A fragile compromise bill designed to boost solar capacity in North Carolina has been “boxed in” by anti-wind lawmakers, supporters say.

A coalition of renewable energy and environmental advocates overcame contention with Duke Energy, the state’s dominant electricity provider, to negotiate the agreement. The compromise bill, House Bill (HB) 589, aims at increasing state solar capacity to 6,800 MW by 2022 while saving ratepayers $849 million over ten years.

None of the negotiating parties were thrilled at the bill, conceived over months of tough negotiations, which would alter policies that made North Carolina the U.S.’s the second largest solar market. But most agreed it would double the state’s solar over 45 months, and the House approved it 108 to 11.

“This bill does not have everything I wanted,” co-sponsor Rep. John Szoka (R) told Utility Dive. “Everybody who agreed to it said pretty much the same thing: ‘We have concerns but we support this bill.’”

Then the bill went to the state Senate, where lawmakers changed the narrative.

In last-minute negotiations, Senate Majority Leader Harry Brown (R) used his leadership leverage to add an amendment imposing a four-year moratorium on permitting wind projects. A conference committee moved the permitting freeze down to 18 months and required further study of wind project impacts.

Wind advocates say the moratorium could cost the state billions in rural region investment and devastate North Carolina’s budding wind industry, which only brought its first project online in 2016. But the amended bill was passed 66-41 by a reluctant House and 36-4 by the Senate.

Majority Leader Brown has long argued wind projects threaten North Carolina’s military installations by interfering with operations and communications. His opponents, who defeated previous efforts to block wind, say there is little to support his arguments.

Gov. Roy Cooper (D) now faces a Sophie’s Choice. After enthusiastically endorsing the preliminary House compromise, his office has been quiet on the wind moratorium. If he signs the bill or lets it become law without his signature, wind loses. If he vetoes the bill, all the work that went into the solar compromise could be lost.

Either way, state insiders say more fights over solar policy and wind siting are in the state’s future.

The wind moratorium

Rep. Bob Steinburg (R), who represents the district where wind development would be most immediately affected, confirmed media reports that Sen. Brown’s concern is that wind projects will interfere with military operations.

Brown is using the military “as a straw man,” Steinburg said. “He has repeatedly said military leaders tell him off the record that wind is a threat, but he has no evidence to support the claim and I have yet to find anyone from the military to say that.”

Brown’s office did not respond to requests for comment.

Wind developers are required to work with the Department of Defense (DOD) and with the Federal Aviation Administration (FAA), Steinburg said. “Any project that is even a potential hazard to the military will not get off the board.”

According to the American Wind Energy Association (AWEA), it is standard procedure for the Department of Homeland Security (DHS), and the National Oceanic and Atmospheric Administration (NOAA) to also be notified. Either can object if there is a hazard.

“A variety of siting, software, and hardware solutions have been implemented,” AWEA reports. No project opposed by DOD is known to have been built.

When North Carolina’s first and only utility-scale wind installation — the 208 MW Amazon Wind Project — was being planned in Steinburg’s district, 149 turbines were initially planned. But during discussions with the military, developer Iberdrola identified 45 turbines of concern.

“Iberdrola nixed those turbines and built a 104-turbine project,” Steinburg said.

Both Steinburg and bill co-sponsor Szoka, a retired Army Colonel and Airborne Ranger, said a recently completed study by the Department of Defense, NC Department of Commerce, and local military bases confirms that wind projects represent no operational threat.

“I would never do anything that would hurt the military,” Szoka told Utility Dive. “But some people are dealing more from emotions than facts.”

Brown got the 36-4 Senate approval for HB 589, despite the wind moratorium amendment, because senators wanted the solar provisions and saw the compromise bill as their only option, the lawmakers said.

“This is a major energy bill and most of the Assembly’s leaders and members wanted it,” Steinburg said. “The wind moratorium, now part of HB 589, appears to have boxed in the governor, the House, and the Senate. It sends a chilling message that lawmakers can pick winners and losers and interfere with the free market and property rights.”

The governor’s decision is difficult. While 13 Democrats supported the compromise bill in the House, Steinburg said the votes are not likely there for a veto override.  

If Cooper chooses the veto, it would wipe away the hard-fought solar compromise. But if he allows the bill to become law, it could cost the state’s economy billions.

Cooper’s office said the governor is “carefully reviewing” the bill in an email, but has not yet made a decision.

Katharine Kollins, president of the Southeastern Wind Coalition, said the moratorium will cost $500 million dollars of scheduled investment in Apex’s 300 MW Timbermill project and RES’s 100 MW Little Alligator project. But, she added, it threatens the development of the state’s 2,000 MW of wind potential, representing an investment loss of as much as $2.5 billion.

Mark Goodwin, President/CEO of Apex Clean Energy, said the moratorium “sends a clear signal that wind energy is not welcome in North Carolina while selfishly seeking to divide the renewables industry.”

It is “an anti-business moratorium shrouded as a pro-military measure,” Goodwin said. “An 18-month delay coupled with the near-certainty of additional red tape means we will almost certainly have to suspend Timbermill Wind.”

Duke, which owns 20 wind projects across the U.S., did not support the amendment but continues to support the bill, Spokesperson Randy Wheeless said. It offers “a more cost-effective means of expanding solar energy,” he said. “Customers will benefit from the market-driven aspects of the bill and the increased options they’ll have with their energy decisions.”

Duke expects the revised solar policies will result in a “0.50% projected decrease in average rates” and a “0.57% projected decrease in residential rates.”

The hard-wrought solar deal

The mammoth solar compromise that resulted in HB 589 brought together a number typical adversaries in an effort to modernize the state’s rules.

The North Carolina Sustainable Energy Association (NCSEA) has often challenged Duke, but supported HB 589 until the moratorium was added. General Counsel Peter Ledford said the solar policy changes are not perfect but “a step forward.” Ultimately, he added, “a lot of things will need to be re-examined.”

Not every Duke critic joined on, however. Long-time utility opponent NC WARN recently argued the bill could slow solar growth. It will, the advocacy group wrote, allow an “attack” on net energy metering (NEM), prohibit third party solar sales, and transform PURPA, the state’s successful large-scale solar policy.

The most complicated solar-related issues in the bill are the PURPA reform and competitive procurement, Rep. Szoka said.

The Public Utility Regulatory Policies Act (PURPA) of 1978 requires utilities to purchase the output of certain types of generation facilities if its cost matches that of other resources.

North Carolina’s liberal interpretation of the law led to “an explosion of utility-scale solar and that has been a good thing,” Szoka said. “But reform is needed because growth is straining utility resources and imposing costs on ratepayers.”

Duke’s Wheeless said the state’s interpretation of PURPA “is out of line with other states” and the changes in the bill would correct that. North Carolina’s has more than 500 solar projects “in some form of development,” he said, making the interconnection process “chaotic.”

“We wanted to move toward a competitive bidding process,” Wheeless said.

The North Carolina Utilities Commission (NCUC) has, in the past, rejected Duke’s petitions for PURPA reform. But a number of sources, including Szoka, Ledford and officials from NC WARN and the solar industry all say that the commission staff now supports Duke’s calls for reform.

NCSEA’s Ledford said that shift gave Duke leverage in the negotiations, putting utility-scale developers at a disadvantage. The result was the bill’s two PURPA reforms.

Much of the bill details how the competitive bidding process that will replace PURPA is to be implemented, Szoka said. “It introduces as much of a free market as you can into a monopolized industry.”

Though it lowers the state’s avoided cost, which will challenge developers, the competitive bidding will be for 20-year PPAs. That will allow solar developers to access lower cost, long term financing, making project economics better, said Brian O’Hara, vice president at Strata Solar. And the targeted total solar deployment of 6,800 MWs by 2022 will provide economics of scale.

Targets include 2,660 MW through competitive bidding, 600 MW through a new Green Source Rider (GSR) tariff, and 40 MW through community solar projects, O’Hara said. That will be in addition to 3,500 MW solar currently existing or in development.

Anna Henry, lead researcher at NC WARN, is not convinced. She acknowledged that the NCUC Staff’s position drove utility-scale developers’ concessions, but said there are still “big questions to be answered.”

One is what will happen when the new capacity limit is reached, she said. Another is about Duke’s control of the RFP process.

Less controversially, the bill renews North Carolina’s GSR, which expired at the end of 2016. It is intended to allow large corporate and institutional utility customers to obtain renewable energy from Duke’s regulated subsidiaries without imposing costs on other customers.

The GSR removes the earlier tariff’s limitation to new load and allows smaller projects and aggregated projects to qualify. But O’Hara said the new tariff lacks adequate details.

The bill also calls for Duke Energy Carolinas and Duke Energy Progress to each deploy a 20 MW community solar program. NC WARN again has general concerns about utility control. Its far more specific critique was of the bill’s rooftop solar provisions.

Rooftop solar debates again

NC WARN’s Henry was especially frustrated by “the breakdown in the stakeholder process” that led to a compromise prohibiting third party sales through PPAs but legalizing leasing of distributed solar.

“Leasing is not the best way to do solar,” Henry said.

NC WARN is in the middle of a lawsuit, now being decided by the state’s Court of Appeals, on a rooftop solar PPA with a local church. Duke says the agreement violates the state’s prohibition on third-party energy sales, while NC WARN says the contract should be allowed because it serves the public interest.

That lawsuit could make the church PPA legal, Henry said, “but it appears HB 589 is an effort to prevent the same type of arrangement from being repeated in the future.”

Yes Solar Solutions President Stew Miller agreed solar leasing “doesn’t pencil out” in comparison to the benefits of ownership offered by new loan programs.

Rep. Szoka acknowledged that late-stage negotiations were tough.

“I wanted third-party sales and third-party leasing is not what everybody wants,” he said. But his 2015 bill, which would have legalized third-party sales, was stopped in committee. He was determined to pass a no-upfront-cost, third-party financed solar option this time.

“To get this thing across finish line, we recognized third-party sales was not viable and I took the issue off the table,” he said.

Leasing was a compromise, NCSEA’s Ledford said.

“Duke is adamantly opposed to PPAs and the NCUC recently rejected NC WARN’s petition to legalize PPAs,” he said. “The Court of Appeals may decide differently but right now both third party sales and leasing are prohibited and, despite the bill’s overly-prescriptive consumer protections, it officially blesses leasing.”

Miller said rebates in the bill authorized to be offered by Duke’s utility companies will spur 100 MW of new capacity over five years and “really help” rooftop installers. His concern is the bill’s order for a cost-benefit analysis of NEM. Duke had given him and other installers the impression they “had time to get ready for that battle.”

HB 589 orders no changes to the state’s NEM policy but instructs the commission to open an NEM proceeding, Rep Szoka said. He and many solar advocates recognize a proceeding reconsider net metering rules in the state is inevitable sooner or later.

The bill’s NEM provision is “guidance to the commission of clear legislative intent” that any NEM changes must come from the commission. It addresses Duke’s past efforts to focus only on costs.

“We very clearly say you must also look at the benefits,” Szoka said.

NC WARN’s Henry agreed the bill's requirement that benefits be considered is a step forward. But she objects to the bill’s instruction to the commission to take up NEM. “It gives Duke Energy cover,” she said. “Now it is legislatively mandated.”

The solarcoaster rides on

Whether or not the compromise solar bill passes, advocates agree that more debates are in the offing.

Henry said most of the bill’s solar provisions have the potential to limit solar growth, especially because so many are under Duke Energy’s control.

Yes Solar’s Miller said he was lukewarm on the solar part of HB 589 but “this is just part of the process,” he said. “They don’t call it the ‘solarcoaster’ for no reason.”

Strata Solar’s O’Hara said more debates are "inevitable” because solar technologies and solar costs change so fast. “If this is solar 2.0, we will be having conversations about solar 3.0 before we get to the end of this bill’s 45-month window.”

But in the short term, the stakeholders agreed the wind moratorium is a significant setback.

It represents “politics at its worst,” Steinburg said.

The moratorium “defies logic, common sense, and the facts, and the people of North Carolina will pay the price,” he said. “Sen. Brown has made this ‘either-or’ but that is not how government works. We need safe military operations, new revenue for taxpayers, and new energy resources for ratepayers.