North Carolina reached a milestone this year as a national and regional leader in solar energy, but the expiration of a key state tax credit threatens to undermine that success.
Solar power installations in the state surpassed a combined 1 gigawatt in capacity for the first time recently, according to a clean energy census by the NC Sustainable Energy Association, putting North Carolina behind only California, Arizona and New Jersey.
According to the census, the Tar Heel solar industry created 4,307 jobs and generated more than $1.6 billion in revenue, with some 450 clean energy firms reporting solar-related activity in the state.
“It’s a great milestone,” says Dave Hollister, co-founder of Sundance Power Systems in Weaverville. “Solar has been a great boon to the state of North Carolina. It has seen rapid growth. We’ve built a very substantial industry in the state; we’ve created thousands of jobs.”
Robin Aldina, manager of energy research for the Sustainable Energy Association, attributes the state’s success in part to government policies promoting the use of solar. Since 1998, a 35 percent tax credit has made solar installations more affordable, while the Renewable Energy and Energy Efficiency Portfolio Standard, enacted in 2007, has required utilities to get a specified portion of the power they sell to customers from renewable sources.
But that tax credit is slated to expire at the end of this year. Legislation to extend it was introduced in the N.C. General Assembly, but the measure failed.
Letting the credit to expire was a mistake, says Avram Friedman, executive
director of The Canary Coalition, a Sylva-based environmental group.
“It is going to hurt the solar industry that’s budding in North Carolina right now,” he says. “It’s just a backwards move to take incentives away to install solar energy right now, with the climate crisis that we’re dealing with and with Duke Energy talking about building expensive new power plants. It’s bad for electrical consumers, it’s bad for the environment and it’s just backwards. Countries around the world, and many states, are going in the other direction. It makes no sense not to try to promote that industry in this state.”
Friedman says the equipment to produce solar energy is getting less expensive year by year. Allowing the tax credit to expire in another five or 10 years would have made more sense, he maintains, because by then the industry probably won’t need the subsidies.
The tax incentive, continues Friedman, “was really helping to level the playing field, because the petroleum industry, the fossil fuel industry, the nuclear industry — they’re all getting heavily subsidized by tax breaks and low fees on exploration on federal lands. By allowing this to expire, it’s just really putting solar at a very strong economic disadvantage.”
The tax credits and other measures to promote the use of renewable energy sources, says Aldina, have been the targets of a “misinformation campaign” by conservative groups like the John Locke Foundation, the Civitas Institute and Americans for Prosperity, which emphasize the fact that the credits cost taxpayers millions.
Joseph Kyzer, communications director of Americans for Prosperity, issued a statement thanking lawmakers for declining to extend the tax credit, which he says has “siphoned more than $220 million from state coffers since 2010.” State legislators, says Kyzer, should be commended for putting “the interests of hardworking families and businesses over state-sanctioned handouts for the renewable energy industry.”
North Carolina, he maintains, “needs lawmakers who stand strong against powerful energy lobbies for a fair and level private-sector playing field. Our state needs trusted leaders who return power to the people and unburden the public from government control. … If reducing the tax burden of one industry creates jobs, then it will work for all industries. The time of state government picking winners and losers is coming to a close.”
Between 2007 and 2013, nearly $2.7 billion was invested in clean energy development in North Carolina, according to a report by the research firm RTI International. State government supported those efforts to the tune of about $135 million. “Clean energy projects were nearly 20 times as large as the state incentives for them,” the report concluded.
Hollister says the push to end the tax credits was an ideological assault funded by groups affiliated with the Koch brothers and other wealthy conservative interests. “It was not financial,” he asserts. “This is pretty much a libertarian, far-right-leaning ideology.”
In fact, continues Hollister, the tax credit has increased the amount of money flowing into state government coffers. “It’s actually been a net positive gain over the past several years to the state of North Carolina because of the increased tax revenue and increased property values.”
Aldina, however, is less pessimistic about the impact of losing the tax credit.
“I don’t think it’s going to put too much of a damper on solar energy in North Carolina,” he predicts. “I think most companies have seen this coming, and they’ve adjusted their business models to make it work without the tax credit.” In fact, he continues, “There could be some benefits to the tax credit going away: It could simply financing options.”
The solar energy industry, he maintains, has done well in spite of a limited amount of market competitiveness and will continue to prosper.
“We’re still in a state with a regulated monopoly: electricity provider Duke Energy,” Aldina points out. “So there’s only a very limited amount of the market that solar can access to right now. Given that they only have a limited free market, they’ve done really well to get a whole gigawatt of energy installed. I think the future of solar in North Carolina looks bright. We’ve had several very good years here, and I think we’ll continue to see growth in the industry.”
Other sustainability measures also challenged
There was also a move in the General Assembly this year to freeze the Renewable Energy and Energy Efficiency Portfolio Standard at its current level of 6 percent, but that effort failed. Under the law, utilities will have to generate 12.5 percent of their power from renewable sources by the year 2021.
“Maintaining that, so companies can still participate in the market, is going to be important going forward,” says Aldina.
In a measure of how much the industry has grown over the past two decades, Hollister says he and his wife installed the first net metering solar power system in the state on their Madison County home in 1995.
“Net metering is the process by which a house can interconnect with solar to the utility grid, and it essentially allows that solar array to use the grid as temporary storage when it’s producing in excess of consumption,” he explains. “That’s been one of the key elements in the expansion of solar. Until that point, most of the systems were battery-based, off-grid systems. The adoption of net metering in North Carolina was the first step in expanding solar resources in our state.”
Hollister, however, believes the tax credit’s expiration will hurt an industry that’s brought a lot of jobs to the state.
“It’s definitely going to have an impact,” he says. “Most of this comes down to return on investment. Small businesses tend to be more focused on short-term returns, so it’s going to have some negative impact on those businesses. Larger businesses have more of a long-term outlook. What this changes is the speed at which you get a direct return on your investment, not whether it’s a bad investment.”
Hollister believes demand for solar installations will remain strong on residential properties, because they increase a home’s property value and saleability.
“The numbers still work fairly well from a residential standpoint,” he reports, adding, “People are doing systems on their homes because they believe it’s the right thing to do. Most people want expansion of solar.”
In the meantime, the impending expiration of the tax credit has kept installers extra busy in recent months, notes Hollister. “I don’t think you’ll find a solar company that has any more room to install solar between now and the end of the year,” he says. “Everybody wants to take advantage of the tax credit.”
And though installing a solar system typically costs several thousand dollars, says Hollister, the cost has dropped by more than half since the tax credit was enacted.
“The renewable energy future is the most inexpensive future we have in producing energy,” he maintains. “Fossil fuel energy, including natural gas, is the expensive future for the state of North Carolina. Everybody sees the writing on the wall, whereas 20 years ago people did not see this. Back then we had a saying: ‘How do you make a small fortune in solar? Start with a big one.’ It’s been an incredible journey.”
Friedman, meanwhile, points out that another piece of solar energy legislation failed to make it through the General Assembly this year. The Energy Freedom Act would have allowed third-party sales of electricity from rooftop solar systems. Under current law, only Duke Energy and electric membership cooperatives are allowed to sell electricity directly to customers.
The law, notes Friedman, “would allow solar contractors to install rooftop solar panels on your house with no upfront costs to you and essentially sell the energy from those panels to you at cheaper cost than you’re paying now for Duke Energy’s power.
“When you’re using solar energy there’s no fuel involved,” he explains. “So you’re not burning anything, you’re not polluting the air, you’re not using fresh water supplies. You’re becoming energy-independent if you have a rooftop solar energy system on your home.”
Allison Eckley of the Sustainable Energy Association also says she’s confident the industry will survive the loss of the tax credit.
“This policy shift is not the first time our clean energy economy has faced challenges,” she points out. “However, we know this is a resilient industry. North Carolina clean energy firms have overcome multiple policy threats in an uncertain business climate to achieve tremendous growth in jobs and revenues since 2008.”