September 17, 2015

North Carolina Renewable Energy Tax Credits Remain Controversial

For 38 years, taxpayers in North Carolina have been footing the bill for the solar energy industry that has yet to prove it can survive without government handouts.  Advocates for solar and other renewable energy sources continue to beg the legislature to prop up this industry, and lawmakers continue to comply.

On Thursday, Sept. 10, Rep. Pricey Harrison (D-Greensboro), along with representatives from a group called Environment North Carolina, held a press conference to announce that the state is ranked fourth nationally for total solar electric capacity, and to extol the virtues of solar energy.

They did not address the numerous questions that surround the inability of solar power to exist without government aid.  They instead lamented legislation pending in the General Assembly calling for changes to the Renewable Energy and Energy Efficiency Portfolio Standard (REPS) and renewable energy tax credits.

Passed in 2007, REPS requires utilities to buy at least 6 percent of their electricity from renewable energy sources.  The percentage is set to rise to 10 percent in 2017 and 12.5 percent in 2020.

Renewable energy tax credits have been in place since 1977.

It was mentioned in the press conference that North Carolina-based consulting company RTI International recently released a study that claims that renewable energy brings energy prices down over time.  What was not mentioned were efforts made by the solar industry in March of this year to convince the NC Utilities Commission not to lower utility rates in the face of falling natural gas prices that were enabling traditional utilities to produce electricity at a lower cost.

Another point not mentioned is that solar requires traditional forms of electrical generation to kick-in when solar electrical production drops, not just at night but on overcast days, adding cost to production when a utility provider has to switch from solar power to traditional energy and then back to solar.

Rep. Michael Wray (D-Gaston) said that Democrats are hoping to support the budget agreement and that the extension of the renewable energy tax credits is an important priority for them.  The original House budget, which was voted for by 31 Democrats, included the extension.

Just one day prior to Harrison’s press conference, Sen. Andrew Brock (R-Davie) and Rep. Mike Hager (R-Rutherfordton) hosted an event intended to revive a House bill that is in the Senate that would freeze the REPS at the current 6 percent.  The event also featured discussion of a study released by Utah State University that says that North Carolina’s renewable energy standards will raise electricity rates, cost families $3,800 each and cause the loss of 24,000 jobs.

Brock said, “I hope it doesn’t show up in the budget.  I’m actively campaigning against it.  I think it’s become a sham.  It’s capital cronyism at its worst.  And the people that are over there are supporting corporate welfare, and it’s creating a tax shelter for multi-millionaires in the state, putting it on the backs of businesses, working families and senior citizens.”

The General Assembly passed the renewable safe harbor bill in April and Gov. Pat McCrory signed it into law.  It extends tax credits for solar and other renewable energy companies to Jan. 1, 2017, for projects that were already substantially under way.  The credits were to expire at the end of 2015.

The Guilford County legislative delegation in the House and the Senate voted for the bill, except for Rep. John Blust (R-Greensboro), who voted against it on the first House vote and then for it on the second vote.

Sen. Jerry Tillman (R-Randolph) also voted for the bill and explained his position by saying that the solar legislation that has been passed is for companies that had work in the ground this year.  Tillman said, “They would not be able because of all the permits and everything to finish their projects for the end of the year when the credits ran out.  So we’ve agreed to extend their credits, just for those folks, and there weren’t many of them, for one more year.”

Tillman said, “Those people had already put hundreds of thousands of dollars out there and had been led to believe by many people that those credits would be extended to them.  But then we realized that they may not, so we made sure that those people would be covered that already had a huge investment, had already purchased the land and had signed contracts in many cases with landowners.”

Tillman also said, “Now we have not done anything to extend credits to any of the other solar people that are wanting to come in and get started, smaller solar companies.”

After Thursday’s press conference, Harrison, perhaps unintentionally, made the point that the renewable industry cannot stand on its own without taxpayer dollars, when she said that when Ohio rolled back its renewable energy standard it just killed the renewable energy industry.

Harrison also said that the regulated energy monopoly makes the playing field between fossil fuels and renewable energy uneven.

Jon Sanders of the John Locke Foundation reported that “wind and solar require a steady, unrelenting diet of government subsidies, investment tax credits, accelerated depreciation schedules, feed-in tariffs, grants and purchase mandates to stay afloat. … Nevertheless, even though the renewable energy operations could not exist without them, those costs are rarely included when presenting policymakers and the voting public with the costs of wind and solar energy.”

According to a NC Department of Revenue report, the state has been giving renewable energy tax credits for solar since 1977.  For 38 years, this state tax credit has been in place for an industry that continues to claim that it just needs more time to be able to stand on its own.  The tax credits, now at 35 percent, were extended as recently as in 2005 and 2009, and are set again to expire in 2015 unless the General Assembly extends them again.

Tax credits are sometimes confused with tax deductions, but are much more like economic incentives.  A tax credit allows you to deduct the amount of the credit from your tax bill.  So a company that owed $50,000 in taxes and had a $25,000 solar tax credit would only owe $25,000 in taxes and the state would be out $25,000 in tax revenue.  Tax credits are often sold to big corporations with hefty tax bills.

The debate over solar and other sources of renewable energy will likely continue.  Tillman has already had to deal with articles that cast him in a negative light for his vote to extend tax credits for projects underway. 

Not one to shy away from controversy, Tillman is, however, trying to make his position clear.  Tillman said, “I’m definitely not for extending subsidies in situations that do not promise productivity or reduced rates in the future.”

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