By the numbers, the vision of 100 percent clean energy across the United States grew exponentially in one year’s time.
In 2019, 51 cities and towns, four states, and Puerto Rico and Washington D.C. committed to 100 percent clean, renewable energy. Within North Carolina, 26 cities have committed to 100 percent clean energy targets and more are expected to join that list.
This is the mission of Ready for 100, a national movement that the Sierra Club and many local governments have embraced, with its vision of healthy and resilient communities powered by 100 percent renewable energy.
The N.C. Sierra Club is working with communities to pass Ready for 100 resolutions. Their next challenge will be to determine what mix of clean energy policies will ensure that they meet their resolutions. In North Carolina, we could learn from programs and policies that have been successful elsewhere.
The Competitive Energy Solutions for North Carolina bill was the product of nine months of negotiations among stakeholders and legislators; it was signed into law by Gov. Roy Cooper in 2017. The next phase of growth in the clean energy sector will be determined by this legislation.
While the law newly allowed a number of good clean energy policies, such as solar leasing, some were not addressed.
Procuring Renewable Energy
Communities with 100 percent resolutions will likely want to buy renewable energy. There are generally three ways they could do this: (1) Own the renewable energy asset and use the energy, (2) Sign a contract with a utility for a solar facility; or (3) Purchase renewable energy credits (RECS) on the market. A REC represents the property rights to the environmental attributes of renewable energy generation. A REC is issued when one megawatt-hour of electricity is generated and delivered to the grid from a renewable resource.
The first options isn't available here because North Carolina does not allow third-party sales of energy. That is, renewable energy developers cannot sell electricity generated on customers' property. North Carolina law only allows utilities to directly sell renewable energy.
While the Green Source Advantage program from Duke Energy is available for large energy users, most small-to-medium-sized communities will not benefit from this program and even the larger cities may face difficulty. Local economic development benefits are accrued when city or county projects are planned and implemented, but the lack of third-party sales in North Carolina means development of a local renewable energy project for a local government’s use is legal only when done within one of Duke Energy’s programs.
Community Solar
North Carolina residents may not have access to solar if they rent, live in a multi-dwelling building such as an apartment, or have a roof that cannot support a solar system. Community solar gives homeowners, renters, and businesses access to the economic and environmental benefits of solar energy generation.
Community solar programs can be set up in many ways. One is for a local government community solar program to allow subscribers to receive credit on their electricity bills for the power produced from a portion of a solar array. Community solar can also expand access to low-to-moderate income customers most impacted by a lack of access, all while building a distributed electric grid. Some North Carolina municipal and cooperative utilities offer community solar programs, such as the Fayetteville Public Works Commission (pictured).
The 2017 Competitive Energy Solutions bill required Duke Energy to offer 40 MW of community solar in North Carolina. Participants are to be compensated at Duke’s avoided cost rate for energy generated by their portion of the community solar facility. However, so far Duke has not yet constructed a community solar facility and this option is unavailable. Community solar is an important option to enable local governments to meet renewable energy resolutions.
Consumer Energy Choice
In much of the country, consumers have a choice between energy suppliers, rather than having to choose the utility that serves the region in which they live. That allows customers to shop around for an electric provider - it could be a local utility or a solar company. Retail electricity choice has been in place in parts of the United States for two decades, allowing industrial, commercial, and residential customers to buy electricity from competitive suppliers.
Community choice aggregations (CCAs) are allowed in eight states: Massachusetts (passed in 1997), Ohio (1999), California (2002), Rhode Island (2002), New Jersey (2003), Illinois (2009), New York (2014), and Virginia (2020). In this situation, a local government can decide on electricity suppliers on behalf of a group of residential and small commercial customers. Many CCAs have chosen renewables for their supply. Several Massachusetts towns have been successful with this model.
Most North Carolina residents get their energy from a monopoly-controlled, highly regulated electricity market. Duke Energy and Dominion Energy make most of the plans about where power comes from, and the N.C. Utilities Commission reviews, sometimes modifies, and then approves the plans.
The same applies to rural cooperatives and municipal public power communities – customers have little to no ability to pick an alternate energy supplier. As more and more communities pass renewable energy resolutions, deciding who provides power becomes increasingly important. That choice is also something many consumers want.
Performance-Based Ratemaking
Utilities in North Carolina are regulated under a cost-of-service model, where all costs associated with electricity are recovered through rates including a return on investment (typically 10 percent). This model rewards additional capital investment at a time when energy demand is flat or declining (except for the role played by the increasing number of electric vehicles).
Traditional utility models were built on electricity demand growth, which became less certain as the U.S. power system was built out and energy efficiency programs succeeded. Electrifying transportation and buildings promises to provide future growth for utilities, but just how much growth and when it will happen is uncertain.
At the same time, customers are demanding more control over how they consume and produce their own energy, and energy costs have reached a critical threshold where renewable energy is now cheaper than many fossil power sources. In response, some utilities are embracing a new model that rewards performance against goals to meet evolving customer demands entitled performance-based regulation (PBR).
PBR transforms the traditional utility revenue model, where profit is driven by returns on capital investments or the volume of electricity sold, into one where profit is driven by meeting goals to deliver an affordable, reliable, and clean power system.
As part of the implementation of Governor Cooper’s Executive Order 80, the N.C. Department of Environmental Quality convened a series of groups to identify obstacles to progress. A group that examined the Utility Business Model recommended convening stakeholders to explore further changes to the utility business model and produce a comprehensive plan that aligns utility incentives and mandates in order to meet clearly identified targets. That work is currently going on as part of the state's Clean Energy Plan process.
All of these policy options – third party sales, community solar, consumer energy choice, and performance-based ratemaking - are succeeding in other states. Our state should give each one thorough and fair consideration so North Carolina can do its part to address climate change.