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NC lawmakers push solar policy reform, new capacity mandates

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NC lawmakers push solar policy reform, new capacity mandates

After months of negotiations among stakeholders, two North Carolina House committees approved legislation designed to reform the state's renewable energy policy to manage robust solar development while not losing ground in the push for cleaner energy.

The Energy and Public Utilities Committee and the Committee on Finance in the North Carolina House of Representative on June 6 approved House Bill 589, which is headed to the House floor. The bill, backed by Duke Energy Corp. and other stakeholders representing solar and business interests in the state, includes provisions that mandate the development of more than 3,000 MW of solar in North Carolina within the next five years.

The bill implements changes to the mandatory purchase of energy and capacity from qualifying solar facilities under the Public Utility Regulatory Policies Act. These changes include capping eligibility for the standard avoided cost tariff utilities must offer under the Public Utility Regulatory Policies Act at 1 MW instead of 5 MW and reducing the maximum standard qualifying facility contract term to 10 years from 15 years.

Duke Energy utilities Duke Energy Carolinas LLC and Duke Energy Progress LLC, along with Dominion Energy North Carolina, have been advocating for the implementation of shorter power purchase agreements, or PPAs, with solar developers to manage the "tremendous" growth of solar in the eastern part of North Carolina.

The legislation absorbs Duke Energy's preference to move to a five-year contract term on PPAs that don't qualify for the standard offer and allows these contracts to be "established through good faith negotiations between the utility and small power producer." The standard contract for these small power producers, defined as facilities up to 1 MW of capacity, would be capped at an aggregate of 100 MW per utility at which time the threshold for the standard contract obligation drops to 100 kW.

California solar developer Cypress Creek Renewables LLC has argued that Duke Energy's utilities are violating federal and North Carolina law by refusing to provide indicative pricing or enter into long-term power purchase agreements with qualifying facilities.

Cypress Creek, however, was involved in the stakeholder process with the developer and Duke Energy both acknowledging "there was some giving on all sides."

"We understood that Duke was looking for some changes to the status quo and we're confident that this bill will continue North Carolina's position as a leader in renewable energy development, and solar in particular," Steve Levitas, Cypress Creek's senior vice president for regulatory affairs and strategy, said in a June 6 phone interview.

Cypress Creek and Duke Energy are "working simultaneously to resolve" the developer's complaint over contract terms.

New solar commitments

The Competitive Energy Solutions bill establishes a bidding process for new solar projects in the state. Public electric utilities must issue requests for approval to procure 2,660 MW of new renewable energy resources over a 45-month term with eligible resources capped at 80 MW of nameplate capacity. At the end of the initial term, the North Carolina Utilities Commission will determine the amount of additional procurement required by public utilities to fulfill generation needs and statutory obligations.

Eligible facilities can be acquired from third parties or constructed, owned and operated by the utility. Utilities also can acquire energy and capacity from facilities owned and operated by third parties.

"You're almost doubling state solar [development] over the next three-and-a-half years in a competitive bidding process," Duke Energy spokesman Randy Wheeless said in a June 6 phone interview. "These contracts would be longer than 10 years ... as long as what we think the market is bearing. We think that opens up the state to a lot of new solar development and we think solar businesses and some of the solar developers would benefit from that as well."

"Under the competitive bidding process, we would also utilize a third-party to examine the new projects, so that we'd have an open and transparent competitive bidding process, which would be good for customers because we could lower prices, but also fair for all solar businesses to compete equally for that business," the spokesman said.

In addition, utilities must implement a separate program to procure 600 MW of contracted renewable energy and capacity available for use by major military installations, The University of North Carolina and other large nonresidential customers for a period of at least five years. At least 100 MW of the renewable capacity must be reserved for major military installations, with 250 MW reserved for the University of North Carolina, according to the legislation.

"I'm not aware of any state making a commitment of that magnitude," Levitas said, referring to the more than 3,200 MW of new capacity mandated by the legislation.

The legislation also opens up the state to third-party solar leasing, requires a utility-offered community solar program capped at 20 MW of total generating capacity, establishes revised net metering rates and implements a solar rebate program that offers incentives to residential and nonresidential customers that install small customer-owned or leased solar facilities.

Dominion Energy North Carolina, known legally as Virginia Electric and Power Co., is a subsidiary of Dominion Energy Inc.