ken Jennings, renewable strategy and policy director for Duke Energy, said H.B. 589 still will allow solar output to grow between 200 and 300 percent over the next few years, while saving customers more than $800 million.

That savings will be generated by new features allowed under the regulatory reform such as competitive bidding to purchase lowest-cost energy, and buying only from areas of the state where it is needed to meet local demand. That reduces stress on personnel and equipment, Jennings said.

A Duke Energy analysis found the utility is paying $55 to $85 per megawatt hour to buy solar power, even though the actual cost is $35. Why? The state’s PURPA compliance rules forced utilities into long-term, fixed contracts. So as the cost of renewable energy dropped, the utility was hemmed into a non-negotiable contract at a much higher payout.

Brian O’Hara, senior vice president of Chapel Hill-based Strata Solar, the state’s largest developer of commercial-scale solar installations, said his company benefited handsomely from the state’s PURPA laws, but there was a down side.

“PURPA is almost a victim of its success,” he said. Strata Solar’s market began to stagnate as PURPA-eligible projects sprang up everywhere. That led to the need for H.B. 589 to channel projects away from areas where they were not needed, due either to lack of demand, or an oversupply.

“What we’re doing here in this state really is a model for other states,” O’Hara said. Virginia and Georgia are examining North Carolina’s reforms for their own states, he said.

“This is not a cure-all” that every state should jump on, countered Chris Carmody, executive director of the North Carolina Clean Energy Business Alliance. “This is an important pivot” into the future.

Carmody took a swipe at government-regulated electric utility monopolies, and their shareholders’ demands. He said H.B. 589’s reforms are merely a starting point. Incentives need to be changed so the state doesn’t get mired in a costly, obsolete regulatory straitjacket while the renewable energy industry undergoes rapid change.

“Our perspective is that North Carolina has properly implemented PURPA,” and states with stingier incentives erred, said Peter Ledford, general counsel of the North Carolina Sustainable Energy Association. “The fact that we are outpacing other states is proof that we have done this correctly.”

He said forcing providers to buy renewable energy under PURPA regulations is “very much a free-market principle.”

Ledford lamented that the end of state renewable tax credits “pretty well devastated” the rooftop solar industry. A provision in H.B. 589 allows homeowners to lease solar panels on their homes instead of owning them. Ledford said that will inject a needed boost to the residential solar market.