Aug 10 - The News & Observer

North Carolina lags behind other states in harnessing solar energy, despite abundant sunshine.

This state's first commercial-scale solar power project, still under development, will generate enough electricity to power about 100 homes. Though significant by North Carolina standards, it's a mere 1/100th of the capacity of a project being planned in Nevada that would be the largest solar power plant in the world.

Durham solar developer Richard Harkrader struggled for two years to find $1.4 million in financing to pay for a solar project that lenders viewed as too risky. The solar panels will be placed in two locations -- at N.C. State University in Raleigh and at the N.C. Zoo in Asheboro -- and are expected to start generating electricity this year.

Harkrader's plight illustrates the harsh economic realities of solar power in North Carolina. Electric utilities aren't required to use renewable resources here, and without a guaranteed market, financing is hard to come by for solar power and other types of alternative energy.

This state also has some of the nation's lowest electricity rates, making it harder to persuade the public to pay more for clean energy.

While states such as California, Nevada, Arizona, and even Pennsylvania and New Jersey farther north, are installing solar power facilities on a commercial scale, the solar movement has largely bypassed sunny North Carolina and the Southeast. In this state, solar power has appealed mostly to hobbyists and environmentalists, and on a small scale.

"In North Carolina, we have not cracked the nut of doing solar yet," said Stephen Kalland, director of the N.C. Solar Center, within the engineering department at N.C. State University. "We are turning a corner. The fact the private sector is beginning to show signs of life is a really good sign."

Electricity rates in the state are almost certain to increase in the coming years. Progress Energy and Duke Power say they will have to meet increased energy demand in the coming decade, and both companies are proposing to build new nuclear reactors.

Before state regulators allow the costly construction -- an expense that would be passed on to utility customers as rate increases -- officials must be persuaded that the Fortune 500 utilities have considered other options, including energy efficiency and conservation. Environmentalists are pushing state officials to require the utilities to use more renewable resources.

Progress Energy and Duke Power produce less than 2 percent of their power from renewables, whereas some states require utilities to derive 10 percent or more of their power from alternative energy sources.

Meanwhile, the cost of renewables has been steadily dropping, giving hope to advocates for wider acceptance of new technologies.

North Carolina offers tax incentives to those who invest in solar energy. Homeowners can take off as much as $10,500 from their state income tax bill, while businesses can subtract up to $2.5 million from their state taxes. Combined with federal tax breaks, solar energy tax credits in North Carolina can reduce the cost of the equipment by more than half.

But solar power remains the most expensive form of renewable energy, because it requires highly refined silicon. Even with a half-price discount, solar power can't compete with conventional electricity unless it is heavily subsidized.

The upshot: Solar power represents a substantial investment.

"The upfront cost is sobering," said William Schlesinger, who paid $25,000 for a small solar unit at his home in Durham. Schlesinger is the dean of Duke University's Nicholas School of the Environment and Earth Sciences.

To make solar energy competitive, N.C. Green Power pays Schlesinger, Harkrader and others for the electricity they sell to utility companies.

The Raleigh nonprofit group, which promotes energy efficiency and conservation, pays subsidies only for renewable energy that is sold to an electric utility, not for power generated for private use. In past years, getting an interconnection agreement with a utility could be frustrating, but last year the N.C. Utilities Commission set guidelines to make the process less cumbersome.

Even with the subsidies, the solar projects will take many years to recoup their costs. The vast majority were never envisioned as anything but money-losing propositions, idealistic ventures to "get off the power grid" or to promote a worthy cause.

Of the several hundred solar electric units that are estimated to be in use in the state, only 21 are subsidized by N.C. Green Power.

Harkrader's project will produce 170 kilowatts of power and sell the electricity to Progress Energy in Raleigh and to the Randolph Electric Membership Corp. in Asheboro.

The solar panels at the N.C. Zoo will be placed on top of three picnic pavilions. The panels at N.C. State in Raleigh will be placed on a site contaminated by chemical dumping and currently in remediation. Harkrader's company, Carolina Solar Energy, is working with Baltimore-based solar developer SunEdison, the company that's developing the megaproject in Nevada.

After five years, Carolina Solar Energy and SunEdison will buy the project from the bank that financed the undertaking. But in the first five years, the business partners will have invested $350,000 in lease payments to the bank. Those lease payments, combined with tax credits, are designed to guarantee a profit for the bank, Harkrader said.

"If the project doesn't produce energy, or if N.C. Green Power goes away, we still have to pay, no matter what," Harkrader said. "But essentially these are maintenance-free projects. That's one of the beauties of solar."

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Copyright (c) 2006, The News & Observer, Raleigh, N.C.

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