John E.P. Morrison: How the renewable energy standard really works

May 5, 2013 

How the renewable energy standard really works

Rep. Mike Hager is holding our state hostage to a national political interest that offers no benefit to North Carolina and harms rural communities and individuals (“Hager digs deep to keep bill alive,” May 1 news story).

Unfortunately, Hager and the national groups backing his effort do not understand how the N.C. Renewable and Energy Efficiency Portfolio Standard (REPS) actually works. Created in 2007 with bipartisan support, the REPS opened the monopoly market for electricity to alternative forms of generation and let a competitive market set the price.

At first, when the supply of renewable energy was low, the price for that electricity was relatively high. Entrepreneurs and companies like Strata Solar, however, seized that opportunity, created additional supplies of renewable energy, and the price came down.

Today, Strata Solar sells the electricity it generates at its solar farms to the state’s utilities at avoided cost. Avoided cost is a price set by the N.C. Utilities Commission and is the same cost as if the utility had generated that energy from conventional sources. In other words, the free market has eliminated the premium for renewable energy so that utilities, and by extension their ratepayers, are financially no better or worse off for using renewable energy.

Repealing REPS will not reduce power bills. It will, however, send a signal to potential investors that North Carolina is not a good place to put their money. All power plants, no matter what the energy source, are capital intensive. Like Duke Energy, alternative energy companies rely on large institutional investors to fund the construction of solar power plants. For an asset with a life of 40 years or more, changing the rules in mid-game is a surefire way to scare away investors.

Most solar farms are built in rural parts of the state. If the REPS is repealed, we can say goodbye to new tax revenue for struggling counties, goodbye to long-term stable lease payments to rural land owners, goodbye to jobs for displaced construction workers and goodbye to millions of dollars of direct expenditure in local economies spread across the state.

John E.P. Morrison

COO, Strata Solar

Chapel Hill

The length limit was waived.

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