Renewable Energy Mandates Face Scrutiny From GOP Lawmakers | Eastern North Carolina Now

   Publisher's note: The author of this fine report, Dan Way, is an associate editor of the Carolina Journal, John Hood Publisher.

McCrory shows fondness for wind farms as NCGA looks at scrapping requirements

    RALEIGH     Interest is coalescing around legislation that would repeal a law forcing energy companies to buy increasingly larger volumes of costly, tax-subsidized, renewable energy. Rep. Mike Hager, R-Rutherford, is drafting language for a bill as Gov. Pat McCrory pushes for offshore wind farms -- a form of renewable energy -- and endorsing an "all-of-the-above" approach to energy.

    "We have to get out of subsidizing a sector of business. It's not the government's job" to determine who will be successful and who won't, said Hager, who is taking the lead in the Republican-controlled General Assembly to phase out Senate Bill 3.

    That law mandates implementation of a statewide renewable portfolio standard requiring power companies to buy power from renewable sources, including solar, wind, swine and poultry waste, and biomass products.

    "If you're arguing for S.B. 3 and to keep the mandate, it's an emotional argument, it's not a logical or fact-based argument," Hager said.

    Hagar said his plan would allow existing renewable energy contracts to be fulfilled. Utility companies that have invested in renewable technology to fulfill state mandates also would not be stuck with any stranded costs.

    "We've got a couple of competing bills we're working through right now," Hager said. "We're trying to combine several of our ideas together in one bill," which he expects will be introduced soon.

    Meanwhile, Jan. 22 McCrory sent a letter to the federal Bureau of Ocean Energy Management supporting a U.S. Department of the Interior decision to establish three wind energy sites off North Carolina's coast.

    "I believe an 'all-of-the-above' energy plan that includes wind is vital to a prosperous energy future in North Carolina," McCrory wrote. "I have pledged to establish a partnership with neighboring states to develop offshore resources and recruit companies to bring a much-needed infusion of energy, jobs and investment to the state."

    Offshore commercial wind farms "could help diversify the portfolio of renewable energy sources in the state," McCrory wrote.

    "The National Renewable Energy Laboratory has estimated that developing North Carolina's offshore wind energy resources could generate $22 billion in new economic activity and create as many as 10,000 permanent jobs. This potential has been solidified with the recent renewal of the federal wind production tax credit," he said in the letter.

    Hager said McCrory's letter "didn't bother me a bit. I support all of the above too, as long as our taxpayers aren't supporting it" with subsidies.

    "I don't want to speak for [McCrory], but I think that he agrees with us in that it's got to be a free market issue in which we're doing our best for our ratepayers and our taxpayers" to deliver low-cost energy, Hager said.

    He said he has talked with the governor and his staff, as well as senators, about his bill, and believes they are all on the same page.

    But Nick Loris, a policy analyst at the Washington, D.C.-based Heritage Foundation, sounded a note of caution.

    "Both Republicans and Democrats throw out this all-of-the-above energy policy, and to me that's the most scary term of them all because it generally means subsidize all of the above," Loris said.

    "Essentially, that's the trouble with the system is you have these federal tax credits like the wind production tax credit or the investment tax credit for offshore wind, and a lot of the generation is occurring in these states with an RPS," Loris said. Federal subsidy benefits are concentrated only in states that have a renewable portfolio standard, and those states generally end up with higher electricity prices.

    "If there's an energy producer who thinks offshore wind makes economic sense, we think they should be permitted to build that to provide that electricity," he said.

    "Unfortunately, all of the time that offshore wind is being proposed it's usually in collaboration with some sort of renewable portfolio standards or generous federal and state subsidies," Loris said.

    "Even the Obama Energy Information Administration notes that offshore wind is the most expensive way to generate electricity," and those subsidized costs are passed along to consumers, he said. "As it stands now, it doesn't seem like the economics of offshore wind make much sense."

    While Hager wants to abolish North Carolina's renewable portfolio standards, Glen Andersen, energy program director for the National Conference of State Legislatures, said utilities "haven't tended to be very supportive" of such reform.

    "The tendency in states where they have tried this, utilities invest a lot of money and also planned their whole energy plans around these policies. Starting one policy and then pulling it out is extremely costly," Andersen said.

    "Suddenly the winds change on a policy that was supposed to be in effect for a number of years. That can cause some economic impacts as well" for businesses and investors in the renewable-energy industry, he said. They have expended substantial effort planning and identifying where resources originate, acquiring them, and allotting them.

    Businesses like "consistent market signals," Andersen said. Abolishing the renewable portfolio standard is not the only concern. Businesses have no guarantee an RPS would not be restored if its supporters regained control of state government.

    "We're committed to complying with the terms of Senate Bill 3, but we believe energy policy should be focused on the long term because of the nature of investments we are required to comply with," said Duke Energy spokesman Jeff Brooks.

    Renewable portfolio standards require "in some cases very long-term investments and commitments," Brooks said. "If something changes with that we'll certainly comply with that, but our focus is generally on the long term."

    Hager said his bill would address those concerns. It will "make sure our municipalities and utilities are held whole on the contracts we told them to get," he said, and "to keep the jobs there until the contracts run out" in 2021.

    That will inject "more certainty than they have right now. ... They know they have a certain amount of time" to recoup investment costs, Hager said.

    As it stands, Duke Energy is having a difficult time complying with many of the legislatively mandated renewable energy sources.

    Brooks said swine and chicken manure and biomass have experienced slack markets. He declined to give hard numbers, citing confidentiality of contracts.

    "At one point we had put out requests for those technologies and had not identified a number of projects that were viable within the time frame we needed or within the parameters" required, Brooks said.

    "We've seen the costs come down in some areas over the years as more of the technologies improve, and the costs come down as more investments are made in the industry, but they still do typically price out higher than the other energies that we dispatch," Brooks said.

    And that's Hager's main point of contention in drafting his legislation.

    "Duke is basically Santa Claus," he said.

    "Anybody who's a beneficiary will be against it because they're getting a bailout, they're getting a subsidy," Hager said. "Everybody gets paid except for the consumer."