by Jon Sanders
Research Editor and Senior Fellow, Regulatory Studies, John Locke Foundation
The U.S. Energy Information Administration offers another glimpse, if you’re paying attention, into just how government-driven North Carolina’s “powerhouse solar industry” actually is.
Look at this graph, from the EIA’s “Today in Energy” post entitled “North Carolina has more PURPA-qualifying solar facilities than any other state“:
Utility-scale—one megawatt (MW) or greater—solar PV growth in North Carolina has been encouraged by a decades-old federal mandate, the Public Utility Regulatory Policies Act of 1978 (PURPA), and by state policies such as the renewable portfolio standard and the state renewable energy tax credit. Currently, 1,173 MW, or 92%, of North Carolina’s 1,271 MW utility-scale PV capacity is certified to have qualifying facility (QF) small power producer status under PURPA, which is more than any state in both absolute and percentage terms.
Congress passed PURPA in 1978 to promote alternative energy resources and energy efficiency, as well as to diversify the electric power industry. PURPA requires utilities to purchase power generated by qualifying facilities at the rate of the utility’s avoided cost. Avoided cost is the cost a utility would incur if it chose to either provide the energy itself (by building new capacity) or to purchase the energy from nonqualifying facilities.
Although PURPA is a federal mandate, individual states were left to set specifics such as the avoided cost calculation and the minimum capacity threshold. For North Carolina, utilities are required to establish up to 15-year fixed-avoided cost contracts for eligible solar PV qualifying facilities (QF) with a contract capacity of up to 5 MW. The availability of long-term contracts helps solar PV developers secure project financing.
North Carolina’s approach contrasts with the approaches of other states such as Arizona or Nevada, where the utilities offer contracts with shorter contract terms or with lower capacity thresholds.
Furthermore, the recent build-out of PV in North Carolina indicates that the avoided cost rates in that state, in addition to state and federal incentives, are attractive to PV developers.