North Carolina’s been a regional leader encouraging solar power for years now, and thanks to a little help from our non-profit friends, things are continuing to look bright indeed for renewable energy. While the current picture may be rosy indeed, things may not be as sunny in the future without further action.
North Carolina’s major energy suppliers have met, or are close to meeting their Renewables Portfolio Standard’s (“RPS”) goals (we’ll get to exactly what an RPS is in just a second). As the utilities have reined in their own solar incentives, the non-profit NC Green Power has filled the gap with –so far– with a nice plan and execution on state renewable energy credits (SRECs).
Those SRECs are keeping things humming along for now, but if NC Green Power’s funding dries up, payback timeframes on solar power here are going to rise dramatically. The legislature should use this current window of opportunity to ensure an equally sunny future for solar by strengthening the state’s Renewables Portfolio Standard, and kicking those utility SREC programs back into gear.
North Carolina’s Renewable Portfolio Standard
A Renewable Portfolio Standard (“RPS”) is a law that mandates a certain percentage of a state’s electricity must come from renewable resources by a target dates set in the RPS.
North Carolina’s RPS, first passed in 2007, requires all investor-owned utilities to produce 12.5% renewable energy by 2020. Municipal utilities and electric cooperatives have a lower goal of 10% renewables by 2018. The RPS also includes a small carve-out for solar power of 0.2% by 2018. That ain’t much, but a mandate is a mandate.
We don’t want to knock North Carolina’s RPS too much, because we’ve seen some states with no RPS at all, but to be honest 12.5% isn’t much of a number. Other states are aiming considerably higher, even double that goal in similar timeframes. A high RPS goal is important because high targets ensure that legislators and utility companies stay active in promoting incentives to help you switch to renewables like solar power. Why else do you think they’re offering you the free money we’re about to talk about?
North Carolina’s Electricity Prices
The average cost of electricity here is 10.08 cents per kilowatt hour (“kwh”). That’s really cheap! Even cheap than the national average of 11.43 cents/kwh. Why is energy so inexpensive? Oh, only because coal and other destructive fossil fuels are generating all that energy.
No biggie. NOT GOOD! When all of the fossil fuel we’re burning starts to catch up with us, energy prices are going to rise, and rise, and rise. All those rising rates are going to cost you boatloads! That is … unless you are making your own power from say, a solar power system.
North Carolina Solar Power Rebates
North Carolina lacks a statewide solar power rebate program, and unlike some other states we’ve seen, the utility companies haven’t stepped in to fill the void. Remember what we were saying about strong RPS goals? Here’s where they would help. For now only customers of Progress Energy are eligible for a rebate. If you’re one of them, you can get a rebate of $1,000/kw on the installation of your solar power system, as well as a credit of $4.50/kw on every monthly bill. Note however, that in order to get that solar rebate and the monthly bill credit, you need to surrender your SRECs over to the utility.
NC Solar Tax Credits
Here’s where North Carolina’s RPS has had an effect already. That spiffy new solar power system is eligible for a tax credit of 35% of the total costs, up to a maximum of $10,500. Note that the solar power tax credit taken in a given year may not exceed 50% of your total state tax liability. Any unused portions of the credit may be carried over for the next five years.
NC Solar Tax Exemptions
In addition to that awesome state solar panel tax credit, North Carolina gives you a little long-term love on your taxes as well when you install a solar power system. You see, when you install a solar power system, your home increases in value because of the anticipated savings in electricity costs. Exempting property value increases from solar power systems from accompanying property taxes is an easy way to incentivize solar power. North Carolina seems to agree; 80% of the home value increase from your solar power system is exempt from property taxes. That’s not the 100% exemption we’ve seen in a lot of states but it’s … well … it’s 80% of the way there!
Unfortunately the equivalent sales taxes exemption that many states also have passed is a big fat 0% of the way there. As in, there is no sales tax exemption for the purchase and installation of solar power systems here. That’s a real shame. Sales tax exemptions help the local solar industry in addition to the customer, so they’re a double win, when such exemptions are in place that is.
Performance Payments (and RECs) in North Carolina
Solar Renewable Energy Credits (SRECs) are generated when you create electricity from clean sources, you know, like those shiny solar panels on your roof. These aren’t just certificates of merit though, they’re certificates you can sell! Utility companies can buy SRECs in order to gain credit for the clean energy you produce toward the utility’s RPS goals.
In North Carolina you have the option to sell your SRECs through NC Green Power (“NCGP”). NCGP is a non-profit organization that helps facilitate REC purchasing agreements statewide. In order to sell your RECs through NC Green Power, you will have to enter into a contract with your utility as well as NCGP. NCGP will pay you $0.10/kwh of solar energy produced. Rates from the utility can very, but currently average about $0.04/kwh, for a total incentive of $0.14/kwh of solar electricity produced. The NCGP program may not be combined with net metering (explained below).
Whether net metering or the NCGP program makes more sense for your finances depends on the specifics of your home and your energy consumption patterns. The best way to find out for sure is to grab one of our free quotes, and let one of our expert partners on the ground walk you through all of your options.
If you’re a customer of one of the municipal or cooperative utilities served by the Tennessee Valley Authority (“TVA”) — Murphy Power Board, Blue Ridge Mountain Electric Membership Corp., Tri-State Electric Membership Corp., and Mountain Electric Cooperative– then you’re also eligible for TVA’s Generation Partner’s (“GP”) program. The GP program will will purchase 100% of your solar output at the retail rate plus a premium of $0.12/kwh. Your utility will track how much electricity your solar power system produces and how much electricity you consume. You will continue be billed at the normal retail rate every month for the energy you use, and then your solar performance payments will be applied as a credit to the final bill. If the credit outweighs your charges, the utility will cut you a check for the difference. The utility chooses whether they send you that check either monthly or yearly.
Net Metering and Interconnection
Similar to the TVA program, with net metering your utility will track how much energy you produce and consume, and then give you a credit for any surplus you produce. North Carolina law requires all three of North Carolina’s largest electric utilities –Duke Energy, Progress Energy, and Dominion North Carolina Power– to make net metering available to customers.
In general, any customer net excess generation (NEG) you produce in a billing month is carried forward as a credit to your bill the next month at the full retail rate. That’s great! What’t not so hot is that all unused credit transfers to the utility without compensation at the beginning of the summer season. You don’t get a check for your unused credits under the net metering law, the way you would in the TVA program.
We can’t be too hard on North Carolina individually, since that’s a shameful trend we’ve seen in a lot of states now, but we’re still not happy about it. Your surplus should be your surplus, no matter how long you hold on to it.
At least you shouldn’t have any problems getting credits for as long as you’re allowed to keep them. Connecting to the grid should be simple with North Carolina’s simplified procedures for solar power systems under 10kw. You won’t be required to carry any additional insurance, and while the utility is allowed to require you to install a redundant external disconnect switch, the utility must reimburse you for the cost of doing so.
5kW Example Return on Investment
So what does all of this add up to for your wallet? Glad you asked! Let’s have a look.
- Installing a typical 5kW solar system in is likely to run you about $25,000 (don’t panic, this is going to drop a LOT). It could be a bit more or less, depending on your local market, but $5/watt is a pretty solid average.
- Let’s start with that NC solar power tax credit. We mention earlier that the tax credit is capped at half of your yearly tax liability, but any credit remaining can be carried over for up to five years. Since tax liability is going to be different for everyone, we decided to be conservative and assume you’ll spread those tax savings out over the full five years. That means you’re getting $1,750 off the first year. We’re only counting that for now, but don’t forget you’re also getting $1,750 off your state tax bill for four more years. In the meantime, your new costs are $23,250 in year one.
- Next let’s figure in that massive federal solar tax credit. This one comes in at 30%, and you can take it all up front. 30% of your $25,000 out of pocket costs is $7,500, for a new price of $15,750.
- Those SRECs you’re selling to NC Green Power will net you another $874, for a new price of $14,876.
- Finally we subtract your annual utility savings, approximately $629 in the first year. That brings us to a final cost in year 1 of approximately $14,247 – more than ten grand off the price already!
- Estimating your annual electricity savings, REC profits, and accounting for four more years of tax savings, your solar power system should pay for itself in a wonderfully short 6 years.
- On top of all those savings, your home value just went up by $12,580. That’s your annual electricity savings multiplied by 20 years, a conservative estimate for the life of your solar panels. Best of all, 80% of that increase is tax free!
- If all of that cash and home value isn’t enough, you’re making some green for the Earth as well. Your new solar power system is the equivalent of planting 110 trees every year.
Remember that these figures are estimates. We try to be conservative in calculating future energy savings and sunlight measures, but your savings could be a bit higher or lower than what we calculated because every home is different.
The best way to find out how much you can save with a solar power system is to fill out the form below and get a free quote from one of our expert installers in your area. Heck, get five quotes. They’re free! Our partners on the grounds will help you plan a system to the specifics of your home that will save you the maximum amount of cash.
The payback timeframe here is still superb – for now. Between the federal solar tax credit saving you bundles of cash up front, the state solar tax credit savings you another pile every year for 5 years, and all those SREC payments and energy bill savings, North Carolina has one of the shortest payback timeframes we’ve seen yet. That’s surely worthy of an “A” in everyone’s book, including ours.