Clean Energy and Energy Efficiency Portfolio Standard

Note: S.B. 678 of 2023 amended North Carolina's Renewable Energy and Energy Efficiency Portfolio Standard (REPS), recasting it as a Clean Energy and Energy Efficiency Portfolio Standard (CEPS). The definition of a "clean energy resource" in S.B. 678 includes renewable energy resources, fusion energy resources, and nuclear energy resources, including an uprate to a nuclear energy facility. 

North Carolina's Clean Energy and Energy Efficiency Portfolio Standard (CEPS), originally established as a Renewable Energy and Energy Efficiency Portfolio Standard (REPS) by Senate Bill 3 in August 2007, requires all investor-owned utilities in the state to supply 12.5% of 2020 retail electricity sales (in North Carolina) from eligible energy resources by 2021. Municipal utilities and electric cooperatives must meet a target of 10% renewables by 2018 and are subject to slightly different rules. In February 2008, the North Carolina Utilities Commission (NCUC) issued an order adopting final rules to implement the CEPS. 

Eligible Technologies

Eligible energy resources include solar-electric, solar thermal, wind, hydropower up to 10 megawatts (MW), ocean current or wave energy, biomass that uses Best Available Control Technology (BACT) for air emissions, landfill gas, combined heat and power (CHP) using waste heat from renewables, hydrogen derived from renewables, and electricity demand reduction*. 

With the passage of S.B. 678 in 2023, eligible technologies also include facilities placed into service on or after January 1, 2007, which are either (i) a nuclear energy facility, including an uprate to a nuclear energy facility, or (ii) a fusion energy facility. 

Up to 25% of the requirement may be met through energy efficiency technologies, including CHP systems powered by non-renewable fuels. After 2021, up to 40% of the standard may be met through energy efficiency.

Requirements

The overall target for renewable energy includes technology-specific targets of 0.2% solar by 2018 (which includes solar electric, solar water heating, solar absorption cooling, solar dehumidification, solar thermally driven refrigeration, and solar industrial process heat), 0.2% energy recovery from swine waste by 2019, and 900,000 megawatt-hours (MWh) of electricity derived from poultry waste by 2014. While the general renewable energy targets and solar set-asides apply individually to each utility, the targets for swine waste and poultry waste were written into the law to apply to the state as a whole, without assigning individual requirements for each utility. Given the difficulty of assessing a utility's compliance with a shared statewide requirement, the NCUC adopted a method for dividing the requirements among the utilities. Through this approach, each utility will be separately responsible for a portion of the swine and poultry waste requirements in proportion to the ratio of their previous year's electricity shares divided by the previous year's total statewide electricity sales. The March 2010 NCUC order also allows the utilities to jointly purchase energy derived from swine and poultry waste.

The NCUC has required that each electric power supplier submit its first annual CEPS compliance plan by September 1, 2008. Beginning in 2009, each power supplier is required to file a compliance report, detailing the actions it has taken to fulfill the requirements of the CEPS. In 2018, NCUC Order adopt various administrative, technical, and conforming amendments to the Commission’s rules, including changes in filling forms and accompanied filling fees. 

The compliance schedule for investor-owned utilities appears below. Note that each year's percentage requirement refers to the previous year's electricity sales (i.e., the 2021 standard is 12.5% of 2020 retail sales). The requirements for swine waste and poultry waste were amended by a NCUC Order in November 2012 by delaying requirements that had been previously established for 2012. Another NCUC Order in March 2014 and another NCUC Order in November 2014 further delayed the swine and poultry waste provisions. The requirements for swine and poultry waste were delayed again by a NCUC Order in  December 2015, and then by another NCUC order in December 2019. The schedule presented below accounts for the changes approved by the NCUC.

• 2010: 0.02% from solar
• 2012: 3% (including 0.07% from solar)
• 2013: 3% (including 0.07% from solar)
• 2014: 3% (including 0.07% from solar + 170,000 MWh from poultry waste)
• 2015: 6% (including 0.14% from solar)
• 2016: 6% (including 0.14% from solar) 
• 2017: 6% (including 0.14% from solar) 
• 2018: 10% (including 0.20% from solar)
• 2019: 10% (including 0.20% from solar + 0.04% from swine waste + 500,000 MWh from poultry waste)
• 2020: 10% (including 0.20% from solar + 0.07% from swine waste + 700,000 MWh from poultry waste)

• 2021: 12.5% (including 0.20% from solar + 0.07% from swine waste + 900,000 MWh from poultry waste) 
• 2022: 12.5% (including 0.20% from solar + 0.14% from swine waste + 700,000 MWh from poultry waste)
• 2023: 12.5% (including 0.20% from solar + 0.14% from swine waste + 900,000 MWh from poultry waste)
• 2024 and thereafter: 12.5% (including 0.20% from solar + 0.20% from swine waste + 900,000 MWh from poultry waste)

Cooperatives and Municipal Utilities

Electric cooperatives and municipal utilities must meet the solar, swine waste and poultry waste goals, but these utilities only must meet an overall target of 10% by 2018. The NCUC amended and delayed the carveouts for swine waste and poultry waste several times, most recently by an order filed in March 2022. Cooperatives and municipal utilities still have to meet the same solar and poultry waste carveouts established for the IOUs, however, they have until 2026 to reach the 0.20% carveout for swine waste. Cooperatives and municipal utilities are permitted to use demand side management or energy efficiency to satisfy the standard without limitation, and may also use large hydropower to meet up to 30% of the renewable energy requirement.

Compliance

Utilities may demonstrate compliance by procuring renewable energy credits (RECs) earned after January 1, 2008. Under NCUC rules, a REC is equivalent to 1 MWh of electricity derived from a renewable energy source, or an equivalent amount of thermal energy in the case of CHP and solar water heating, or 1 MWh of electricity avoided through an efficiency measure. The law explicitly states that RECs do not include credit for emissions reductions from oxides of sulfur and nitrogen, mercury or carbon dioxide. RECs must be purchased within three years of their generation, and must be retired within seven years from when their cost was recovered. Utilities may use unbundled RECs from out-of-state renewable energy facilities to meet up to 25% of the portfolio standard. Qualifying out-of-state facilities are (1) hydroelectric power facilities with a generation capacity up to 10 MW, or (2) renewable energy facilities placed into service on or after January 1, 2007. Suppliers with fewer than 150,000 customers are not limited in the amount of out-of-state renewable energy RECs they may procure to meet the standard. As required by SB 90 of 2009, the NCUC adopted the North Carolina Renewable Energy Tracking System (NC-RETS) in July of 2010 to ensure proper counting of RECs. For the purposes of REC compliance, the Commission will assign triple credit for every one REC generated by the first 20 MW of a biomass facility located at a "cleanfields renewable energy demonstration park", as defined by SB 886. The credit multipliers will first be applied to the carve-out for poultry waste. Only after the poultry waste carve-out has been completely met can the credit multipliers be applied to the general market CEPS requirements. 

Cost Mitigation Measures

Utilities may recover the incremental cost of renewable resources and up to $1 million in alternative energy research expenditures annually from customers. The cost per customer account is capped according to the following schedule:

Special Provisions

Due to the combined circumstances that it 1) has fairly stringent per-account cost caps, 2) allows for energy efficiency and conservation measures to comprise 25% of General Requirement compliance through 2021 and 40% thereafter, North Carolina's CEPS can function in ways similar to an Energy Efficiency Resource Standard (EERS). However, since it does not require specific annual targets for efficiency and demand-side management, it is not formally considered by DSIRE to be an EERS.

The NCUC is responsible for administering the CEPS and may adjust or modify the CEPS schedule if the commission deems such modifications to be in the public interest. Under the NCUC's final rules, there are no specified penalties or alternative payments for noncompliance, but the commission has existing authority under Chapter 62 of the N.C. General Statutes to enforce compliance.

* Senate Bill 75 of 2011 allows for electricity demand reduction to count towards the standard. Unlike "energy efficiency measures", which are only allowed to account for 25% of a utility's requirement, electricity demand reduction is capable of meeting up to 100% of a utility's renewable energy requirement under the law. Senate Bill 75 defines electricity demand reduction as "a measurable reduction in the electricity demand of a retail electric customer that is voluntary, under the real-time control of both the electric power supplier and the retail electric customer, and measured in real time, using two-way communications devices that communicate on the basis of standards."