Simmering discontent among North Carolina rooftop solar companies reached a boil last week, with more than a dozen calling on the state’s governor and utility regulators to put the brakes on a Duke Energy proposal they believe will cut the value of home solar panels by more than a third.
Similar fights over how rooftop solar owners get credit for the electrons they create are raging across the country, with for-profit utilities squaring off against rooftop installers and climate activists. The Florida legislature, for instance, just passed a utility-backed measure that clean energy advocates say will throttle or even kill the customer-owned solar market.
But the battle lines over the crediting scheme, called net metering, are drawn differently in North Carolina. Aligned with Duke are some of the groups who oppose the Florida bill, as well as the nonprofit association whose members include the unhappy rooftop installers. All say Duke’s plan is imperfect but still good for home-owned solar, and far preferable to the bruising conflicts seen in other states. Plus, a 2017 law requires the Utilities Commission to produce a new net metering regime within five years.
But the rooftop companies — together with Durham nonprofit NC WARN, an outspoken Duke foe, and dozens of other activist groups — believe that, at best, it’s too early for compromise. They point out the same 2017 law requires an investigation of the benefits and costs of rooftop solar, and that analysis should come first.
“The law said, ‘do the study,’ but they never did it,” said Bob Kingery, co-owner of Southern Energy Management, one of the oldest rooftop solar companies in the state. “Settling for a net metering rate that’s negative to the consumer with no study feels improper to us.”
A national campaign against net metering
Thirty-nine states along with D.C. and four U.S. territories have mandatory net metering policies, allowing rooftop solar customers to get credit for electrons they add to the grid at retail rates. This one-to-one exchange helps solar panels pay for themselves and reduce overall costs for customers over time in the form of lower energy bills.
Rooftop solar delivers other advantages beyond cost savings, including cleaner air, fewer electrons lost in transmission, and reduced need for electricity from centralized fossil fuel power plants. Most state utility commissions who’ve sought to put a price on these benefits have pegged them above the retail rate utilities are paying for them, according to a 2019 analysis.
But for the investor-owned, for-profit monopoly utility, there’s an obvious problem: Its business model rests on selling its product at a markup — albeit one approved by regulators. Fewer kilowatt-hours sold at a markup means less revenue and less profit. And kilowatt-hours swapped at the retail rate are a wash.
“The utility industry raised this in 2013 as a major threat to their bottom line,” said Grant Smith, a senior policy advisor with the nonprofit Environmental Working Group. He cited a paper and other materials from the Edison Electric Institute, the utilities’ national lobbying association. “In that report, they say, ‘What are we going to do about this?’ The first thing they mention is increasing fixed charges and reducing the export rate for net metering.”
Externally, utilities focused on the claim that non-solar customers were subsidizing solar customers by paying more for the poles, wires, and other fixed costs of the grid. They also argued that rooftop solar necessitated expensive grid improvements, though an analysis from the Lawrence Berkeley National Laboratory shows massive upgrades are triggered only when rooftop solar accounted for a tenth or more of electricity sales — a bar it’s very far from reaching.
In state after state, utilities have sought to reimburse solar customers less for their unused generation and charge them new “grid access fees” and “standby charges.” They also worked to increase fixed charges for all customers to counteract gains in efficiency, said Smith, whose organization is also intervening against the Duke proposal in North Carolina.
‘Something was going to change’
Duke publicly flirted with proposing net metering changes in 2014 but backtracked in the wake of its Dan River coal ash disaster. Three years later, it ensured a sweeping clean energy law included a key directive on net metering. The 12-line provision orders regulators to establish new net metering rates and end current rates for all customers at the start of 2027. Reinforcing utility claims, it requires the new rates to ensure that “the net metering retail customer pays its full fixed cost of service. Such rates may include fixed monthly energy and demand charges.”
A law adopted last year aimed at cutting Duke’s carbon pollution 70% by 2030 buttresses the 2017 measure, directing the commission to “revise net metering rates” and to “ensure … no cross-subsidization occurs.” Again, the measure had robust backing and drafting input from Duke.
Together, the two statutes put the thumb on the scale against rooftop solar, said David Neal, a senior attorney at the Southern Environmental Law Center, who helped negotiate Duke’s proposal on behalf of the Southern Alliance for Clean Energy and Vote Solar.
Complicating the path for net metering, the Utilities Commission has repeatedly sided with Duke on how it calculates the basic cost of connecting all residential customers, allowing a “minimum system” method that Neal says overcharges all residential customers whether they have solar panels or not.
“We have fought as hard as I know how to fight to show the commission that that is not a sensible way to do a cost-of-service study,” Neal said. “We’ve lost.”
What’s more, says Peter Ledford, general counsel for the North Carolina Sustainable Energy Association, the state-sanctioned ratepayer advocate has repeatedly come after rooftop solar in commission proceedings.
“When’s the last time you saw Public Staff advocate for rooftop solar?” Ledford asked. “They’re not coming out and saying, ‘Let’s get rid of net metering,’ but they’re certainly no friends of the policy.”
Facing the law’s 2027 deadline, Ledford’s group and the Southern Environmental Law Center saw a compromise, similar to a widely touted deal they’d brokered with Duke in South Carolina, as their best option.
“Something was going to change,” Ledford said. “If you look at the politics of it, it wasn’t going to change for the better. There’s no upward movement — it’s a matter of mitigating the downward movement.”
‘You never like everything in a compromise’
Thus, in November, the groups and Duke announced they’d reached a settlement on net metering.
Today’s net metering scheme is straightforward. Solar owners get a one-to-one retail credit on their electric bill for any kilowatt-hours they offset or contribute. Those credits rollover month by month until the end of May, when they’re zeroed out.
The compromise proposal is anything but simple. It preserves the one-to-one retail credit for solar energy, but with an important caveat: The value of the credit would be higher during times of peak demand — between 6 and 9 a.m. in the winter and 6 and 9 p.m. in the summer — and lower during “off-peak hours.”
Compared to non-solar customers’ $14 “basic facilities charge,” rooftop panel owners would face a minimum bill of $22 in Duke’s central and western territory and $28 in its eastern territory. Only abnormally large systems of 15 kilowatts would face an extra charge to access the grid.
Solar customers with electric heating would get an extra upfront rebate — about $2,500 for an average-sized, 7-kilowatt system — as well as an annual bill credit, so long as they installed a smart thermostat that would allow Duke to control it remotely to manage demand. Existing solar homes could switch to the new net-metering rates or stay on their old plans, with a few adjustments, until 2037.
For its part, Duke believes the deal will ensure solar customers pay more of their fair share of costs, though they would have preferred customers to contribute even more. “You never like everything in a compromise,” acknowledged Lon Huber, Duke’s vice president for rate design.
Without question, solar customers would fare better under this proposal than under the now-stalled plan in California or under the Florida legislation, which allows steep new charges and slashes bill credits by more than half.
Still, no one is quite sure what the impact will be. The Sustainable Energy Association estimates solar customers could come out about as well as they do currently, so long as their systems aren’t oversized and they’re mindful of on- and off-peak usage. Those taking advantage of the thermostat rebate could even save more money than solar customers do now.
In light of scientists’ increasingly dire warnings about climate change and its impacts, basically maintaining the status quo is unacceptable, said Jim Warren, the director of NC WARN. “In an age of climate crisis, we cannot afford to go back a step or two,” he said. “We can’t afford to advance just a step or two.”
But rooftop installers worry most about the worst-case scenario, which they also view as the most likely: rooftop customers don’t do anything to change their behavior. In that case, the value of their panels would drop between 25% and 35%.
“It’s going to potentially reduce the value of solar significantly,” said Stew Miller, co-founder of Cary’s Yes Solar Solutions, another veteran rooftop installer, “which is going to have an impact on high-paying jobs and benefits.”
The program is mind-numbingly complicated, installers say, too difficult for installers to explain to customers and too difficult for solar panel owners to navigate. About half of their customers, who have gas heat, would be excluded from the chance to get the extra rebate. Plus, the rebate program is in a separate docket at the Utilities Commission, one for Duke’s eastern utility and one for its central and western utility.
“There are two dockets that are completely independent of each other,” said Southern Energy Management’s Kingery. “If one of them gets approved and the other doesn’t, the economics get even worse for the consumer.”
Across the border in South Carolina, regulators approved Duke’s time-of-use proposal but rejected a similar rebate program without saying why. Observers believe Public Staff is likely to oppose the rebate here, too, though the Utilities Commission has overruled Public Staff before.
‘No immediate need’
Kingery and other installers are clear-eyed about the political situation and the 2027 deadline. But they also point to another stipulation in that 2017 law. The new net metering rates, it reads, “shall be nondiscriminatory and established only after an investigation of the costs and benefits of customer-sited generation.”
Rep. John Szoka, a Fayetteville Republican and chief author of the law, has said he envisioned regulators, not Duke, would conduct the investigation.
“It’s not up to the utility to determine whether net metering is good or bad,” he told the Energy News Network in 2017. “We know what that answer will be. We’re not putting the fox in charge of the hen house here. That is not the intent.”
In filing its net metering proposal with regulators, Duke asserts that a 2021 rate design study serves as the mandated “investigation.” But that study is a series of qualitative reports on discussions the company had with various stakeholders. There is no publicly available quantification of rooftop solar costs and benefits conducted by Duke, let alone an independent analysis overseen by the commission.
Kingery is confident that a robust analysis would vindicate the current net metered payments, just as they have in other states, and that there’s still time for such an investigation. “There’s no immediate need to change net metering in North Carolina,” he said. “It’s not as if the number of customers is growing drastically and Duke has issues with the reliability of the grid.”
That’s why the net metering proposal should be put on hold until regulators have conducted the required study, he said. “That’s a step in the right direction, in our minds.”