Energy Policy in North Carolina: Next Steps
Monday, March 31st, 2008By Diane Cherry, IEI
Many people have already written about the important steps that North Carolina has taken towards a new energy policy with the Renewable Energy Portfolio Standard (REPS) that was recently signed into law. This flexible, market-drive standard is designed to encourage the use of renewable energy sources such wind, solar and biomass by our state’s electric utilities. By increasing the amount of renewables required amount over time this legislation puts the electricity industry on a path toward increasing sustainability.
If the passage of the REPS was a comprehensive solution to all of the challenges and opportunities presented by the new energy economy, we could all pat ourselves on the back. But in fact this is just the first step in the long journey necessary to place North Carolina on the forefront of those states with innovative energy policies. So what else needs to be done? We also need to focus on energy efficiency and energy related economic development, just as California, Texas and other states have done.
First, energy efficiency should be explored across all sectors of North Carolina’s economy – residential, commercial, industrial and transportation. Homes, offices and public buildings all use appliances and equipment that may be less efficient than other models. Policy mechanisms such as appliance efficiency standards could change this by requiring manufacturers to meet minimum efficiency levels for all products. Tax credits for commercial green buildings and energy efficient new homes have been passed in several states, and could be put in place here too. Because buildings have long lifetimes and are not easily retrofitted, it is crucial to target building efficiency with mandatory energy codes prior to construction. The state of North Carolina should lead by example, incorporating energy efficiency into its own facilities, fleets and operations.
In the transportation arena, there are several policy mechanisms that could help raise the fuel economy and reduce the vehicle miles traveled, including tailpipe emission standards, land use policies that incorporate smart transportation, state transit funding, state fleet procurement policies, congestion pricing, and other financial incentives. Because the built environment in North Carolina is going to be transformed over the next 25 years, it is crucial that we be a leader in all of these areas.
Second, North Carolina needs significant leadership to develop its renewable energy resources. Potential energy resources specific to North Carolina include coastal and mountain wind and tidal energy from the sounds. The price of electricity generated from wind is competitive with that produced from coal or natural gas if tax breaks are available (especially in the early stages). In addition to federal incentives, North Carolina has the 35% Renewable Energy Tax Credit.
However, there are other obstacles to developing wind. First, there has been considerable public opposition to wind farms in the mountains, and similar opposition may arise on the coast. Second, the ‘Ridge Law’ prohibits construction of structures taller than 35 feet on ridges above 3000 feet in elevation, and has limited the installation of any wind energy generation equipment. Leadership is necessary to unravel these problems and they aren’t solved with the new REPS legislation.
Studies also indicate that North Carolina has the potential to produce a significant amount of energy from biomass, although further research is needed in this area. With respect to solar energy, North Carolina has useful locations throughout the state for some types of collector systems, but these would need to be integrated into the existing grid, and solar power remains relatively expensive. Finally, North Carolina has some hydropower, which represents a small percentage of the state’s electricity generation.
Alternative fuels in transportation are receiving greater attention across the country but still have a long way to go in North Carolina. In 2003, there were nearly 11,000 alternative fueled vehicles in North Carolina —2.1% of the U.S. total. Ethanol, as an alternative fuel, has received particular attention; however, the current and future benefits of ethanol are underwhelming. Ethanol meets barely 1% of the total energy consumption in the transportation sector. According to the North Carolina State Energy Plan, to achieve a 10% increase in ethanol use in North Carolina, corn production must increase by 130% and acreage in corn must increase by 10% from current levels. It is not clear that this is achievable.
Looking to the future, as intermittent renewable technologies for wind and solar energy systems improve, there will be a need for energy storage for extended periods with or without connections to the electric grid. As such, there may be opportunities for advances in the conversion of electricity to chemical energy with extended storage periods. Technologies are necessary to help in all of these areas.
In order to reap the benefits from new efficiencies and new sources of energy, North Carolina should focus on supporting the economic competitiveness of the new businesses and industries that are sure to arise. This is the heart of the economic development opportunity. In the General Assembly this session a bill was introduced entitled the North Carolina Green Business Fund, which would have distributed funds to support biofuels, green building and green entrepreneurship. As a state with over 80 rural counties, such a fund would have been an important first step in spreading economic development opportunities more widely through the support of energy related enterprises. Local firms such as Cree, Novozymes, Megawatt Solar and others should be held up as a model of investment in local talent and local technologies that can both make a profit and help the environment.
Several of the unanswered energy questions we face as a state include:
1. Challenges associated with energy and the environment offer North Carolina a unique opportunity to develop local, technology-based solutions, the basis for a competitive advantage in energy and environmental technologies. This requires costly and risky initiatives by public and private actors over a sustained period of time. Should North Carolina be the first mover in the new energy economy within the southeastern United States? How should North Carolina position itself on the technology front? How does this new energy economy become an economic development opportunity for North Carolina?
2. Should North Carolina develop alternative fuels for transportation? What should the state’s strategy be for alternative energy sources over time?
3. What can North Carolina do to improve in the area of energy efficiency such as in building codes, transportation policies, appliance and equipment efficiency standards?
While passage of the REPS bill is a great first start, North Carolina has much more work to do and the Institute for Emerging Issues wants to build on this work in its energy program. It’s important that we capitalize on this new energy economy.