North Carolina's solar industry is booming. So why are state Republicans threatening to strangle it? | North Carolina | Indy Week
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North Carolina's solar industry is booming. So why are state Republicans threatening to strangle it? 

In the short term, the uncertainty on Jones Street has been good for business. Actually, great for business: More than Steve Nicolas' 18-employee company, NC Solar Now, can handle, in fact.

Since 2010, Nicolas, a Londoner who moved to North Carolina in the early '80s to work for a tobacco-leaf distributor in Wilson—"The opposite of green," he quips—has seen NC Solar Now grow exponentially. That growth has been powered largely by substantial federal and state tax credits, which offset the cost of installing solar panels, $20,000 or $25,000 for a typical rooftop job on a home or business.

But these credits and other incentives are now in jeopardy, owing to the objections of right-wing outfits like Americans for Prosperity and the John Locke Foundation, along with Republicans reflexively wary of all things green, who together argue that tax credits for renewables amount to the government picking winners and losers in the marketplace.

As AFP-NC State Director Donald Bryson wrote on his website last month: "Consumers and investors—not politicians—should decide which industries, companies, and projects succeed by engaging in unrestricted trade."

(Worth noting: Many conservatives in the Legislature, though not the state chapter of Americans for Prosperity, wanted to pass a law in 2013 banning automakers from selling their cars in the state, a measure directly targeted at electric-car maker Tesla.)

The tax credits are just one front in a broader assault on the state's burgeoning renewables industry, of which solar is the dominant player. Also in the crosshairs are the Renewable Energy Portfolio Standards, which require utilities to obtain an ever-escalating proportion of their energy supply from renewable sources, and a requirement that essentially cudgels utilities into purchasing power from small renewable-energy producers.

Together these policies have made North Carolina a national leader in clean energy, supporting 45,000 jobs and contributing more than $4 billion to the state economy—the kind of success you'd think would cement the programs' future in the minds of Republicans who drone on ad infinitum about job creation. But that's not the case; their future is murky.

"The industry is emerging and becoming a very vital part of the North Carolina economy," says state Sen. Josh Stein, D-Wake, one of the Legislature's most outspoken clean-energy advocates. "There's a growing number of commercial and residential solar projects—that's all wonderful. We should not stop this growth in its tracks. Period."

click to enlarge Steve Nicolas - COURTESY OF STEVE NICOLAS
  • Courtesy of Steve Nicolas
  • Steve Nicolas

In April, the Legislature extended tax credits—up to 35 percent of the installation price, plus the 30 percent federal credit—but only through the end of the year. Meanwhile, without congressional action, the federal credit will fall to 10 percent at the end of 2016.

If you want to go solar, now's the time.

And people are, Nicolas says. Demand is so high, there's a two-to–three-month lag between contract and installation.

Attired in a blue polo shirt and khakis, the soft-spoken Nicolas sits in a nondescript conference room—adorned only by a scuffed-up white board, two generic paintings of mountains and a 3-by-5-foot photovoltaic panel—in a nondescript office building, obscured from Atlantic Avenue in North Raleigh by a row of trees and shrubs. No matter what lawmakers do, he says, his business will survive. Maybe it won't hire new people; maybe it will shift its focus from rooftop installation to service and maintenance and other products, including solar water heaters. But it will survive, regardless.

"We'll weather whatever storm comes along," he says.

Stew Miller isn't quite so sanguine.

Like Nicolas, Miller, co-founder and president of Yes! Solar Solutions in Cary, has seen his business spike of late; his employee count has doubled in the last year or so, to more than 20. But he worries that the Legislature will undermine the company's progress.

"It's very hard to run a business and plan for future expansion if you don't know what the rules are gonna be next year," Miller says. "If the tax credits don't get extended, we're going to have to look at either sizing appropriately"—i.e., layoffs—"or moving to another state. South Carolina has some pretty good incentives."

(Volvo and LPL Financial recently chose South Carolina over North Carolina in their search for a friendlier business climate.)

Today North Carolina ranks No. 1 in the South, and fourth in the country, in solar-energy capacity—not bad for a state that had almost nothing a decade ago. Incentives have helped businesses and investors inject more than $3.4 billion in the state's clean-energy sector between 2007 and 2014, according to a recent report from RTI International.

Solar tax credits spurred more than $645 million in green-energy investment between 2010 and 2013, according to a February study from Duke University's Center on Globalization, Governance & Competitiveness, but they also took nearly $73 million out of the state's kitty—money that conservatives would rather see go to more corporate and income tax cuts.

(As a legislative fiscal analysis points out, tax credits—for solar as well as other projects like historic preservation and research and development—will cost the state's general fund more than $175 million a year starting in 2017-18.)

In its recently passed budget, the House continues the solar credits for one year, then tapers them off in year two, an effort to wean the solar industry off government support. This measured approach has drawn the ire of groups like Americans for Prosperity—an AFP-NC spokesperson did not respond to the INDY's request for comment—and hardliners in the more dogmatic Senate, whose budget is forthcoming.

"We understand that the [solar] tax credit isn't going to exist forever," says Brian O'Hara, senior vice president of strategy and governmental affairs at the Chapel Hill-based Strata Solar, the largest solar producer in the state. "We'd like to see a reasonable phase-out"—something along the lines of the House's budget. "We recognize the political realities that we're in."

PHOTO BY ALEX BOERNER
  • Photo by Alex Boerner

While the tax credits are important to the state's clean-energy policies, the rooftop solar that Nicolas and Miller sell is but a bit player in the grander scheme. Most of North Carolina's growth over the last several years—and the reason the state is at the head of the class in the solar world—has come from "utility-scale" projects, or when companies produce energy from solar or biomass and sell it to utilities like Duke Energy.

Arguably the most important tool the state has to encourage these projects is the Renewable Energy Portfolio Standards, passed by the Legislature in 2007. REPS set a floor for how much energy the state's utilities must source from renewables. In 2012, that was 3 percent. Today it's 6 percent, with scheduled increases to 10 percent in 2018 and to 12.5 percent by 2021. (For comparison, California requires its investor-owned utilities to procure 20 percent of their electricity sales from clean sources.)

This has led to, for instance, Duke Energy partnering with Strata to build a 65-megawatt facility in Duplin County, which will be the biggest photovoltaic plant east of the Mississippi River. The Duplin project is just part of a $500 million solar expansion Duke Energy announced last September.

"The total investment in utility-scale projects across North Carolina is estimated at $2 billion," according to the Duke University report. Already, the state has 150 operational solar facilities with a capacity of 1 megawatt or more, each producing enough energy to power 164 homes, according to the Solar Energy Industries Association.

Another, more complex initiative North Carolina has launched didn't originate with the state at all, but rather with the feds. The Public Utilities Regulatory Policies Act of 1978, passed in the midst of the energy crisis, was designed to reduce the country's dependence on foreign oil.

That act requires utilities to offer to purchase power from "qualified facilities," or small producers who often rely on solar, wind turbines and biomass. Below a certain threshold—the act sets it at 100 kilowatts—the utilities have to pay an advantageous (to them) standard rate for the power they buy. States can raise that threshold, though, which then requires producers to negotiate with the utility.

A higher threshold, supporters say, means a more diverse and green energy supply—and that's precisely the regime North Carolina established three decades ago. The N.C. Utilities Commission's rules set it at 5 megawatts, 50 times greater than the national floor. There it has sat ever since.

     
"There's certainly a doctrinaire group within the majority opposed to clean energy and doing everything they can to kill the clean-energy industry."
     

Last year, Duke Energy and the state's other investor-owned utilities asked the commission to reduce that threshold to the national level, arguing that giving them more bargaining power would lead to lower prices for ratepayers. The commission, in a Dec. 31 order, opted to maintain the status quo.

Some Republicans in the General Assembly aren't happy about that.

A bill muscled through the House by Majority Leader Mike Hager, R-Burke and Rutherford—who, like Gov. Pat McCrory, is a former Duke Energy official—would both freeze the REPS requirement at its current 6 percent and reduce the qualified-facilities threshold to the national level of 100 kilowatts.

But even within the GOP caucus, there is dissent. When the Senate Finance Committee took up the legislation in May, committee chairman Bob Rucho, R-Mecklenburg, refused to allow debate on the REPS portion of the bill—which had been added the day before, without notice, at Hager's request. Instead, Rucho limited the discussion to a less controversial portion dealing with natural gas pipelines. Then Rucho refused to divide the bill's sections and ordered a voice vote rather than a roll-call vote.

According to media reports, the nays were considerably louder than the ayes. Rucho declared the bill passed anyway.

This episode gets at an important point: "I don't think there's a monolith of people opposed [to clean-energy programs]," Stein says. "There's certainly a doctrinaire group within the majority opposed to clean energy and doing everything they can to kill the clean-energy industry."

Jeffrey C. Billman is the INDY's Raleigh news editor. Reach him at jbillman@indyweek.com or on Twitter @jeffreybillman.

  • Oh, right, it’s because the thriving solar industry is green (among other reasons).

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