North Carolinians are forced to pay twice to prop up the state’s renewable energy lobby: once in the form of higher taxes and again for higher electric bills to support a Renewable Energy Portfolio Standard (REPS).
North Carolina is the only Southeastern state with a REPS program. A REPS program forces utilities to meet mandated levels of electric generation through the use of “renewables,” such as solar and wind. Under the North Carolina REPS law, first adopted in 2007, this mandated level rises over time; it is scheduled to double to six percent this year and increase to 12.5 percent by 2021.
These alternative sources of fuel have two main problems: They are not available 100 percent of the time as are conventional fuel sources, and they are more expensive than traditional sources, especially when you add in the extra costs required to provide backup energy by traditional power sources when wind and solar drop off line – which they frequently do.
Because electric utilities are regulated monopolies, they simply pass these increased costs through to you – the ratepayers of North Carolina.
A recent study conducted by Strata Policy in conjunction with Utah State University’s Institute of Political Economy estimated that North Carolina residential ratepayers will pay on average a total of $149 million more per year in utility bills thanks to the renewable portfolio.
Such increased energy bills naturally impact low-income households the hardest, as they must spend a larger share of their monthly income on utility bills than do higher middle- and upper income households.
Moreover, as every North Carolinian knows, our state is in a continuing struggle with neighboring states to attract new industry. REPS is driving up the cost of electricity in North Carolina and making us uncompetitive in attracting new industry. The Strata study further concluded that higher energy bills on commercial and industrial ratepayers has discouraged investment and job creation, already costing the state 24,000 jobs and $14.4 billion in personal income.
Higher utility bills is not the only cost imposed by North Carolina’s “renewable energy” lobby, however.
North Carolina has one of the most generous tax credits for renewables in the United States. While the federal government gives a tax credit of 30 percent for building wind or solar projects, North Carolina tacks on an additional 35 percent credit.
While the amount of the renewable credit given to non-business filers has stayed static, the amount given to businesses in North Carolina has skyrocketed.
Since 2010 total credits given to businesses have increased over 2,400 percent, rising from $11 million to $268 million in 2014. With the growth rate in credits more than doubling every year we are likely to see over half a billion in credits granted in 2015 and even more in the next few years as new wind projects come on line and the pace of solar construction increases anticipating an end to tax credits.
The “Desert Wind,” project to be built in Northeastern NC will alone generate nearly $140 million in renewable energy tax credits if construction estimates are accurate. This is equal to nearly all of the business credits issued in 2013.
A $100 million hole in tax collections in 2015 growing to over $200 million in 2016 and increasing dramatically are the effects of these credits. While some liberal advocates worry about the impact of the 2013 tax reform on the state budget, the impact of the renewable energy credits on the state budget will be dramatic and with no corresponding revenue flow from new jobs and ongoing investments.
The credits are transferrable, and as such are often sold to companies for cash, and the largest users of these credits are actually big banks and insurance companies. Why should the average taxpayer have to foot the bill for providing these tax credits to companies like Bank of America, Blue Cross Blue Shield, BB&T, and, yes, Duke Energy themselves?
These credits mean everyone in NC pays higher taxes so a favored few corporations receive the tax breaks.
Legislative mandates and tax credits for a specific industry, such as renewables, distort the market. They also incentivize those getting the tax benefits, primarily solar and wind companies, to hire lobbyists to ensure the revenue stream continues flowing. Without these tax breaks and mandates their business model does not work.
Political patronage runs rampant while ratepayers, taxpayers and the state’s economy suffer.
We should not have to pay twice for our electricity. North Carolina must change course and protect ratepayers and taxpayers. It needs to end the REPS and stop the renewable tax credit at the end of 2016 for projects started this year. That will allow projects underway to finish and will protect ratepayers from ever escalating charges to support the REPS mandate.