Utility Scale Solar Energy: North Carolina's Emergent Success
By Lauren Shwisberg
North Carolina politics are always lively, sometimes infuriating, and often paradoxical. The North Carolina General Assembly has made the news several times this year for enacting some of the most controversial conservative policies in the country. Conversely, for the first time in 32 years, the southern state went blue in the 2008 presidential election. Yet, this state with a paralyzing partisan mix of liberal universities and stalwart conservatives, a burgeoning high tech industry and strong history of agriculture, has puzzlingly and quietly become one of the hotbeds of solar development in the United States. Even despite attempts from the right to repeal the state Renewable Portfolio Standard (RPS) this year, North Carolina ranked third in capacity of utility-scale solar in advanced development or under construction, as can be seen by the map below that was published by SNL Energy in mid-October.
The ‘Perfect Storm’
No single factor has contributed to North Carolina’s success in attracting solar investment, but rather it has been a ‘perfect storm’ of adequate policy, responsive industry, and research and development expertise.
First, North Carolina has one of the oldest, most favorable renewable tax credits in the country. Enacted in 1977 to encourage solar water heating and cooling, the 35% tax credit, when combined with the 30% federal renewable tax credit can reduce residential and commercial investors’ initial project costs by about half.
However favorable the longstanding tax credit may be, North Carolina’s story of fast-paced solar proliferation really began with passage of the RPS in 2007 by the democratically held State Assembly; this was one of the first standards of its kind in the Southeast and was also in a state dominated by investor-owned utilities. North Carolina’s RPS is one of the least stringent in the country, requiring investor-owned utilities to provide 12.5% of electricity from renewable sources by 2021, but even this slight mandate has provided the semblance of market certainty that is necessary to attract significant investment.
In addition, North Carolina has additional assets that set it apart and have allowed it to realize the surprising spectacle exposed by the map above: a vibrant university environment, a large military presence, and a burgeoning high tech industry.
Universities and military installations have provided expertise and external funding for projects in the state. Using federal grants, North Carolina’s many universities have undertaken research and development to improve technology and implementation. Notably, North Carolina State University maintains a national database of state solar policies with funding from the Department of Energy. Likewise, military installations such as Camp Lejeune Marine Corps Base in eastern North Carolina have attracted Department of Defense funds for renewable projects, spurring investments in local solar companies and job creation.
North Carolina’s tech industry has also been rapidly developing, beginning in the Research Triangle area. Once called the ‘Silicon Valley of the Smart Grid,’ the Research Triangle is home to many companies conducting high-level renewables research, attracting federal and private investment. Even technology companies without a renewables focus are getting in the game: Apple constructed a 20 MW solar project at its datacenter in Maiden, and in conjunction with its plans to expand its Lenoir datacenter, Google is attempting to restructure the state utilities’ policies to make large solar purchase more accessible.
Limitations and Challenges
When examined closer, solar in North Carolina has some interesting and limiting quirks. For example, most of the utility-scale projects are relatively small. SNL Energy’s map, with a range of 1-60 MW for a small project, is deceptive. The bulk of North Carolina’s projects are actually under 5 MW, which Duke Energy, the majority investor-owned utility in the state, has designated as the cutoff for a standard rate option to sell back electricity. This cutoff is a result of a combination of complicated utility laws for projects above 5 MW and the reluctance of the investor-owned utilities to incorporate large projects into their grid before fully understanding the process and implications.
It is also worth noting something this map does not show, which is a large bias toward utility-scale customers in North Carolina. Residential customers are limited by two main factors: inflexible financing and a weak net-metering policy. In North Carolina, customers are required to own the source of renewable generation on their property, eliminating the possibility of the third-party finance and lease model that has been successful in states like California. Also, the utility takes ownership of all Renewable Energy Credits (RECs) generated from customers’ installations, removing a supplementary financial incentive that is appealing to both owners and external financiers. Finally, investor-owned utilities are the only ones in the state that currently net-meter, so those in localities with public utilities are out of luck.
Thus, the story of North Carolina’s success is far from complete. The state still must overcome substantial hurdles to future growth in the industry, including the expiration of the renewable energy tax credit in 2015 and an increasingly aggressive and antagonistic Republican majority in the General Assembly. However, with the vocalized support of Republican Governor Pat McCrory, it appears that many North Carolinians are starting to realize the potential of this promising industry to assist in their economic recovery. North Carolina should continue to build from its early achievements and foster a robust solar industry using the state’s unique advantages.