House representatives in North Carolina filed legislation this week that would legalize third-party sales of electricity, opening the door for solar companies to expand business in the state.
House Bill 245, dubbed The Energy Freedom Act, would for the first time allow property owners in North Carolina to buy electricity directly from a renewable energy company, bypassing their utility.
The legislation, introduced by Rep. John Szoka (R), cites the need to diversify North Carolina’s energy resources, provide greater energy security and reliability through the development of distributed energy resources, and to encourage private investment in new generating facilities and ancillary businesses.
Under the law, renewable energy projects owned or operated by a third party would be eligible to participate in net metering arrangements through the public utilities.
The only limitations are that a renewable energy project owned and operated by a third party must be located on the power-purchasing customer’s property, and that the project cannot produce more than 125 percent of the customer’s annual average electricity consumption.
“There is a long history in North Carolina of electricity customers like the U.S. military, the [University of North Carolina] system, data centers and retail employers asking for more access to renewable energy,” according to a statement released by the North Carolina Sustainable Energy Association (NCSEA).
“This bill allows a free market financing option that is only prohibited in five states; and given the value clean energy continues to bring to our state, it doesn’t make sense that North Carolina remain one of them,” the group said.
The four other states that don’t allow such agreements are Florida, Georgia, Kentucky and Oklahoma. According to the Database of State Incentives for Renewable Energy, 24 states allow third-party solar leasing. The laws are unclear in another 21 states.
A consortium of 10 major companies backing the proposed North Carolina bill includes Wal-Mart, Lowe’s, Target and Volvo.
"We are writing because we believe that it is important to have choice when selecting energy suppliers and products to meet our business and public goals," the companies said in a letter to Rep. Szoka. "Changing North Carolina law to allow us -- and others -- to purchase renewable energy from third-party providers would create an even more positive business environment and would help us continue to create jobs and contribute to an even more robust local economy."
Duke Energy, one of North Carolina’s two major investor-owned utilities, recently made an entry into the third-party owned solar market by acquiring a majority stake in the California-based commercial solar installer REC Solar. With respect to the new bill in Duke's home state, spokesperson Randy Wheeless said the utility wants to see a more comprehensive piece of legislation than what Rep. Szoka has put forward.
"Really, this just addresses a sliver of the solar issues that need to be addressed in North Carolina," said Wheeless. "We’re advocating for a more holistic look at tax credits, net metering and all of those other solar issues out there.”
"We just think that’s a more positive step than to address these issues one by one as some other states have done, and it’s proven to be very unproductive," he added.
Wheeless said Duke is pushing for legislation in North Carolina similar to a comprehensive agreement stakeholders reached in South Carolina last year. Under the South Carolina settlement, utilities agreed not to pursue any fees on solar projects through 2020.
Allison Eckley, communications coordinator for NCSEA, said that her organization stands by the value of legalizing third-party electricity sales as a stand-alone issue.
“We’re still a few years from really understanding how that bill is working for South Carolina, so delaying action that can be taken today isn’t something our state can afford to do to see how something else goes for another state,” said Eckley.
Since its introduction on Monday, the North Carolina bill has picked up 12 co-sponsors. It has also been deferred to three different committees, which suggests that opponents -- most notably Duke Energy -- are already maneuvering to delay action, Eckley said.
Clean energy has seen rapid growth in the Carolinas in recent years. Annual revenues from clean energy activities in North Carolina alone saw an increase from $1.2 billion in 2013 to $4.8 billion in 2014.
Following this trend, North Carolina has become one of the fastest-growing solar markets in the U.S., ranking fourth in the country overall.
Due to restrictions on the third-party sale of electricity, most of the development to date has been at utility scale. But that hasn’t stopped rooftop solar companies from entering the budding market. NRG Home Solar and Sungevity launched operations in the state last month, with financing options to help customers avoid paying high upfront costs.
According to GTM Research, two out of three new residential solar installations in the U.S. in 2013 were third-party-owned systems. Residential solar loans are starting to gain market share. However, analysts expect that most residential solar installations (60 percent or more) will still be third-party owned in 2015.
While the U.S. solar market is booming, financing remains a barrier to adoption in many cases. If passed, Rep. Szoka’s bill would be a huge win for U.S. solar companies.