By Shelley Robbins, Clean Energy Group
As states and the federal government take steps to transition away from fossil fuel generation, it is important to pay attention to recent clean energy developments in states where energy legislation has historically been less proactive, and the traditional integrated utility monopoly model has held influence over the policymaking process. In those states, where clean energy is now gaining a stronger foothold, valuable lessons can be found. Actions by these states to change the direction of energy policy are a powerful confirmation that clean energy is a viable, cost-effective alternative to fossil fuels.
A perfect example is South Carolina, where the legislature passed the landmark Energy Freedom Act in 2019; and where the South Carolina Public Service Commission rejected Dominion Energy’s integrated resource plan in 2020, and then rejected Duke Energy’s integrated resource plan in 2021— both for failure to adequately consider and model available clean energy options. Now, Duke Energy, one of the state’s vertically integrated investor-owned utilities, has worked with stakeholders to create a program that addresses winter peaking with a combination of solar, time-of-use rates, smart thermostats, and soon additional technologies that will likely include battery storage.
For South Carolina, solar PV paired battery storage (solar+storage) can be more than just a tool to reduce demand and offset fossil-fuel consumption. These technologies can be used to create community resilience hubs throughout the state, providing services during hurricanes and other extreme weather events. Solar+storage can keep critical devices powered, protecting vulnerable populations during outages that may imperil their lives by leaving them too hot, too cold, or without needed medical devices that require electricity. It can also be a tool to reduce the state’s high energy cost burdens, leading to a host of positive benefits for lower-income households.
South Carolina now stands among the more proactive Southern states in clean energy policy. But it wasn’t always that way. There were numerous regulatory and political challenges that had to be overcome to make way for meaningful change. The story of how South Carolina met these challenges offers important insights for other states.
The Evolution of South Carolina Energy Policy
It is important to note that backlash resulting from a failed nuclear project had a big part to play in South Carolina’s shift to advance clean energy. Back in 2007, South Carolina’s investor-owned utilities, Duke Energy and South Carolina Electric and Gas (SCE&G), had considerable influence at the Statehouse and the Public Service Commission (PSC). That year, a piece of legislation called the Base Load Review Act (BLRA) passed fairly quietly, which allowed PSC-regulated utilities to collect revenue for major construction long before the projects were put into service —projects such as two new reactors proposed for the SCE&G/Santee Cooper VC Summer nuclear plant, approved in 2008. Construction on the nuclear reactors – the first in the U.S. in 30 years – began in 2013, but the project was abandoned in 2017 when estimated costs soared by billions.
The VC Summer failure ultimately produced the political will, via public pressure, to scrutinize the existing regulatory paradigm and then rip it apart. Backlash from VC Summer debacle also led the Legislature to replace all seven utility commissioners in 2017, and the new commissioners were chosen with a more rigorous selection process than those of previous years. In 2018, the BLRA was repealed, a Utility Consumer Advocate was created, and reforms were introduced at the PSC. In 2019, the Legislature adopted the Energy Freedom Act.
A New Clean Energy Paradigm
The Energy Freedom Act (EFA) laid the groundwork for South Carolina’s clean energy transition. It included language codifying a customers’ right to be able to reduce their electricity consumption, added “energy storage” to the definition of a customer generator, granted customers the right to their energy data and allowed data sharing with third-party vendors, and addressed the inclusion of capacity value, locational value, and ancillary service value of storage to avoided cost calculations. The legislation also enabled the PSC to require all-source solicitations for capacity over 75 megawatts and required the utilities to establish Solar Choice Net Metering tariffs (the next iteration of the net metering program). Finally, EFA established new requirements for utility integrated resource plans (IRPs) and directed the PSC to approve, deny or modify those plans within the framework of a litigated proceeding, allowing for intervenors to challenge utility assumptions and methodologies.
Beyond the enabling elements in the EFA, the two most significant developments for the expansion of solar+storage in South Carolina were the approval of a solar choice program and the rejection of Duke Energy’s IRP.
Duke Energy’s Solar Choice and Smart$aver Solar as Energy Efficiency programs open the door for more residential and small-scale commercial solar projects by creating a program that pairs time-of-use (TOU) rates with smart thermostats and rooftop solar. The programs enable customers to receive rebates as well as monthly demand-response incentives for lower both summer peak and winter peak demand if they enroll in the TOU program and allow Duke to manage the energy use during periodic peak demand events on the grid. This is an innovative way to incentivize renewable energy that recognizes its value to the grid. But even more exciting is that Duke Energy committed to expanding the programs to include “other peak load reduction technologies,” such as battery storage and heat pump water heaters, by June of 2022. Duke also committed to initiating a stakeholder process to explore a similar program tailored to low-income customers.
In the Commission’s order rejecting Duke’s IRP in June 2021, the PSC noted that Duke under-estimated the value of solar and storage, over-estimated the cost of battery storage, and under-estimated future gas prices and risks. The Commission ordered Duke to remodel the IRP using the National Renewable Energy Laboratory’s Annual Technology Baseline – Low figures for battery storage. Duke must also remodel its natural gas price assumptions. And for future IRPs, the PSC ordered Duke to correct their capital cost assumptions for battery storage compared to combustion turbines, to accurately model the capacity value for solar paired with storage on the grid (with stakeholder input), and to evaluate more robust options and emerging technology within the energy efficiency (EE) and demand-side management (DSM) programs, focusing on approaches that do not rely on behavioral changes. Since the goal of the EE/DSM programs is to reduce consumption of fossil fuels and reduce the need for expensive capital investments, it stands to reason that customer-sited solar+storage should play a role and be evaluated for cost-effectiveness as an emerging tool within the program, as has been done in several New England states.
With each of these policy changes and PSC decisions, South Carolina has put in place the elements it needs to expand the adoption of solar+storage. Notably, the state has done this without the benefit of belonging to an independent system operator (ISO) or regional transmission organization (RTO). These wholesale energy market managing constructs have helped demonstrate the value of solar+storage in other regions of the country; South Carolina’s success shows that individual states can advance distributed solar+storage markets without the support of regional energy market managers.
Lessons Learned in South Carolina: Opportunistic Teamwork
The shift from a policy that favored the monopoly utilities, shareholders, and protection of profits to a policy that increasingly values distributed renewable energy and market competition did not happen organically. It was the product of crisis, intense protracted debate, and compelling advocacy by an impressively diverse group of players, all mission-aligned with the goal of opening the state to distributed renewable energy. This lesson can be of value to other states where the shift to clean energy has been sluggish. But perhaps South Carolina’s greatest achievement was the ability of the various stakeholders — from big business to environmental advocacy groups — to work together in historic fashion to raise a solar-policy phoenix out of VC Summer’s ashes.
Now it is time to put these hard-fought policy pieces to work. As South Carolina adopts more solar+storage, it will have the potential to increase the state’s resilience to extreme weather and utility outages, protect vulnerable citizens during times of crisis, clean up its grid in a cost-effective manner, reduce energy burdens, and improve air quality as polluting fossil-fuel power plants are retired. South Carolina isn’t the only state that can do this; lessons learned there can be adopted and applied elsewhere, spurring new clean energy transformations in historically challenging regions.