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Utility regulators have greenlit a small solar farm outside Asheville, North Carolina, despite objections from the state’s ratepayer advocate, ruling that the upsides of the Duke Energy project outweighed worries over its cost-effectiveness.
The solar panels — to be installed atop 30 acres of a capped landfill in the small town of Woodfin — will help Duke fulfill its promise for more solar in the area. They’ll also help Buncombe County achieve its aim of powering its operations entirely with renewable energy.
But regulators on the Utilities Commission made clear their decision wasn’t a signal to other local governments with ambitious climate goals to attempt similar deals of their own. “The Commission will assign no precedential value to this Order in such circumstance,” they wrote.
And until state policymakers grapple with an “artificially low” cost benchmark new solar farms must meet or underbid, the ratepayer advocate will probably keep raising objections and clean energy advocates will keep pushing back, said Peter Ledford, general counsel for the North Carolina Sustainable Energy Association. “It’s setting us up for more fights,” he said.
While the exact price tag of the 5-megawatt Woodfin facility is confidential, Duke calls it minuscule in light of its entire portfolio. Spread among all ratepayers in the territory, it would cost an extra 2 cents per month, the company testified at a hearing last year.
But the Public Staff, the state’s ratepayer advocate, honed on the project’s cost-effectiveness. It was not in the public interest, staff members said, largely because it was “well above” the avoided cost rate — what Duke would spend to produce a kilowatt-hour of electricity from a gas plant.
The commission shared those concerns, it said in an order issued last week, but a host of factors left it “persuaded that the Woodfin Facility presents benefits that help to balance the cost.”
The first dates back to Duke’s 2015 agreement with community and environmental leaders. The company had proposed a 45-mile transmission line through the Blue Ridge Mountains and a 680-megawatt gas plant to replace its Asheville coal plant. In the face of intense opposition, the company relented, promising instead two smaller gas units, 15 megawatts of solar, and 5 megawatts of battery storage in or near the city. A third “peaking plant,” envisioned to run only when demand is at its height, would be avoided if possible.
Utility commissioners blessed the compact when they permitted the two gas plants and denied preapproval of the peaking plant. They wrote in their 2016 order that they expected Duke to ask for permission to build the Asheville-area storage in a “timely manner” and the solar “as soon as practicable.”
That order didn’t constitute preapproval of the Woodfin solar project, commissioners wrote in their recent decision, but it did direct Duke and the Buncombe community to “work together in solving the energy needs and challenges facing the region.” The project, they concluded, is “consistent” with both the 2016 order and the commission’s “directive to engage with the community in planning for the energy transition.”
For Commissioner Dan Clodfelter, the 2016 order was the only reason to permit the project, writing in a separate concurring opinion: “The fact that this project is brought forward in fulfillment of commitments made … is dispositive, though only just barely so.”
The panel also gave Duke and the county credit for working to lower the costs as much as they were able, with the latter proposing to offer the landfill site effectively rent-free. It noted the dearth of expansive flat land, already cleared of trees, in the mountainous region of western North Carolina. It acknowledged that building new transmission lines had already and would again face local opposition. And it allowed that Duke could learn a valuable lesson from building and operating a solar farm on top of a landfill.
“The majority was trying to find a reason to justify granting” the application, observed Ledford.
But the commission’s justifications focused on the “unique facts” of the Woodfin solar farm, and explicitly discounted what Buncombe has in common with nearly two dozen other communities around the state: a 100% renewable energy target.
This approval, the panel said, “should not be cited by utilities to support a future project, where the only driver is attainment of local renewable energy goals, under the same cost allocation paradigm.”
In his concurring opinion, Clodfelter called these local targets “ambitious, and laudable,” but said his panel’s job was to focus on statewide objectives. “The Commission should not encourage any expectation by local governments that it will assist them in meeting their own, possibly different, goals,” he wrote, “by allowing them to shift costs from their local taxpayers to ratepayers of the utilities regulated by the Commission.”
Indeed, many cities and counties see the achievement of their goals as inextricably linked to how and whether the commission steers Duke as a whole toward evermore renewable energy: They’re commenting and intervening in record numbers on the company’s 15-year plan, which has been largely panned for its lackluster approach to solar, wind, efficiency and battery storage and its over-reliance on gas.
For Ledford and other clean energy advocates, arguments about cost-effectiveness ignore a crucial fact: The avoided cost rate is now set unreasonably low by policy and is unattainable for all but the largest solar projects.
The figure, set every two years by the commission, had previously incorporated avoided fuel costs and “avoided capacity,” the price for new infrastructure like a gas plant or a transmission line. But a wide-ranging solar law enacted in 2017 drastically limited how much avoided capacity could be factored into the rate for solar-only projects.
Combined with declining fuel costs, the change caused the benchmark to plummet more than 40%, falling from 5.5 cents per kilowatt-hour for a 10-year, fixed-price contract to just over 3 cents. As a result, Ledford said, “It’s almost impossible to do a project at or below avoided cost.”
Duke acknowledges the conundrum, at least for the Asheville area. “We made a promise for the 15 megawatts in that region,” said company spokesperson Randy Wheeless. As for future permission slips from the commission, “if the only threshold is that it has to be below avoided cost, that’s going to be tough to meet.”