Year-End Decision Holds Big Impact For NC Solar In 2015

Jan 2, 2015

North Carolina energy regulators quietly released one of their most significant, long-awaited decisions of 2014, just as the year was ending. The state Utilities Commission had spent nearly the entire year re-evaluating the rules for solar energy. On Wednesday, the commission decided to leave substantially intact the rules which have underlied a solar energy boom in North Carolina.

A solar farm in Cleveland County.
Credit Strata Solar

The rules essentially required utilities to buy the power from small solar farms, at a set price, for up to 15 years. So, solar developers knew the price they would get for their product and how long they would get that price.

It’s a more generous deal than in most states, and North Carolina has become the fourth-largest producer of solar power in the U.S., largely due to small solar farms using these contracts.

Both the solar industry and electric utilities proposed changes to the state’s rules. Solar developers asked for expanded eligibility for the contracts, as well as longer contract lengths. But they were more concerned with the requests by Duke Energy and Dominion Power to shorten the contract length to no more than 10 years and reduce who is eligible, down to the federal minimum.

“It would effectively kill the industry in North Carolina,” Joel Olsen of solar company O2 Energies said back in July.

Without the standard contracts, developers have to negotiate a sale price for their energy with power companies, which adds time and uncertainty to a project. State numbers earlier this year showed developers and utilities successfully reached a deal on only three of 60 projects.

Solar developers also claim the shorter contract lengths would make financing their projects impossible. Peter Pequeno, the chief lending officer at Surrey Bank and Trust in Mount Airy, agreed.

“They would pretty much drive anybody that wants to provide any type of solar power out of business, because the economics don’t work.” Pequeno said, also back in July. “You can’t recover your cost and you can’t earn a decent return on your investment.”

The utilities argued the changes - more price negotiations and shorter locked-in rates - would mean better deals for customers.

In a nearly 70-page filing, the Utilities Commission wrote that it didn’t buy that argument for shrinking the contracts, nor the solar industry’s argument to expand them.

“Absent such evidence, the Commission determines it inadvisable in this docket to introduce regulatory uncertainty by changing the existing framework,” the order says.

The commission ordered both the contract length and the size of plants that can take advantage of it to remain the same.

That means the solar industry in North Carolina can release a collective sigh of relief.

Duke Energy spokesman Randy Wheeless admits the company didn’t get what it asked for, but says Duke will also be more involved in developing its own solar projects.

“I think what we’re looking at in 2015 is a big year for solar. I think Duke’s going to be building a lot, and other developers will be building a lot, too,” Wheeless says.

Duke currently owns less than 20 megawatts of the solar power its utilities use, about 500 megawatts total. The company plans to buy another 128 megawatts in new projects in 2015.