ORIGINAL REPORTING: How The E21 Initiative Is Building Smarter Utility Business Models In Minnesota
How the e21 Initiative is building smarter utility business models in Minnesota; Policy wonks, utility execs, and environmentalists prove collaboration can produce big new ideas
Herman K. Trabish, June 18, 2015 (Utility Dive)
Some of the nation’s most active renewables advocates have run head-on into the determination of conservative legislators to roll back state assistance to renewable energy, and the nation's biggest power company is stuck in the middle.
The resulting political wrangling between North Carolina activists, Duke Energy and GOP lawmakers has now roped in Google, Apple, and Facebook.
The two crucial questions at issue in North Carolina’s current legislative session, explained North Carolina Sustainable Energy Association (NCSEA) Communications Coordinator Allison Eckley, are whether lawmakers will freeze the state’s landmark renewables mandate and whether it will extend the vital investment tax credit that has made North Carolina the fourth-leading U.S. solar builder.
“We are concerned the legislation would freeze the Renewable Energy & Energy Efficiency Portfolio Standard (REPS),” wrote trade association TechNet to North Carolina legislators recently on behalf of its members Google, Apple, and Facebook.
Duke Energy wants "a collaborative process that involves all the issues, including the REPS and the tax credit, and includes all the stakeholders,” explained Spokesperson Randy Wheeless. “What Duke really wants is something similar to what we did in South Carolina last year. We like the collaborative process.”
“House Bill 332 would freeze the amount of renewables-sourced electricity utilities must buy at 6% of retail sales instead of increasing it to 10% in 2018 and letting it reach the 2021 target of 12.5%,” Eckley explained.
“As global companies providing services to consumers around the world from our operations in the state, a reliable, sustainable electricity supply is critical, and requires sourcing power from renewable energy,” the TechNet letter on behalf of the IT giants said. “We believe the REPS should be maintained because our collective experience shows that programs like the REPS can actually reduce the overall cost of energy to ratepayers.”
Duke is mostly neutral on HB 332, according to Wheeless.
“We didn’t ask for the legislation that freezes the REPS. But it does include a provision calling for a stakeholder process to chart a future path for renewables policy," he said. “We like that part of it.”
And, he added, “freeze or not, there is going to be a lot of solar brought online by Duke projects in 2015 in North Carolina.”
Duke helped design the 2007 legislation that included the REPS and is meeting its obligation under the standard, Wheeless said. “We have a clear path forward on meeting it to the 2021 deadline and we have no issue with the REPS as it is.”
But a lot of other solar and renewables issues are related to the REPS Wheeless said. “There is no reason the success of the collaboration between stakeholders in South Carolina in 2014 cannot work in this state.”
The politics of the freeze
The freeze was passed by North Carolina’s Republican lower house. Renewables advocates’ strategy was to keep it away from the Republican Senate by bottling it up in committees. That was frustrated when anti-subsidies Finance Committee Chair Sen. Bob Rucho (R) pushed it through his committee with a controversial voice vote. Rucho and his office did not respond to multiple requests for comment on this story.
The bill could be tangled up in the Rules Committee technicalities for a while, but the state's legislative session is slated to run until August 20 and could go into September, observers say, which means there's still ample time for conservative legislators to work out the procedural issues and pass it.
“Things are looking ominous,” Eckley said. Every effort is being exhausted to remind Republican Governor Pat McCrory of his “all-of-the-above approach to energy,” she added.
“It is a common misconception that policies that drive the growth of renewables and energy efficiency are costly to utility customers,” Eckley said. NCSEA’s recent report, "Understanding the Impact of Electric Choices on North Carolina Residential Rates and Bills," shows that “actually the primary driver behind rate increases has been charges to pay for conventional generation like coal and natural gas.”
“According to [North Carolina Utilities Commission] rate information, the average monthly residential bill is estimated by the Commission to be $107.04 and $106.67 for [Duke Energy Carolinas (DEC)] and [Duke Energy Progress (DEP)] customers, respectively,” NCSEA’s study reports. “Within this total, monthly REPS charges are nominal: $0.39 and $0.83 per month, respectively.”
The Renewable Energy and Energy Efficiency Portfolio has saved ratepayers $162 million since 2007 and is expected to save $651 million by 2029, the study adds.
“In the chart (above) you have to squint to see those tiny line item charges in comparison to the rest of the bill,” Eckley said. The trend in rates has been upward and “those few cents of nominal extra charges are keeping rates lower over the long term.”
Wheeless’s last home electricity bill from Duke Energy Carolinas, he said, confirming the study’s findings, was $154 and the Renewable Energy Rider was $0.39.
“We take pride in the fact that the cost impact to Duke Energy customers has been pretty small for building renewables,” he added.
The investment tax credit
The other really crucial decision North Carolina lawmakers face in the current session is on the state’s 35% investment tax credit (ITC), Eckley explained. Unless extended, its previous 5 year extension will expire at the end of 2015.
HB 97, the Appropriations Act, passed the House with a 2 year extension of the ITC. In a compromise negotiated by renewables advocates, utilities, and lawmakers, the ITC provision in the budget bill keeps the credit at 35% next year and provides it at a reduced 20% rate in 2017, Eckley explained.
“We think it will be an uphill battle to keep it in the Senate’s version of the budget,” Eckley said. Energy stakeholders widely agree that efforts to kill the incentives by the self-described fiscal conservative Rucho are not helpful, though he would not comment for this piece.
“Policies like the REPS and the ITC are the closest things we have to a market for energy,” Eckley said. “Without them, the utilities would continue to have a lock on where we get our electricity and how we pay for it.”
“Tax credits have been a hot issue in the General Assembly this year, including those for the film industry, and Duke has been one of the largest benefactors of the solar tax credit,” Wheeless said. “But we understand the state has big issues to address. We will let the legislature decide.”
The ITC is not a cost to ratepayers or taxpayers, Eckley said. “The state simply takes in less revenue – but that leads to economic benefits for the whole state.”
NCSEA research shows, she explained, that North Carolina’s $2.6 billion-plus investment in over 20 different renewables technologies since 2007 has had a $4.7 billion-plus economic impact in the state. Every taxpayer dollar invested has produced $1.54 in state and local government revenue.
The politics of solar leasing
For the present, HB 245, which would allow third party ownership (TPO) financing of solar and other renewables, will remain in committee.
“TPO is exciting and a lot of states have it and North Carolina should have been one of the first, but the REPS and the ITC are more important right now,” Eckley said. “The people calling the shots in the House and the Senate are more concerned with what they call mandates instead of this new opportunity.”
“There have been bills all over the map this session and I don’t know how much progress is being made so we want to get people together in a room and see what we can agree on,” Wheeless said. “We think the state would be better off.”
It will be a long session and, in politics there is always give and take, Eckely said. “TPO and other clean energy issues have been dangled. But we represent a diverse group stakeholders. Some might benefit more from the REPS, some from the ITC, and some from TPO because it would enable them to have solar on their homes. But when something is on the chopping block, it takes all your forces.”
One point of complete agreement
Many renewables advocates say Duke’s collaborative stakeholder process will never come together in North Carolina because the state’s solar industry does not need the powerhouse utility the way South Carolina’s industry did. They also argue Duke's call for such a process is a distraction that allows conservative legislators to do the dirty work.
But if Duke's renewables summit ever does get convened in North Carolina, participants could take cues from the broad agreement between solar advocates and the utility on the ITC Safe Harbor bill, SB 372, just signed into law by Governor McCrory.
“Regardless of unexpected delays, if investors and developers who have projects in advanced stages of development have a minimum amount of construction completed, they get the ITC even if the project is not online by the end of this year,” Eckley said in explaining why NCSEA backed it.
“We like the soft landing,” Wheeless said. “We are just as active as anybody and a hurricane or something could delay the completion of construction past December 31 of this year. This provides some certainty.”