North Carolina Solar – Everything You Need to Know

north-carolina-solar

Information about North Carolina Solar Power

North Carolina has the 3rd most residential solar of all 50 states in the US, beating other very solar-friendly states like Colorado, New Jersey, and Massachusetts! No doubt the explosive growth in the state was due in part to North Carolina’s incredible 35% tax credit for solar - which unfortunately has been defunct since 2015 - but even today homeowners in the state can save upwards of $10k with North Carolina Solar!

Read on for more information on purchasing solar in North Carolina as well as relevant solar policy and incentives.

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#1 Overall Solar Grade

D
Overall Grade
16 years Avg. Payback Time (For Cash Purchase)
4.5 % Cash Estimated IRR (Return on your investment on cash purchase over 25 years)
$9,625 Your Net Profit Over 25 Years (Cash Purchase)

* Note that these are estimated values for informational purposes only, and do not take into account the full complexity of all financial projections. They also only apply to cash purchases, which means your numbers will be different if you lease your system or pay for it with a loan (factoring in interest). Also note that we are not financial advisors, so this information should not be construed as financial advice.

North Carolina is almost a trailblazer for solar in the southern states, paving the way for others to follow. They’ve been first-adopters of many policies typical of solar-friendly states like RPS goals, net metering, and solar tax credits.

While this is all great news, unfortunately many of these policies feel like legislators settled for ‘adequate’ instead of fantastic. For example, the state mandates that utilities must offer net metering to customers with solar - great! - but stops short of mandating that they must pay customers at the end of the year for any electricity put into the grid - not so good.

Even still, North Carolina earns a solid average for establishing a robust framework of solar policy and incentive that other southern states can look to as an example.

#2 Options for Buying Solar Panels in North Carolina

North Carolina homeowners currently have two options for buying solar: upfront cash purchase and loans, and a third financing method gaining momentum. Read on to see which makes sense for you!

Cash Upfront

If you’re purely interested in financial savings, a cash purchase is certainly the way to go! Homeowners who install an average-sized 5-kilowatt solar system can expect to spend about $12,985 on the installation after receiving the federal tax credit, but save around $9,625 after 25 years (the estimated life of most solar systems).

Our estimates take into account both the slow drop in efficiency of the solar panels each year (0.08% decrease annually), as well as the increase in utility rates (2.10% annually in NC).

We’re not going to lie – this isn’t as high as other states with utility rates that rise quickly each year or offer deep incentives for solar. However, you obviously still save money installing solar, all while decreasing your own carbon footprint. It’s still a win-win!

As the owner of the installation, you are eligible to receive all the federal, state, and local financial incentives, which can drop your cost even more. You’re also responsible for your system – if equipment breaks or your installation starts producing less power, it’s up to you to hire a technician to troubleshoot and repair. Keep in mind though that inverters and solar panels both have long term warranties, usually between 12 and 25 years, so your out-of-pocket expenses will remain low.

However, there is a catch to these high savings. While the federal tax credit and other incentives certainly take a huge dent out of the total cost going solar (more on that below), you’ll typically receive these incentives after the installation is complete, so you have to pay the entire bill upfront for your solar installation!

Bottom Line: Unless you’ve got thousands of dollars sitting in the bank waiting for investment, paying cash for your installation might be out of reach. If this is the case for you, take a look at solar loans.

Solar Loans

Loans offer a great way to purchase a solar installation while avoiding the high initial investment. Your financial savings over the life of the installation won’t be nearly as high as with a cash purchase due to the interest you’ll have to pay.

Many institutions now offer loans for solar installations including banks, credit unions, and even dedicated solar loan companies. With loans, the agreement term, interest rate, and fees all affect how much money you can save, so be sure to call around to a few different establishments to see what terms they offer. Solar installers often have a preferred lender as well, so it doesn’t hurt to reach out to a few installers!

Bottom Line: For the same 5-kilowatt installation above which costs $12,935 (after the federal tax credit), when you add a standard 15-year loan with 5% interest, you can expect to save about $4,127. Savings are about half as much as a cash purchase, but loans have the huge added benefit of not requiring any large upfront payment like cash purchases. For many homeowners, this might be the only option.

More: Solar Loans

Solar Leases and Power Purchase Agreements

Third party ownership is not allowed in North Carolina at this time.

More: Solar Leases

PACE Financing

PACE (Property Assessed Clean Energy) is an exciting new financing mechanism that is slowly growing in the US after it began in the late 2000s in Oakland, CA. With PACE financing, local governments foot the bill for homeowners’ solar installations (or other green home projects), and the homeowner pays back the ‘loan’ through an assessment on their property taxes.

PACE programs often see low interest rates and longer terms than conventional loans, which makes them a great deal for homeowners wanting to go solar. Besides, the loan is connected to the property – not the individual – so if you decide to move, the new owner simply continues to pay the loan off on their property tax assessment.

Seem like a good idea? It is! North Carolina homeowners might have to wait a little bit though. While North Carolina has passed legislation allowing PACE financing in the state (a huge first step in the process!), there aren’t yet any active programs.

Bottom Line: PACE will be a great option when a program is finally available! So be sure to call up your local city or county and tell them to look into it!

#3 North Carolina Solar Policy Information

Despite its status as one of the best states for solar, North Carolina lacks really strong, robust solar policies. They’re certainly better than many other southern states – which lack any pro-solar policy – many of the policies, like their net metering or solar access laws, feel unfinished. That leaves progressive cities like Asheville to fill in the gaps when proper statewide legislation is lacking (read on for more about this situation).

north-carolina-map

Renewable Portfolio Standard

Renewable Portfolio Standards (RPS) is a fancy phrase for when a state sets a goal that a certain percentage of all their electricity used in the state must come from renewable sources. California, for example, mandated that 50% of all electricity used in the state must be from renewable sources by 2030. Montana set a goal of 15% by 2015. As of early 2017, 29 states have adopted RPS goals (you can see a map of them all here).

In 2007 the state of North Carolina set a goal that 12.5% of electricity from investor-owned utilities must come from renewable sources by 2021, with a 10% goal for municipal utilities and electric cooperatives. The state even set a solar carve out but at a fairly low goal of 0.2% (interestingly, the same percentage that should come from swine waste).

The state’s RPS has been under fire for a while now, first in 2013 when lawmakers tried to repeal the bill, and more recently in 2015 when the state House of Representatives voted on a bill to freeze the mandate. Thankfully, that bit was removed before the bill passed.

As the only southern state to adopt an RPS, we can look to North Carolina’s RPS as a beacon for neighboring states to look towards for years to come – as long as it’s still in place.

More: Renewable Portfolio Standard (RPS)

Electricity Prices

Utility rates affect how much savings you can see by installing solar. The higher your rates, the more money you can save! And as utility rates continue to climb across the country and solar installations decrease in price, installing solar panels becomes a better and better financial investment!

In North Carolina, the average utility rate in is $0.1178 per kWh according to the US Energy Information Administration. This is obviously much lower than Hawaii’s $0.28 per kWh (the highest in the country!) and even a little lower than the national average of $0.1245, though a bit higher than the regional average of $0.1170.

It’s safe to say North Carolina has relatively low utility rates. However, even with these rates, we’ve seen you can still save money going solar in North Carolina, much like homeowners in other solar-heavy states that also have relatively cheap electricity like Texas, Colorado, and Arizona (all of which are under the national average).

Net Metering

North Carolina also established net metering incentives in 2005 for homeowners connecting their solar installations to the grid. Any excess electricity you produce is credited to your next utility bill at the full retail rate (so if you pay $0.11 per kWh, you’ll receive bill credits worth $0.11 for each excess kWh you produce!).

If you’re on a time-of-use rate (TOU) like Duke Progress’ R-TOU Program, how credits are calculated is a little different. The excess electricity you produce during off-peak hours is used to offset your electricity usage during off-peak hours. That’s simple enough. If you produce excess electricity during on-peak hours, it offsets your on-peak usage. Also simple.

Here’s where it gets a little tricky. The excess electricity you generate during on-peak hours can go towards offsetting your off-peak hours (because on-peak electricity is more valuable than off-peak electricity due to the higher demand). In this same vein, excess electricity you produce during off-peak hours cannot go to offsetting any electricity you use during on-peak hours. Make sense?

Net metering in North Carolina unfortunately comes with one big downside. Unlike in other states like Florida, where homeowners are paid in cash for any excess electricity they have left over after 12 months, in North Carolina any additional bill credits you have left over at the beginning of the summer are forfeited – given to the utility with no compensation to you, the homeowner.

While in other states the payout isn’t much (maybe $0.02 or $0.03 per kWh), it’s really the principle of the matter – you created that electricity and pumped it back into the grid where others can use it. Wouldn’t you like to be compensated? To move the solar industry forward, North Carolina needs to step up their game and finish writing out this incomplete net metering program.

More: Net Metering

Interconnection Process

The process of receiving approval from the utility to connect your solar installation to their utility grid is known as the interconnection process. Utilities aren’t known for being a particularly hasty bunch, so as you can imagine, in the past this could be an arduous, frustratingly tedious process.

As more homeowners install solar, many states across the US have adopted standardized interconnection to ensure the process is as fast and painless as possible.

The North Carolina Utilities Commission initially adopted statewide interconnection standards in 2005 and subsequently revised them in 2008 and 2015 for customers of the state’s three investor-owned utilities: Duke-Progress, Duke Energy, and Dominion. The requirements for approval differ based on the size of the installation, breaking down into three tiers. For North Carolina homeowners, the only tier you’ll probably need to know is the very first tier, referred to as the Inverter Process.

The Inverter Process is reserved for installations up to 20 kW in size. As 20 kW is equal to almost 80 solar panels, the vast majority of residential installations fall into this category! Homeowners are required to pay a $100 fee for the interconnection application (as opposed to $250 or more for higher tiers), and utilities can require additional safety disconnect switches (typically installed on the side of the house next to your solar inverter) for a higher level of safety, but must reimburse homeowners if the installation is smaller than 10 kW.

Homeowners Associations

The state of North Carolina protects homeowners’ right to install solar. First off, cities, counties, Homeowners Associations (HOAs) or other similar organizations can’t prohibit you from installing solar. That’s good news as in the past particularly crabby HOAs have attempted and sometimes succeeded in blocking homeowners installing solar.

HOAs and other organizations can force you to move your solar panels to another section of the roof if they are visible from common areas or areas open to the public. However, this is only allowed if the move doesn’t prevent the solar panels from working efficiently.

Unfortunately, the state’s protection doesn’t act retroactively to covenants already in place, so if the HOA regulations or covenants existed before 2007, they could pretty much do whatever they want.

If you live in Chapel Hill, the city adopted strict solar access rights laws in 2005, two years before the state-wide law! These laws are much stricter than the state laws and provide even more protection for solar homeowners:

Subdivisions shall not include covenants or other conditions of sale that restrict or prohibit the use, installation or maintenance of solar collection devices. (Article 4.6.7 from the above link)

Not only does the law mention installation, but also use and maintenance, all without any caveats in regards to visibility. Good job Chapel Hill!

More: Solar Access Rights in the US.

#4 Financial Incentives, Rebates, and Tax Credits 

North Carolina homeowners can take advantage of the federal tax credit and state tax exemptions to drop their installation cost even further.

Federal Tax Creditnorth-carolina-sunset

Any homeowner who purchases (either through cash or loan) and installs a solar installation is eligible to receive the federal renewable energy tax credit. This tax credit is worth 30% of your total installation cost, and if your tax liability isn’t high enough in a single year, you can break it out and claim portions over several years. The credit was originally meant to phase out at the end of 2016, but federal lawmakers extended the credit to 2019, at which point it drops to 26% until 2021, and then 22% until 2022 at which point it is phased out completely.

As you probably know, tax credits – unlike tax deductions – are worth a dollar-for-dollar amount, so it’s almost like receiving a 30% discount on your entire installation!

More: Solar Federal Tax Credit

State Personal Tax Credit (Defunct)

Until 2015, the state of North Carolina offered a Personal Tax Credit equal to a whopping 35% of the cost of the solar installation, with a cap of $10,500 for residential applications. Unfortunately, the incentive expired in 2015 and is no longer available. 

Property Tax Exemption

North Carolina homeowners can also take advantage of property tax exemptions for their solar installation. According to a memorandum from the North Carolina Department of Revenue in 2011, any residential solar installation that is not used to produce actual income is 100% exempt from property taxes. The memorandum explicitly states that homeowners who receive credits as part of a net metering program are exempt from property taxes for their installation, which is great news for solar homeowners!

If your utility does compensate you for your excess electricity, you are still exempt from paying 80% of your solar installation’s value, though as we saw in the net metering section above, utilities rarely pay residential customers for excess electricity in net metering programs.

So if you installed a $12,000 installation on your $200,000 home and only received credits from your utility, you’d only pay property taxes on the $200,000 value of your home, not the total value of $212,000!

City Permit Rebates

To make the process of installing solar even more affordable, one city and one county even offer rebates for the permitting fees. These rebates aren’t worth thousands of dollars, but money’s money!

As part of their Green Building Permitting Incentives, Catawba County Utilities & Engineering refund 50% of the total fee cost for photovoltaic solar installations (as well as solar water heating, geothermal heat pumps, and greywater or rainwater collection). Homeowners pay all permitting fees before the project then apply for the rebate after the installation is complete.

The City of Asheville also offers rebates on permitting fees for homeowners who install PV solar as well as thermal solar, wind, and geothermal heat pumps. Solar projects are eligible for a $50 rebate and homeowners must apply for the rebate once the project is complete.

If you’d like to dig even more on local incentives and rebates, check out the DSIRE database.

What to Do Next?

So if you’re looking to install solar panels in North Carolina, you can expect to save up to $16,000 over the life of the installation – just be sure to choose the financing that fits your needs and take advantage of all the available incentives!

We hope you find this review of going solar in North Carolina helpful. Have any thoughts? Add them to the comments below!

Image Credits under CC License  via Flickr: 1 Pixabay: 23 

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