North Carolina’s investment in renewable energy appears to be peaking.
For the first time since 2007, the amount of money that residents and businesses have claimed in the state’s renewable energy tax credit has barely budged.
Last year, the amount claimed was $136.3 million, only 7.5 percent more than the $126.7 million claimed in 2014, according to a report issued Friday by the N.C. Department of Revenue.
In previous years, the amount claimed would roughly double every year as Duke Energy and other utilities raced to meet the state’s mandate for renewable energy. The smaller increase in 2015 does not have an obvious explanation, said Charlotte tax accountant Randy Lucas, who advises investors in renewable energy projects.
“It’s a mystery,” Lucas said, “but I don’t think you can conclude that the industry is on the decline.”
Solar credit expires
The unexpected slowdown of 2015 tax credit claims largely reflects North Carolina’s solar energy boom, which has propelled the state to third place nationwide in total solar capacity installation. Over the past 8 years, North Carolina has added more than 2,000 megawatts of solar energy, equivalent to two nuclear power plants in total output capacity.
The tax credit is the amount of state taxes avoided by those who installed solar panels or 17 other renewable technologies in a given year. Solar farms represent the vast majority of the tax credits claimed in recent years.
The total amount claimed in 2014 was so large that it prompted the Republican-led state legislature last year to eliminate a generous state tax credit that was fueling North Carolina’s solar energy boom. The tax credit expired at the end of 2015.
However, the tax credit could continue increasing because the tax credit is spread over five years for corporate tax filers, and will show up in reports for the next four years. Additionally, renewable energy projects not yet completed but under construction last year were granted a “safe harbor” provision and allowed to file for their tax credit in the year after the credit expired.
“Maybe some projects spilled over into 2015 and will be reflected in 2016,” Lucas said.
Solar expansion did not flatline in 2015. According to an analysis by the N.C. Sustainable Energy Association, solar energy capacity installed in 2015 totaled 860 megawatts, nearly double the 442 megawatts installed in 2014.
At 35 percent, North Carolina’s renewable tax credit was one of the most generous state tax credits in the nation, and cut a third of the cost of building a solar farm. When paired with the federal 30 percent tax credit, a developer could cut the cost of a renewable energy project by more than half.
The North Carolina legislature also eliminated the state tax credit for solar pool heaters, solar space heaters, biomass, landfill gas, geothermal heat pumps, wind turbines and anaerobic digestors.
The rationale for the state tax credit was that it promoted alternative energies and it stimulated economic investment. For example, the $136.3 million tax credit claimed in 2015 resulted in nearly $892 million in spending and other investment.
The biggest claimers of the state tax credit for renewables in 2015 were Duke Energy ($13.8 million), N.C. Farm Bureau Mutual Insurance Co. ($6.8 million), and Wells Fargo Bank ($5.8 million). Some residents claimed less than $100 last year for their renewable investments.
A single corporation can heavily influence the state’s tax credit profile. In 2014, Duke claimed $62.9 million in renewable energy tax credits, nearly half the total amount claimed by all tax filers that year.
Back in 2007, when the state imposed a renewable requirement on electric utilities, a policy known as the Renewable Energy Portfolio Standard, the amount that residents and businesses claimed in the state tax credit was just $440,137.