The rest of the story on an oft-repeated statistic

Duke Energy tweeted this morning:

Gosh, did you know?

More to the point, do you know why? If you read my report last year on reforming PURPA contracts, you do. Here’s an excerpt, with hot links used in place of the end notes.

Despite no obvious geographical distinctions from the other U.S. states that would explain it, North Carolina is awash in solar energy facilities, more so than every other state except California. That is because the distinctions driving it are political, not geographical. …

The oft-repeated statistic of “second in solar” owes to favorable state energy policies for the solar energy industry. It is not market-driven — a fact renewable energy advocates readily acknowledge.

The way North Carolina has chosen to implement PURPA regulations is very favorable to solar energy facilities. In fact, North Carolina has several other public policies that are very favorable toward solar energy facilities. Their combined effect is that North Carolina alone is home to 60 percent of all PURPA projects in the entire United States. See chart.

The Federal Energy Regulatory Commission lets each state implement PURPA regulations. This means states differ over them, sometimes widely. Over time, many states have changed how they implement PURPA rules, including reducing their avoided-cost rates and contract lengths.

North Carolina relies on a combination of terms that are all very generous to solar energy facilities. For example, North Carolina has the highest avoided-cost rates and the longest fixed-rate contract terms of any state in the Southeast U.S. North Carolina also allows qualifying renewable power facilities up to 5 megawatts (MWs) in size (or 5,000 kilowatts, kWs). Many states are at the Federal Energy Regulatory Commission minimum of 100 kW, though some go to 20 MWs or more. …

At the same time, North Carolina employs an array of other policies that directly favor solar energy facilities:

  • The state’s Renewable Energy and Energy Efficiency Portfolio Standard mandate contains a stepwise increase in the percentage of a public electric utility’s retail sales required to be generated from renewable energy sources
  • The property tax that otherwise would be assessed on solar energy facilities is reduced by 80 percent
  • An extremely generous investment tax credit of 35 percent, meted out over five years, just sunset for new facilities in 2016

All told, the political environment in North Carolina is heavily tilted in favor of solar energy facilities.

The major electricity policy restructuring law passed last year included provisions to get every last solar installation already built or somewhere in the works under contract with Duke Energy (see discussion of Section II). That bill was a “grand compromise” that made some needed reforms to PURPA contracts (but not avoided-cost rates!), among several other things.

It is for all those reasons and more that I consider solar an unsustainable energy source.

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

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