Fragmented Policies Hold Back Energy Innovation in North Carolina

Ivan Urlaub

Given the regulatory and policy challenges North Carolina faces, it takes patience for the solar power and energy efficiency industries to move forward there. According to staff at North Carolina Sustainable Energy Association, Duke Energy is taking the lead with developing some opportunities, but other utilities are lagging behind it. The respondents to this written interview were Executive Director Ivan Urlaub (the primary source), General Counsel Peter Ledford, Regulatory and Policy Analyst Daniel Brookshire, and Engagement and Equity Specialist Jordan Jones.

CEFF: How would you describe the solar-energy market's current successes and challenges in North Carolina?

NCSEA: The traditionally-regulated monopoly utility business model has been a challenge in North Carolina. Utility-scale solar developers must sell their electricity to the incumbent local utility, which is typically Duke Energy. And customers looking to adopt rooftop solar have limited financing options.

Solar successes in North Carolina have come in spite of, not because of, our regulatory regime.

The expiration of North Carolina’s state Renewable Energy Investment Tax Credit in 2015 was particularly challenging for the customer-sited solar industry. It cannot leverage the same economies of scale as the utility-scale solar industry.

Utility-scale solar has seen success in large part due to the proper implementation of PURPA by the North Carolina Utilities Commission.

On the other hand, the utility-scale solar industry has faced challenges due to roadblocks imposed by Duke Energy such as delays in the interconnection process, interconnection screens not used anywhere else in the country, and manipulations to the avoided cost rate to suppress the prices paid to independent power producers.

CEFF: What is your perspective on the energy efficiency market's successes and challenges at this time in North Carolina?

NCSEA: North Carolina has no state requirement for utilities to invest in energy efficiency. Utilities may utilize energy efficiency to comply with the state’s Renewable Energy and Energy Efficiency Portfolio Standard, but they are not required to do so.

Last year, Duke Energy's territory in the Carolinas had energy efficiency and demand side management savings represent about 1 percent of its retail energy sales. This makes the company a leader for the Southeast.

However, many of the electric cooperatives and municipal utilities don't offer utility-supported efficiency programs. This depresses North Carolina’s statewide savings average. [It’s a] challenge to determine how we may increase energy efficiency opportunities in these territories.

An additional challenge to the energy efficiency market’s success has been the low cost of natural gas. This has caused certain programs, such as HVAC incentives, to fail the cost-effectiveness tests used in North Carolina’s regulatory structure.

Another challenge we face in North Carolina is how to move beyond the easy-to-reach "low-hanging fruit" for energy efficiency and promote more holistic efficiency measures like retrofitting and weatherization. The easy-to-access technologies include such as lighting upgrades, behavioral programs, and faucet aerators.

NCSEA’s General Counsel, Peter Ledford, spoke to Southeast Energy News about this exact subject just last month.

CEFF: What stakeholder decisions would catalyze forward movement in these two markets in North Carolina?

NCSEA: As it currently stands, large utilities such as Duke Energy fight to keep independent power producers (IPPs) from profiting from solar energy because that is money that Duke Energy, could be making. Until something is done to break this paradigm, large utilities will continue to fight independent power production in North Carolina.

Additionally, utilities such as Duke Energy will not invest in energy efficiency voluntarily. And North Carolina does not have a collective statewide strategy in this area.

Duke Energy has a cost-recovery rider that incentivizes it to provide the efficiency programs that it currently offers.  This has helped it become a leader in the Southeast for energy efficiency and demand side management savings.

North Carolina also has no strategy and few opportunities for efficiency/savings in other areas such as natural gas, water and gasoline.

Ultimately, it is going to take decisions at either the North Carolina Utilities Commission or the North Carolina General Assembly to prioritize deeper savings to catalyze forward movement in these two markets.

Note: Emma McDonald contributed research to this article.

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