North Carolina Solar Dispute Pits a Rare Alliance Against Ratepayer Advocate

The case at the utilities commission shows the challenge of building smaller solar projects under current law.

A solar project in the heart of North Carolina’s Blue Ridge Mountains has united climate activists, clean energy advocates and community leaders together with Duke Energy, their frequent nemesis.

But to win approval, the 5-megawatt solar farm on the edge of Asheville must overcome one noteworthy opponent: the state-sanctioned utility customer advocate.

The project in Woodfin, a tiny town nestled between Asheville and the French Broad River, would help Buncombe County meet its goal for 100% renewable energy and allow Duke to make good on a promise to build less fossil fuel infrastructure and more solar in the area.

But the state entity charged with advocating for ratepayers, called Public Staff, is an outlier. The group argues the solar array is unnecessary and too costly compared to what Duke would spend producing electricity from one of its natural gas plants.

If the seven-member utilities commission accepts that rationale, it could send a chilling signal to other communities hoping to meet their clean energy goals with relatively small solar farms, especially in western North Carolina where large expanses of flat land are rare.

No matter what, the dispute has laid bare how the state’s current policies skew heavily against 5-megawatt solar projects — once a staple of the industry and still considered a crucial component of the clean energy transition.

‘The deal doesn’t get better than this’

Buncombe County is among the nearly two dozen local governments in the state who’ve set aggressive renewable energy targets in line with the Paris Climate Agreement. The county pledged in 2017 to power its vehicle fleet and government buildings entirely with carbon-free sources by the end of the decade. Asheville, the county seat, followed suit a year later.

But fulfilling these goals is no straightforward task, since these communities don’t run their own utilities and most rely on Duke for their electricity. Few have enough government buildings to meet their targets with rooftop panels or enough of their own suitable land for ground-mounted solar farms. The law prevents them from buying electricity from a third party such as a solar company.

For Buncombe, the Woodfin project is a way around those obstacles. The county has offered about 30 acres of a closed landfill at effectively no charge to Duke, which will build and operate the solar farm and connect it to the grid. The county will buy the renewable energy credits associated with the project — ensuring the solar energy will help the county meet its renewable energy goal.

“This project gets us about 20% of the way there,” said Brownie Newman, the chair of the Buncombe County Commission since 2017 and lead sponsor of the goal.

Newman and others say the project is also key to a deal Duke struck with local leaders and environmental activists in 2015. The company had proposed a 45-mile transmission line through the Blue Ridge Mountains and a 680-megawatt gas plant to replace its Asheville coal plant. In the face of intense opposition, Duke agreed instead to build two smaller gas units, 15 megawatts of solar, and 5 megawatts of battery storage in or near the city. A third “peaking plant,” envisioned to run only when demand is at its height, would be avoided if possible.

“As the leader of the opposition, we made it clear that, to gain public support, any new proposal had to include clean energy components,” state Sen. Julie Mayfield, who co-directs the Asheville-based advocacy group MountainTrue, said in a letter to regulators last year. “Every part of the revised [project] was critical. … It was a package deal.”

Utility commissioners blessed the package when they permitted the two gas plants and denied pre-approval of the peaking plant. They wrote in their 2016 order that they expected the company to ask for permission to build the Asheville-area storage in a “timely manner” and the solar “as soon as practicable.”

Today, Duke has more than fulfilled its commitment on battery storage, with a 9-megawatt battery up and running in Asheville and a battery-solar microgrid in the works for Hot Springs. As for solar, Duke believes it can erect 8 to 10 megawatts of panels at its power plant site once the coal ash dump has been excavated and sealed. The Woodfin project would be the final piece of the puzzle.

The proposed site checks boxes that few other parcels of land in the area can. It’s next to an interconnection point on county-owned land, so the project won’t require grid upgrades or additional rights of way. It’s free, flat and already cleared of trees. “This site is one of the best you’re going to get in western North Carolina,” Mayfield said. “The deal almost doesn’t get better than this.”

Though mounting the solar panels without puncturing the landfill’s cap will add extra costs, Duke believes the experience could inform future applications. “It’s not the first on a [municipal] landfill site in America,” said company spokesperson Randy Wheeless, “but it would be the first one we’ve ever tackled.”

Duke won’t seek cost recovery for the project until its next rate case. But spread out among Duke Energy Progress customers in eastern North Carolina and far western North Carolina, it would cost the average residential customer 2 cents a month on a $100 utility bill. In light of the company’s entire generation portfolio, said Wheeless, “it’s miniscule.”

‘Not just … a few pennies’

But Public Staff believes that infinitesimal rate impact belies the project’s cost-effectiveness.

The exact expense of the Woodfin project is confidential, but Jeff Thomas, an engineer in the Public Staff’s energy division, testified it was “well above” avoided cost, a figure set every two years by the commission that’s roughly equal to how much Duke would spend producing a kilowatt-hour of electricity from a gas power plant.

The agency opposes distributing those extra costs among all of the utility’s customers when, in its view, only a small subset reaps the rewards, and it fears the Woodfin project would set a precedent that other communities with renewable energy goals could follow.

“It opens you up to what’s the next project, and the next one and the next one,” said James McLawhorn, director of Public Staff’s energy division, “and pretty soon you’re not just talking about a few pennies.”

The agency isn’t persuaded there’s much educational value to Duke’s erecting solar panels on a landfill, since it has already done so on one of its coal-ash dumps. It rejects the notion that the 2015 agreement alone evinces the project’s need.

And while McLawhorn and other Public Staff members stressed to the Energy News Network that they weren’t anti-solar and didn’t begrudge Buncombe County its renewable energy goal, they made clear they don’t view more solar as always better.

“They don’t need any new generation in the area,” McLawhorn said, of Asheville. “They still have time to explore new opportunities,” he said, adding later, “the goal is not to have every electron in every county to come from solar.”

Is small beautiful?

Not even clean energy enthusiasts would argue that goal is technically possible. But experts do say that small, distributed generation in all 100 counties would bring important benefits that fewer, centralized solar farms can’t — including reduced transmission line loss, more and more permanent job creation, and energy independence.

“When you start getting into a grid that’s smart enough to have better microgrids and better self-healing networks,” said Steve Kalland, the executive director of the North Carolina Clean Energy Technology Center, “you want all this distributed solar.”

Inherently, smaller solar projects have always been costlier than larger ones on a per-kilowatt-hour basis. But lawmakers recently exacerbated the problem by altering the key measure of cost-effectiveness: the avoided cost rate.

Four years ago, avoided cost was tied to how much Duke would otherwise spend building a new gas power plant — avoided capacity — as well as how much it would spend on natural gas fuel itself — avoided energy.

The figure was a crucial element of the state’s terms under the Public Utility Regulatory Policy Act (PURPA), a 1978 federal law requiring monopoly utilities like Duke to purchase power from small power producers. Solar developers building a project of 5 megawatts or fewer could secure a 15-year standard-offer contract at avoided cost. Hundreds did, mostly in eastern North Carolina.

But in 2017, lawmakers passed a wide-ranging law that pushed most solar development into a competitive procurement program and out of standard-offer PURPA contracts. It also drastically limited how much avoided capacity could be factored into the avoided cost rate for solar-only projects.

That change, combined with declining fuel costs, caused the avoided cost rate to plummet more than 40%, falling from 5.5 cents per kilowatt-hour for a 10-year, fixed-price contract to just over 3 cents.

Experts say few 15-megawatt projects can be built at that price, let alone 5-megawatt ones. The expiration of state-level tax credits in 2015 makes it even  harder for solar developers to lower their costs. And farms in the southeastern part of the state — where land is especially cheap — are effectively stalled until major transmission upgrades are made.

“All of these things have combined to make economies of scale the biggest driver in project development,” said Kalland. “Nobody wants to build a project much smaller than 20 megawatts anymore.”

A section of the 2017 law was supposed to help counterbalance this trend, directing Duke to establish a community solar program in which customers who want to go solar but lack their own suitable rooftop space can buy a share in a new solar farm of up to 5 megawatts.

But the avoided cost change and other provisions of that same law crippled the program before it could get off the ground. Duke is prevented from allocating any of its costs to non-subscribers, so it assumes a 5-megawatt farm can be built at avoided cost. To date, the company hasn’t found any solar developers who will.

“The community solar provision,” said Peter Ledford, general counsel for the North Carolina Sustainable Energy Association, “is fundamentally flawed.”

‘People would feel really let down’

Ledford is dismayed by Public Staff’s opposition to the Woodfin project, which he says is part of a disturbing trend. “It seems that they’re intentionally targeting solar,” he said.

(Public Staff says it’s following the lead of the General Assembly, which did, after all, make changes to the avoided cost formula in the name of helping ratepayers.)

But given the Woodfin project’s role in the 2015 agreement and its broad support, Ledford and other backers are hopeful, though far from sanguine, about their chances.

“Solar was part of a compromise agreement between the utility and the community, which the commission formally approved,” said Newman of Buncombe County. “People would feel really let down if the commission now stopped it.”

Still, only one member of the current panel heard the 2015 case, and it recently sided with Public Staff on another high-profile solar item, denying a bid by solar developer Friesian to build a 70-megawatt facility in Laurinburg.

Few are willing to talk about backup plans if the commission does reject the Woodfin project. But there will be one, said Mayfield, who spearheaded Asheville’s renewable energy goal as a city councilor before joining the state Senate.

“We’re not just going to let Duke off the hook,” she said. “And I don’t think they want off the hook.”

A rejection could also inject urgency into an existing debate about revising the avoided cost criteria and other policies that now discourage smaller-scale solar.

“It just can’t be that these kinds of projects are not ever going to be allowed in western North Carolina,” Mayfield said.


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