The Southeast U.S. has seen exponential solar growth over the past five years, from less than 200 megawatts in 2012, to almost 3,000 megawatts in 2016, to roughly 6,000 megawatts in 2017, according to the Southern Alliance for Clean Energy’s inaugural Solar in the Southeast report.
Based on utility and other industry forecasts, new projects are expected to increase solar deployments to 10,000 megawatts across the region in 2019, and to 15,000 megawatts by 2021, which amounts to 3 percent of retail electricity sales.
The outlook for solar in the Southeast is generally sunny; however, there are some states, such as Tennessee and Alabama, that lack supportive public policies, putting those states well behind the regional average for solar deployments through 2021. There are also several policy changes in the works that will affect how solar and other clean energy technologies are deployed, including a new law in Virginia, a net metering bill in South Carolina and a grid modernization plan in North Carolina.
This week’s column will examine policy developments in those three states.
Southeast U.S. Solar Capacity Forecast
Source: Southern Alliance for Clean Energy
Virginia's big utility bill
On Friday, Virginia Gov. Ralph Northam approved legislation (Senate Bill 966) that ended a freeze on electricity rates in the state, while also returning money to customers and encouraging investments in renewable energy and grid modernization.
While it isn’t perfect, the bill is a big deal for clean energy, according to advocacy groups. For one thing, it declares 5.5 gigawatts of solar and wind to be in the “public interest,” which allows utilities to bypass certain regulatory tests for adding new clean energy generation, according to the Solar Energy Industries Association. So, if there's a "least-cost" requirement in a procurement, for instance, the new language designates solar and wind as a least cost-resource.
The new law also supports $1 billion in efficiency improvements, initiates a grid modernization process, and broadly overhauls the utility regulatory landscape in Virginia.
The bill originally allowed Dominion, the state’s largest utility, to pocket a portion of over-earnings from ratepayers and reinvest the remainder in grid upgrades without any oversight. Because the utility could use the upgrades as justification to increase its rate base, many stakeholders complained the legislation would allow Dominion to double-charge ratepayers. Virginia’s State Corporation Commission and the state Office of the Attorney General both objected to the bill for that reason.
In a surprise twist for the state’s powerful monopoly, the state House of Delegates voted to remove the double-dipping language.
The legislation also directs Dominion to refund customers $200 million to compensate for the rates the company has charged in excess for the last few years, and to pass along $125 million in savings Dominion expects to see from the federal tax cut.
Despite these changes, many stakeholders in the state still consider the bill a win for Dominion. Regulators will be limited in ordering refunds for customers in the future, and while Dominion can no longer “double-dip” by charging ratepayers for grid upgrades, it can still invest in renewable energy or grid improvements instead of handing out some refunds.
The bill also allows Virginia utilities to spend tens of millions of dollars on undergrounding power lines, which some say is an unnecessary expense.
“We know undergrounding is one of the most expensive options to improve reliability, and it’s hard to justify that sometimes,” said Caroline Golin, Southeast regulatory director for Vote Solar. That money could go toward cheaper solutions like better tree-trimming and management or certain distributed energy technologies.
“There are a lot of traditional and nontraditional solutions that are more cost-effective than undergrounding power lines,” Golin said.
But while there are lots of things to pick apart, the legislation is widely considered a fair compromise and positive for renewables and grid edge technologies. Sean Gallagher, vice president of state affairs at SEIA, said designating 5.5 gigawatts of clean energy to be in the public interest is “a great first step to help Virginia spur solar development and catch up with neighboring states that are already clean energy leaders.”
“However, we must ensure the grid modernization process that this bill initiates is data-driven, solicits the public’s input, and is not a blank check for a utility to spend consumers’ money with little accountability,” he added.
Net metering caps in South Carolina
South Carolina is one of the few states in the Southeast with a meaningful distributed solar market. That’s thanks in large part to Act 236, the Distributed Energy Resource Program Act of 2014, which enabled net metering in the state. But now, in a familiar conflict, the state’s net metering cap is about to be hit.
“We are working very hard this session to try to lift those caps or at least extend those caps,” said Tyson Grinstead, public policy director at Sunrun.
Failing to raise the caps will turn South Carolina into a Nevada-like situation, he said, where the solar market stalled when net metering compensation was reduced and other fees were increased. “If they aren’t raised…the value of solar for customers is gutted,” said Grinstead, which makes it difficult for the industry to sell, putting roughly 3,000 solar jobs in South Carolina at risk.
Bipartisan legislation moving through the state legislature could help to avoid that. The bill (House Bill 4421), which advanced in the South Carolina House Judiciary committee earlier this month, calls for eliminating the NEM cap and would put in place other pro-solar reforms. As currently written, the legislation would give a 100 percent property tax exemption to residential solar and an 80 percent property tax exemption over 10 years to commercial solar. While the state isn’t currently assessing property tax on home solar systems, the law helps to codify the practice.
The legislation has several outside backers, in addition to Sunrun, including Palmetto Conservative Solar Coalition, the South Carolina Energy Caucus and the Citizens for Responsible Energy Solutions Forum. Conservative blogger and radio host Erick Erickson also came out to an event in support of HB 4421 this month. Erickson also wrote an op-ed denouncing “monopolistic traditional power companies” for “stifling free-market innovations in power.”
According to Grinstead, the bill has resonated with lawmakers from across the political aisle partially because it comes as the South Carolina copes with the failure of the VC Summer nuclear plant. “Legislators are starting to think solar, particularly rooftop solar, is the only way folks can get control over power,” he said.
Matt Moore, chairman of the Palmetto Conservative Solar Coalition, applauded a South Carolina House Judiciary subcommittee for its unanimous passage of the pro-solar bill. Supporters are now hoping for a full committee vote in order to get the bill on the floor of the House.
“I'm thrilled that House members recognize how HB 4421 will continue this positive trend by giving consumers even more free market energy choices," said Moore. "Now the bill moves to the full Judiciary Committee, where we are confident that despite big power's objections to energy freedom, House members will support sending HB 4421 to the full South Carolina House for passage."
Duke Energy's $13 billion "grid modernization" plan
North Carolina is leading the way on solar in the Southeast. A decade ago, North Carolina became the first state in the region to set a quantitative target for renewable energy, which specifies that investor-owned utilities shall achieve a mix including 12.5 percent renewable and energy efficiency by 2021. Municipal utilities and co-ops are to achieve 10 percent by 2018. The renewable energy target, coupled with a favorable implementation of the Public Utility Regulatory Policies Act (PURPA), has created a vibrant market for solar development in the state.
North Carolina installed 2,700 megawatts of solar power capacity in 2017, with Duke Energy Progress and Duke Energy Carolinas combined delivering 83 percent of the solar deployed that year.
2017 also delivered some policy changes. Last year, the state passed the Competitive Energy Solutions for North Carolina (HB 589), which ensures the trajectory of solar growth through 2022 by directing utilities to establish a competitive bid process for solar. It also amends the state’s implementation of PURPA to make it somewhat less favorable. Still, solar growth is expected to remain strong, with annual installations reaching 6,000 megawatts by 2021, according to the Southern Alliance for Clean Energy report.
Additional policy changes are now under consideration that could affect the outlook for solar.
Forecast for Southeast States
North Carolina regulators are currently considering Duke Energy’s 10-year, $13.8 billion Power/Forward Carolinas initiative. Duke says the initiative will result in nearly 14,000 new jobs and more than $1 billion in taxes to benefit communities and provide customers an electric grid that is “smarter, more reliable and more secure.”
But according to Vote Solar, Duke is using the guise of “grid modernization” to justify one of the single largest capital expenditures by any utility, effectively prioritizing long-term shareholder profits.
“Half of the plan is to underground power lines, which can absolutely improve reliability and storm...issues. But it’s not proven to be the most economic approach to improve reliability,” said Vote Solar’s Golin, who made the same critique of the Virginia utility bill.
“The vast majority [of the spending] is earmarked for things Duke is spending on normal routine grid infrastructure, like capacity additions, storm hardening, and replacing power lines -- the stuff we would consider general O&M -- but it’s branded as this new grid modernization package and not substantiated,” she said. “And it will have massive impact on rates. We’re looking at a 50 percent rate increase.”
Golin acknowledged there is a lot of grid work that needs to be done, but she said it needs to be done in a much more thoughtful way. Otherwise “we’re going to end up limiting the role of distributed energy resources, and we’re going to end up saddling people with a lot of costs that are unnecessary,” she said.
Vote Solar isn’t the only clean energy advocacy group that’s come out against Duke’s plan; the North Carolina Sustainable Energy Association and the Environmental Defense Fund have also publicly opposed Power/Forward. Big tech companies, including Google, Facebook and Amazon, and business voices, including Carolina Utility Customers Association, Kroger and the Carolina Industrial Group for Fair Utility Rates, have also expressed opposition.
Vote Solar wants regulators to require detailed distribution resources planning before approving Duke’s grid proposal, in order to ensure advanced technologies are also being considered as solutions to grid reliability needs. “Solar and storage could go a long way in serving those needs and offsetting investments,” said Golin.
Hearings on the Power/Forward initiative are now underway, and a decision is expected at the end of April.