North Carolina again delays mandates for power from swine and poultry waste

The North Carolina Utilities Commission, over the objections of several parties, on Dec. 1 gave several power companies yet another one-year delay on compliance with the commission’s swine and poultry waste set-aside programs.

North Carolina is home to a number of massive swine and poultry farms, and the state has put a priority on use of waste from those operations to produce renewable electricity.

On Aug. 12, a joint motion to modify and delay the 2015 requirements was filed by Duke Energy Carolinas (DEC), Duke Energy Progress (DEP), Virginia Electric and Power d/b/a Dominion North Carolina Power, GreenCo Solutions, Public Works Commission of the City of Fayetteville, EnergyUnited Electric Membership Corp., Halifax Electric Membership Corp., the Tennessee Valley Authority, North Carolina Eastern Municipal Power Agency (NCEMPA) and North Carolina Municipal Power Agency Number 1 (NCMPA1). They requested that the commission relieve them of compliance with North Carolina’s Renewable Energy and Energy Efficiency Portfolio Standard (REPS) requirement through use of swine waste resources and as REPS requirement for use of poultry waste resources by delaying their need to comply with these requirements by one year until 2016.

The joint motion further requested that the commission allow the applicant parties to bank any poultry and swine renewable energy certificates (RECs) previously or subsequently acquired for use in future compliance years and allow them to replace compliance with the swine and poultry waste set-aside requirements in 2015 with other compliance measures.

The applicants stated that they have individually and collectively made reasonable efforts to comply with the REPS poultry and swine waste resource provisions and that the relief sought is in the public interest.

Commenters included the North Carolina Pork Council (NCPC), the North Carolina Poultry Federation (NCPF), the commission’s Public Staff, the North Carolina Sustainable Energy Association (NCSEA) and Optima KV LLC

Optima, in its comments, stated that DEC and DEP have not made reasonable efforts to comply with the swine waste set-aside requirement “because they have refused to contract with Optima for the purchase of swine waste biogas at a commercially reasonable price, even though Optima’s technology is viable (as confirmed through independent expert review), and it has long-term feedstock agreements in place.” Optima described its facilities and technology and stated that it had proposed to sell DEC and DEP “biogas to generate electricity would produce the equivalent of approximately 10,500 RECs per year.” Optima further stated that DEC and DEP “rejected the proposal out of hand based on price and refused to meet with Optima to discuss the project.” Optima stated that it attempted to contract with DEC and DEP at a lower price, but such negotiations were continually rejected.

Optima stated that “the proposed price would allow DEP or DEC to meet a significant portion of its swine waste set-aside obligation while consuming a relatively small percentage of its REPS cost cap” and noted commission precedent that the set-asides should have priority under the cost cap over the general requirement. Optima recommended that the commission “find that DEP and DEC have not made reasonable efforts to comply with their swine waste set-aside obligations in 2015.”

Optima concurred with NCSEA’s approach to establish partial compliance. Optima also recommended changes to the triannual reporting requirements to include initial offer prices, reasons that contracts were not executed, and the current status of any contracts entered into, including any reason for termination.

NCPC, in its comments, expressed concerns that requests to delay the set-asides have “become the norm,” that the motions for delay have become formulaic, and that the triannual reports have “become less than fully informative.”

The commission has previously exercised its authority and delayed compliance with the swine and poultry waste set-aside requirements on two occasions: first in a November 2012 order, and a second time in a March 2014 order. Additionally, the commission delayed compliance with the swine waste set-aside requirement a third time in a November 2014 order.

“Based on the triannual reports submitted by the electric power suppliers in Docket No. E-100, Sub 113A, the Joint Movants’ motion, the parties’ comments, and the entire record herein, the Commission finds that the State’s electric power suppliers have made a reasonable effort to comply with the 2015 statewide swine waste set-aside requirements established by G.S. 62-133.8(e), but will not be able to comply,” said the Dec. 1 order. “Compliance with the swine waste set-aside requirement has been hindered by the fact that the technology of power production from swine waste continues to be in its early stages of development. No party presented evidence that the aggregate 2015 swine waste set-aside requirement could be met. While Optima stated that DEC and DEP had not made a good faith effort to comply with the swine waste set-aside requirement, it acknowledged that ‘DEP and DEC are not now in a position to comply with the swine waste set-aside in 2015, whether or not they contract with Optima.’ Optima further added that ‘the initial Optima project can deliver some biogas relatively quickly, the project will take approximately nine (9) months to be fully operational. The other two Optima projects are not as far along in development and one of them is unlikely to be able to produce biogas in 2016.’ NCPC stated that projects could be developed in North Carolina at the right price point; however, NCPC made no contention that the swine waste set-aside requirement could be met in 2015.

“The Commission, at this time, is not persuaded that pricing disputes were a significant contributing factor to the Joint Movants’ failure to meet the swine waste set-aside requirement. Therefore, based on the overall availability of swine waste RECs, the lack of technological progress in the market, and contract performance, the Commission finds it appropriate to delay the swine waste set-aside by one year. However, the Commission also finds merit in NCPC’s contention that it may be inappropriate for the electric power suppliers to reject proposals solely based on the price of RECs when there is ample room under the REPS cost-cap. The Commission has clearly stated that the set-aside requirements take priority and the General Assembly has established the reasonable limit an electric power supplier can spend for compliance with the REPS. Therefore, while the Commission does not intend to interject itself into negotiations, further monitoring of such negotiations may be necessary in future years. The failure to contract with swine waste developers is directly relevant to the question of whether the electric power suppliers have made a good faith effort to comply with the swine waste set-aside requirement. Therefore, the Commission finds merit in some of the NCPC and Optima’s proposed changes to the triannual reporting requirements and stakeholder process.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.