Shedding Light on the Proposed Next Generation of Rooftop Solar Policy in North Carolina
You may have heard about plans for the next generation of rooftop solar policy for customers of Duke Energy in North Carolina. But you may not be getting the whole picture. We think it is important for people to understand the facts surrounding this new proposal for new net metering rates, the billing arrangement used to compensate solar customers for the energy they provide to the grid. There are many reasons why groups that are otherwise often at odds with Duke Energy came together to support a pathbreaking new settlement for changes in the Carolinas:
1. Change was coming to the Carolinas
Recent legislation in North and South Carolina requires utility regulators to take a fresh look at net metering policy. In North Carolina, the General Assembly enacted a 2017 law that requires revision of net metering tariffs, including a provision that requires existing retail rate net metering to end at the conclusion of 2026. The closer we get to that date without a successor net metering rate, the harder it is for customers to adopt solar. The law tasked the Utilities Commission with looking into the costs and benefits of customer-sited generation and to “ensure that the net metering retail customer pays its full fixed cost of service.” In South Carolina, the 2019 Energy Freedom Act similarly required the Public Service Commission to review the costs and benefits of the existing net metering program and to devise new, “Solar Choice” net metering tariffs to go into effect by June of 2021.
These laws all but guarantee that changes are coming to net metering in the Carolinas. Anybody that fails to consider these laws is ignoring the chief reason that parties came to the table to negotiate a deal with Duke Energy in the first place.
2. The settlement is supported by a broad array of solar interests, clean energy advocates, and environmental organizations
The ground-breaking settlement was initially reached between Duke Energy and the following parties in South Carolina:
- Vote Solar
- Solar Energy Industries Association
- North Carolina Sustainable Energy Association
- Southern Environmental Law Center, on behalf of nonprofit clean energy and conservation groups:
- Southern Alliance for Clean Energy
- Upstate Forever
- South Carolina Coastal Conservation League
In North Carolina, the same national, regional, and North Carolina-based groups that are passionate about expanding access to rooftop solar support the settlement. None of the settling solar advocates are funded by the Koch brothers or are otherwise out to “put the brakes” on solar, despite what some have suggested.
3. The settlement retains net metering, shifting to a monthly netting interval, and moves customers to a new time-of-use rate while protecting existing solar net metering customers
The new settlement retains the key element of net metering, a one-to-one credit for solar exported to the grid (along with the one-to-one offset for solar energy consumed behind the meter). The settlement:
- Shifts to a monthly accounting of those credits, with any excess production (exports that go beyond offsetting energy purchased from the utility) credited at wholesale rates. Under current net metering in North Carolina, those excess credits disappear at the end of May each year.
- Provides a value of the net metered credits based on the time of day in which the solar energy is produced (with any peak solar production offsetting peak consumption from the utility, and any off-peak solar production offsetting off-peak consumption).
- Includes no new fixed fees or demand charges. Instead, there will be a minimum bill and a small amount for nonbypassable charges, neither of which will harm customers with appropriately sized rooftop solar systems. A proposed grid access fee only applies to unusually large systems.
- Provides a new “Solar $aver” incentive that provides a $0.36 per watt rebate for customers who invest in solar and participate in the smart thermostat program that provides an additional $100 credit the first year and $25 per year after that.
These forward-looking time-of-use rates comply with directives in the law, encourage lowering electricity use at times of high demand, provide a more durable solution for net metering for years to come, and can be used to help incorporate a broad range of distributed energy technologies. Customers have new opportunities to save on their bills by shifting usage to off-peak periods, by integrating behind the meter storage to take advantage of solar energy even after the sun goes down, and by charging electric vehicles during low-price discount periods.
It is also important to remember that existing solar customers are protected under a grandfathering provision under this deal. Existing customers can choose whether to stay on the former flat rate net metering program through 2037 with minor adjustments after 2026 or adopt the revised time of use rate. Given the law’s requirement that existing net metering not extend past the end of 2026, legacy customers would see the following changes beginning in 2027:
- a minimum bill set to $10 higher than the basic facilities charge
- monthly netting with excess exports credited at the wholesale rate at the end of the month
- ending the annual bill reset, meaning no more lost bill credits for excess generation at the end of May
Analyzed over the course of a year, these changes should have little to no impact on the bill savings for existing net metering customers.
With appropriately sized solar arrays, adjusting to the time-of-use periods, and considering the new Solar Saver incentive, the economics of adopting solar under this settlement are about the same as they are under the current flat-rate net metering arrangement. The payback period for a customer under the settlement would be roughly the same as the payback period under current retail rate net metering, while also encouraging solar customers to reduce their use at peak times of demand, helping to reduce system costs and benefiting all customers.
4. Proceeding without a Settlement is inherently risky, as advocates have discovered in California
One consequence of not reaching a settlement with a utility is the kind of knock-down, drag out fight that has disrupted the solar industry around the country. Even winning that kind of fight is a temporary reprieve at best, because the utility is always free to take another swing at solar in a future regulatory proceeding, causing uncertainty and unpredictability for customers and solar businesses. This happened in Nevada in 2016, when a sudden change in net metering rates decimated the solar industry overnight. And it is playing out in California, where a proposed decision of the state’s Public Utilities Commission would dramatically change solar net metering for the worse by adding steep, new fixed charges and shifting to instantaneous netting with all solar exports valued at wholesale rates. Some have suggested that our settlement with Duke is a replay of the California proposed decision. But as explained above, the Carolinas settlement allows solar to keep expanding. The settlement avoids new fixed charges and demand charges, maintains the key component of net metering under which electricity sent to the grid is netted against purchases from the utility, with only excess monthly exports credited at wholesale rates. The only potential grid access fee would apply to unusually large solar arrays of 15 kilowatts or larger—and would only apply to those kilowatts above 15 kW.
Without a settlement, solar advocates would have to fight it out before the utilities commission, risking an uncertain outcome. Avoiding the risk of a worse outcome and coming to agreement on a durable, long-term solution provides certainty and a platform for sustained growth for solar in the Carolinas.
5. Existing net metering policies in the Carolinas have not yet provided a way for low-income customers to directly benefit from rooftop solar. We are working to change that
One of the allures of rooftop solar is the chance to save money on utility bills and achieve some level of energy independence. But because of the up-front costs of solar, it is often out of reach for lower-income households. And rooftop solar is completely out of the question for renters. There are increasing options for customers to pursue leasing that defrays some or all the upfront costs, but those options are still not viable for our lowest income neighbors.
Part of the settlement with Duke Energy includes an agreement to work on a new incentive program targeted at low-income households. We look forward to working on creative solutions to bring the bill-saving benefits of technologies like solar and storage to more of our neighbors. And we continue to push for expanded access to energy efficiency investments in low-income households, which is a proven way to help customers save money on their bills while improving comfort and indoor air quality.
The settlement does not block us or other advocates from continuing to fight for ways to make the benefits of solar available to low-income households, whether through expanded community solar offerings or by pairing solar with affordable housing projects.
The settlement represents a durable, predictable rate structure that will work for solar net metering and other new, distributed energy technologies for years to come. We remain confident that this settlement will work for North Carolinians.