News: CJ Exclusives

Solar Complex at Turkey Plant Raises Corporate Welfare Concerns

FLS gets tax credits for replacing propane rather than electricity

A jumbo solar geothermal complex installed at a Robeson County turkey processing plant is being hailed as the largest of its kind in the nation and a distinction for North Carolina’s expanding solar industry.

Critics say it’s costly crony capitalism wrapped in corporate welfare, as the solar energy produced by the complex will heat water that had been warmed with propane rather than electricity. They note that the solar array will not replace electricity from the power grid.

FLS Energy, an Asheville-based solar company, has erected an array of 2,100 solar panels that heat as many as 100,000 gallons of water daily at the Prestage Foods turkey plant in St. Pauls. The hot water is used to clean equipment and processing rooms at the 260,000-square-foot plant.

FLS owns and operates the solar thermal installation. It sells low-cost electricity to the farm and gets a lucrative mix of state tax credits for construction, and revenue from renewable energy certificates sold to Duke Energy. Power companies are obligated by state mandate to purchase a percentage of its electricity from green power.

“It’s a crony capitalism scheme that makes this solar company rich while bilking taxpayers and ratepayers out of money out of their pockets,” said Michael Sanera, director of research and local government studies at the Raleigh-based John Locke Foundation.

“People are unaware their power bill is higher to support these crony capitalism scams,” Sanera said.

FLS has made similar deals with schools, community colleges, and other government entities. Without the government-required incentives and subsidies, the deals would collapse because the solar energy is more costly to produce than what is being generated at traditional power plants, Sanera said.

“This is a too-good-to-be-true deal that the snake oil salesmen are selling,” Sanera said. FLS gets the high-yield income built into the front end of the renewable energy certificates, and by the time their clients have the option to purchase the solar systems, the equipment likely will be obsolete, he said.

“Prestage has no knowledge of any details surrounding any financing packages FLS Energy may have assembled,” Summer Lanier, Prestage Farms public relations director, wrote in response to a list of questions she requested in lieu of a phone interview.

“FLS Energy offered us a cost-effective and stable, long-term alternative to our current energy needs. Commenting simply on what critics have said, and without being involved in FLS Energy’s financial matters, any response would be unfair speculation on Prestage’s part,” Lanier wrote.

“We simply made a business decision which will help our company, community and the sustained employment of 350 local residents,” and give Prestage Foods the option to buy the equipment after 10 years, she wrote.

“We anticipate an annual savings for our hot water heating costs of around 35 percent. This could be more or less depending on the price of propane at a given time,” Lanier wrote.

In a news release distributed at the outset of the project, Brownie Newman, FLS vice president and director of project finance, said the partnership with Prestage Foods will “reduce their dependence on propane and reap the rewards of lower energy costs. It’s a win-win for everyone.”

Newman did not grant an interview for this story. He requested a list of questions to be sent to Joanna Baker, FLS marketing manager, for his review. Baker responded with an email saying the solar thermal farm has been completed at no cost to Prestage Foods.

“FLS Energy owns the solar thermal system and sells Prestage Foods the energy it needs to heat water,” the response said. “Prestage does not pay for any repairs or maintenance costs of the project.”

The response did not answers questions regarding the overall cost of the project, how much FLS received in tax credits for construction and will be paid from sales of the renewable energy certificates to Duke, or how frequently a backup propane system would be needed to supplement the solar energy.

Nor did Baker respond to criticism of the project as a form of crony capitalism.

Roy Cordato, vice president for research and resident scholar at JLF, questioned the fairness of the renewable energy certificates for the Prestage Foods project.

Under state statute, a renewable energy certificate is awarded for every 1 megawatt hour of electricity produced by green power. The certificates can be bought, traded or bartered.

“Most farms heat their water with propane, not electricity, so why are they [FLS] getting to sell credit … to the power company for saving electricity when they’re not saving electricity?” Cordato asked. “Solar is substituting for propane, not for electricity.”

There is no shortage of propane, he said, and the subsidy the solar company receives is “a very bizarre allowance.”

FLS did not reply to questions about that issue in Baker’s email response.

A request for an interview with officials in the North Carolina State Energy Office on the propane for renewable energy certificate issue was not granted.

But Seth Effron, communications director, issued a short, written statement that said “alternative energy sources have been encouraged for a variety of policy objectives including moving away from imported fuel sources, adopting renewable sources, and reducing pollution.”

Just like other tax credits for businesses, Effron’s statement said, “any company [that] meets the qualifications for the credit can receive it.”

Whether it is a good idea to pay for replacing propane power with solar geothermal and then selling revenue-rich renewable energy certificates when no electricity is saved off the grid “is more of a state policy kind of question” than one for utility operators, said Duke Energy spokesman Jason Walls.

“It’s not our position to say necessarily whether the policy is right, wrong, or indifferent,” Walls said. That is a legislative and regulatory matter, he said.

“These projects that FLS is undertaking are part of that [state-mandated] renewable energy portfolio standard that we are required to comply with,” Walls said.

“What state law requires us to do is provide 12.5 percent of our electric generating capacity through renewable energy” in a cost-effective manner for customers,” Walls said.

“Buying the renewable energy certificates from these geothermal systems is a cost-effective form of renewable energy,” he said, “so yes, this project is a good project for our customers.”

Dan Way is a contributor to Carolina Journal.