For decades, energy costs have been manipulated by state government subsidies. Just like other subsidies, whether for the film industry, automobile manufacturers, or even specific companies, special treatments transfer the tax burden from the recipients of the subsidies to others, creating unfair advantages, interference in free markets, and barriers to prosperity.
There is some good news from recent legislative action, but still much work to be done.
After 38 years, North Carolina will stop one solar industry subsidy by ending a 35 percent tax credit for construction costs. Decades ago, renewable energy advocates swore a temporary “boost” was all they needed to get their industry started, but the industry has not ended its significant dependence on taxpayers and ratepayers.
Subsidizing renewables has driven up energy costs for North Carolina citizens: $224 million in tax giveaways and special treatment, 3,600 jobs lost because of higher energy costs, and $556 million in increased energy costs and money taken out of the economy this year.
High energy costs deter business startups and expansions, particularly manufacturing industries that long have been the backbone of the state’s economy. Higher energy costs affect all energy consumers. Low-income families are hit hardest.
Although the solar industry and its beneficiaries fought tooth and nail to keep the credit, spending millions on high-powered lobbyists, the General Assembly and the governor agreed it was time to allow the 35 percent state tax credit for renewables to sunset at the end of 2015.
But the special treatment won’t end when the tax credit sunsets. A mandate forcing North Carolinians to buy renewable energy remains in place. “Renewables” include solar, wind, hydropower, geothermal, and biomass — but in reality, the beneficiaries are wind and particularly solar.
The state renewable portfolio standard, enacted in 2007, requires 12.5 percent of our energy by 2021 to come from a mix of renewable sources and conservation measures. The mandate was phased in. It’s at 6 percent until 2018, when it is scheduled to increase to 10 percent, and finally reaching the full 12.5 percent level in 2021.
North Carolina is the only state in the South that imposes a mandate for energy consumption on its citizens. Electricity prices are 38 percent higher in states with mandates requiring consumers to purchase these more expensive forms of energy.
The special treatments don’t end with the RPS. North Carolina has 111 different financial incentives and policies that favor renewables. Renewable projects get an 80 percent property tax abatement, accelerated depreciation allowance, and a selling advantage called net metering, which allows renewables to avoid the costs of using the power grid.
All of these special treatments subsidize renewables even more at the expense of energy consumers, aka taxpayers.
Environmental concerns also arise when spent solar panels must be decommissioned. The panels contain dangerous toxins and pollutants. There are potential sedimentation and erosion control issues associated with solar facilities. And as solar farms expand onto native scrubland and former farmland, we lose natural ecosystems and open space.
Legislation repealing or phasing out the state mandate has been introduced in 2011, 2013, and again this year. House Bill 760, freezing the RPS at its current rate of 6 percent, passed the House 77-32 but never made it through the Senate. It is eligible for consideration during the 2016 short session of the N.C. General Assembly.
So we have large giveaway programs to lure new businesses to North Carolina while we mandate higher energy costs for existing businesses. Isn’t it time to eliminate the special treatments and instead lower costs for everyone? After all, that’s what free markets are all about, and they work pretty well.
Let’s give it a shot. Repeal the RPS and other special treatment for renewables.
Becki Gray (@beckigray) is vice president for outreach at the John Locke Foundation.