North Carolina’s Big Clean Energy Plan An Example For Battleground States

Courtesy of RMI.
By Heather House & Shelby Kuenzli

On October 13, 2021, North Carolina Governor Roy Cooper signed into law the first major piece of climate legislation in the Tar Heel state in recent years. North Carolina House Bill 951 — Energy Solutions for North Carolina — was passed by both chambers of the North Carolina state legislature with bipartisan support. Being that North Carolina is a battleground or “moderate” state, this legislation speaks volumes about how climate solutions can become ground for both sides to advance priorities.

With the federal clean energy performance plan hanging in the balance, it’s more important than ever for states and local governments to step up and implement climate action plans. Sixteen states thus far have passed laws requiring greenhouse gas emissions reduction, yet the only other Southeastern state to have done so before October 13 was Virginia. Many typically progressive states have yet to pass similar legislation.

This breakthrough law allows North Carolina to transition from having a Clean Energy Plan and carbon reduction targets to having a concrete law with enforceable steps. The law, while not perfect, is an important step forward and a win for the climate. With this legislation in place, the imminent rulemakings of the North Carolina Utilities Commission (NCUC) will be an important focus for stakeholders to shape the implementation of this new law.

What’s in the Law

The Energy Solutions for North Carolina Act is a breakthrough for advocates and stakeholders across the state who have been working for years to advance a clean energy agenda. The Act directs the NCUC to take all reasonable steps to reduce carbon emissions from the electric sector 70 percent by 2030 and 100 percent by 2050. To achieve this goal, the NCUC will have to implement a plan with the electric public utilities including input from stakeholders.

Here are some significant wins from the Act:

• Of all new solar implemented, 45 percent will have to go through competitive solicitations and must be third-party owned and operated; the other 55 percent will remain utility-owned. This is a win for third-party solar developers and customer rates.
• All coal retirement expenses shall be at least 50 percent securitized, a step that can reduce the costs to utility customers of accelerated plant retirements.
• Performance-based regulations were authorized by H951. While this has the potential to be a win, the details of how the implementation shakes out will determine its success.
• The NCUC will explore on-bill financing of energy efficiency.
• The NCUC will develop a rider for a voluntary energy program that will allow customers to purchase renewable energy or renewable energy credits. This is posed to be a big win for commercial, industrial, and residential customers, but it remains unclear on whether this program will be inclusive of local governments.

These developments in isolation are wins for the state that stakeholders should be proud of; however, a lot of attention has been centered on the shortcomings of the Act. Consumers and consumer advocates, who are concerned about potential electricity rate increases, preferred 100 percent securitization of coal retirement costs and 100 percent competitive all-source procurement. While these targets were reduced, the passing of this legislation creates major strides forward in the right direction.

North Carolina’s Clean Energy Transition — Wins and Lessons Learned  

While a lot of the legislation was crafted behind closed doors with few stakeholders directly involved, there were a lot of voices that helped influence this legislation that haven’t been historically present in energy or regulation engagements. For example, the Department of Environmental Quality (DEQ) led an inclusive stakeholder process that included local governments, businesses, industries, power providers, technology developers, residents, and others to increase the use of clean energy technologies, energy efficiency measures, and clean transportation solutions. RMI was honored to support DEQ and the state to run this inclusive stakeholder process and summarize the input from these groups that led to the development of the Clean Energy Plan (CEP).

Following the release of the CEP, DEQ and the state demonstrated commendable leadership. They didn’t put the plan on a shelf. Instead, they worked with a broad set of North Carolina stakeholders to explore two of the top CEP recommendations. DEQ was tasked with setting up “key stakeholder groups to design policies that align regulatory incentives and processes with 21^st-century public policy goals, customer expectations, utility needs, and technology innovation.”

RMI supported this effort by facilitating a group of North Carolina energy stakeholders, alongside the Regulatory Assistance Project, through the North Carolina Energy Regulatory Process to develop recommendations for policy and regulatory changes. The efforts of these North Carolina stakeholders yielded a variety of policy proposals and proposed legislation that were carried forward into the 2021 legislative session.

Another component that may have contributed to this legislation was stakeholder input received on Duke’s 2020 Biennial Integrated Resource Plan (IRP). RMI, through the American Cities Climate Challenge Renewables Accelerator, in partnership with World Resources Institute, supported 15 North Carolina cities and counties in learning about pathways for elevating their goals and priorities. The local governments from across the state then requested that the NCUC take their clean energy goals into consideration when reviewing the IRP. All of these cities’ concerns became key topics during legislative discussions. This is prime example of the power that local governments have in swaying the clean energy conversation in their state.

The persistent work of cities, stakeholders, and advocates in North Carolina to make their voices, and the voices they represent, heard haven’t gone unanswered. While the resulting legislation in North Carolina may not be ideal from the perspective of all stakeholders, because of their efforts, the law now better supports a cleaner and more equitable energy transition plan.

After Legislation Comes Implementation

While the Energy Solutions for North Carolina Act is a big win for the state and an example of bipartisan climate collaboration, more work is ahead of North Carolina stakeholders. Over the next 180 days, the commission will host several proceedings and rulemakings that will determine the extent to which the Act’s vision is realized. North Carolina stakeholders need to provide input to ensure the ambition of the North Carolina Clean Energy Plan’s main carbon reduction target is met equitably. RMI was pleased to have the opportunity to support North Carolina stakeholders in getting to this point and looks forward to continuing to support them in realizing the law’s target CO₂ reductions.

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