by Dr. Roy Cordato
Senior Economist, Emeritas
1. Solar cronyism overtakes Jones Street
My colleague Jon Sanders, as usual, was completely right; Wednesday was another day when the Carolina cronies, this time in the form of the solar industry, took complete control of the NC legislature. A bill to end North Carolina’s expensive and coercive renewable portfolio standard was shot down in the House, and in the Senate the 35% tax credit for investment in solar power, scheduled to die at the end of this year, was extended. These two votes firmly establish the North Carolina Republican Party as the party of rich and powerful business interests, regardless of who thy are.
The legislative history on the state’s RPS is exhibit #1. In 2007, when it was originally passed, it was supported almost unanimously by the then minority Republicans in both chambers of the General Assembly. The thought at the time was that it gained this support, not because the Rs cared a whit about the environmental arguments that were being made, and which were dropped by all sides in later years, but because the bill gave special subsidies to the utility monopolies, Duke Power in particular, for building new nuclear power plants. These subsidies are referred to as Construction Work in Progress, or CWIP, and allow Duke to pass along nuclear power plant construction costs to consumers before a plant is finished and even if it is never completed.
In 2013 there was an attempt in the Republican controlled legislature to repeal the RPS. But because Duke Power opposed the repeal (largely because the CWIP provisions would also have been repealed) it was killed in committee. The RPS lived on.
Fast forward to Wednesday and the opportunity for the Republicans to latch on to another powerful industry. The latest attempt to repeal the state’s RPS faced no opposition from Duke Power. The elimination of CWIP was not part of the bill. But between 2007 and 2015 the solar industry, due to the RPS and a litany of tax breaks and special government favors, grew to be wealthy and politically powerful. And it did this completely on the backs of North Carolina’s rate payers and taxpayers. It is an industry that would probably only exist to heat back yard swimming pools if it weren’t for the special interest largesse flowing in its direction. In other words, it became a perfect constituency for today’s Republican controlled state legislature. And sure enough, with Duke out of the picture, the more sainted solar industry has come in to fill the void. True to form, the Rs have hitched their wagon to the new crony on Jones Street.
All this brings me to the #1 reason why I am not and never will be a Republican. North Carolina’s Republican Party is exactly what the stereotype paints it to be, the party of rich and powerful business interests.
So what’s next? I would keep an eye on North Carolina’s powerful hospital lobby and the attempt by some state legislators to repeal NC’s Certificate of Need (CON) Law, thereby eliminating the industry’s monopoly control over health care facilities.
2. NC DENR reports — Large investment banks absorbing solar industry welfare payments
According to NC DENR (footnote 6) in their latest report on North Carolina’s renewable portfolio standard.
Investors are allowed to claim a maximum of 20% of the ITC each year and are eligible to take the ITC during the first ten years after the project. ITC claims are expected to rise through 2015. Through 2012, solar accounted for about four fifths of all renewable energy investments. Renewable energy developers typically…partner with "tax equity investors," which are typically large investment banks or insurance companies that have high taxable income from other business activities that allow them to claim the full tax benefits.
Especially in light of Wednesday’s votes in favor of keeping solar subsidies and mandates alive, shouldn’t NC taxpayers know who these large investment banks and insurance companies are and who their campaign contributions are going to?
3. NC DENR reports — De facto no limits on solar tax credit. $2.5 million cap is a scam.
According to NC DENR (footnote 25) in their latest report on North Carolina’s renewable portfolio standard.
North Carolina tax laws allow solar energy developers and investors to qualify for unlimited tax credits by adding multiple DC to AC solar power invertors. These invertors divide large solar energy facilities into smaller projects, each of which is eligible for a 35% state ITC up to the $2.5 million cap, thereby rendering the cap meaningless. There is no limit on the number of solar projects for which an individual investor may claim tax credits.
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