ENEC 698.003 – NC Solar Policy – Final PresentationAlsey Davidson, Charlie Egan, Kyle Harris, Evan Kirk, Will Mueller, Daniel Parker, Alex Wilhelm

Executive Summary2

Introduction

Literature Review

Research Methods

Data Analysis

Conclusions

Appendix

Executive Summary3

Introduction

Literature Review

Research Methods

Data Analysis

Conclusions

Appendix

4

Introduction Literature Review Research Methods Data Analysis Conclusions

Despite genuine benefits, opposition to solar PV installations remains strong

Economic – Create jobs, increase land tax

value, etc.

Environmental – Reduces CO2 footprint

Political – Progress towards REPS

5

Introduction Literature Review Research Methods Data Analysis Conclusions

“When the property tax abatement was inserted into the 2007 SB3, the assumption was that solar farms would be set up on land that otherwise had little use and therefore little value. 20% of the property tax was more than the land was currently producing and therefore would encourage development in Tier 1 and 2 counties, in wetlands, etc. What has happened is the farms, with the help of mandates and tax credits, are flourishing on prime real estate. Farmland that normally would draw 50% property taxes, are now drawing only 20% from solar. And properties that might be a good location for a manufacturing site or other business are losing 80% local revenue.”

Concerns regarding how solar PV installations affect property taxes guided the formation of our research question

RESEARCH QUESTION: Did North Carolina solar tax credits

and abatements contribute net economic benefits to the State?

Executive Summary6

Introduction

Literature Review

Research Methods

Data Analysis

Conclusions

Appendix

Executive Summary7

Introduction Literature Review Research Methods Data Analysis Conclusions

Literature Review

Market Uncertainty &

Asset Investment

Germany: A Case Study in Mitigating

Uncertainty

North Carolina’s Solar Incentives

Executive Summary8

Introduction Literature Review Research Methods Data Analysis Conclusions

Theory: Uncertainty & Investment Our investigation informed by theory that market uncertainty influences planning strategies

and discourages asset investment among firms. Particularly acute challenge for markets manipulated by politically contentious regulatory

regimes. Subsidies and tax credits for renewable energy development.

Cyclical pattern of expiration and short-term renewal of clean energy incentives discourages long-term investment in new assets among solar firms (Barradale, 2010; Fabrizio, 2013)

Executive Summary9

Introduction Literature Review Research Methods Data Analysis Conclusions

Credible, predictable, and viable policies + long-term government commitment are key to long-term investment (Jacobsson & Lauber, 2006; Sawin, 2004; Agnolucci, 2006).

Germany: Case Study German Experience in Clean Power

Steady, unchanging regulatory environment Low legal/administrative barriers to investment Strict deadlines for permit submissions Easy, short planning applications Set-in-stone investment strategies

Rapid diffusion of renewables 3 Exceptions

1997-98: Litany of legal challenges to federal feed-in tariff increased operating costs, created perverse incentives

2000: Mixed signals from European Commission on German policy 2003: Biennial review added to Renewable Energy Act

How to Mitigate Uncertainty

Executive Summary10

Introduction Literature Review Research Methods Data Analysis Conclusions

Rapid growth due to seeming long-term gov’t commitment. In 2014 was comprised of 450 solar firms which brought in approximately $1.64 billion in

revenue. NC ranks second nationally in solar electric capacity (SEIA).

Yet today, the Property Tax Abatement for Solar Electric Systems (N.C.G.S. § 105-275) faces possible expiration due to N.C. General Assembly opposition.

Since July 1st, 2008, § 105-275 has exempted 80% of the appraised value of solar systems from property taxes.

Applies to commercial, industrial, residential, and agricultural. Further, NC’s 35% Renewable Energy Investment Tax Credit also faces expiration.

Generated $717 million in spending (N.C. Department of Revenue) in 2014

Solar Incentives in North Carolina

Executive Summary11

Introduction

Literature Review

Research Methods

Data Analysis

Conclusions

Appendix

Executive Summary12

Introduction Literature Review Research Methods Data Analysis Conclusions

Data Collection From Multiple Sources

2. Gather land identification information• FERC Form 556 and Registration Statement• Identification number / Parcel Number / Lat. Long.• Project developer• Owner• Nameplate system capacity

1. Define Population• Operating by Dec. 2014• PPA Agreement start date• Nameplate capacity

3. Collect county-specific tax information• Real property tax• Parcel acreage • County, city, and/or fire district tax rates• Business personal tax

Executive Summary13

Introduction Literature Review Research Methods Data Analysis Conclusions

Two Types of Taxes Paid By Solar CompanyReal Property Tax

Business Personal Tax

BPT = (Cost per KW*1000)(Nameplate capacity) (0.2)(Depreciation constant)(Applicable tax rates)

Example: Arndt Solar Farm in Catawba County (2012)

RPT = ($1,229.01)(49/57.4) = $1,049.21

BPT = ($4,750*1000)(5 MW)(0.2)(0.94)(0.005858) = $22,584.34

Total Taxes Paid in 2014 by Arndt Solar Farm: $23,633.55

RPT= (Total Tax Liability)*(Proportion of Parcel Used)

Executive Summary14

Introduction

Literature Review

Research Methods

Data Analysis

Conclusions

Appendix

15

Introduction Literature Review Research Methods Data Analysis Conclusions

Data Analysis• 121 projects that paid real property tax • 61 projects also paid business personal tax

16

Introduction Literature Review Research Methods Data Analysis Conclusions

Data Analysis• Of the 121 projects paying real property taxes:

• Tier 1 - 58• Tier 2 - 49 • Tier 3 - 14

• Of the 61 projects paying business personal taxes:

• Tier 1 - 32• Tier 2 - 22• Tier 3 - 7

17

Introduction Literature Review Research Methods Data Analysis Conclusions

Tier 1 counties benefit the most from solar projects

• Real Property Tax Data for 121 Projects• Average Size: 4.45 MW• Range: 1 MW – 20 MW

Tier 1 Tier 2 Tier 30

10

20

30

40

50

60

70

Solar Projects by Tier

Num

ber o

f Pro

ject

s

The poorest Eastern counties benefit the most from solar projects in North Carolina

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Introduction Literature Review Research Methods Data Analysis Conclusions

Research Limitations

• No central database for solar project information• Tax data was difficult to find for some counties

(Duplin) • Farms online in 2014 did not pay Business Personal

taxes

Executive Summary19

Introduction

Literature Review

Research Methods

Data Analysis

Conclusions

Appendix

Executive Summary20

Introduction Literature Review Research Methods Data Analysis Conclusions

Solar increases local government revenue

1,000% to 10,000%

McCallum Solar Farm Robeson County, NC

Agricultural = $685

Commercial w/ solar = $60,650

Source: NC Clean Energy Technology Center

z

In most states, >50% of local

government revenue is from property

taxes

Robeson County (Tier 1)

Executive Summary21

Introduction Literature Review Research Methods Data Analysis Conclusions

Existing tax abatement is critical to solar in NC

Source: Solar Energy Industry Association (SEIA), NC General Assembly

In 2008, NC established an 80% tax abatement on the appraised value of a solar energy electric system from

property tax

Reduced taxes More cash Sustainable Industry

In April 2015, NC HB681 called for a repeal to the tax abatement for solar serial referral to judiciary II stricken

Thank you for your attention. Questions?