Solar installers in North Carolina could get some breathing room for adjusting their business models to lower net metering rates under an amended proposal hammered out by an installers group and Duke Energy (NYSE:DUK) that was announced Tuesday.

Filed with the North Carolina Utilities Commission on May 19, the stipulation proposes a “Bridge Rate” that will help installers and customers transition from the state’s current retail-rate net metering to a lower rate based on the “avoided cost” rate the utility pays large commercial customers with solar generation.

Duke’s original proposal, filed in November 2021, was the result of an agreement with solar supporters, including the North Carolina Sustainable Energy Association and Solar Energy Industries Association (SEIA). It also contained the cut to avoided-cost rates, plus other provisions that more than a dozen installers complained  in a March 10 letter to Gov. Roy Cooper (D) would “reduce the value of solar production by 25 to 35% for the average consumer.” (See Duke and Solar Advocates Forge NC Net Metering Agreement.)

Key differences between Duke’s original proposal and the stipulation include the following:

• The proposed grid access fee of $1.50 to $2.05/kW per month for systems of more than 15 kW has been removed.
• The complex time-of-use rates proposed in the original have also been removed. Under those provisions, the electricity produced by a rooftop installation during off-peak hours would have only been applied to lower a customer’s off-peak rates, while on-peak generation could only be applied to on-peak consumption. 
• The original proposal’s upfront rebates of 39¢/watt are also no longer in the package. They would have been available to solar customers with all-electric homes, who installed smart thermostats and enrolled in Duke’s demand response program for 25 years. The stipulation commits Duke to developing demand response programs that will include customers with gas heating or appliances. 

If approved by the NCUC, net metering rates in the stipulation would apply to solar customers in both of Duke’s North Carolina utilities — Duke Energy Progress and Duke Energy Carolinas — and would be in effect from Jan.1, 2023 to Dec. 31, 2026.

Existing customers on retail-rate net metering would switch to the Bridge Rate in 2027 and could stay on it for up to 15 years, minus the time they were on the retail rate. Duke’s current residential retail rate, as listed on the company’s website, is 10.6¢/kWh; the avoided cost rate, based on rates paid to larger commercial projects would be about 3¢/kWh.

“Duke Energy knows that customer-sited solar is an important part of the future growth of solar in North Carolina,” said Lon Huber, Duke Energy’s senior vice president of pricing and customer solutions. “We believe this phased-in compromise will help the installer industry navigate market changes and adapt to” longer-term rate design changes. 

In a statement of support filed with the NCUC on Friday, SEIA said the stipulation “allows the solar industry the additional time that is needed to alter its business models and practices to accommodate new and innovative tariff structures through the proposed Bridge Rate. Building in some additional time for a smooth and thoughtful transition helps to avoid a sudden, negative disruption to the existing rooftop solar market as consumers become educated about the new options and companies adjust the way they market [for] any new policy.”

Dave Hollister, founder and president of Sundance Power Systems of Ashville, N.C., one of solar installers who negotiated the stipulation with Duke, claims to have one of the first net-metered rooftop solar arrays in North Carolina on his home. He sees the compromise as basically a bottom-line issue. It “removes all of the inherently difficult issues for calculating a return for a customer and improves the return for solar customers,” he said in a phone interview with NetZero Insider.

Going from retail-rate to avoided-cost net metering “didn’t affect people’s actual bills as much as you might think,” he said. Hollister also believes that as more distributed and renewable generation, such as offshore wind, goes on the grid, the avoided-cost rate will go up.

A National Issue

Intended as an incentive to offset the high cost of solar in the early days of the rooftop industry, retail-rate net metering — paying solar owners for power they pump back onto the grid — has been a subject of disputes between utilities and solar advocates across the country.

Utilities have long argued that solar customers do not pay their fair share of system costs, which are then shifted to other, often lower-income customers. Installers have countered that utilities and regulators do not consider the benefits rooftop solar provides to the grid and all utility customers.

The North Carolina compromise was preceded by the defeat of a Florida bill (HB 741) that would have phased out net metering in the state. The bill was passed by the state legislature but vetoed by Gov. Ron DeSantis (R). (See Solar Advocates Cheer Fla. Net Metering Win, Brace for Next Battle.)

Mississippi regulators recently considered a change to the state’s program, which credits customers at a rate between the retail rate and the avoided-cost rate. The Public Service Commission ultimately decided to keep the current structure while adding a solar rebate for residential customers to try to spur the market.

And in California, strong opposition from the industry and public officials resulted in the Public Utilities Commission pulling back a proposal that would have slashed net-metering rates for solar owners up to 80% and added a monthly grid charge. (See CPUC Postpones Net Metering Plan.)