ORIGINAL REPORTING: Duke Energy Helps Clear The Way For Rooftop Solar

Duke-solar industry breakthrough settlement aims to end rooftop solar cost shift debates; Successor tariff deal reshapes solar with dynamic rates, demand response requirements

Herman K. Trabish, Sept. 16, 2020 (Utility Dive)

Editor’s note: South Carolina’s regulators are expected to rule on this in early 2021.

A landmark settlement between Duke Energy and distributed energy resources (DER) advocates in North and South Carolina could remake the rooftop solar sector and be a model for ending regulatory disputes across the country. The proposal, released Sept. 16, could calm contention between utilities and solar advocates over the perceived "cost shift" some utilities and policymakers see as a subsidy for rooftop solar paid by non-solar-owning customers.

The settlement would, if approved by Duke's North and South Carolina regulators, pair rooftop solar with smart DER devices and time-varying rate designs to add to the utility's demand response capability and give customers an incentive to help address the utility's peak demand challenges. "This is a totally new framework that treats self-consumed solar paired with demand response as energy efficiency and includes rate design innovations in dynamic pricing," said Duke Energy Vice President for Rate Design and Strategic Solutions Lon Huber. "We eliminate the cost shift, but retain a vibrant solar market, which could be a paradigm-changing win in the national net metering debate."

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Legislative and regulatory conflicts continue to increase nationally over replacing the retail rate net energy metering (NEM) tariff typically paid to solar owners for electricity exported to utility systems, said North Carolina Clean Energy Technology Center (NCCETC) Senior Policy Program Director Autumn Proudlove. "Some states have delayed action, but the approved changes have reduced compensation."

Successor tariff debates ultimately slow rooftop solar growth, according to Proudlove. But Duke and other utilities who see how customer-owned DER can cost-effectively help reduce peak demand and meet policy goals are working with stakeholders across the country on ways to take advantage of those DER investments without imposing costs on other customers. The new proposal, developed in response to solar policy directives in South Carolina's 2019-enacted Act 62, and North Carolina's 2017-enacted House Bill 589 (HB589), can accomplish those objectives, according DER advocates who helped shape the settlement.

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NEM compensates rooftop solar owners for the generation their arrays send to the grid, and is available in 40 U.S. states and Washington, D.C. Compensation is set at the same retail rate customers pay for electricity, unless successor tariffs are in place that adjust that compensation. NEM was deployed state by state to support early renewables growth. Retail rate compensation was a proxy for the value of the exported generation. Since at least 2013, utilities have complained about NEM to regulators, arguing its reduction in solar-owning customers' bills shifts system costs to the rest of the customer base. Solar advocates argue NEM benefits all utility customers by reducing operational costs.

The result is often-heated conflicts between utilities and solar advocates over a successor tariff that would theoretically represent the true value of distributed solar but prevent an undue shift of costs to non-solar-owning customers. The Duke settlement aims to eliminate some of those debates through rate design and smart technologies. In many states, compensation debates "have been quite contentious" because utilities "want to reduce or eliminate the cost shift and have proposed compensation at avoided costs or wholesale rates," Proudlove said. Solar advocates are "realistic about coming changes," but want cost-benefit or value-of-solar studies to set a compensation that matches the value of their exported generation… click here for more

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