North Carolina regulators slash payments to rooftop-solar owners

Last Thursday, North Carolina regulators approved a controversial net-metering plan that will cut the future value of rooftop solar systems for Duke Energy customers. On the same day, the regulators also rejected an incentive package that had been devised to make the utility’s proposed solar reform more palatable to key solar industry players in the state. 

Thursday’s rulings from the North Carolina Utilities Commission add yet another layer of complications to a long-running rooftop solar policy struggle that’s split solar and environmental advocates in the state. In 2021, a coalition of groups including the North Carolina Sustainable Energy Association, the Solar Energy Industries Association and leading U.S. residential solar installer Sunrun reached an agreement with Duke to support a plan that linked the utility’s net-metering proposal with a separate set of incentives that would soften the economic blow to future rooftop-solar customers.

Now that regulators have nixed that incentive package, it’s unclear how all the solar groups that previously supported Duke’s net-metering reform will react.

In a Friday statement, Will Giese, Southeast regional director for the Solar Energy Industries Association, called the decision ​“a step forward for North Carolina’s rooftop solar market that preserves the ability of residents to choose the power that works for them.” Many other states in the Southeast have net-metering programs that offer significantly less certainty or value for customers who want to install solar on their rooftops.

Representatives of the North Carolina Sustainable Energy Association declined to comment Friday on the commission’s decisions, saying that the association was still reviewing them. A staff member of the Southern Environmental Law Center, which represented nonprofit groups Vote Solar and the Southern Alliance for Clean Energy in negotiations for the 2021 agreement, also declined to comment on the decisions until the group had had a chance to review them.

Meanwhile, another group of solar companies, environmental groups and community advocates have opposed Duke’s net-metering plan from the start. Those groups, including more than a dozen North Carolina–based solar companies and more than 50 nonprofit groups, say Thursday’s double whammy of decisions has only strengthened their opposition.

“This ruling is just rotten,” Jim Warren, executive director of NC Warn, the nonprofit group leading the opposition, said in a Thursday interview, adding that the decisions give Duke Energy ​“everything they asked for, and more.”

Duke spokesperson Randy Wheeless disagreed in a Friday statement, calling the commission’s decision a ​“constructive outcome” to ​“more than a year of negotiation and collaboration” that creates a ​“program that will be fair to solar and non-solar customers alike.”

What’s in the new net-metering plan?

The net-metering plan approved on Thursday significantly changes how customers with rooftop-solar systems are paid for the energy they produce and how they’re billed for power from the utility grid.

Customers who decide to add rooftop solar in the future will be hit with new minimum bills. Utility customers of Duke Energy Carolinas will have to pay a minimum monthly bill of at least $22, and customers with Duke Energy Progress a minimum of $28. For customers of both utilities, these monthly minimums will limit the bill reductions they can achieve by selling solar power back to the utility.

Customers who decide to opt in to solar net metering will also be required to switch to rate plans that charge more for electricity when that power is more expensive for the utility to supply to the grid. These new ​“time-of-use” and ​“critical peak pricing” plans would replace the utility’s existing flat rates for electricity, which average 11 cents per kilowatt-hour.

Instead, customers on these new plans will be charged between 5.6 and 7.7 cents per kilowatt-hour during the periods of highest solar generation, but as high as 17 to 19 cents per kilowatt-hour during mornings and evenings, when Duke’s grid is facing the highest demand for electricity. Existing net-metered customers will be allowed to remain on the current rates until the start of 2027.

Customers on net-metering tariffs earn retail rates for the power they export to the grid. Because the new lower rates correspond to time periods when home solar arrays tend to produce more power than customers can use, that rate plan is expected to lower the total value of net-metered solar for customers. For the typical solar customer in North Carolina, Duke estimates that the current average monthly bill savings of $80–$98 will fall to $40–$68 under the new plan.

Duke has said that these changes are needed to reduce the ​“cost shift” that solar-equipped customers enrolled in net-metering plans impose on customers who don’t have solar on their roofs.

This is a critical issue for solar net-metering policy battles in multiple states. Utilities argue that paying solar-equipped customers the full retail electricity rates for the power they send back to the grid, as many state net-metering regimes do, compels utilities to increase rates on the rest of their customers to make up for the ongoing costs such as maintenance and upgrades of equipment that solar customers are no longer paying. Rooftop-solar advocates say that utilities have fudged the math on these cost shifts, ignoring some of the financial and social benefits that rooftop solar provides to the grid in order to stifle competition from a new source of electricity.

Utilities across the country have undertaken similar efforts to change net-metering rules that pay customers full retail rates for the power they send back to the grid. One of the most noteworthy shifts in net-metering policy is taking place in California, the country’s leader in rooftop solar, where regulators late last year approved significant reductions in the payments for rooftop-solar exports, while adding new policies meant to expand access to solar for lower-income and disadvantaged customers.

Losing efficiency incentives, adding a battery pilot program

Solar groups that agreed to support Duke’s net-metering plan in both North Carolina and South Carolina have said that they did so because the utility’s proposed cuts in net-metering payments for rooftop-solar customers were an acceptable alternative to the threat of even steeper cuts. But their support hinged on Duke’s offer of a separate package of incentives to make this lost solar value sting a bit less. Regulators rejected that incentive package in a Thursday ruling.

The package would have offered an incentive worth roughly $2,500 off the full installation cost of a typical 7-kilowatt solar system for customers using electric heating who signed up for the utility’s smart-thermostat rewards program. Eligible customers would also have received an initial $75 bill credit and an additional $25 credit per year.

Commission staff concluded that this incentive package had been improperly defined by Duke Energy as an energy-efficiency plan rather than a solar-rebate plan, prompting the commission to reject it.

Instead, the commission ordered Duke to offer the solar installation incentives only to a limited group of customers as part of a pilot project. That pilot will offer incentives only to customers who install batteries along with solar systems, with a total cumulative cap of 10 megawatts of installed solar capacity per year across both Duke Energy Carolinas and Duke Energy Progress service territories.

Batteries can be valuable not only for backup power during grid outages like those that struck North Carolina this winter, but also for storing solar power for later use at times of the day when it’s more valuable to the grid. California’s new net-metering regime also offers increased value for rooftop solar systems that are paired with batteries.

Giese of the Solar Energy Industries Association called North Carolina’s new solar-plus-battery incentive ​“a smart, innovative approach, setting the bar for other states in the region to consider the benefits of these technologies for strengthening energy security in the face of extreme weather.”

The plan approved by North Carolina regulators on Thursday also allows solar-equipped customers to choose an alternative rate structure in place of the time-of-use rates the previous plan would have made mandatory. Giese described this alternative rate option as a welcome ​“glide path that ensures monthly crediting for solar customers through 2026 and provides critical certainty for current customers and those considering going solar.”

But Warren said these changes don’t alter the underlying harm of the new net-metering structure, which will jeopardize the growth and affordability of rooftop solar in North Carolina.

NC Warn has vowed to legally challenge the North Carolina Utilities Commission’s decision to approve Duke’s net-metering plan on the grounds that it ignores a 2017 law requiring an independent cost-benefit analysis to be conducted before changes can be made to net-metering policy.

The North Carolina Attorney General’s Office has echoed those concerns, questioning the legality of Duke’s use of internal studies rather than publicly vetted data to claim that net-metered solar customers are increasing costs for other customers who lack solar. 

John Szoka, the former North Carolina state representative who led the passage of HB 589 in 2017, which set the current net-metering reform process in motion, said after the law’s passage that ​“it’s not up to the utility to determine whether net metering is good or bad,” adding, ​“we’re not putting the fox in charge of the henhouse here.”

For a deeper dive into the controversy surrounding the net-metering reform plan proposed by Duke Energy, see Canary Media’s previous coverage.