RENEWABLES

S.C. takes 'deliberate' steps toward solar

South Carolina has laid the groundwork to significantly expand its use of solar.

There are no lofty renewable goals or thousands of megawatts of rooftop solar systems and farms under contract.

But the framework is there to loosen restrictions on net metering, create financing arrangements for solar panels and encourage utilities to add more solar to their electricity mix.

The fanfare behind the new renewable energy proposal isn't in the legislation, now sitting in a Senate committee, according to those involved in the process. It may be more that the measure came together without anyone publicly using words like "battle" or "fight."

Instead, utilities and environmental advocates interviewed by EnergyWire have called the process "collaborative" and consider the draft legislation an opportunity for South Carolina. More importantly, they say it could be a blueprint for other Southeastern states.

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"Across the South, states like North Carolina and Georgia have already moved to take advantage of local, affordable solar power, and this compromise legislation is what South Carolinians have been waiting for," said Katie Ottenweller, leader of Southern Environmental Law Center's Solar Initiative, in a statement. "With smart, forward-looking policies in place, the state's solar market can and will grow rapidly, bringing enormous benefits to the people of South Carolina."

The bill amends a 2013 measure (S.B. 536) that would open the door for solar companies, such as SunRun and SolarCity, to sell solar panels as well as the electricity at a fixed rate over a 10- or 20-year time frame. Doing so would let a homeowner or business finance the panels and alleviate pricey upfront costs, making solar more economical right away.

Other state legislatures have taken up similar proposals. And, as the utilities have in those states, the South Carolina electric companies stepped in, arguing that those private solar companies would be illegally operating as utilities.

Companies shouldn't be selling electricity if they are not regulated by the state's Public Service Commission, the utilities said.

Other Southeastern states, including Georgia, Florida and North Carolina, prohibit third-party sales for solar and other renewables. Leasing solar panels is OK, however, the utilities in those states say.

Such laws in those states and in South Carolina are vague, according to the solar industry and others. Clearing up that gray area in South Carolina was a key driver for amending S.B. 536, said Hamilton Davis, energy and climate director for the South Carolina Coastal Conservation League.

"Our key leaders in the Legislature basically said, 'If you guys, the utilities, don't want this, then bring us something you can live with, because we need to move forward with solar in South Carolina,'" said Davis, one of the dozens who had a key role in drafting the new legislation.

An economic issue

That directive led to a 100-plus-page report that examined the barriers to renewable energy, including a low net metering cap and a tightly regulated utility model that essentially prevented private solar companies from doing business in South Carolina.

The report said South Carolina has a "significant solar resource" but pointed out that it gets less than 2 percent of its electricity from solar and other renewables.

All of the utilities dispute the assertion that they've been slow to incorporate solar and other renewables into their electricity mix:

  • Santee Cooper, the state-owned utility, started with a landfill gas station in 2001. The utility now has 130 megawatts of renewables on the grid or under contract, spokeswoman Mollie Gore said. That mix includes landfill gas, solar, biomass and wind from a small turbine the company owns and operates. It also has partnered with the state's electric cooperatives on a 3 MW solar system that will start operating this year. Santee Cooper has also taken the unusual step of offering low-interest loans to customers who wanted to install solar panels. The utility started in 2008 packaging federal tax breaks and other incentives, including the loans.
  • South Carolina Electric & Gas installed a 2.6 MW solar farm at Boeing's manufacturing facility in 2011. The utility also plans to add a total of 20 MW of solar energy from large-scale solar farms over the next three years, significantly boosting the utility's solar output.
  • Duke Energy Corp. has a large renewable energy subsidiary. That unit has wind and solar projects mostly in the Northeast, the Midwest and Southwest.

South Carolina utility officials use a word that industry executives in other Southeastern states frequently use to describe their slow approach to renewables: deliberate.

"In South Carolina, yes, we've been slow; we've been deliberately slow so we could get to the point that we could get to a comprehensive package like this," said Ryan Mosier, a spokesman for Duke Energy.

The state's reluctance to embrace renewable energy was becoming an economic development issue, some say.

"I did believe and still do that regional economic competitiveness is a big part of what's driving South Carolina," said Lee Peterson, an Atlanta-based tax attorney for CohnReznick, a national firm that specializes in renewable energy finance.

Peterson has testified in support of solar and renewables in front of South Carolina officials, including the Public Service Commission.

"South Carolina is being left behind in this sector, and that doesn't sit well no matter who you are," he said. "It almost requires them to step up and compete with their neighbors."

The renewable energy report was presented to the Legislature earlier this year, and then a group went to work on drafting a new solar bill. They started out with basic concepts and some legal language and built upon that.

"We were all comfortable with the concepts: There's going to be leasing; there's going to be a renewables program; we're going to set the stage for net metering," said Davis from the coastal conservation organization.

Groups could work individually, but eventually they would all reach a point where they would have to get in a room and have as many as two dozen people drafting pieces of the legislation. Meetings would last all day. Sometimes there would be as many as three in one week with attorneys, lobbyists and advocates from all sides.

"It's a delicate balancing act to make sure when you change one thing here, it doesn't lead to something else, somewhere else," Davis said.

Financing and the bottom line

The bill hits several key issues, including third-party financing and net metering.

Third-party financing, in particular, helps tax-exempt entities such as churches, schools, local governments, nonprofits and the military. Typically, the tax-paying financier owns the solar system and then passes along a federal tax credit of 30 percent to the customer.

This type of arrangement works with third-party sales under a purchasing arrangement. The tax law does not allow it to happen when the panels are leased, so even under the new proposal, churches, nonprofits and others wouldn't get the tax breaks.

The tax-exempt organizations were the easiest to want to help, but legally they were the most difficult, said John Frick, government relations vice president for the state's electric cooperatives, which serve 1.5 million customers in all 46 counties.

"As we started working through the scenarios, about every idea we came up with was something untenable legally," Frick said.

To get past this, the bill requires utilities to come up with programs to make solar panels more affordable for nonprofits.

The bill also expands net metering -- allowing customers with solar systems to get bill credit for selling excess electricity to the power grid. But there is an additional step: The state's PSC must come up with additional standards, including the value of solar, to implement the program.

"Everybody thinks you should pay what it's worth," Frick said. "But what is it worth?"

If the value isn't high enough, renewable energy companies argue, they will have trouble doing business. If it's too high, utilities will argue that they can get cheaper power elsewhere, even from large-scale solar farms.

"The bottom line is, if you have solar panels on your roof, and your panels are producing at capacity, and you're not using Santee Cooper electricity, then your investment is working," said Gore from Santee Cooper.

When that's not happening, Santee Cooper -- or any other utility in the same situation -- has to provide that backup power.

"We still have our lines running to your house, and we still have our generating units backing up your solar panel," Gore said. "From our standpoint, the rates need to reflect the cost to serve you and to serve your neighbor who doesn't have solar panels."

How those details play out is unsettling for the utilities and environmental advocates. Renewable energy boosters argue that tacking on fees to pay for such costs offsets any savings that residents and business customers get from using solar.

"That's been the angle utilities have used across the country to go after net metering," said Charlie Coggeshall, renewable energy manager for the Southern Alliance for Clean Energy.

'We're not even close to the finish line'

The marathon meetings lasted through last week. Sometimes tinkering with the bill was just to make sure numbers matched up. Other times, parts of the legislation were bogged down in jargon.

That happened at one point before the first subcommittee meeting two weeks ago.

"We literally didn't have language that I didn't feel comfortable turning over to staff because it was hard to read and understand," said Frick from the electric cooperatives group. "Sometimes it said, 'See Section 20-C,' when it really meant 'Section 10-B.'"

Details were key, Davis and others said. This was not a bill that would be passed and then dramatically overhauled a year later. There could be opportunities to tweak the bill, but the idea was to pass something with the understanding that the law would stand for years to come.

"I think this is going to set the stage for a while," Davis said. "The hope is that you get it as close to right as you can."

The legislation is now being passed around for everybody to review and weigh in.

"I feel pretty good about the fact that you're not representing this as one thing when there's actually something else going on," Davis said.

Today is another key date for the bill. It is expected to be aired before a full Senate Judiciary panel. There's a full docket, so the bill may not be heard until the next meeting.

Utilities and environmental advocates bring up the time crunch. South Carolina's legislative session ends June 5. The bill must pass the Senate and cross over to the House by May 1. That leaves one month, which isn't a lot of time for such a massive piece of legislation.

If any one of the groups -- utilities, environmental advocates, business leaders -- wrote the legislation, it would look drastically different, Davis said. That's not what happened here, he said.

"People have gotten comfortable with each other and developed relationships. That makes it easier to work together, and I would say there's maybe a higher level of trust and familiarity in who you're dealing with."

Davis said that is probably unique for this bill and acknowledges that it's a difficult place to get to.

"There are people who have been doing this for a long time, myself included, but you get to know your way around and you know the players involved and it just makes the process more efficient," he said.

The compromise draft legislation is still the beginning.

"We're not even close to the finish line. We're at the start of the race," Davis said.

Twitter: @BizWriterKristi | Email: kswartz@eenews.net

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