June 23, 2015

New Law Could Crush North Carolina's Solar Industry

House Bill 332 may send jobs elsewhere.

In the last seven years, North Carolina has climbed to the forefront of solar installation in the United States thanks to progressive regulations put in place in 2007 that set mandatory minimums on how much renewable energy utilities must sell their customers. Some in the solar industry say a new law in the state legislature aims to bring that progress to a screeching halt.

N.C. House Bill 332 will freeze those mandates before they are set to more than double over the next six years. The mandates, called Renewable Energy and Energy Efficient Portfolio Standard (REPS) requirements, require public utilities like Duke Energy to acquire a certain percentage of the energy it sells from qualified renewable energy facilities, such as solar farms. Under REPS, utilities are currently required to acquire six percent of the energy they sell from qualified renewable facilities. That number was doubled from three percent in 2012 and is set to increase to 12.5 percent by 2021, unless Bill 332's sponsors have their way.

If passed into law, the bill would freeze the REPS requirements at six percent, as well as change the way many solar farms in the region get paid for the energy they generate.

Currently, any solar farm or other qualified facility generating over five megawatts of energy per day has to negotiate with utility companies on how much their paid for the energy they generate. Smaller facilities are paid a standard rate that some in the solar industry believe is key to the growth the industry has seen in the state because it saves time and legal fees that result from negotiations. The new bill would decrease the size of facilities that are paid a fixed rate to anything under 100 kilowatts, or .1 megawatts. The 5,000-percent decrease would mean mostly just residential solar users would be paid a fixed rate and any other facility would need to carry out its own negotiations with a utility company.

Brian O'Hara, senior vice president of Strata Solar, says the bill has the potential to roll back the growth that led to North Carolina ranking second in the country in solar installations last year.

"For any industry, whether it's solar or anything else, it's not good to change the rules in the middle of the game and that's effectively what (Bill 332) does," he says.

According to a study recently released by Research Triangle Institute, there are currently 23,000 renewable energy jobs in North Carolina. Private companies have invested $2.6 billion in the state's solar industry since the existing policies were put into place in 2007.

In a letter sent in May to N.C. Senate President Pro Tempore Phil Berger and Speaker of the House Tim Moore, three corporations urged lawmakers to reconsider passing House Bill 332, which has already passed the House of Representatives and is now in the Senate. A letter signed by Apple, Google and Amazon, all of which have offices in western North Carolina that include solar farms and other large investments in solar energy, states the bill would have a "significant negative impact" on the supply of renewable energy in the state.

"The undersigned companies have chosen to locate in North Carolina in part because the state's existing energy policies enable us to operate and grow our businesses in furtherance of the goals mentioned above," the letter reads. "Any change should therefore consider not just protecting, but expanding these benefits, and any changes should include a comprehensive review of energy policies through established, inclusive stakeholder processes."

O'Hara says the new bill would be coming at the worst possible time for an industry that is just beginning to reach its full economic potential.

"Pulling the policies now would do so just as the industry is almost ready to stand on its own," he says. "Solar development is going to continue to grow and if North Carolina becomes a less attractive place for it then the jobs are going to go elsewhere."

O2 EMC is a renewable energy developer and independent power producer based in Cornelius that owns and operates 10 solar farms, has 4 under construction, and another 6 in development. According to Logan Stephens, project development manager with O2, many of those wouldn't have been built if the proposed bill were a law while the company was growing. Almost all of O2's projects fall between one and five megawatts of capacity.

"It's going to make it very difficult for projects of this size to be able to get a contract to sell power," Stephens says. "The key to doing a project efficiently and cheaply is to be able to do it at scale, so if we're able to do a large project but the only contract we can get is for a small rooftop system, we wont be able to achieve the same cost efficiency."

He also echoed O'Hara's comments about the potential consequences of a scale back on renewable energy policies.

"The question you have to ask is: if the legislature passes policies that shut this industry down, where is that investment going to go? It's going to go outside the state. Where are those jobs going to go? They're going to leave the state as well."

On June 2, 500 solar workers representing Strata Solar and Asheville-based FLS Energy marched into lawmakers' offices and spoke to representatives about the consequences of passing legislation like Bill 332.

"What was important about that day was that it really let legislators know that these are real people with real jobs in this industry," O'Hara says. "It's easy to get caught up in rhetoric or ideology when talking about these sorts of things and forget that these are people with real jobs on the line."

Proponents of the bill have said forcing utilities to pay for solar energy as opposed to selling what they generate in their own plants raises the rates for consumers.

N.C. Representative Mike Hager, who introduced the original language that has become Bill 332, says he is skeptical of the numbers in the RTI report. He believes the tax credits given to companies in North Carolina for investing in renewable energy aren't worth the return.

"The jobs are, at best, temporary, migratory construction jobs. Of the 24,000 so-called jobs created, 18,000 to 19,000 have come from energy efficiency and not renewable energy. I think they're using these numbers to cover up their inadequacy. We're spending a billion dollars and getting back a very low return," Hager said. "My concern in this issue is for the constituents, it's for the 9.5 million people in North Carolina."

According to the RTI report, renewable energy lowers electric bills in the long run, and existing North Carolina solar projects will generate $651 million in net savings for energy customers across the state by 2029.

Duke Energy spokesperson Randy Wheeless says Duke is neutral on the bill and won't be negatively affected if the REPS requirements continue to grow, as the utility company is already planning for such a scenario. He said Duke is currently building four solar farms that the company hopes to see finished by the end of 2015. He said Duke will be able to provide the required renewable energy to customers as mandatory rates go up without having to purchase it from independent facilities. It's unclear how that will affect independent solar farms and other renewable energy facilities.

Duke has, however, lobbied in support of lowering the rate of energy a facility needs to generate to qualify for a standard contract, Wheeless said.

"A lot of those power purchase agreements are just passed through to customers, so we will be fighting for customers," he says.

According to the Solar Energy Industries Association, the installation prices for solar have dropped 73 percent since 2006. The growing number of solar companies in North Carolina – there are currently 450 – also drops rates to a point that makes the rates competitive and relatively cheap, said Monica Embrey, energy campaigner with Greenpeace.

"The more solar that is installed, it actually helps reduce everyone's electricity bills whether you are putting panels on your roof or not," she said. "Everyone's bills actually drop. The talking point is that it's bad for poor people, when you actually look at the studies you see that's wrong. It's a good spin, but it doesn't stand on any ground."

O'Hara says he and other solar workers plan to continue actions like the June 2 visit to Raleigh in order to raise awareness among legislators he fears may be getting behind a bill that will cost their constituents thousands of jobs.

"One thing to be clear about is that the solar industry is not going away," he says. "What's at stake is not the future of solar energy. What's at stake is North Carolina's leadership position in that industry."

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