Through 2019, North Carolina ranked second in the United States in installed solar capacity (meaning, not including rooftop solar), trailing only California. Last year, however, we dropped to third overall - and fifth based on solar added that year.
How did we get to our previous second-place spot? What have other states done to move up? How can we regain our standing?
How North Carolina became #2 in solar
North Carolina's huge utility scale solar boom came about due to a pioneering law setting standards for renewable energy use, tax incentives and the state's favorable interpretation of a federal renewable energy law governing utilities. But, over time, some of those standards have aged out or been changed.
In 2007, North Carolina became the first state in the Southeast to pass a renewable energy and energy efficiency portfolio standard (REPS), an important signal for developers that there is a price for and value of solar in the market. North Carolina also had one of the most generous installation tax credits in the country (35 percent), which - when combined with the federal tax credits - made utility-scale solar projects financially attractive. An installation tax credit allows a solar developer to deduct the cost of installing a solar energy system from state or federal taxes. Our state had an 80 percent property tax abatement for any state property taxes associated with installed renewable energy systems.
Finally, North Carolina had generous state terms for a federal statute known as the Public Utilities Regulatory Policy Act (PURPA) of 1978. PURPA requires utilities to buy power generated from “qualifying renewable energy facilities” at an “avoided cost” rate that is set by each state. The N.C. Utilities Commission required contracts to be offered to qualified solar facilities of 5 megawatts (MW) or less, with 5-, 10-, and 15-year terms. These standard contracts with dependable terms were attractive to investors and helped to grow the utility-scale solar business.
Collectively, these policies allowed North Carolina’s solar market to flourish. So what changed?
Two policies were completely eliminated. The state investment tax credit ended in 2016. The following year, the General Assembly replaced the generous PURPA terms with competitive procurement, which mandated a ceiling on utility-scale solar based on three “tranches” overseen by an independent administrator. Bottom line: It meant North Carolina would only add roughly 2,000 MW of solar projects.
Federal tax credits and state property tax relief are now the only policies for encouraging solar growth. The federal tax credit, though, is ramping down: It was reduced to 26 percent in 2020 and sits at 22 percent this year.
Which states have gained ground?
As North Carolina's solar star faded, other states aggressively implemented solar-friendly policies, leading to its development elsewhere. So which states are taking the lead, and why?
Texas
In 2020, California remained first in the nation for installed solar capacity, followed by Texas. North Carolina fell to fifth for the year, behind Florida and Virginia. Texas does not have a statewide renewable energy portfolio standard to promote solar. But several factors helped: the state’s deregulated electricity market, a streamlined permitting/interconnection process, transmission lines designed to handle renewable power, and vast amounts of land that get direct sunlight. Invenergy, a large renewable energy developer, broke ground this year on a $1.6 billion solar farm northeast of Dallas. This project is expected to be the largest in the country upon its completion in 2023.
In Texas, about 5 gigawatts (GW) of coal are expected to go offline in the next five years; new solar generation capacity is expected to meet Texas’ energy demand, with more than 4 GW planned for installation during that time frame. Cities have helped the solar boom: n July 2020, Houston’s city government transitioned to 100 percent wind and solar for all of its operations, including wastewater treatment plants, the zoo, and all three of its airports. In fact, Houston is now the largest U.S. city government powered entirely by renewables.
Virginia
Virginia legislators passed the Clean Economy Act in 2020, mandating 100 percent clean energy by 2050 or a zero carbon grid for the entire state. The most significant provision in the law is a renewable portfolio standard - of the nation's most stringent. In policy terms, it's similar to North Carolina's REPS, but not in numbers. That's due to Virginia's 2050 clean energy target - a mandate that North Carolina doesn't have.
There's more:
- Virginia has attracted high-tech employers that are using renewable energy to meet their corporate sustainability goals. Virginia’s metro areas, such as Hampton Roads, have become central points for data centers that use large electricity quantities. Microsoft, Amazon, and Facebook centers are responsible for 70 percent of the country’s internet traffic, all of which flow through Virginia.
- Virginia's large agricultural lands offer space for solar development. Dominion Energy estimates that it will need about 8,000 acres for every 1,000 megawatts' worth of new solar panels installed. Solar offers farmers a dependable income that can diversify income streams to allow farmers to stay on the land.
- Virginia is served by PJM, a regional transmission organization that allows for wholesale energy market participation across Delaware, Maryland, New Jersey, Ohio, Pennsylvania, Tennessee, West Virginia, and the District of Columbia; and parts of Michigan, Kentucky, Indiana, Illinois and North Carolina. Since almost all of Virginia is within PJM's service territory, any clean energy developer can continue to receive revenue for the period after their contracts expire and enable more opportunity.
Florida
The Solar Energy Industries Association says that, in 2021, the Sunshine State will build about 2,000 megawatts of new solar capacity. North Carolina, on the other hand, will build about 500 megawatts. The growth can be tracked to two Florida laws, unmatched in North Carolina, that make solar exempt from sales tax and property tax. That makes solar much less expensive to install, and lowers annual property taxes because county tax agencies must leave out a solar system's value when when assessing a home's value.
What North Carolina can learn
North Carolina has room to grow and take back the ground it has lost in the solar steeplechase. The landscape, especially in eastern North Carolina, is filled with utility scale solar projects, but there's plenty of room to grow with rooftop solar.
State law should require an improved solar rebate program offering by Duke Energy, improvements to its community solar program and continued support for customer-friendly net metering policy. To continue to build utility scale solar, North Carolina leaders should look to enhance the solar interconnection and permitting process to ensure that utilities are not unnecessarily delaying solar projects. And the state should work with local governments to ensure that solar is not unfairly targeted by moratoriums or bans, which have been put in place for concerns over aesthetics, property taxes, or utility-scale solar decommissioning.
With an eye on the policies and practices that have helped other states scoop our lead, North Carolina can regain its status in solar development. If our state's leaders and utilities learn from the initiatives taken elsewhere, North Carolina's solar future can be bright indeed.