Environment

What ‘Schoolhouse Rock’ didn’t tell you: How House Bill 589, the renewable energy law, was made

 

Rep. John Szoka (Photo: General Assembly)

R ep. John Szoka, who lives in Fayetteville, but is originally from Ohio, was present during a pivotal moment in modern environmental history.

“I remember when the Cuyahoga River burned” in 1969, Szoka, a three-term Republican, told the NC Energy Policy Council this week. The result of pollution, the blaze ushered in a new era of environmentalism, including the creation of the EPA.

Considering a major river ignited in his home state, Szoka nonetheless has a conservative-leaning environmental history. For example, he supported a measure that would have wrestled control from local governments to regulate the cutting of trees for the placement of billboards.

But he is interesting in solar energy, and after failing to advance renewables legislation in the 2015-2016 session (third-party solar energy sales were unpalatable for Duke) he was the leading co-sponsor on House Bill 589: hard-fought, flawed, fast-tracked, but as-good-as-we’re-going-to-get-under-the-circumstances legislation that could further spur the growth of solar power and imposes an 18-month moratorium on wind energy. It is now law.

The NC Energy Policy Council is an appointed board operating under the auspices of the NC Department of Environmental Quality. Its members heard from Szoka and the special interest groups that helped craft the legislation, which provided insight into how most of the bill was made — and how it nearly failed.

At one point in May, nine months’ of talks among clean power groups and Duke Energy had stalled. The river, so to speak, was about to catch fire.

“There would be potential solutions and then they would drift away,” said Szoka, who by design, did not attend these meetings until the impasse. “We got involved when there were intractable problems that had to be resolved.”

On Saturday, May 13, the interest groups and the bill co-sponsors, including Reps. Dean Arp and Sam Watford, hunkered down for a marathon six-to-eight hour mediation. “Using different settlement techniques,” Szoka said, “we had a breakthrough.”

Duke Energy’s most pressing concern was to reform the state’s implementation of PURPA, a federal law that was written nearly 40 years ago to oblige utilities to buy renewable energy. The law also intended to provide access to the grid to any “qualifying facility.”

States have leeway on how to implement PURPA (the Public Utility Regulatory Policies Act), and HB 589 changed how Duke buys renewable energy. Now solar companies have to bid on the price they’ll sell power for — up to 80 megawatts — and the contracts run for 10 years instead of 15. Fixed-price contracts, previously available to power generators up to 5 megawatts, will now be offered only to companies up to 1 megawatt.

Ken Jennings of Duke Energy said this new process will lower the costs, presumably to ratepayers, and “create more certainty for developers and lower financing costs.”

However, the bidding process could also foreclose on opportunities for start-ups in that 1-megawatt to 5-megawatt range that can’t compete with larger, more established companies.

“Duke achieved its goal of PURPA reform,” said Chris Carmody, executive director of North Carolina Clean Energy Business Alliance. “Now we need a functioning queue, a level playing field and transparency.” The Charlotte Business Journal reported earlier this year that as many as 500 projects are in line to be interconnected to Duke Energy’s grid. At least two companies have filed complaints with the state utilities commission alleging Duke is moving too slowly in processing the projects.

An independent evaluator appointed by the Utilities Commission will conduct the bidding process. This was included in the bill, said Brian O’Hara, senior Vice President of Strata Solar in Chapel Hill, because Duke might also want to compete. “We needed someone beside Duke to run the bid.”

The restrictions on net metering prevented several environmental groups, such as the Sierra Club, from fully supporting the bill (its position was neutral). Although homeowners can now lease solar from third-parties, the bill also allows Duke to petition the utilities commission to increase fees on net metering or decrease the credits. These restrictions, said Peter Ledford of the NC Sustainable Energy Association, leads to uncertainty for people who want to install a rooftop system. They will find it more difficult to calculate how soon they could recoup their investment. (Another shortcoming: Leasing agreements aren’t legal for owners of apartment buildings or other multi-family housing, who would also benefit from lower energy bills.)

Still, the bill does throw a bone to the rooftop solar industry. While commercial and industrial projects have flourished, the small, residential market has been decimated since the legislature allowed a state tax credit to expire in 2015. “We needed to open up that market and throw them a lifeline,” Ledford said.

“This is not a cure-all but an important pivot,” Carmody added. In three and half years, when solar companies have made their final bids to provide power, “We’ll know what energy mix should be. We’ll improve wind and energy storage in next bill.”

Missing from the hour-long conversation was any discussion of the wind energy moratorium. Sen. Harry Brown muscled that language — calling for a four-year hiatus — into the bill at the last minute, which threatened to derail the entire legislation. In fraught 11th-hour conference committee meetings, the House and Senate compromised on an 18-month moratorium.

“We’re not dwelling on wind today,” Szoka said, in a clipped manner suggesting he was still irritated by the maneuver. “My mistake was not getting the Senate involved early enough.”

Wind energy, though, will be part of the next discussion, if not next year, then the following session. Duke Energy Carolinas announced yesterday it is seeking bidders for wind energy projects. The moratorium, then, not only delays the deployment of two more wind farms in economically distressed Eastern North Carolina, but could force Duke to bypass the state, at least temporarily and receive power from outside North Carolina.  (Amazon has one farm near Elizabeth City, but that power is transmitted to the company’s data center in Virginia.)

“We are smack in the middle of a revolution in the energy industry,” O’Hara said. “We’re going to need to have conversations about a Clean Energy Bill 3.0.”

Szoka replied: “That’s a scary thought.”

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