North Carolina is often looked to as exemplary in the solar industry. It ranks third in the nation for overall solar power, an increase from 6th in 2019, and the region is one of the fastest-growing solar areas of the country. 6,486 megawatts (MW) of solar have been installed as of the third quarter of 2020, with a projected growth of 3,275 MW over the next 5 years – 7th in the US for projected growth.
While its growth is impressive, North Carolina lags behind the top-ranked states in “Solar-Friendliness” and “Quickest Return on Investment” according to the Solar Energies Industry Association’s (SEIA) ranking system. It takes an average of 11.52 years for a 5 kilowatt (kW) residential solar panel to repay its investment in North Carolina, compared to less than four years in Massachusetts and Rhode Island. This is due to the difference in initial cost of installation, as well as below-average energy costs in the state.
There are still a number of reasons for homeowners in the state to invest in solar, however. While it may take slightly longer, solar panels will eventually pay for themselves in energy savings. Duke Energy customers save an average of $44,527 over 25 years after switching to solar, a number that is only increasing as solar energy gets cheaper.
Previous state subsidies for solar promoted early growth in the industry, but currently, the largest support for solar homeowner growth is the national Investment Tax Credit (ITC) that provides a federal tax credit of 26% of the cost of the solar panel system for panels installed in 2020.
Solar industry breakdown
The majority of current solar in North Carolina, as well as the area experiencing the most growth, is utility solar. A report from the Solar Energy Industries Association (SEIA) reveals that while there is some growth in residential and non-residential sectors, utility growth is a clear frontrunner in NC, which isn’t the case for all states.
For instance, the leader in solar power, California, has much higher proportions of residential and nonresidential solar growth. Installations that fall under utility solar include “solar facilities developed with the primary goal of supplying a utility with energy,” according to the NC Sustainable Energy Association (NCSEA). The majority of the large-scale projects supported by Duke Energy are in the Northeast corner of North Carolina.
One reason North Carolina has more large-scale utility projects than residential solar is due to the state’s historical tobacco production. Rural farmers who want to hold onto their family land while transitioning to a more reliable industry have looked to solar as an appealing option. Already cleared, these farms are easy to transition into large-scale solar projects. Less incentives for homeowners and backlogged interconnection requests have all slowed solar growth in other areas. While Duke Energy is required to provide community solar under House Bill 589, another way for residents to support clean energy, they have yet to operationalize any community solar projects.
Legislative support for solar
In 2007, the legislature passed the Renewable Energy and Energy Efficiency Portfolio Standard, which requires that North Carolina meet 12.5% (at 7.09% as of 3rd quarter 2020) of its energy needs through renewable energy resources or energy efficiency measures by 2021. This standard promoted other measures to increase renewable wind and solar investment in the state, putting NC ahead of many other states in their renewable infrastructure. The policies included a 35 percent tax credit for renewable energy investment, extended from a tax credit originally legislated in 1977, and created thousands of jobs in NC in doing so. Recent state tax collector audits related to partnership use of these credits has raised frustration for many who invested in solar in North Carolina early on.
Years of Republican control of the legislature and governor’s office after this bill passed led to a weakening of climate policy. In 2015, the legislature voted to retire the tax credit for installation of residential and commercial solar generation that played a role in solar growth in the state. Now, state-specific solar legislation is limited to property tax exemption for home value increase due to solar panel installation.
With the re-election of climate friendly Governor Cooper in 2020, there is hope for a continued renewal of strong climate policy, although the elections left the house and senate in Republican hands.
In his first term, Cooper signed House Bill 589, “Competitive Energy Solutions for NC,” into law on July 27, 2017. This legislation, according to NCSEA, represents “the first major piece of comprehensive energy legislation passed in North Carolina since 2007.” Achieving limited success, HB589 has failed to meet demand for solar rebates by homes and businesses. Rebates sold out in 21 minutes in 2020. To address this, the utility will be offering two application periods in 2021. Additionally, Duke energy has yet to offer any of the 40 MW of community solar required by the bill. Addressed in this report, Duke blames software updates and difficulty meeting the restrictions imposed on the program.
Continuing to pursue a climate-focused agenda, Cooper issued Executive Order 80 in 2018. In 2019, Cooper expanded EO80 with a clean energy plan calling for 70% reduction in carbon emissions from the utility sector by 2030 and net zero emissions by midcentury.
Industry support for solar
While government incentives are important, North Carolina’s utilities also have the potential to encourage renewable energy usage; Duke Energy offers a 60 cent per watt rebate on systems up to 10 kW. Average customers will require a 10.21 kW system to cover the full cost of energy use, meaning that even if they successfully get rebates, their whole system will not be subsidized. Energy generated by solar panels in North Carolina goes directly to the utility, which is Duke Energy for most residents. In return, users get energy credits. This means that even in low energy moths, credits can be used from high energy months to pay for electricity usage. A smaller system will not generate enough energy credits to cover the cost of energy used by most residential households. This means that many residents must either pay a higher price on part of their installation to cover their full energy needs, or pay for and use energy from fossil fuels in addition to their solar energy.
Furthermore, Duke Energy has received criticism for the often complicated and slow path to interconnection for utility solar projects. Steps taken this year led to the utility implementing “queue reform” to address the backlog of ready solar projects. Duke has a very mixed record on climate. They have recently faced newsworthy legal challenges for the now cancelled Atlantic Coast Pipeline as well as for their challenge of coal ash cleanup plans. Duke has skirted paying for the full cost of cleanup, proposing rate increases to help offset cleanup costs.
However, Duke has also promoted climate infrastructure and goals, committing to net zero emissions by 2050, and at least 50% carbon emissions by 2030. After the legal challenges and cancellation of the Atlantic Coast Pipeline, Duke invested the $2 billion it had planned to put towards the pipeline into more clean energy and grid investments. This will help Duke reach its goal to double its share of renewables from 8 gigawatts (GW) to 16 GW by 2025.
Homeowners wishing to install solar in North Carolina have to go through their energy provider, and the largest energy provider in the state is Duke Energy, which operates as a regulated monopoly. This benefits homeowners in some ways by keeping energy prices lower, but can also make North Carolina a less appealing option for investors who know they will have little control over energy prices and will have the added burden of being compliant with Duke policies, expectations, and approval.
With president-elect Joe Biden showing a clear commitment to combating climate change, and the nomination of Michael Regan, current head of the Department of Environmental Quality (DEQ) in North Carolina, for EPA director, national policies and officials experienced with North Carolina-specific issues may mean a change in rebates or policies in the future to promote further growth in clean-energy sectors including solar. If Regan is confirmed as EPA Director, the NCDEQ will appoint a new director in charge of continuing to promote clean energy in the state as mandated under HB586 and EO80.