With New Law, South Carolina Sets a Foundation for More Solar Energy
- September 8, 2014
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Another state in the Southeast U.S. is recognizing the economic and environmental benefits of solar energy as commissioners, utilities and stakeholders in South Carolina are ironing out details of a new solar law that enables third-party leasing and contemplates the state’s two investor owned-utilities utilities, collectively, installing an estimated 300 megawatts (MW) of renewable energy by 2021, up from about 8 megawatts currently.
South Carolina joins North Carolina and Georgia in showing it can begin to turn a new leaf to toward cleaner energy development. The new law is the South Carolina Distributed Energy Resource Program Act (S.B. 1189), which lawmakers in both the House and Senate passed unanimously and Gov. Nikki Hale (R), signed into law in June. Curiously, she waited until August to start promoting it (photo).
The state’s two large investor-owned utilities – South Carolina Electric & Gas and Duke Power (including the former Progress Energy) – have the option to opt in, or out, of the program. If they opt in, they’ll get full rate recovery for meeting at least 2% of their five-year average peak power demand from renewable sources, most of which will likely be solar. If they opt out, no rate recovery for whatever path they pursue.
At this writing there appeared to be a significant and growing amount of public and lawmaker pressure to opt in. It was that public pressure that had been building for years which kicked off serious deliberations leading to the new law, according to Kenneth Sercy, Utility Regulation Specialist, and Hamilton Davis, Climate and Energy Director, at the South Carolina Coastal Conservation League, one of the bill’s biggest backers.
“What you’ve seen here is growing public interest in policies that boost investments in clean energy options,” Davis said. “The tide of public opinion is garnering more media coverage and that’s getting the attention of lawmakers.”
State Sen. Greg Gregory, who has been widely credited for leading the bill writing process, said, “It looks bad for us to just have a sliver of the solar power generating capacity as our neighboring states,” he told the South Carolina Radio Network . “I think this bill certainly starts us on the road to just catching up.”
Grant Reeves, who heads the South Carolina Solar Business Alliance, said he expects South Carolina Electric & Gas (SCE&G / SCANA) to throttle up its investments in solar, in part because its rates have been about 40% higher than Duke Energy’s rates. Higher rates mean a shorter time-frame for recovering costs.
Already, South Carolina Electric & Gas is pushing forward with two large projects totaling about 4 MWS.
The law is not a renewable energy requirement so South Carolina remains without a Renewable Portfolio Standard which could generate solar renewable energy credits, or SRECs. System owners can sell SRECs to help recoup their investment.
The law increases the maximum size of a solar system qualifying for what is widely viewed to be one of the better net metering policies in the country. The maximum size would jump from 100 kW to 1 MW.
The net metering law could change because it is subject to regulations that the Public Service Commission and interested parties hope to agree on by the March 2015.
Duke Energy is expected to hold out unless the net metering deliberations produce a less ratepayer-friendly regime. Currently, any excess power generated by a customer’s solar system earns a credit at the full per kilowatt-hour ‘retail’ rate. At present, that is the only economic incentive for residents and businesses to go solar in South Carolina besides the uncapped federal 30% Investment Tax Credit, which drops to 10% after 2016.
Lawmakers demonstrated an encouraging grasp of the value of small solar projects by requiring a utility that opts in to allocate one-half of the 2% for projects between 1-10 MWs and the other half comprised of solar projects under 1 MW. Of that second half, one-fourth of those must be 20 kW or smaller.
The other major feature of the new law authorizes the state to begin utilizing third-parties to finance in the form of leases provided that qualifying lease agreements pass muster with the state’s Public Service Commission. Stay tuned on that too.
Solar advocates shouldn’t expect a quick surge in the amount of in-state solar energy on the state’s grid until the rules are ironed out probably next Spring. Attempts to increase the cap on an existing, modest, 25% state tax credit did not garner enough support. The credit is capped at $3,500 or 50% of a taxpayer’s liability – whichever is less – for the year the system is activated. Companies such as SolarCity and Sunrun pushed to authorize direct third-party sales, but fell short.
A large tax credit wouldn’t necessarily benefit how commercial solar projects are financed, according Colin Murchie, Director of Project Finance at Sol Systems, which tracks state solar markets. “Attempts to simultaneously implement this program together with a significant tax state tax credit could actually restrict the availability of finance and increase its costs,” Murchie said.
Murchie said South Carolina faces a handicap that hampers solar development in North Carolina for how it enables Duke Energy there to control solar’s growth and who in the Tar Heel state benefits from it. Such a complication could result in a shortage of tax equity that could otherwise fund third-party ownership of solar systems, Murchie said. “The market could develop more efficiently with a program that includes projects independent of a utility.”
South Carolina had been viewed as among several states in the Southeast with no interest in enabling a competitive market for solar energy. While that’s still the case, at least engineering and procurement contractors could see growth in their business and third-party lessors could gain something of a toehold there, thereby expanding the constituency for clean energy and perhaps support for a more robust solar law.
The sentiment among most clean energy advocates is the new law is a step forward for solar in the Palmetto State. Whether South Carolina will see in-state growth in solar energy and related jobs remains to be seen.
“What we had was (sic) a lot of barriers, barriers that stood in our way when it came to solar energy,” Governor Haley said at the ceremonial signing. “Then we look at the fact that we want to find as many domestic resources as we can when it comes to energy.”