News: CJ Exclusives

Friends, Foes Agree: Subsidies Drive Renewable Industry

Environmentalists laud government incentives at press conference

RALEIGH — An environmental group lauding North Carolina for ranking No. 4 nationally in solar energy capacity agrees with foes of renewable energy mandates — the state’s purported boom in clean energy mostly results from the government forcing utilities to purchase the higher-cost energy, along with lucrative incentive deals that shift costs to taxpayers.

“Specifically, the state’s Renewable Energy Portfolio Standards and the renewable energy tax credits have set the stage for solar businesses … to soar,” said Rachel Morales with Environment North Carolina, a state-based environmental advocacy group, at a Thursday news conference unveiling a report titled Lighting the Way: The Top States that Helped Drive America’s Solar Energy Boom in 2014.

“Strong public policies at the local, state, and federal level are necessary for North Carolina to achieve its true solar potential,” Morales said.

“North Carolina has become a national leader in clean energy technology, and it’s largely a result of Senate Bill 3,” said state Rep. Pricey Harrison, D-Guilford. S.B. 3, passed by the General Assembly in 2007, requires electric utilities to buy increasingly larger volumes of renewable energy, and provides 35 percent state tax credits for solar investment.

“What amazes me about this is it basically acknowledges everything that the opponents of solar subsidies have been saying … that the solar industry is a creature of the state,” said Roy Cordato, John Locke Foundation vice president for research and resident scholar.

The state has issued $224,508,181 in renewable tax credits since 2010, mostly to large banks and insurance companies, according to the state Department of Revenue.

North Carolina’s solar industry “is not a creature in any way, shape or form, of the market,” Cordato said, “which means it’s not the low-cost, reliable energy that some people make it out to be.”

He cited an Environment North Carolina press release that “says it’s the public policies” responsible for solar growth, “which basically puts a gun to ratepayers’ heads and says you must buy this. Well, any industry can survive if people have to buy your product.”

“We talk about mandates. We talk about subsidies. We talk about all these other things. But polio vaccines are mandates. Anybody here think that’s a bad idea?” state Rep. Charles Jeter, R-Mecklenburg, said during the news conference.

“We have to understand that just because it’s a mandate, just because it’s a subsidy, just because it’s a tax credit doesn’t mean it’s bad,” Jeter said.

State Rep. Michael Wray, D-Northampton, said solar projects “are delivering much needed investment, jobs, business opportunities, and new tax revenues to our local and state governments.”

There are five large-scale solar projects valued at $135 million in his district. The renewable energy tax credit that entices investors to such projects is supposed to expire at the end of the year, but Wray said extending it in the budget being negotiated is “a top priority.”

Carson Harkrader, project manager at Carolina Solar Energy in Durham, thanked state Reps. Jeter, John Szoka, R-Cumberland, Jason Saine, R-Lincoln, and Sens. Jerry Tillman, R-Randolph, and Brent Jackson, R-Sampson, for their support of the solar industry.

Harkrader said a solar farm project she is working on in eastern North Carolina would raise county property tax revenue on the site from $3,800 annually to $170,000. If a nearby small town annexes the site, its yearly revenues would rise from $500,000 to $625,000.

Responding to a reporter’s question about the cost of disposing spent solar panels and other equipment at the end of their useful lives, Harkrader downplayed any environmental concerns.

“There’s no toxic materials,” she said, though experts say solar panels contain hazardous materials.

“I’m not suggesting there’s not a cost” to the state through the tax credit giveaways, Jeter said. “What I’m saying is, the benefit is greater than the cost.”

Cordato said he knows of no cost-benefit analysis to validate Jeter’s claim.

While the speakers hailed the 23,000 jobs purportedly created by the clean energy sector, none could break down the jobs by category, or say whether they were full-time, year-round positions, or temporary, part-time jobs.

Cordato said the number is somewhat irrelevant, because any industry receiving subsidies would create jobs.

Solar supporters “assume that money’s going to stay in somebody’s mattress” if it doesn’t get used by renewable energy interests, Cordato said. “It’s terrible economics,” because it doesn’t consider how many jobs the private sector might have created had the government not diverted money to the favored green-energy industry.

The previous day, at a panel discussion hosted by the American Energy Alliance, state Rep. Mike Hager, R-Rutherford, said the renewable tax subsidies are hurting the state budget.

“If you’ve been subsidized for eight years, and you think you have a business, you probably have a charity instead,” Hager said.

Bob Luddy, CEO of CaptiveAire Systems, a privately held company doing ventilation systems for kitchens, issued a statement saying green energy may be a noble goal, but only makes sense if it’s cost effective and market driven.

“Subsidies are often sold as near term, but they are perverse incentives and most often become permanent,” stifling incentive to compete in the market through innovations, Luddy said.

Ryan Yonk, an assistant professor at Utah State who was among a team researching the cost of REPS policies, said based on the national average of REPS states, a family in North Carolina made $3,870 less in 2013, North Carolina received $14.4 billion less in real personal income, ratepayers shelled out $149 million more than they would have without the REPS, and there were nearly 24,000 fewer jobs.

Most affected are “the folks who can least afford it. The folks that are tied to fixed incomes,” Yonk said. “It’s having a real effect on Main Street. It stifles that ability to grow.”

Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.