RALEIGH — Duke Energy, the state’s dominant electric utility, has no intention of derailing the 7-year-old renewables policy that has catapulted North Carolina among the nation’s top-ranking solar developers.
But executives with the Charlotte power company say they will push for one change: reducing how much North Carolina households are paid for generating electricity from solar panels.
Duke CEO Lynn Good said Wednesday that electric utility payments for power bought from small and medium-sized solar panel owners were established at a time that solar energy costs were much higher than they are now, when the struggling solar industry needed a financial boost.
“Subsidies can kick-start an industry, particularly when the economics require subsidies,” Good said. “The cost of solar panels and installations is coming down at a pace that we don’t believe subsidies will be required any longer.”
Solar advocates warn that such a move to reduce payments for solar energy, already underway in other states where the popularity of solar panels has soared, would put a damper on solar development here.
They are particularly concerned because the N.C. Solar Center and the city of Raleigh are developing a program called Solarize Raleigh to promote residential solar panels, and counting on homes and small businesses receiving the current payment level for electricity generated from solar panels.
“It would probably halt residential and commercial rooftop solar development,” said Jason Keyes, a Seattle lawyer specializing in renewables whose firm recently opened a Cary office.
Merger exceeds expectations
Duke executives discussed their concerns and a range of other issues related to the company during an hourlong meeting with News & Observer editors and reporters. Company leaders said Duke’s merger with Raleigh-based Progress Energy, completed 18 months ago, has exceeded expectations in financial savings and resulted in a boost of charitable contributions in the Triangle.
But payments for solar power are a rising concern as this form of renewable energy takes off across the state. Duke plans to ask the N.C. Utilities Commission, which regulates electricity rates, to consider reducing the payment Duke and other utilities make to households and businesses with solar panels.
“I think it’s time to take a look at it before it becomes a huge issue in North Carolina,” said Paul Newton, Duke’s president of North Carolina utility operations.
Under existing policy, households and businesses with “net metering” contracts are paid the full retail price for electricity they send out to the grid – about 11 cents a kilowatt hour – which is the same amount households pay for electricity from Duke and Progress. Federal law, however, requires that solar power producers be paid only the cost electric utilities avoid incurring by not generating their own power, which is less than 7 cents a kilowatt hour in North Carolina.
Keyes said small solar producers should be paid the full cost of electricity because unlike giant solar farms, homes and businesses are connected to the power grid and don’t require multimillion-dollar extensions of transmission lines.
Solar panels proliferate
Under increasingly popular “net metering” arrangements, homes and businesses use the solar power they generate for their own needs, and sell only surplus power they don’t use. They are not paid in cash for electricity, but instead awarded credits to offset their power bills. At the end of the year, any unused credits are erased.
But the credits mean that households and businesses with solar panels can end up paying just a few dollars a month for electricity.
North Carolina’s large, industrial-scale solar farms, which represent the vast majority of solar power here – about 277 megawatts – are paid at the lower rate. The large solar farms don’t operate on credits and wouldn’t be affected by the change Duke will propose; they have long-term contracts to sell all the power they generate. As energy businesses, they can reap millions of dollars in revenue from power sales.
The payment scheme for the smaller solar producers wasn’t a concern when solar panels were a rarity in North Carolina, but as of November, there were more than 1,300 solar installations that reap the full price of power they generate. The amount of total power capacity is now 11.5 megawatts, more than twice the amount online two years ago.
James McLawhorn, director of the electric division of the Public Staff, agreed that the rapid spread of small solar producers is making their fee schedule a concern, because other power customers are subsidizing the higher payments utilities make for power purchases. The Public Staff is an independent state agency that advocates for consumers in utility rate cases.
“If we charge you 11 cents a kilowatt hour, it’s for the generating stations and it’s for whatever the fuel is that we use to generate the power,” Good said. “And effectively what the solar panel is replacing is the fuel. It’s not replacing the grid.”