RALEIGH — The Senate Finance Committee on April 2 approved a bill with bipartisan support to extend by one year eligibility for the state’s 35 percent renewable energy tax credit. The legislation is intended to provide “a soft landing ” to large solar projects already in the regulatory approval and construction stream.
The incentive is scheduled to expire Dec. 31. Lawmakers in the House and Senate are divided on whether to allow it to die or resuscitate it, and competing bills have been filed. Senate Bill 372 channels the extension primarily to a handful of giant solar farms as large as 3,000 acres being built in eastern North Carolina.
“This is a part of stopping the tax credit for renewable energy … and get it completely over by December of 2016,” after which no new projects would become eligible, said Sen. Bob Rucho, R-Mecklenburg, one of the bill’s primary sponsors.
“One of the concerns has always been that the costs of other than fossil fuel of any types of renewables is a higher cost of electricity. There are mandates that the electric industry has to accept those projects,” Rucho said.
“Therefore, one of the reasons why we’re terminating this tax credit on renewables in our electric supply is that at this point either they’re going to be equal to the cost of fossil fuel electric generations or they shouldn’t be subsidized anymore,” he said.
Even with the sunset, legislative fiscal research staff calculated the phase-out would cost the state $36.7 million annually, with a total cost would be $183.5 million, spread over the five-year life of the credit.
The North Carolina Sustainable Energy Association, which represents the renewable industry, “is encouraged by today’s progress of the Renewable Energy Safe Harbor, Senate Bill 372,” said spokeswoman Allison Eckley.
“The safe harbor provides investors and developers who have projects in advanced stages of development the certainty needed to confidently advance their renewable energy projects forward regardless of unexpected delays that the utility might face during the interconnection process,” Eckley said.
Rucho noted that there are a number of projects for which construction is almost complete but face delays connecting to the power grid. “There’s a lot of money invested,” he said. “We feel it’s only fair to be able to say that if [connection] is out of their control … we will give them up to one year to make the connection so that they can become eligible” for the tax credit, he said.
“This isn’t something that they just hook to a substation and then two linemen throw a switch and then say you’re on line,” said Sen. Bill Rabon, R-Brunswick, another primary sponsor.
The federal government must approve the projects, and operators of the electric grid must work the projects into their system while making sure the power supply is not interrupted when the projects are linked to the grid, Rabon said. That process could take as long as 18 months to schedule.
The measure has its skeptics. “How much money was it we are going to take out of the hard-working people’s pockets for this?” asked Sen. Bill Cook, R-Beaufort.
Jonathan Tart of the Fiscal Research Division told committee members that the projects most likely to be affected by the bill are utility-scale solar generators that would begin drawing the annual $36.7 million in tax credits in the 2016-17 fiscal year.
“You’re looking at potentially $500 to $525 million of investment, and it’s predominantly coming from what we understand are four very large projects of approximately 100 megawatts each, and another one for 65 or 75 megawatts,” Tart said.
Sen. Jerry Tillman, R-Randolph, a primary sponsor of the bill, cited jobs that might be created from a large expansion of solar farms.
“It will take several thousands jobs to complete this project in the physical work, the structural work that has to be done, and then several hundred people would be hired at top-paying jobs to maintain these sites,” Tillman said.
“Yes there are some costs involved, but the long-term impact is huge for North Carolina,” he said. “These proposed projects would be in eastern North Carolina, and they would cover about 3,000 acres, and would put North Carolina at the forefront of solar power.”
Meantime, Sen. Brent Jackson, R-Sampson, vice chairman of the Agriculture/Environment/Natural Resources Committee, had concerns about the huge swaths of unspecified land required to install such enormous solar farms.
“I’ve not heard tell of a 3,000-acre project. My question is, is that 3,000 acres of farm land that’s going to be taken out of production?” Jackson asked.
“This land has been laying there, and they have willing lessors or sellers. They got their land that’s not producing one nickel,” Tillman said.
“Yes, it’s potential farmland, but it’s also a potential energy producer for the whole state” that will create employment in “very depressed counties,” Tillman said.
To qualify for the credit extension, a taxpayer must submit an application by Oct. 1, 2016, and pay an application fee of $1,000 per megawatt of capacity, with a $5,000 minimum.
Taxpayers receiving the credit would have to cover between 50 percent and 80 percent of the cost of the project, depending on how much electricity it would generate. The credit could not be applied to a project that has received any other renewable energy credit.
The maximum credit would be $2.5 million per installation on a nonresidential property, and would range from $1,400 to $10,500 on residential property, depending on the type of project.
“I know it’s controversial, our subsidizing an industry,” said Sen. Angela Bryant, D-Nash. But, she said in making a motion to approve the bill, “It has been a boon in many of our rural counties in eastern North Carolina.”
Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.