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Duke Energy, solar developer open to re-evaluation of NC energy policy

Duke Energy Corp. and a large North Carolina solar developer appear to see eye to eye on the need for a comprehensive look at the state's energy policy.

The North Carolina Energy Policy Council recently recommended that the General Assembly consider taking a closer look at energy policy, especially in regard to solar guidelines, after utilities raised concerns about numerous solar projects seeking to interconnect to the grid and the "tremendous growth" of distributed generation.

"The [Energy Policy Council] recommended that the General Assembly consider and evaluate key renewable energy issues, determine the best track for assessment, and take necessary action to ensure continued reliable and cost effective energy for North Carolina citizens," North Carolina Department of Environmental Quality spokeswoman Lexi Rudolph said in a Dec. 13 email. DEQ Secretary Donald van der Vaart is acting chairman of the Energy Policy Council.

Rob Caldwell, senior vice president of distributed energy resources for Duke Energy, also serves on the Energy Policy Council as a representative of investor-owned utilities. Duke Energy spokesman Randy Wheeless said the proposal "did not come from the pen" of the company itself, but added that Duke Energy does see potential comprehensive talks about energy policy as a "positive sign."

The council recommended that lawmakers approve an "independent and comprehensive power grid reliability study" that would be funded by Duke Energy and Dominion North Carolina Power around the positive and negative impacts of non-dispatchable third-party solar; a re-evaluation of the 80% property tax exemption for solar projects based on current installation costs; a review of mandates under the state's renewable energy and energy efficiency portfolio standard, or REPS; and a study to assess the need for a permitting program for solar projects.

REPS, passed in 2007, requires investor-owned utilities to generate up to 12.5% of their energy needs through energy efficiency or renewable energy resources by 2021.

Brian O'Hara, senior vice president of strategy and government affairs at Chapel Hill, N.C.-based Strata Solar, said discussions around North Carolina's solar policies have been ongoing and the developer is open to a broad evaluation of the regulations.

"I mean, it has been 10 years since major energy legislation in the form of the renewable portfolio standard was passed in North Carolina and a lot has changed in the last 10 years," O'Hara said Dec. 14. "I think it is worth taking another look and seeing how can we build on the success that we've seen in the renewable energy industry, and are there policy changes that we need to make in order to do that."

O'Hara noted that the final recommendation of the Energy Policy Council has evolved from initial proposals from some subcommittee members "that have been pursuing a pretty aggressive agenda against solar power for a while."

"Those got significantly scaled back ... and that eventually rolled up to the full Policy Council and passed as a recommendation to broadly look at energy policy issues in light of changes," O'Hara said. "And I think, generally speaking, were pretty supportive of where it ended up."

Duke Energy's utilities and Dominion North Carolina Power, legally known as Virginia Electric and Power Co., have also suggested the North Carolina Utilities Commission make changes to its traditional standard contract policy for renewable energy projects. The utilities seek to limit the threshold and term of mandated avoided cost contracts under the Public Utility Regulatory Policies Act, or PURPA.

Their argument is that the state's existing policies "have created a distorted marketplace for solar projects" that could have an adverse and costly impact on customers. The utilities also note that 60% of PURPA projects are located in North Carolina partly because the price and terms they are mandated to offer these projects are "unnecessarily generous" when compared to other utilities and states.

As of Nov. 28, North Carolina had the most solar capacity in advanced development, totaling 2,553 MW, according to an analysis of SNL Energy data.

Dominion North Carolina Power, a subsidiary of Dominion Resources Inc., said the company has reached a point where distributed generation "saturation" is causing a backflow problem on its transmission grid.

"Duke has proposed, through their avoided cost filings, some fairly fundamental changes to the way the solar market has worked and would work going forward in the state," O'Hara said. "Our position on that has been if there are changes that can be made that are good for ratepayers, are good for the renewable energy industry and are good for the utility, we're happy to have discussions about what those changes might be.

"We're not going to be in position to essentially give up the market access that exists today for nothing in return. But if there's a way to change the way the market works that benefits all those parties and all those stakeholders, then I think we need to be willing to have those conversations."

The North Carolina General Assembly is in a special session at the request of outgoing Gov. Pat McCrory to address funding in the wake of Hurricane Matthew and recent wildfires. The Legislature is expected to address the Policy Council's recommendation during its regular session in January 2017.

SNL Energy is an offering of S&P Global Market Intelligence.