North Carolina residents and businesses claimed a record quarter-billion dollars in tax credits for installing and financing renewable energy projects last year.
That amount may well never be matched because the state legislature let the renewable energy subsidy expire and it is no longer available. But because taxpayers can spread out the tax credit over five years, the claim amounts will not suddenly vanish next year.
The biggest users of the tax credit were insurance companies and other corporations, although hundreds of private residents also claimed the benefit. The 2016 tax credit data was issued by the N.C. Department of Revenue this week.
The $245 million in tax credits claimed last year represent state income taxes that corporations and individuals were exempted from paying that year, and nearly doubles the renewable tax credits claimed the year before, $136.3 million. The total has been doubling nearly every year since 2007, when North Carolina’s legislature required electric utilities to use renewables.
“I think you’re looking at the peak,” said Stephen Kalland, executive director of the N.C. Clean Energy Technology Center at N.C. State University. “My guess is, that’s the max.”
The tax credits have been rising steeply for years as North Carolina vaulted to second place nationally for total solar energy capacity, behind just one state: California. One factor that likely contributed to last year’s surge was that 2016 was the last year the tax credit was available, prompting developers of renewable projects to accelerate their construction schedules to qualify for the benefit.
The state’s renewable tax credit was one of the most generous in the nation, cutting the cost of a renewable energy project by 35 percent, up to $2.5 million per facility for businesses. When coupled with a 30 percent federal tax credit, project developers could cut the cost of a renewable facility in half. North Carolina’s Republican-led legislature let the subsidy expire for solar energy and 17 other renewable technologies in 2015, with an extension granted into 2016 for projects already under development.
Brian O’Hara, senior vice president for strategy and government affairs at Chapel Hill-based Strata Solar, credited the state renewable tax credit for helping launch the state’s solar industry. Industrial-sized solar farms have dramatically come down in cost and no longer require the subsidy to become profitable, he said. Strata is the state’s largest solar farm developer and employs about 300 people on staff and about 1,500 hourly-paid workers who erect the facilities across the state.
“For utility-scale solar, the tax credit has served its purpose,” O’Hara said. “It gave North Carolina an edge in growing a solar industry.”
In addition to state and federal tax credits, the state’s solar explosion was also driven by the 2007 state law mandating electric utilities derive a portion of the electricity they sell from renewables. That year residents and businesses claimed just $440,137 in renewable tax credits.
North Carolina quickly went from a smattering of small rooftop solar arrays, considered exotic and experimental a decade ago, to about 2,600 megawatts of solar power today, most of that in utility-scale solar farms sprawling over farmland and vacant real estate.
The list of 2016 beneficiaries of the tax credit spans 150 pages, showing that the credits were claimed for projects valued at a total $1.7 billion.
Blue Cross and Blue Shield, the state’s largest health insurer, claimed $37 million in 2016, the biggest renewable tax credit user for the year. Duke Energy Corp. claimed $23.9 million and Progress Energy (since renamed Duke Energy Progress) $7.5 million. Wells Fargo Bank claimed $13.2 million, the N.C. Farm Bureau Mutual Insurance Co. $9.3 million and Bank of America $7.7 million.
The largest individual claim came from Strata Solar CEO Markus Wilhelm, who claimed $4.8 million.
Much further down the list was iPhone maker Apple, which operates data centers in the state and claimed $1.7 million.
O’Hara said that insurance companies, banks and other corporations that claim the renewable tax credit are typically investors in solar farms and can claim the tax credit because they finance the undertaking.
Joel Olsen, CEO of O2 emc, a solar farm builder and operator about 20 miles north of Charlotte, said solar farms generate tax benefits to the state that far outweigh the temporary loss of revenue from the tax credit. The projects operate for 30 years and pay local property taxes and state property taxes during that time.
Olsen said that his company put in a 20-megawatt solar farm in Montgomery County that’s paying nearly $100,000 a year in property taxes. Before the project was built, the land was generating less than $1,000 a year in county property taxes, he said.
“Every dollar that’s been spent here generates ... revenues for state and local governments,” Olsen said.