North Carolina's Renewable Energy and Energy Efficiency Portfolio Standard ("REPS")
In 2007, North Carolina enacted its Renewable Energy and Energy Efficiency Portfolio Standard ("REPS") with the passage of Senate Bill 3 ("REPS Law," N.C. Gen. Stat. 62-133.8). A typical renewable energy portfolio standard ("RPS") is a state policy that requires electricity providers to obtain a minimum percentage of their power from eligible renewable resources by a certain date.
How the REPS Works
North Carolina's REPS differs from a traditional RPS because it: (1) includes energy efficiency as a resource that can be used to meet the power requirements; (2) includes minimum requirements from three different renewable energy technology types - solar, poultry waste, and swine waste (collectively referred to as the "set-asides" or "set-aside requirements"); and (3) allows renewable energy certificates ("RECs") derived from out-of-state renewable energy facilities to be used for a portion of the requirements.
Eligible renewable energy resources include solar-electric, solar thermal, wind, hydropower up to 10 megawatts (MW), ocean current or wave energy, biomass, landfill gas, combined heat and power (CHP) using waste heat from renewables, and hydrogen derived from renewables.
Electricity providers can choose to meet the REPS by either pursuing their own projects or looking to the private market.
The investor-owned utilities ("IOUs") are required to supply 12.5% of their retail electricity sales from eligible resources by 2021. IOUs may meet up to 25% of the requirement through energy efficiency measures, including CHP systems powered by non-renewable fuels. After 2021, up to 40% of the standard may be met through energy efficiency.
Electric membership corporations ("EMCs" or "co-ops") and the municipal service providers ("munis") are required to supply 10% of retail electricity sales from eligible resources by 2018. These providers may meet 100% of their REPS requirements through energy efficiency and demand-side management measures. These providers are also allowed to meet up to 30% of their requirements through large hydropower projects.
The following is a summary of the compliance schedule for North Carolina's electricity service providers. Note that each year's percentage requirement refers to the previous year's electricity sales (i.e. the 2021 goal is 12.5% of 2020 retail sales), and that the swine and poultry waste goals are aggregate goals for the state and not for each individual electricity provider.
|Year||Total Requirement||Solar||Swine Waste||Poultry Waste|
The electric service providers meet their REPS requirements by retiring renewable energy certificates ("RECs") in North Carolina's Renewable Energy Certificate Tracking System ("NC-RETS").
RECs are tradeable financial certificates and are equal to one megawatt of electricity, or an energy equivalent, that is generated by an eligible renewable energy resource or saved due to an energy efficiency measure. There are two types of RECs - bundled and unbundled. RECs that are obtained through the purchase of renewable energy and the renewable energy attributes are known as "bundled" RECs. RECs that are purchased without the associated energy are known as "unbundled" RECs.
Setting the Rules for the REPS: The NCUC Rulemaking Process
Shortly after the REPS Law was passed, the Commission undertook an expedited rulemaking process. The REPS Rulemaking Docket (NCUC Docket No. E-100, Sub 113) sets the rules for complying with the REPS as well as defining the parameters for the development of the renewable energy compliance market in North Carolina.
NCSEA has been extensively involved in this docket since its inception. NCSEA's overarching approach to the myriad of issues contained within this docket is to expand the economic development opportunities within North Carolina by removing barriers to indigenous renewable energy generation.
Depending on the type of electric service provider, the REPS compliance plans are found in one of two different annual proceedings at the Commission. The first is the integrated resource plan (“IRP”) proceeding and the second is the REPS compliance plan proceeding.
The investor-owned utilities file their REPS compliance plans as a part of their IRP annual filing. The IRP filings are due by September 1 of each year. The IRP proceeding generally takes approximately one year to complete. Because the IRPs are based on the previous year’s estimates and then there is an extensive time period to approve the IRPs, the REPS compliance plans are around two years old by the time they are approved. The 2009 integrated resource plans proceeding is NCUC Docket No. E-100, Sub 124.
Other Electric Service Providers
Generally, the other electric service providers that are operating within the state and have a REPS requirement file their REPS compliance plans as part of the Commission’s REPS compliance plan proceeding. The compliance plans must be filed with the Commission by September 1 of each year. The annual compliance plans are strictly informational in nature as the Commission only has limited regulatory jurisdiction over these providers. The 2009 REPS compliance plans proceeding is NCUC Docket No. E-100, Sub 125.
As with the REPS compliance plans, the REPS compliance reports are found in various proceedings at the Commission.
Because the investor-owned utilities are required by the REPS Law to file rate riders with the Commission to recover their incremental costs associated with complying with the REPS, their REPS compliance reports are filed as part of their REPS rider proceedings. The REPS rider proceedings are utility specific and are filed on a schedule that is tied to the utility’s other annual cost recovery riders (Commission Rules R8-55 and R8-67). These schedules are staggered throughout the year to balance out the Commission’s and other intervenors’ workloads.
Duke Energy files first. Its REPS compliance report and proposed REPS cost-recovery rider is due 120 days prior to the first Tuesday in June, which generally works out to early February. Duke’s 2009 REPS compliance filing can be found in NCUC Docket No. E-7, Sub 936.
Progress Energy files second. Its REPS compliance report and proposed REPS cost-recovery rider is due 120 days prior to the third Tuesday in September, which generally works out to late May. Progress Energy’s 2009 REPS compliance filing can be found in NCUC Docket No. E-2, Sub 974.
Dominion North Carolina Power files last. Its REPS compliance report and proposed REPS cost-recovery rider is due 105 days prior to the second Tuesday in November, which generally works out to late July. Dominion has not yet filed for a REPS cost-recovery rider.
Other Electric Service Providers
All other electric service providers that have a REPS requirement but are not subject to the IRP proceeding are required to file their REPS compliance report with the Commission by September 1 of each year. Commission rule R8-67 states that the Commission will schedule a hearing to take testimony on the compliance reports.
To date, only the 2008 compliance reports have been filed and those were filed in conjunction with the 2009 compliance plans in NCUC Docket No. E-100, Sub 125. In a recent Commission order, the Commission decided to waive the hearing on the 2008 REPS compliance reports. The Commission found that little would be served at this time, before the initial REPS compliance year, to hold a hearing to verify the validity of the compliance reports. The Commission, however, also found that certain providers raised valid questions in their reports and thus decided to conduct separate provider-specific proceedings. As a result, the following proceedings are currently in progress.
By October 1 of each year, the Commission is required to file an annual report on the status of the REPS to the Governor and to members of the Environmental Review Commission and the Joint Legislative Utility Review Committee of the General Assembly. This report is a detailed summary of the state of the REPS and covers, among other things, issues that have come before the Commission, the utilities and other electric service providers’ REPS compliance plans, spending applied to the REPS cost caps, and potential issues that the Commission foresees on the horizon. A copy of the annual REPS reports can be found on the Commission’s website.
North CarolinaRenewable Energy Certificate Tracking System (“NC-RETS”)
Shortly after the passage of the REPS and the completion of the REPS rulemaking process, NCSEA petitioned the Commission to implement a centralized renewable energy tracking system. NCSEA proposed this system as a means to track utility compliance with the REPS and foster the renewable energy market in North Carolina by bringing generators, sellers, and buyers of renewable energy certificates together. In 2008, the Commission established a proceeding to investigate implementing such a renewable energy tracking system, NCUC Docket No. E-100, Sub 121.
The Commission ultimately chose to implement a tracking system named the North Carolina Renewable Energy Tracking System (“NC-RETS”). NC-RETS became operational on July 1, 2010.
NC-RETS uses verifiable energy production data from participating facilities to create a digital certificate for each MWh (or thermal equivalent) generated from renewable energy. Electric power suppliers use NC-RETS to track the results of their energy efficiency and demand-side management customer programs. NC-RETS and all related energy production and customer program records are audited by the Public Staff. NC-RETS will integrate with all other renewable energy certificate tracking systems in the United States to allow for the import and export of RECs to and from North Carolina. NC-RETS will eventually contain a public report showing the status of REPS compliance.
NC-RETS can be accessed via the Commission’s website or by going to North Carolina Renewable Energy Tracking System (NC-RETS).
How North Carolina's REPS Differs from Other States
No Private "White Tag" Market
As previously discussed, North Carolina’s REPS includes energy efficiency as an eligible renewable resource and includes a MWh of electricity or energy equivalent saved using an energy efficiency measure in its definition of a REC. North Carolina’s NC-RETS issues RECs associated energy efficiency as part of its system and refers to these as energy efficiency certificates (“EECs”). Other states often use a different term, “white tags,” for these financial instruments.
In white tag markets, private businesses are allowed to participate by selling their white tags to utilities that have a RPS requirement. An illustrative example of how this would work is the case of an energy service company that does building retrofit work. The company knows how much electricity and energy the building used in its pre-retrofit state. After the work is completed, the company then measures how much electricity and energy the retrofitted building uses. The resulting energy savings are converted to white tags. In a white tag market, the energy service company could sell its white tags, or RECs, to a utility for the utility to use to comply with its RPS requirements.
While energy efficiency savings can be used by electric service providers in North Carolina to comply with their REPS requirements (N.C. Gen. Stat. 62-133.8(b) and (c)), the Commission decided during the REPS rulemaking process that those energy efficiency savings must be utility-sponsored (see NCUC Docket No. E-100, Sub 113, Order Adopting Final Rules, February 29, 2008, p. 52). This decision effectively eliminated a private white tag market in North Carolina.
RECs Are Stripped of Environmental Attributes
In many states, a REC includes the environmental attributes, such as carbon emission savings. In North Carolina, a REC only includes the energy and excludes emissions or other environmental attributes. (N.C. Gen. Stat. 62-133.8(a)(6)).
Out-of-State RECs are Allowed
To mitigate the potential costs of the REPS, the General Assembly allowed up to 25% of a utility's requirement to be met through the purchase of unbundled out-of-state RECs. (N.C. Gen. Stat. 62-133.8(b) and (c))
The Commission later found during the rulemaking process that utilities can use bundled out-of-state RECs to meet the entirety of their REPS requirements (see NCUC Docket No. E-100, Sub 113, Order Determining In-State vs. Out-of-State RECs, July 13, 2009).
REPS Cost Caps
A major difference between North Carolina's REPS and other states' RPS requirements is that our REPS includes a cost cap (N.C. Gen Stat 62-133.8(h)). Once a utility reaches its cost cap it has complied with the REPS even if it has not met the electricity requirements.
The cost cap is a per account annual cap that the utilities are allowed to charge their customers to recover the incremental costs of procuring renewable energy to comply with the REPS (energy efficiency and demand-side management program costs are excluded from this rider and are recovered separately). These incremental costs are recovered through an annual rider charged to the utility's customers. The Commission oversees the annual REPS Rider proceedings for the investor-owned utilities.
The following table summarizes the per account cost caps by customer class.
|Customer Class||2008-2011||2012-2014||2015 and thereafter|
The incremental REPS costs that are applied against the REPS riders are calculated as follows:
|Bundled Renewable Energy Price (Energy + REC) - Utility's Approved Avoided Cost Rate =|
|Incremental REPS Compliance Cost|
|Unbundled REC = Incremental REPS Compliance Cost|
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