A group of North Carolina rooftop solar installers has reached an agreement with Duke Energy on the future of net metering in the state. Several weeks ago, seventeen NC rooftop installers, including Sundance Power Systems, signed a letter to Governor Roy Cooper stating that the proposed changes by Duke Energy would reduce the value of a solar customer’s investment by 25-35%. The presidents of three of those companies delved deep into negotiations with Duke in an attempt to create a less onerous set of changes than those proposed. Choosing this collaborative approach versus litigation has created a transition period through a new ‘Bridge Rate’. This will allow the original changes to take place but in a phased manner, allowing a smoother transition for future rooftop solar customers. Stew Miller of YES Solar, Dave Hollister of Sundance Power Systems, and Bob Kingery of Southern Energy Management (SEM) are the three solar company owners who lead the way on these crucial negotiations. “In the end, we did the best we could to secure the best deal possible for our industry, one that would give us a runway that was sellable to our customers, and buy some time for some systemic changes to occur that could create a better system moving forward.” said Hollister of Sundance.
Many states are fighting over net metering, mainly leading to negative changes in policy. The efforts of these North Carolina solar company leaders will create a strong path forward for rooftop solar adoption. It is encouraging to see the NC rooftop solar industry and Duke Energy work together on a negotiated solution as opposed to a litigious, expensive and time-consuming battle that would have served no one well. Climate change necessitates changes in energy policy and solar power is a key part of this fight for a better future. While much work remains and the effectiveness of these policy changes has yet to to be tested, this is a positive step forward.
Background on This Important Issue
Duke Energy filed changes to net metering, dubbed Solar Choice, months ago. Various environmental and solar groups supported the proposed changes but solar power companies in North Carolina were left out of the discussion. But what are these changes all about? Essentially, Duke is innovating their business model with regard to Distributed Generation (DG). The main goal is to provide incentives that will capture environmental and social benefits of solar and deliver them back to customers in the form of an energy efficiency incentive. This program would help align the utility with the business model for rooftop solar.
Original Duke Net Metering Proposal Details
- The original filing would be very complicated and it would be difficult to calculate customer savings.
- According to NC rooftop solar installers’ calculations, without any incentive program, all customers would have had the value of their solar investment reduced by 25-35%.
- The grandfathered rate did not have any energy escalator and extended paybacks for all legacy customers by 7-8 years. This would have negatively impacted the value of this investment for existing customers.
- Due to the cost effectiveness requirements for energy efficiency programs, the program would not be available to customers who currently heat with gas. With no incentives available to gas customers, they would have seen a significant decrease in the financial benefits associated with rooftop PV installation.
Elements of New Negotiated Policy
- All ROI improved by years.
- If the Smart Saver incentive program fails, the bridge rate makes it much simpler to calculate the ROI for prospective customers.
- Gas customers will not be harmed as much as they would have been in original settlement.
- Bridge rate for existing customers created. Existing customers may switch to bridge rate in 2027 and can remain on the bridge rate for 15 years minus the time spent on current net metering.
- Commits Duke to propose energy efficiency programs recognizing the reduction in consumption from the grid associated with installing rooftop solar.
- Buys the industry and society time of up to 5 years to find a true value of net metering and better rate schedules that include benefits of DG solar.
- If necessary, commits both Duke and the solar industry to work through the legislature to ensure that the reduction in consumption from the grid (self-consumption) associated with a customer adopting renewable energy (rooftop solar) be considered energy efficiency. This will change the entire equation for cost shifting and better recognize the value of distributed solar.
- Establishes a floor for the termination of the bridge rate for future incentives under the bridge rate for future incentives reading: “If at any time during the Bridge Rate Period, an energy efficiency (“EE”) program associated with the installation of solar rooftop PV containing a total incentive or combination of incentives that equal at least $.60/watt for applicable Time of Use (“TOU”) rates is approved by the Utilities Commission for all eligible residential customers (regardless of heating source).
- Retains opportunity to promote better rate designs in the future as the value of DG changes and social pressures mount to shift to renewable energy on a wide scale.
- Consumer protections are in the works to maximize transparency around financial benefits within North Carolina’s solar market. (i.e. inflated savings projections & opaque pricing to be monitored.)
- Establishes a relationship directly with Duke decision-makers and a shared understanding of installers’ business needs and allows the rooftop solar industry to negotiate directly in all future incentives and tariffs.
- Reached an agreement that aligns with the NC Carbon Plan to value distributed energy technologies, such as rooftop solar, appropriately. This includes adding a value of carbon reductions, which will be a long-term driver for sources of clean energy such as rooftop solar.
Growth Opportunity for North Carolina Solar Industry
The proposed agreement provides a significant growth opportunity for the industry under the available yearly capacity of the bridge rate, enabling the solar industry to transition to a more sustainable Solar Choice tariff. The agreement also aligns on an updated valuation framework and waives the bridge rate minimum bill (but not the basic facilities charge) for low-income customers.
“Duke Energy knows that customer-sited solar is an important part of the future growth of solar in North Carolina”, said Lon Huber, Duke Energy’s senior vice president of pricing and customer solutions. “We believe this phased-in compromise will help the installer industry navigate market changes and adapt to the long-term rate design of Solar Choice.”
With these concessions, the North Carolina rooftop solar companies can now fully support the changes to net-metering before the North Carolina Utilities Commission and they encourage their customers and allies to do the same.