Energy bill could see North Carolina join national fight over net metering
Highlighting a set of rules that promote rooftop solar, last week the activist group NC WARN became one of the few in North Carolina to urge a veto of a controversial energy bill that cleared the state legislature minutes before a month-long adjournment.
In a letter to Democratic Gov. Roy Cooper, the nonprofit condemned the finely-tuned compromise between Duke Energy and the renewables industry, which would more than double the state’s solar capacity, but – after a last-minute amendment by state senators – block new wind farms for 18 months.
NC WARN’s sharpest criticism wasn’t directed at the wind provision, however. The outspoken Duke foe honed on twelve lines about net metering – part of the bill since its unveiling.
“The bill would allow Duke Energy to attack rooftop solar by adding more fees on customers and lowering net metering payments,” wrote the group’s director, Jim Warren.
The little-discussed section directs Duke, which has advocated lower payments to solar panel owners in the past, to recommend new net metering rates for approval by the North Carolina Utilities Commission.
The clause sets the stage for a battle between the state’s investor-owned utility and rooftop solar – one already raging in dozens of states across the country.
Among the state’s clean energy leaders, Warren is unique in his thorough disapproval of House Bill 589, which, before the wind amendment, was the product of months of negotiations and enjoyed broad, bipartisan support in the GOP-controlled General Assembly.
But even advocates who championed the original compromise share Warren’s concern over the net metering clause.
“Even with some of the other benefits to the rooftop solar industry in this bill,” said Peter Ledford of the North Carolina Sustainable Energy Association, “that one small piece about net metering could be hugely problematic.”
‘A concerted effort to undermine net metering’
Net metering is the system by which solar owners are compensated for excess electricity they send to the grid, typically at the retail rate.
To encourage rooftop solar, in the last three decades more than 40 states have adopted some form of net metering. As solar costs have plummeted, residential solar nearly quadrupled from 2012 to last year.
That has provoked concerns for utilities. A 2013 paper commissioned by the Edison Electric Institute, the national lobbying group for investor-owned utilities, warned that distributed generation would cause “declining utility revenues, increasing costs, and lower profitability potential” — threatening the traditional utility business model.
“That hit the utilities like a ton of bricks,” said Steve Kalland, director of the North Carolina Clean Energy Technology Center.
The Edison paper exhorted utilities to raise rates and introduce new fees for rooftop panel owners, among other steps, to make up for lost electricity sales. After that, said Kalland, “we started to see a concerted effort from utilities to undermine net metering.”
Much of the utilities’ efforts have been aimed at western states with flourishing rooftop markets: Arizona, California, and Nevada. But increasingly, they’re seeking changes to net metering rules where rooftop panels are still scarce, including North Carolina.
‘A shot in the arm’
Current North Carolina rules allow projects of one megawatt or less, about the size of the Charlotte IKEA’s rooftop array, to connect to the grid via net metering.
Most customers get credit on their monthly utility bills at the retail rate – about 11 cents a kilowatt hour – for any net electricity they contribute to the grid, and small residential and commercial solar systems pay the utility no extra charges.
“The net metering rules are quite favorable to rooftop solar right now,” said Autumn Proudlove, a research director with Kalland’s group. “But there are other issues that have prevented rooftop solar from really booming in the state.”
Those include the state’s relatively low retail electricity rates, and the lack of a clear legal path for customers to lease panels from a third-party solar company. Rooftop solar makes up well under one percent of the state’s 3,000 megawatts of capacity, according to data from Duke.
House Bill 589 attempts to shift the balance, in part by clarifying the law to allow third-party leasing of solar panels, up to a cap of 250 megawatts.
NC WARN, now engaged in a protracted legal battle with Duke over a form of third-party leasing the bill explicitly prohibits, is skeptical of the provision.
But major retailers and brewers eager to meet sustainability goals count the leasing section as a win, and many advocates and lawmakers call it a good, though modest, first step.
House Bill 589 also directs Duke to develop a solar rebate program for homes and other small customers, totaling up to 100 megawatts by 2022.
“I’m fairly positive about that,” said Stew Miller, the president of Yes Solar Solutions, whose customers include homes, small businesses, and nonprofits. Miller is “lukewarm” on the bill overall, but said of the rebate, “this will help us. This will give us a shot in the arm.”
‘Fox guarding the hen house?’
But these inducements for rooftop panels will only work if the state’s net metering rules stay favorable to solar owners, Miller and other experts say.
“If net metering goes south,” said Kalland of the Clean Energy Technology Center, “the third-party leasing and the rebate program is meaningless.”
In 2014, Duke said it would propose lowered net metering rates, but never filed a formal request with regulators.
Now, House Bill 589 mandates that Duke propose new terms, revisions advocates say could damage rooftop solar. A section that grandfathers existing rates for ten years causes particular worry.
“Homeowners make this investment in rooftop solar assuming a useful life of 20 to 30 years,” said Ledford, with the Sustainable Energy Association. “So, there’s the possibility of them making an economic decision now and having the calculus change during their payback period.”
In defending the provision, Duke spokesman Randy Wheeless seemed to accept the premise that payments to solar owners could decrease. But, he said, “a 10-year guarantee that net metering continues as-is is still a pretty good deal.”
Rep. John Szoka (R-Cumberland), who with Rep. Dean Arp (R-Union), chaired the months of negotiations that led to the bill, said higher net metering prices aren’t inevitable, thanks in part to how the legislation is written.
New rates would only be set after an examination of distributed generation’s costs as well as benefits – a point favoring rooftop solar, said Szoka. On the other hand, he said, reading from the bill, “such rates may include fixed monthly energy and demand charges” – language that benefits the utility.
“You can see how every line of this bill was balanced on the edge of a knife,” Szoka said. “I think there will be a robust debate before the North Carolina Utilities Commission, and there should be. We need to have these things settled on the basis of the facts.”
Who gets to establish those facts, however, is already a source of controversy.
Ever since the 2013 Edison study, utilities have argued solar panels strain the electric grid more than they benefit it, shifting costs from solar customers to non-solar customers. Utility-driven analyses tend to peg the value of solar below the retail rate.
Investigations by third parties or utilities commissions, however, show the opposite. Twelve such recent studies concluded that distributed generation’s benefits, such as avoided fuel costs and stable electricity prices, were worth more than the local retail electricity rate.
Many clean energy advocates say House Bill 589 allows the utility to conduct the study – as does Duke.
“Assuming this bill goes into law,” said Wheeless, “we would bring forth a net metering tariff that would take into consideration the costs and benefits.”
But Szoka is adamant the Commission will conduct the cost-benefit study.
“It’s not up to the utility to determine whether net metering is good or bad,” he said. “We know what that answer will be. We’re not putting the fox in charge of the hen house here. That is not the intent.”
No matter what, fights over net metering ahead
Gov. Cooper is heavily weighing veto requests from groups like NCWARN, and says the state Senate has complicated his decision with the wind provision. “They are essentially trying to pit renewables against each other,” he said last week, according to the Charlotte Business Journal.
In any case, clean energy advocates are girding for battle before regulators on net metering.
And while solar installer Miller sees the importance of the fight before the Utilities Commission, most of his hopes lie elsewhere.
“There’s so many advances being made every day. There’s so many smart people that support this. There’s money out there to invest in and fund new technologies,” Miller said. “I think we can overcome anything the utilities – or the politicians – dream up to try and slow down the implementation of clean energy.”