This article is the second in a pair of articles related to “green policies” and how to implement them. The first part of this series was previously published here.

As concern over climate change makes almost-daily headlines, “green” policies are becoming increasingly popular. Part 1 of this article noted that — from Fortune 500 company board rooms to the N.C. Governor’s Office — recent policy pronouncements call for reduced energy usage, lower greenhouse gas emissions, and increased numbers of zero emission vehicles. But how — in a state like North Carolina, where direct retail purchases from third-parties are not permitted — do retail utility customers achieve the goals of these “green” policies? Part 1 of this series discussed energy efficiency measures, time-of-use rates, and self-generation. This second part of the series looks specifically at HB 589, passed by the General Assembly in 2017, N.C. Sess. Law 2017-192, and implemented by the N.C. Utilities Commission over the past eighteen months, and examines whether (or not) it may make it “easier . . . to be green” by providing new mechanisms for utility customers to access renewable energy resources.

Solar Leasing

Let’s assume your client owns a large distribution warehouse or a parking deck, but doesn’t have the capital to pay the upfront cost of a solar energy installation. Can another entity lease those rooftops, construct and operate solar panels on them, provide electricity to the business (which would be “behind-the meter” as discussed in Part 1), and receive “lease payments” for the energy provided by the solar panels?

Until the passage of HB 589, the answer would have been “no”; rooftop solar panels had to be owned by the owner of the building receiving energy from those panels; otherwise, the retail utility customer – the building owner – would be receiving electric energy from non-utility facilities, in violation of North Carolina’s prohibition of third-party electricity sales discussed in Part 1. Likewise, retail customers could not subscribe to a portion of the output from larger solar energy facilities – a concept known as “Community Solar” that is starting to become popular in other states.

In Part VI of HB 589, however, the General Assembly enacted Article 6B of N.C.G.S. Chapter 62, in which it declared, “it is in the interest of the State to encourage the leasing of solar energy facilities for retail customers and subscription to shared community solar energy facilities.” N.C.G.S. § 62-126.2. The Utilities Commission adopted Rule R8-73 to provide the framework to implement the solar leasing program and Rule R8-72 to implement the community solar program.

To date, there has been little activity under these programs; whether that lack of activity is because these programs are too new and public awareness is lacking, or because the regulatory requirements are too burdensome, is a topic of debate. But on December 17, 2018, an affiliate of Duke Energy, “Duke Energy Clean Energy Resources” received its Certificate to conduct business as a solar facility lessor, and on October 15, 2018 Eagle Solar & Light received theirs. Stay tuned.

Solar Rebates

In contrast to the slow start of solar leasing, solar rebates (60 cents per watt for solar energy systems of 10 kilowatts (kW) installed capacity or less; 50 cents per kW for nonresidential customers; 75 cents per kW for nonprofit customers for systems up to 100kW or less) — another program created by HB589 and codified at N.C.G.S. 62-155(f) — have been selling like hot cakes. In fact, they are hotter than hot cakes: the statute limits the total amount of rebates each year, and that annual limit has been reached within hours of when the rebates become available. The eligibility requirements can be found online, and the rebate/incentive program will run through 2022. If your client has facilities in other states, the DSIRE website run by the North Carolina State Energy Center (mentioned in Part 1), lists the solar rebate programs in all fifty states and local jurisdictions around the country.

Energy Storage

Unfortunately, the wind doesn’t blow all the time, and the sun doesn’t shine all the time. How do customers who want to be 100% renewable meet their energy needs when the wind is not blowing and the sun is not shining? Many large utility customers are starting to consider how to integrate their solar panels and other self-generation with new technologies being developed for energy storage. These utilities hope that “energy storage” – by batteries or otherwise – is the holy grail to answering this question.

Article XII of HB 589 may be taking a step in the search for this holy grail by mandating a study related to energy storage. The NC Policy Collaboratory selected the NC Clean Energy Technology Center at NC State University (discussed in Part 1) and NC Central University to conduct the study. That report was issued on December 3, 2018. A full copy of the study and associated materials can be found here.

Energy storage issues will be in the forefront of technology research and policy debate over the next several years: To what degree is energy storage part of regulated utility service? How should storage output be valued/priced (if at all)? How can energy storage be paired with utility-scale renewable generation facilities? See generally NC Utilities Commission (“NCUC”) Docket E-100, Sub 101, Rebuttal Testimony of Michael R. Wallace (filed 1/8/19). For now, there are more questions than answers, but many observers believe that energy storage will create a paradigm shift for “being Green” in the future.

Green Tariffs

But what are options in the near-term? As discussed in Part 1, in North Carolina, retail customers are not able to directly purchase renewable energy from third-party sellers. To provide more access to affordable renewable energy, utilities are starting to offer large-scale renewable energy purchasing programs called “green tariffs.” Through green tariffs, qualifying customers are able to designate and contract with the utility for a part or all of their electricity demands to be generated from renewable resources.

Part III of HB589 created N.C.G.S. § 62-159.2 and authorized Duke Energy Carolinas and Duke Energy Progress (collectively “Duke”) to create a “green tariff” to allow certain customers to contract with renewable energy facilities to provide quantities of energy to Duke equivalent to their energy usage – a total aggregate of 100 megawatts (“MW”) is reserved for major military installations; 250 MW, for the University of North Carolina system; and another 250 MW, for other qualifying customers (those with 1 MW of load at a single location or 5 MW of aggregate load at multiple locations).

On January 23, 2018, Duke filed its proposed green tariff, called “Green Source Advantage” (“GSA”), with NCUC in consolidated Docket Nos. E-2, Sub 1170 and E-7 Sub 1169. Under the proposed program, the customer would enter into a three-party contract with the renewable energy facility and Duke, whereby the customer pays Duke for the renewable energy and capacity produced and provided to Duke (and associated Renewable Energy Certificates (“RECs”) provide to the customer), at a price the customer negotiates with the renewable energy facility (“GSA Product Charge”). Then, Duke would pass through that stream of payment to the renewable energy facility, and Duke would credit the customer’s bill for the energy and charge the customer an administrative fee. The proposed program further provides that Duke would enter into a separate Power Purchase Agreement (“PPA”) with the renewable energy facility setting forth the terms of its purchase of the energy and capacity in the quantities designated by the customer.

Not surprisingly, given the complexity of the program, numerous aspects of the proposed tariff have been contested both by renewable energy producers and by the intended beneficiaries, including UNC-Chapel Hill and the U.S. Department of Defense. The most contentious issue was how the bill credit would be calculated, especially given that the green tariffs contracts could run from 2 to 20 years in length. The 65-page majority decision by the NCUC, issued on February 1, 2019, approved two methods to calculate the bill credit: (1) at the utility’s “avoided cost,” as determined pursuant to N.C.G.S. § 62-156(c), for the duration of 2- and 5-year contracts, and refreshed every five years for 10-, 15- and 20-year contracts, or (2) at an hourly, marginal cost to the utility, under a formula that is fixed for the term of the agreement.

Duke made its Compliance filing with the NCUC on March 18, 2019, including its form GSA Application, Term Sheet template, standard GSA Service Agreement form, and standard Power Purchase Agreement Form. Response Comments were filed on April 8, and Duke’s Reply Comments, on April 18. Although the final terms of the GSA program and contract forms have not yet been approved by the Utilities Commission as of the date of writing this article, they should be by the time you are reading this and can found on the Utilities Commission website in Docket Nos. E-2, Sub 1170 and E-7 Sub 1169. Only time will tell whether or not the GSA program, as approved, will be as attractive and subscribed to as its legislative sponsors had hoped, or whether it will prove unworkable and ignored, as some have feared.

Is it “easy to be Green”? The private sector is definitely looking for ways to make it easier. The beginning of Part 1 of this article discussed the many companies and institutions who have adopted “green policies.” It is worth noting that, in the NC Utilities Commission Green Source Advantage docket, either petitions to formally intervene or letters of position were filed by UNC-Chapel Hill, the U.S. Department of Defense, Apple, Google, Walmart, Davidson University, Duke University, Wake Forest University, New Belgium Brewing, SAS, Sierra Nevada, Unilever, and VF Corporation – all advocating for greater flexibility, more access, and favorable terms to meet their energy needs from renewable sources. Technology moves forward, entrepreneurs are being creative, and markets are evolving. This will be an area for continued legislative activity, regulatory reform, and legal proceedings in the weeks, months, and years ahead. Those attorneys counseling large energy users will need to stay alert and stay abreast of new opportunities and new developments as they occur. Sitting on a lily pad and watching the world slowly go by will not be an option in these fast-changing times.

Gray Styers Jr. is an attorney in Raleigh and co-chair of the Energy & Natural Resources Practice Group at Fox Rothschild. He is also a Utilities Law Specialist as certified by the NC State Bar and a fan of Muppets movies.

May 13, 2019/by EnvironmentalLaw