The ongoing fight over climate change is one of the most polarizing political debates of our time. ‘Pro-renewable energy Republican’ is now synonymous with ‘parachute-less skydiver.’ ‘Oil-baron Democrat’ holds a similar stigma; partisanship is now the norm.
At the end of 2015, the North Carolina General Assembly allowed the renewable energy tax credit to expire. A 2015 bill extended the credit for projects already underway, but only for one additional year. The credit, equal to 35 percent of an installation’s cost, was a major driver for the solar industry in North Carolina.
Now, the renewable energy portfolio standard, the state’s other major piece of environmental legislation, is under attack.
The portfolio standard requires electric utilities to supply 12.5 percent of electricity sales through renewable energy resources. Duke Energy, the nation’s largest electric utility, supported the legislation, but nevertheless, it has fallen into the same battlefield that swallowed the tax credit.
“I think you can sum it all up to say that Republicans are against anything Democrats are for, and I think that Democrats are probably the same way to some degree,” said Jay Faison.
Faison, founder of the ClearPath Foundation and self-proclaimed conservative, spoke about policy issues and clean technology investment at this year’s NC Clean Tech Summit. CEO and co-founder of Generate Capital Scott Jacobs was another speaker at the summit.
Jacobs said that climate change has become “a politicized moniker, which is ridiculous.” He said, “If you went to a doctor, who—you went to tell the doctor you had some symptoms that were problematic—and that doctor, and 99 more doctors, all said the same thing to you which is, ‘Take this pill,’ would you take the pill? Or would you say, ‘I’m not going to listen to doctors’?”
Faison, Jacobs, and others raised an important point at the summit: While the government is caught up in the climate change debate, the renewable energy market is moving ahead.
Here’s why the free market is taking the reins:
Renewables are rapidly approaching, reaching, and passing grid parity
When using renewable energy costs the same as purchasing energy from the grid, the renewable has reached grid parity. In North Carolina and across the country, renewables, especially solar and wind, are approaching this milestone.
“The pace of change is more rapid in the world of resources than its ever been,” said Jacobs.
In the United States, the cost of utility scale solar on average has actually dropped to 5¢ per kilowatt hour (Duke Energy’s current rate is 9.36¢ per kilowatt hour). The cost of residential rooftop solar is higher, but not by much, and the prices are continuing to drop.
Large scale renewable installations are big enough to be profitable without subsidies
The expiration of the renewable energy tax credit “killed residential and small solar in the state,” said Joel Olsen, founder of O2 Energies.
Olsen was also a panelist at the NC Clean Tech Summit this year. He said that it no longer makes economic sense to install small-scale rooftop solar systems. The timeline to recover the costs has just become too large without the tax credit.
Even having reached grid parity, building a large-scale solar farm involves huge upfront costs. This is where the tax credit came into play, and where it will no longer help.
Regardless of the hit, however, the solar industry has survived. Olsen’s company specializes in utility-scale solar farms, which are still profitable because of their size. According to Olsen, his company only had to make slight changes to their business model to continue installing solar in NC.
Without the tax credit, it will be hard to economically justify putting solar panels on your home. Solar companies and investors, however, can still focus on large-scale solar farms, which can power hundreds of homes.
The private industry is adopting a long-term outlook
“There’s a ‘short term-ism’ in politics,” said Jacobs. “we have people in a constant election cycle, and in that constant election cycle they are constantly raising money for those elections, those campaigns.”
Jacobs compared this cycle in politics to CEOs who are more concerned with quarterly earnings than whether or not they will still be profitable in ten or twenty years. He said that when you take a longer term outlook, renewable energy becomes a much more lucrative opportunity.
Renewable energy infrastructure involves large upfront costs. When those costs are spread out over the lifetime of the infrastructure, they are much less daunting.
Jacobs, Faison, and others made spreading the upfront costs of renewable energy infrastructure their business. Their investment companies pay the initial costs, allowing the investors and homeowners to pay them back over time.
New technology will make it possible for renewables to become mainstream forms of energy generation
Energy storage technology, from molten salt towers to Tesla’s home battery systems, is opening new doors for renewable energy. Energy storage has the potential to allow renewables to constantly produce energy. This technology can allow solar to power your home at night, and wind turbines to supply electricity when the wind isn’t blowing.
Investors will continue to invest in renewable energy
Truman Semans, a panel moderator at the NC Clean Tech Summit, explained why renewable energy investment will continue. He described to the audience a meeting he had with the Pacific Pension and Investment Group.
“A significant percentage of them did not believe in climate change, but a much greater percentage of them, when asked, said ‘Of course I’m going to take account of climate change in my investing because, whether I believe in it or not, the markets believe in it,” said Semans.