It appears to be win some, lose some for the solar industry when in the N.C. General Assembly.
The big news yesterday was that Republicans included no version of an extension of North Carolina’s 35% renewable energy tax credit in the budget compromise worked out by the Senate and House leadership. It will end, effectively, Dec. 31.
But with the budget document finally available after months of delay, it seems clear that the leadership has dropped plans to freeze the state’s renewable energy portfolio standard. And while the proposal is alive in two bills already adopted by the House, it appears unlikely that either will be passed in the waning days of the legislature's session.
Rep. John Szoka (R-Cumberland) says House Majority Leader Mike Hager remains interested in trying to move forward with the freeze. But Szoka says the general sentiment in the House is not to push forward with the proposal.
Hager (R-Rutherford) could not be reached for comment.
The renewable energy standard, adopted in 2007, mandates that utilities produce specific amounts of the power they sell from renewable resources.
The percentage of power from renewables has been rising in stages. It is currently at 6% for the state’s publicly traded utilities. Under the 2007 law, it is slated to rise to 12.5% by 2021.
The freeze has been supported by conservative groups and championed in the House, particularly by Hager.
It appears that the renewable energy trade off in the negotiations between House and Senate was to allow the tax credit to die and make no change to the portfolio standard.
Maintaining the standard will cushion somewhat the impact on the of the end of the tax credit. Demand for renewables, particularly solar power, should continue to rise in the state.
The industry has been expecting the credit to end soon, if not now. And the continuing drop in solar development costs makes it possible to build projects without the tax credit. But the industry may not grow in North Carolina as fast as it has over the past few years.
Both incentives played an important part in North Carolina’s rapid rise as a player in the solar industry. While the tax credit had long been slated to end this year, there was a concerted effort to get an extension. When that failed, industry supporters attempted to get the legislature to phase out the credit over 2016 and 2017, extending its life, but reducing the percentage in steps.
Betsy McCorkle, government affairs director for the N.C. Sustainable Energy Association, says her group was disappointed by the decision to abandon the tax credit.
“The legislature has sent a clear message to countless clean energy workers, investors, businesses and customers that North Carolina is looking to roll back the clock on $4.7 billion in net positive economic impact and squander one of our state’s greatest economic opportunities of this decade and the next,” she says.
The big loser in all of this will be the state’s rural communities, McCorkle says. Solar project development has been concentrated most the eastern part of the state — and in some of the state’s most economically stressed counties. Solar projects have created construction jobs and increased local property tax revenues.
One large project built by Cornelius solar developer O2 EMC in Montgomery County is expected to pay $110,000 in state and local taxes this year, as opposed to the $300 paid in taxes on the property when it was a tobacco farm.
Szoka says he is surprised that there is not greater support for renewable energy incentives among rural legislators. He hopes that a legislative study on renewable energy issues, slated to be finished next year, will help demonstrate the advantages of the industry.
McCorkle’s group calculates that every dollar in revenue the state looses to the tax credit, solar projects pay $1.53 in state and local taxes. It contends the credit has been a money maker for the state.
Group applauds decision
Americans for Prosperity, one of the groups leading the charge to end the tax credit, lauded the legislature for letting the tax credit end this year.
“Real tax reform requires principled commitment and a taxpayer-focused approach to governing that prioritizes interests of hard-working families and businesses over state-sanctioned handouts for the green energy industry” says AFP Communications Director Joseph Kyzer. “We’re thanking members for taking a tried but true path to lasting, effective change.”
Szoka, who started his legislative career as an opponent of green energy incentives, says he has studied the numbers and he sees the industry as benefiting the state generally.
He says he thinks the industry will weather the current assault. And he says it is possible that, in the long run, North Carolina may consider offering tax incentives again.