Solar Energy in North Carolina: A 2021 View

In our final Exploring North Carolina Smart Grid webinar of 2021, we checked in on the status of solar energy in North Carolina. The session featured John Gajda, principal engineer at Strata Clean Energy; Maura Farver, distributed energy technology strategy and policy director at Duke Energy; and our own David Farmer, senior engineer at Advanced Energy. The presenters discussed how North Carolina is faring in solar generation, some of the advancements that have helped solar technology mature and regulatory changes that have shaped its use.

Solar Generation in the U.S.

Advanced Energy’s Farmer kicked off the webinar by discussing the current and future landscape of solar in the U.S. According to the U.S. Energy information Administration, the country is expected to see substantial growth in solar capacity in the coming years as it becomes a major source of generation, thanks in part to declining costs.

Utility-scale solar — typically in the form of large ground-mounted solar farms with the specific purpose of selling energy to the local utility — has been the primary contributor to solar’s rise. Utility-scale facilities are generally at least 250 kilowatts but can exceed 100 megawatts (MW), with panels that are either fixed-tilt or tracking.

At the end of the 3rd quarter of 2021, North Carolina ranked fourth in installed solar capacity nationwide, with over 7,000 MW. More than 7 percent of the state’s electricity generation comes from solar (compared to just over 2 percent nationally). And just like in the U.S. more broadly, utility-scale solar makes up most of North Carolina’s solar facilities. Residential solar has been slower to take off; less than 1 percent of households have rooftop solar, partially for economic and regulatory reasons (e.g., low electricity rates in the Southeast).

Although not a large player, community solar represents another way people can reap the benefits of renewable energy without investing in the technology themselves. Several community solar programs exist in North Carolina, particularly in cooperative and municipal utility territories.

An Industry Matures

Strata Clean Energy’s Gajda began by building on Farmer’s discussion of utility-scale solar, noting that it is considered front-of-meter (FTM) solar because it connects directly to a utility’s distribution or transmission system. In contrast, residential solar is considered behind-the-meter (BTM) solar because it can be used by consumers without passing through an electric meter and interacting with the grid.

The first utility-scale systems in North Carolina came online around 2008, a bit after residential solar. Today, the state is home to approximately 670 solar facilities that total just over 5,000 MW in capacity. Across all electricity generation sources, there are more than 1,100 power plants in the state, totaling more than 38,000 MW in capacity. (Capacity is the nameplate value of a plant, or its maximum output. Energy generation reflects how much energy a source of electricity actually produces, usually expressed in an annual amount.)

The 2010s was a particularly important decade for solar both nationwide and at the state level. In 2010, solar provided just 0.1 percent of the U.S.’s total energy consumption (beyond just electricity generation). That number jumped to 1.0 percent in 2019. A similar, but starker, trend was seen in North Carolina: In 2010, solar produced 0.2 percent of energy consumption; in 2019, it made up 2.7 percent.

While solar is often highlighted for its ability to clean up our energy mix, solar development also produces millions of dollars of economic impact. This benefit comes in the form of additional property taxes, landowner lease payments and more. North Carolina also ranks 11th in solar jobs.

Gajda then shifted to operational advances that are allowing solar to mature in North Carolina and elsewhere. Recently, drones and artificial intelligence (AI) have helped solar operators maximize the production and efficiency of their facilities. For example, this combination can help identify when a solar plant experiences a partial outage, or when certain solar modules are producing poorly. Drones can collect images through aerial scans, and then AI can process those images to determine the situation and inform technicians what to look for.

Daily production forecasting is another advancement. Early forecasting was based on simple regional irradiance (the amount of solar energy in a particular area at a particular time) and temperature. The industry is now able to incorporate more data into its forecasts, such as water vapor, ground albedo (which looks at solar reflecting off the ground) and cloud indexes, which benefits grid operators.

Gajda ended his presentation by discussing reliability, both of the solar sites and of the grid they connect to. Reliability is particularly critical to assess in older facilities that were built before there was a better understanding between utilities and solar operators about utility-scale solar design, operation and maintenance. Strata, Duke Energy and other stakeholders are working on a self-inspection program for North Carolina that looks at the point of interconnection for these older facilities (from the utility grid to the solar farm, for example). Another critical aspect to ensuring reliability is managing the settings inside the solar inverter.

In 2018, IEEE, the largest technical professional organization for the advancement of technology, released an updated version of its distributed energy resource interconnection standard 1547. IEEE 1547-2018 sets the framework for distributed energy resources to participate in grid-support services, which may allow for greater solar penetration. Utilities and regulatory commissions are at various stages of adopting the standard, so Advanced Energy is partnering with IEEE, Duke Energy and others on the IEEE 1547 Conformity Assessment Program (ICAP) to encourage compliance.

Solar Regulatory Developments in North Carolina

Between Duke Energy Carolinas and Duke Energy Progress — the two Duke Energy utilities that serve North Carolina — there are about 3.7 gigawatts of utility-scale solar in the state, with more to come, began Duke Energy’s Farver.

How did we get here? A number of developments have impacted solar growth in North Carolina over the years.

A significant event was the introduction of the Public Utilities Regulatory Policy Act (PURPA) in 1978. PURPA’s intent was to ensure that utilities were purchasing renewable energy from small power producers at a fair compensation, known as the avoided cost rate. Each state has its own way of setting that compensation.

While solar largely remained out of the market in the 1980s and 1990s, in 2003, Advanced Energy launched NC GreenPower at the request of the North Carolina Utilities Commission (NCUC). NC GreenPower was the first independent, statewide, multi-utility green pricing program in the U.S. It lets North Carolina electricity consumers support local renewable energy generators through their utility bills, which helped propel the industry early on.

In 2007, the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard (REPS) was created. This bill, Senate Bill 3, made North Carolina the first state in the Southeast with such a standard. REPS stated that electric utilities needed to meet a certain percent of their electricity needs with renewable energy or energy efficiency, which further created a market for solar energy in North Carolina.

As costs dropped, the PURPA avoided cost rate began to look attractive to solar developers, particularly for facilities under 5 MW. This led to a proliferation of solar in the state, which helped spur 2017’s House Bill 589, a collaborative effort between government bodies, solar developers, large businesses, nonprofits, electric utilities and others.

House Bill 589 contains programs for both residential and business customers and establishes solar rebates, community solar opportunities and more. It also addresses PURPA reform by crafting the Competitive Procurement of Renewable Energy or CPRE. CPRE maintains PURPA’s long-term contracts but also requires competition among developers to bring the best value to customers.

CPRE uses a 20-year term for solar resources up to 80 MW. Tranche 1 procured 520 MW of solar, Tranche 2 will procure 664 MW, and Tranche 3 is underway and has approximately 330 MW left to procure. It is expected to open in January 2022, with winners notified in July. The overall CPRE target is 2,660 MW.

Tranche 3 has also informed Duke Energy about the importance of timing in the interconnection process. A new clustering approach was developed to improve efficiency, in which there is a window to enroll, and all projects are studied collectively.

The most recent regulatory development was the passing of House Bill 951 in October. House Bill 951 provides a framework for a broad clean energy transition. The heart of the bill is a target for utilities to reduce carbon emissions by 70 percent by 2030 and to reach carbon neutrality by 2050.

Much of House Bill 951 will be overseen by the NCUC. For example, the NCUC is required to publish a Carbon Plan by the end of 2022 — with input from stakeholders and utilities — for how to meet the bill’s 2030 and 2050 goals. Any and all tools are available to meet the targets, including energy efficiency, demand-side management, grid modernization, etc. The plan will be reviewed every two years, giving the NCUC flexibility without having to worry about compromising the grid’s reliability.

Additional components of House Bill 951 include coal retirements and the securitization financing tool; performance-based regulation, which represents a different way of tracking utility progress and evaluating their efforts by decoupling utility revenue from energy sales; provisions for renewable energy programs for customers; on-bill repayments for energy efficiency investments; and “Blend and Extend,” which will explore how to lower older, higher rates while extending the life of contracts to produce a win-win for customers and facilities.

Under performance-based regulation, the NCUC will consider multi-year rate plans. These plans are designed to help utilities better prepare for longer-term investments by aligning rates over multiple years and capping utilities’ return on investment. The North Carolina Department of Environmental Quality will also submit a strategy for ensuring financing for decommissioning solar sites.

Overall, House Bill 951 represents a massive and exciting undertaking, though we are still in its initial stages.

Wrapping Up

We hope you enjoyed and learned from this year’s Exploring North Carolina Smart Grid webinar series. If you missed or want to revisit any of our previous sessions, you can view recordings and access additional resources here. We want to thank all of the presenters for sharing their time and expertise as well as Duke Energy for collaborating with us to deliver the series.

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