North Carolina may be nearing a renewable energy tipping point that could well be dubbed peak solar.
The state ranks third in the nation for solar energy production, thanks to utility-scale solar farms that have sprouted on cheap farmland in recent years. But North Carolina’s frenetic rate of solar energy buildout can’t go on forever, and solar developers and experts say they’re beginning to see early signs that solar power development may be peaking in North Carolina.
Unlike peak oil and peak coal – predictions premised on finite fossil fuel resources – the upper limit of solar power in North Carolina is not triggered by a looming sunshine shortage but rooted in land availability, grid logistics and economics.
One hint that the state’s solar boom is peaking: Duke Energy says that some of its rural substations are reaching maximum load and can’t accommodate any more large solar farms without costly retrofits. Substations, the grid’s valve system where electricity flows down to the utility pole level, are the most common interconnection points for solar farms in North Carolina.
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The substation constraint is being compounded by the expiration, at the end of last year, of North Carolina’s 35 percent state tax credit for solar farms and other renewables. In losing the generous tax credit, which reduced solar farm costs by up to $2.5 million per project, solar developers have lost their chief funding source to pay for major substation upgrades on Duke’s power grid.
Stephen Kalland, executive director of the N.C. Clean Energy Technology Center, predicted that the resulting grid interconnection logjam, and a shortage of available land near remaining substations, will crimp solar farm development within three to five years.
“We’re going to run out of places to put ever larger solar systems,” Kalland said. “The projects will get bigger but they will be fewer of them, but the net will continue to grow for a few more years.”
North Carolina’s solar boom dates back to the state legislature’s 2007 passage of the renewable energy portfolio standard. The law requires Duke Energy and other electric utilities to rely on renewables for a portion of their elecriticity sales.
In the initial years on the renewables mandate, utilities paid upwards of 15 cents a kilowatt hour – more than twice the wholesale cost of electricity – in subsidy payments to solar developers. But as the price of photovoltaic panels plummeted, the solar subsidy – called a renewable energy certificate – has shrunk to less than a penny per kilowatt hour.
Subsidy prices have declined so precipitously that the state’s largest solar developer, Chapel Hill-based Strata Solar, stopped accepting subsidy payments from Duke this year. When Duke’s solar subsidy offer dropped this year below 1/10 cent per kilowatt hour, said Brian O’Hara, Strata Solar’s senior vice president of strategy and government affairs, Strata began shopping for better deals on the open market for renewable energy certificates.
That means that Duke is now paying Strata only wholesale electricity rates – without the subsidy – for power generated by six Strata solar farms that went online this year. “There is zero rate impact for rate payers,” O’Hara said. “And Duke is locking in a price for 15 years.”
As global solar prices went into a free fall and panel efficiency improved, solar farms became cost-competitive with coal-burning power plants and combined-cycle natural gas plants, two of the cheapest sources for generating electricity. The cost inversion, from priciest to cheapest, hasn’t won over all critics of renewables, but it has shifted their focus to new concerns: that solar panels may be toxic, and that solar farms conflict with agriculture.
Republican state Sen. Bill Cook of Beaufort County said this year that solar farms permanently ruin farmland. Cook has recently co-sponsored legislation that would require solar farms (and wind farms) to establish a 1.5-mile buffer from neighboring property lines. Senate Bill 843, introduced in May, has been referred to a Senate committee that oversees legislative rules and procedures.
Cook’s bill would also require solar farms to guarantee 15 percent of the value of the facility – plus the value of the underlying land – to cover future costs of dismantling and removing the energy project at the end of its lifetime.
Likewise, the N.C. Department of Environmental Quality in 2014 and again in 2015 also expressed concerns to the N.C. Utilities Commission about the environmental impacts of solar farms, including land clearing, storm runoff, soil erosion, herbicide use and other issues.
“There’s a reason we’re not getting attacked on price anymore,” O’Hara said. “Our competition right now is natural gas pricing.”
North Carolina now exceeds 2,000 megawatts of solar energy capacity, equivalent to two nuclear reactors if all the solar panels were exposed to sunshine under cloudless skies and generating electrons. Most of this solar capacity is contracted to Duke Energy.
Charlotte-based Duke owns about 500 megawatts of solar production in the state, and the utility has long-term contracts to buy power from third-party solar farms with a combined capacity of 1,200 megawatts, for a total solar commitment of 1,700 megawatts, said Duke spokesman Randy Wheeless.
Strata has developed about 550 megawatts of North Carolina’s total, and sells much of that power output to Duke.
O’Hara said that as recently as 2013, the average substation upgrade cost was $75,000 per solar farm, and not all projects required substation upgrades. This year, he said, upgrade cost estimates have averaged over $300,000 and been as high as $3 million.
“All of these costs are paid by the developer, not the utility or the ratepayers,” O’Hara said. “We will not build the project with a $3 million upgrade cost because it would not be profitable.”
Privately owned Strata Solar, which employs 300 people, is turning its focus to new sources of revenue as it anticipates a slowdown in North Carolina. The company is expanding beyond the Southeast and expects to propose giant solar farms in the Southwest in the coming months. These projects could be up to 300 megawatts in capacity, compared to the typical North Carolina solar farm that’s 5 megawatts or 20 megawatts.
The company built its first solar farm in North Carolina in 2011 and now operates 99 solar farms here. To date, Strata’s most productive month in the state was in April, when its solar farms generated 90,347 megawatt hours of electricity in a single month, equivalent to about 4 1/2 days of round-the-clock power generation by Duke’s 900-megawatt Harris nuclear plant in New Hill in southwestern Wake County.
Strata designs its solar farms to take advantage of the summer afternoon sun by angling its panels at 20 degrees, rather than slanting the panels at a neutral position of about 35 degrees. At the flatter position, Strata’s panels catch more sunlight when the summer sun is directly overhead and electricity demand is at its highest. It’s also when Duke pays its highest wholesale rates to third-party generators, maximizing Strata’s revenue.
Strata typically builds and operates projects for outside investors, such as banks, insurance companies, corporations and even affluent individuals, but the company also retains partial ownership of some solar farms.
Strata is also offering third-party remote performance monitoring services from its Chapel Hill monitoring operations center. Strata tracks 117 solar farms in the Southeast, including its 99 projects in North Carolina, on a wall of flat screen monitors in the center. Strata technicians can zoom in on individual projects through Google Earth and can call up lines of granular data on every solar farm in the system that transmits data to Chapel Hill every 60 seconds.
Wheeless, the Duke spokesman, said as more of North Carolina’s substations get “tapped out,” solar developers will start to look to interconnect their solar farms directly to transmission infrastructure, as is done in the deserts of the Southwest.
“A lot of the ideal solar sites have been taken,” Wheeless said.