North Carolina Legislature Approves Major Renewable Energy Reform Bill

On June 29, the North Carolina House and Senate voted to enact a compromise version of 2017 H589, titled “Competitive Energy Solutions for North Carolina.” This major new energy legislation evolves and, in some respects, significantly expands solar business opportunities in North Carolina.

The bill also establishes an 18-month moratorium (through Dec. 31, 2018) on the North Carolina Department of Environmental Quality (DEQ) issuing permits for new wind energy projects. The state will use that time to evaluate potential impacts of future wind energy development on North Carolina’s major military installations’ operations, training and readiness missions. 

The bill represents a compromise among many varied stakeholders and now goes to Gov. Roy Cooper to decide whether to sign it into law.

Key provisions of the bill relating to solar energy include the following:

Parts I and II address transitioning the current utility-scale solar development model, driven by the Public Utility Regulatory Policies Act, to competitive procurement in the Duke Energy Carolinas LLC (Duke) and Duke Energy Progress LLC (Progress) service territories. Within 120 days of enactment of the bill, Duke and Progress must jointly or individually file with the North Carolina Utilities Commission (NCUC) a competitive procurement program subject to the following parameters mandated in the legislation:

• An aggregate 2,660 MW of procurement between Duke and Progress must be reasonably allocated over a 45-month period, but utilities can decide where to site projects to reliably and cost-effectively serve customers’ future energy needs.
• The bill mandates 20-year-term power purchase agreements (PPAs) that must be approved by the NCUC prior to each solicitation.
• Procurement will be managed by an independent third-party administrator.  
• Duke and Progress can only self-develop and bid in up to 30 percent of a competitive procurement requirement, and must procure the remainder through projects acquired from third parties prior to commercial operation or through third-party PPAs.
• Projects in the Duke and Progress balancing authorities in South Carolina can bid into the procurement.

Part III mandates a “Green-Source” renewable energy procurement program be filed with the NCUC within 180 days of enactment.

• The program is applicable only within Duke and Progress service territories.
• It allows industrial and high-load customers (with contract demand above 1 MW or aggregate above 5 MW at multiple service locations) to negotiate and enter into renewable PPAs to procure power through the program directly from solar or other renewable energy facilities.
• It mandates a 600 MW aggregate program between Duke and Progress, although a combined 350 MW is set aside for participation by the major military bases in North Carolina and the University of North Carolina system.
• Participating customers can elect contract terms of between two and 20 years.  
• Nonparticipating customers must be “held neutral” and not advantaged/disadvantaged from the program.

Part VI establishes a new “Distributed Resources Access Act,” which creates third-party residential and commercial solar leasing programs and community solar programs, and mandates a review of utility net metering rate designs in North Carolina. 

• It applies only within Duke and Progress service territories. Municipalities have the option to offer leasing.
• It is similar to the South Carolina Act 236 leasing program enacted in 2014.
• The program is leasing only; third-party sales continue to be prohibited in North Carolina.
• It is capped at 1 percent of each utility’s prior five-year average retail peak demand.
• Generator size is capped at 1 MW commercial or 20 kW residential and 100 percent of contract demand.
• Utilities must file new net metering rates that ensure nonparticipating customers are held harmless and each net metering customer pays its full fixed cost of service.
• A certification process is established for new “solar electric generator lessors.”
• DEC and DEP must establish new community solar programs for 20 MW of projects.

Part VII provides for expedited review of swine/poultry waste generator interconnection requests of 2 MW or less.

Part VIII establishes a rebate program applicable to small residential and commercial solar installations, which is required to be filed within 180 days of enactment.

• It applies only within Duke and Progress service territories.
• Incentives can be applied toward up to 10 kW (residential)/100 kW (nonresidential) installations.
• “Reasonable incentives” will be established by the NCUC for installation of 10 MW of capacity annually between 2018 and 2022.
• A percentage of the nonresidential incentives are set aside for nonprofit organizations.

Part XIII establishes a moratorium through Dec. 31, 2018, on DEQ issuing permits for new wind projects, and commissions a study to evaluate and map out land-, air- and water-based military operations in North Carolina, to avoid encroachment and adverse impacts from future wind energy development on military operations, training and readiness.   

Please contact any of the authors to learn more about H589 — “Competitive Energy Solutions for North Carolina” — and its expected impacts on the renewables market in North Carolina.

McGuireWoods’ renewable energy practice advances our clients’ interests by getting deals done, by helping clients successfully and creatively navigate the complexities and pitfalls in this dynamically evolving industry, and by maximizing the value of various tax, energy, environmental, market and governmental incentives available to the industry. McGuireWoods earned a nationwide ranking for its renewable energy work in the prestigious Legal 500 US Guide, which commended the firm’s “responsiveness, industry knowledge, strength in depth and value for money.”