Duke Energy proposes renewable energy programs for North Carolina customers

Less than two years after highlighting the challenge it faced from a torrent of new solar power facilities in North Carolina, Duke Energy has proposed three programs which, if approved by state regulators, would continue the expansion.

The proposals reflect Duke’s efforts to comply with a new state law passed in July to allow the solar sector to keep growing and give Duke tools it needs to help accommodate the growth.

North Carolina ranks second in the nation for installed solar capacity, behind California, because its policies have been highly favorable to the renewable energy.

Falling prices of solar panels in recent years have only further encouraged solar developers to invest in North Carolina and pour their electricity onto Duke’s grid, knowing that the power company, under federal law, had to buy it.

Duke made a plea to the Federal Energy Regulatory Commission in 2016 to change the rules and curb the growth of unneeded power from independent producers.

One executive testified that by 2020 the company could face a dramatic choice: start backing down nuclear generators during the day to make room for all of the excess solar power — a maneuver that’s not necessarily favorable to a nuclear plant’s design — or find buyers and available transmission lines to move the excess power off the system. “Either alternative creates material challenges to prudent and reliable operations,” said Kendal Bowman, Vice President of Regulatory Affairs and Policy at Duke.

Last July, North Carolina addressed the issue, enacting a new law that reshaped the state’s renewable energy policy, House Bill 589: Competitive Energy Solutions for North Carolina.

“It was a significant reorganization of electricity policy,” Jon Sanders, director of Regulatory Studies at the John Locke Foundation in Raleigh, said in an interview with Daily Energy Insider.

The three solar proposals Duke recently filed with the North Carolina Utilities Commission are driven by the new law.

Duke proposed a $62 million solar rebate program targeted to residential, non-residential and non-profit customers. The proposal would increase the state’s private solar market by 200 percent during the next five years, the utility said.

“The Competitive Energy Solutions law for North Carolina will reduce the cost our customers pay for solar, while also supporting solar energy in ways that are meaningful for them,” said David Fountain, president of Duke Energy in North Carolina, as quoted in a written statement from the company. “For many customers, installing solar is a significant investment. Duke Energy’s rebate program will help them by lowering their initial costs.”

For its part, Duke owns and operates more than 35 solar facilities in the state, representing nearly 550 megawatts of capacity. Overall, more than 2,500 megawatts of solar capacity are connected to Duke’s system in the state.

Adoption of the new law was the result of extensive negotiations involving various stakeholders.

“The proposed solar rebates program is the result of two years of collaboration between the N.C. Sustainable Energy Association and Duke Energy,” said Ivan Urlaub, executive director of NCSEA, as quoted in Duke’s news release. “If approved, this program will enable more North Carolinians across our state to realize the cost-saving benefits of solar. We are glad to have been a voice for electric consumers in the design of this program.”

Under the new law, customers will have the option of leasing solar power systems from third-party vendors rather than having to buy them.

The company also proposes a so-called community solar plan. Under the “Shared Solar” plan, multiple customers would be able to subscribe to the output of a nearby solar system as opposed to one that’s installed on their roof.

Duke also introduced its proposed “Green Source Advantage” program that would give large customers, such as military installations, the University of North Carolina and large non-residential customers, the option to buy renewable power to help meet their sustainability goals.

The “Green Source Advantage” program, which expands a pilot project, would set aside up to 600 megawatts of capacity over five years for big customers.

North Carolina’s new law reinterpreted the federal Public Utility Regulatory Policy Act of 1978, commonly known as PURPA. The federal law was established during the Carter administration after the 1973 oil crisis to reduce dependence on foreign oil and encourage energy sources other than traditional fossil fuels.

PURPA requires regulated utilities to buy electricity from independent power producers as long as the cost is less than or equal to the utility’s avoided costs — what the utility would have to pay to produce the electricity.

The trouble was that North Carolina’s translation of PURPA was significantly more generous to renewable energy developers compared to that of other states in the Southeast. So it served as a magnet for developers.

As an indication of just how attractive the state’s policies have been, Duke’s Bowman testified that 60 percent of all PURPA projects in the country are in North Carolina.

North Carolina’s new law, however, seeks to rebalance the state’s policies.

It shortens, for example, the maximum length of a contract it can grant producers from 15 years to 10 years, reducing the time the utility might be tied to an agreement that turns unfavorable as the comparative market prices of other energy sources decline.

The new law requires Duke to bring 2,660 megawatts of renewable energy onto the system over a 45-month period through a new competitive bidding process run by an independent administrator. Duke can compete in the process. Its stake will be limited to 30 percent of the procurement.

The standard contract term for the competitively bid contract will be 20 years, giving developers an incentive to participate.

An incentive for Duke’s support of the new law is that the utility can determine the location and allocated amounts of renewable energy projects in its services territory. It also will have the right to dispatch, operate and control third-party renewable energy facilities as it does its own facilities.

“It seemed like that was the bargain for reforming the PURPA contracts,” said Sanders of the John Locke Foundation. “The state will allow continued growth in solar. In return, Duke would have dispatch rights over the solar energy that they’re required to contract for.”

“It’s a big deal,” he added. “I think the legislature wanted to find some way of protecting energy dispatch and find some way of protecting the solar industry which they have tried so hard to incubate.”