SOLAR PV: Changing the Landscape

Economicnorth carolina Developer’s to the renewable Volume 5 guide energy industries Spring 2013

Growing Pains of a GLOBAL Industry EDitor’s Note

In the five years since enactment of North Carolina’s Renewable Energy & Energy Efficiency North Carolina Portfolio Standard (REPS) a lot has changed. Duke Energy is now the largest electric utility in the Economicguide to the renewable energy Developer’sindustries country, and one of the largest owners of renewable energy projects as well. More than $1 billion has been invested in renewable energy projects located in this state, and at least as much again invested ISSN 2155-7292 (Print) in clean energy-related manufacturing and production facilities. North Carolina broke into the top 5 state PV markets with nearly 132 MW installed during 2012, and is poised to continue its rise dur- ISSN 2155-7306 (Online) ing 2013. Accompanying that success, are some of the country’s top solar energy companies such as Asheville-based FLS Energy, Durham-based Semprius, and Shelby-based Schletter. Published by the Appalachian Energy Center, Appalachian State University Many firsts have also occurred in North Carolina in recent years. The largest solar thermal facility was installed by FLS Energy and allows St. Pauls-based turkey processor Prestage Foods to save hundreds of thousands of dollars in energy costs every year. Apple, Inc.’s data center - now one of many in the state - stands out for its 20-MW solar farm and the world’s largest fuel cell power plant. Chemtex is developing the U.S.’s first commercial scale cellulosic ethanol production facility in the southeastern part of the state, in no small part due to the commpany’s collaboration with the Biofuels Center of North Carolina and the biotechnology expertise of Novozymes AS.

While industry developments are far too numerous to cover comprehensively in this publication, others, like the federal offshore wind lease, are playing out as I write this and proffer the promise of Jeff Ramsdell, Publisher continued growth in the renewable energy industries. Whatever the future, one trend is abundantly clear from these past five years - North Carolina’s renewable energy industries are successfully con- Jason W. Hoyle, Editor necting the high-tech with the traditional, knowledge with application, and urban with rural. The Joey Mosteller, Copy Editor long-sought promise of the renewable energy industries is being realized, right here, right now, and Glen Rockwell, Research Assistant every North Carolinian is better off for it as a result.

Jason W. Hoyle, Editor

On the Cover: Silicon crystalline solar Inside this issue cell. Image Credit Dennis Schroeder / By the Numbers.………………..……………3 NREL The Country’s Largest Utility.…………...…4 News & Headlines…………………………...5 Download at: Geographical Perspective\Biofuels……...…9 www.energy.appstate.edu

Featured Articles Growing Pains of a Global Industry………12 About Solar PV: Changing the Landscape……..…16 This document is produced by the Appalachian State University Energy Center with funding provided by the State Industries Energy Office, North Carolina Department of Commerce. However, any opinions, Biofuels …………………..…….………….…22 findings, conclusions, recommendations, or errors herein are those of the author and Energy Efficiency & Green Building…....…25 do not necessarily reflect the view of the State Energy Office, the North Carolina Photovoltaic Cells…...... …...…...…...…....…28 Department of Commerce, or Appalachian State University. This public document was Wind Turbines….….….…………………..…30 printed at a cost of $3,812 for 5,000 copies at $0.7624 per copy. by the Numbers 5th $1.04 billion Rank of North Carolina’s Invested in NC renewable energy projects between 2007 and 2012 PV market among state Source: RTI International markets in 2012 when nearly 132 MW was installed Source: SEIA and GTM $1.5 billion Projected cumulative savings through 2020 in NC’s state-owned th buildings from the State Energy Office-run Utility Savings Initiative 6 Source: Utility Savings Initiative 2012 Report Rank of North Carolina among states for cumulative PV capacity installed, estimated at 229 MW by the end of 2012 611,000,000 Source: SEIA and GTM Estimated number of gallons of biofuels needed to be produced annually within North Carolina to achieve state goal of providing 10% of its own liquid transportation fuel by 2017 Source: Biofuels Center of North Carolina 14th Charlotte, NC’s 2012 ranking among all U.S. cities for the most ENERGY STAR- 745% certified buildings Percentage growth in PV generating capacity under contract with Source: ENERGY STAR utilities in North Carolina from 2008 and 2012 Source: North Carolina Public Utility Commission filings

53.8% 17.2 mill. Utility segment’s market share of U.S. PV capacity installations in Square feet of floor space 2012 - the highest utility share ever certified as ENERGY STAR in Source: Solar Energy Industries Association Charlotte during 2012 Source: ENERGY STAR

56% 42% 44.8 mill. Cumulative LEEDTM-certified Renewable energy’s share of new Wind power’s share of new electric square footage in North Caro- electric generating capacity installed generating capacity installed lina at the end of 2012 nationwide during 2012 nationwide during 2012 - the largest Source: U.S. Green Building Council Source: Energy Information Administration share of any source Project Database Source: Energy Information Administration The Country’s Largest Utility uke Energy is, for any practi- In 2012 alone, Duke Energy added The company’s expertise has also cal purpose at least, “The more than 650 MW of wind and solar extended to innovation in integrating DUtility” in North Carolina – a capacity across the U.S. – an increase of renewables into the grid. Late 2012 saw regulated monopoly, indeed. On July 2, more than 50% from 2011. The compa- the completion of one of the largest 2012, Charlotte, NC became home to ny is actively engaged in advancing en- battery-energy storage systems in the the nation’s largest electric utility with ergy technology as well, and has plans world at Duke’s 153-MW Notrees wind the closing of the merger between Duke to invest as much as a billion dollars in farm in Texas; the system can provide Energy and Progress Energy. The com- smart grid technologies to improve the as much as 24 MW-hours of electric- bined company employs nearly 28,000 efficiency of its distribution and trans- ity to help smooth the weather-related people, provides electricity service to mission infrastructure. variations in output from wind farms. 7.2 million retail customers located Duke was also recognized in 2012 with in six states, and owns and operates Duke Energy Renewables was a Project of the Year award by POW- 62,772 MW of electricity generating started with the acquisition of Texas- ERGRID Magazine for a PV-integrated capacity in the U.S. and Latin America. based Tierra Energy in 2007, and battery system used to smooth out min- was expanded with the purchase of ute-by-minute fluctuations in output An impressive industrial giant by Vermont-based Catamount Energy a from a 1.2-MW project located near the any standard of measure, Duke En- few years later. In November 2012, the Rankin Substation in Gaston County, ergy’s generation fleet remains coal- company acquired Outland Energy NC. The company has other renewable intensive and largely focused on cen- Services, a Minnesota-based provider storage and integration projects, includ- tralized generation plants. However, of operations and maintenance servic- ing the storage capability integrated over the past five years, the company es for wind farms. with the 1-MW PV array installed at has quietly been working on a new fac- the Marshall Steam Station in Catawba The company has done more than et to its energy business – a clean and County, testing of battery systems at simply purchase and develop projects, renewable facet. Duke Energy Renew- small-scale distributed PV generation though. With a growing wind portfolio, ables was started as a division of the sites, and has plans to roll out a pro- Duke recognized the need to optimize company’s unregulated commercial gram to re-purpose used Chevy Volt turbine output and subsequently devel- business in 2007, and in the years since batteries for grid storage in 2013. has invested more than $2.5 billion in oped the Renewable Energy Monitor- renewable energy generation, resulting ing Center (REMC) which provides Most recently, Duke announced in nearly 1,800 MW of wind and solar 24-hour operational monitoring and the company would be filing for a new capacity and a project pipeline in excess coordination 365 days per year. An rate schedule sometime during the sum- of 5,000 MW. even stronger indicator of Duke’s firm mer of 2013. The new rate schedule has footing and strategic interest in renew- been described by the company as a ables is the company’s recent decision clean energy rate that will be available to expand its renewables business and to industrial customers. Creation of Duke Energy’s air offer the services of both Outland and this schedule was partially the result of emissions between the REMC to renewable energy project a collaborative effort with Google, and 2008 and 2012... operators outside the Duke enclave. was made public in conjunction with Google’s announcement that its Lenoir data center will be expanded. 17.7% decline in CO2 emissions

19% decline in total CO2 emissions intensity 68.2% decline in

SO2 emissions 48.5%

decline in NOx emissions

Image Credit: Duke Energy Renewables

4 ...Economic Developer’s Guide to the Renewable Energy Industries News & Headlines

World Record PV Cell Efficiency Semprius’s modules have glass lenses that focus light in order to magnify the intensity of sunlight by about emprius, a 29-employee Durham-based company 1,100 times and have been measured at 34% efficiency focused on high-concentration photovoltaic mod- – more than twice the efficiency of current photovoltaic ules, announced plans to locate an $89.7-million S technology. The company’s triple-junction gallium arse- manufacturing facility – the company’s first – in the Vance nide cells are intended to be installed on rotating mounts County town of Henderson in mid-2011. The facility is ex- that track the sun across the sky to further increase their pected to create 256 high-technology manufacturing jobs output, and are currently in prototype testing at various paying an average of $45,565 – more than 50% higher than locations across the Southeast. The company’s technology the average wage in Vance County. According to the News was recognized by MIT’s Technology Review as one of & Observer, the company was offered incentives worth the top 10 emerging technologies in 2012 as an “Ultra- $15.5 million from Virginia, but opted to locate the facil- Efficient Solar” panel. ity in North Carolina after state and local officials offered an incentive package totaling nearly $18.3 million, including a $3-million grant from Commerce’s JDIG fund, $10.3 Wind & Wood: Renewables at N.C. Ports million in tax credits and exemptions, nearly $2 million erving renewable energy markets has been an in- in grants from the GoldenLEAF Foundation and the NC creasingly lucrative activity for the Port of More- Rural Center, and $2.6 million from Vance County. Shead City, as the facility begins positioning itself The facility is expected to take advantage of developments in the wind turbine to initially have a produc- market, particularly offshore wind projects. The More- tion capacity of about 5 head City facility has received several shipments of wind MW per year (about 67,000 turbine blades and other components in recent years. One PV modules) and has the wind turbine shipment originating from India and bound potential to expand produc- for California, included turbine nacelles, crates with bal- tion capacity to as much as ance-of-component parts, turbine blades as long as 85 feet, 150 MW per year (about 2 and had a combined weight of more than 80 tons. The million PV modules). Cur- Semprius’s solar modules turbine shipments that have been received are typically rently, the company out- focus sunlight through lenses loaded onto trucks for transport to their final destination sources its semiconductor onto small photovoltaic cells to in a same-day expedited process that has been praised by processing to Research Tri- produce electricity. several logistics companies who have overseen the ship- angle Park-based RTI Inter- Image Credit: Semprius ments. national, but will begin in-house processing once construc- Renewable energy business at the ports features more tion of its new facility is complete. than inbound cargo, however. Port facilities were upgrad- Accompanying the manufacturing facility announce- ed in 2011 to improve wood-chip handling capabilities ment in mid-2011 was the closing of a $20-million funding with the goal of processing and exporting 40,000 tons of round led by Siemens Venture Capital. In early 2012, Sem- wood chips over a two-month period for new client Co- prius announced it had secured an additional $3-million in financing. This latest round Unloading California-bound Wind Turbine of investment included the first investment Components at the Port of Morehead City by Morgan Creek Capital Management and additional funds from In-Q-Tel, the Central NC Ports’ shore crane unloads Palm Intelligence Agency’s investment arm. Springs, CA-bound wind turbines shipped on the M/V PAC ADARA from Semprius’s business, founded in 2006, India. uses a technology developed by three pro- Top: Wind turbine nacelles, which fessors at the University of Illinois at Ur- were stowed below deck during the bana-Champaign that, through a patented voyage, are discharged directly from process called micro-transfer printing, al- ship to truck at the Port of Morehead lows the substrate on which the semicon- City. ductor crystals grow to be reused. The solar modules use only a tiny amount of highly Bottom: Four wind turbine blades efficient semiconductor material, unlike being transported in a specialized more-traditional technologies which use blade-cage system are discharged large areas of semiconductor material. from their above-deck stowage and offloaded by NC Ports shore crane. Image Credit: North Carolina Ports

Spring 2013... 5 News & Headlines gent Fibre. In November 2012, the Port Authority’s Board company also launched a new lithium metal purification of Directors voted to invest $5 million to design storage process targeting next-generation energy storage applica- and loading docks to handle wood pellets. The impact of tions that will enable North Carolina to further capitalize the ports extends beyond mere import-export business. on the state’s dominance in domestic lithium-based battery technology. Enviva LP currently operates a Hertford County- based wood pellet plant, and with the new wood-pellet On the other side of Charlotte from Gaston County’s handling capabilities at the Port of Morehead will be growing lithium processing expertise, is Concord, NC’s expanding its operations with an even larger facility in expanding stake in producing key components in lithium Northampton County. Also, in early January 2013, In- batteries. Also in mid-2011, Charlotte-based Celgard LLC ternational WoodFuels LLC announced a 300,000 met- announced plans for $105-million expansion of its existing ric ton-per-year wood pellet processing facility in Wilson facility that is expected to add 250 new employees to the County that will create 32 full-time jobs and invest more 600 current workers. The Concord facility mostly serves than $60 million over the next three years. The company the electric vehicle market and specializes in producing the will produce wood-pellet fuel for export to Europe where membranes found within batteries that facilitate the elec- electric utilities will use the fuel to displace coal burned in trolytic reaction. power plants. Company President Steve Mueller told the Department of Commerce that the Wilson, NC location Growth in electric-platform vehicles also spurred was selected based on the support the company received expansion of Hitachi Metals North Carolina, Ltd.’s rare from local and state agencies saying, “The combination of earth permanent-magnet processing facility in China plentiful fiber supply, a strong rail network and two excep- Grove. The $60-million investment is expected to create 65 tional port facilities in North Carolina offers WoodFuels new jobs paying 20% more than the average county wage, reliable, cost-efficient and long-term resources suited to a doubling employment at the plant over the next few years. multi-decade export business.” The expanded facility will produce neodymium magnets engineered for use in hybrid-electric and electric vehicles.

Geology Drives Electric Vehicle Niche A Rising Star orth Carolina is home to a highly unique mix of minerals (highlighted in the last volume of this ake Forest, NC-based Power Secure Inc. is a Npublication), including a variety of rare earth rapidly growing manu- elements and the nation’s largest reserves of lithium. Wfacturer and energy ser- Continued rapid expansion of the market for hybrid and vices provider. After more than 30 years in business, the company found electric vehicles – major con- Image Credit: PowerSecure sumers of lithium – continues itself in search of a revival in 2009 to pay economic dividends on when layoffs pared its workforce to 179 people. Since the state’s geological resources. 2009, the company’s workforce has nearly more than tri- pled, due in part to a hiring binge that extended from early Rockwood Lithium (for- 2011 through 2012 and saw the company adding an aver- merly known as Chemetall age of about 15 new employees per month. Foote Corp.) held the grand- opening ceremony for its Kings Lithium carbonate, Li2CO3 an This extraordinary pace of hiring has been driven by Mountain-based lithium pro- inorganic compund used in the rapid growth with the company’s traditional business of manufacture of cathodes used in cessing facility in early Summer providing back-up generator services to grocery stores ex- lithium-ion batteries. panding into new markets such as data centers, hospitals 2012. The facility is already the Image Credit: Wikipedia Commons largest lithium processing plant and other facilities where energy reliability is highly val- in the U.S., and the $75-million ued. Bolstering the growth in its traditional markets, the expansion will increase employment by as many as 100 company also has been acquiring portions of existing en- jobs, expand production capacity by 5,000 metric tons per ergy service providers such as Lime Energy and Southern year, and includes a new technology development center Energy Management with a focus on assuming the con- focused on research and development related to lithium tracts with these companies’ largest customers. battery technology for electric vehicles. Partly due to these newly acquired business portfo- Also located in Gaston County is the sprawling 900- lios as well as continued strong growth of its traditional acre lithium processing facility of FMC Lithium, where businesses, the company announced a record backlog of U.S. Senator Kay Hagan was on hand for a late-2011 ex- $206 million in its first quarter results in early May 2013 pansion announcement. The Bessemer City facility an- – a backlog worth $32 million more than the company’s nounced a $50-million expansion expected to add as many trailing 12-month revenues. In its first-quarter 2013 inves- as 25 new jobs to the existing 215-employee plant. The tor presentation, the company projected continued rapid

6 ...Economic Developer’s Guide to the Renewable Energy Industries News & Headlines growth would sustain at compound annual rate of 26% chips that are moved to the boiler along a conveyor from over the period from 2010 through 2015 with its utility in- an 85-foot storage silo where a three-day fuel supply is frastructure and distributed generation divisions leading kept. the way. Another facility in a well-established industry has also Several new business lines driving this rapid growth put renewable energy to work as a means to reduce energy were recently added. On the energy services side, these bills by about 35%. Prestage Foods operates one of the include energy performance contracts and solar installa- state’s largest turkey processing plants in St. Pauls, NC, tions. The company has also branched out into develop- and saves more than $200,000 per year by purchasing hot ing and manufacturing highly efficient LED lighting solu- water from the world’s second-largest solar water-heating tions at three Morrisville locations. The company’s LED installation. Another North Carolina company, Asheville- products include refrigerator case lights, shelf lights, street based FLS Energy, owns and operates the more than 2,100 lights, and parking lot lights. water heating panels located adjacent to the Prestage facility. These panels soak up the sun’s rays heating as many as 100,000 gallons of water per day to temperatures as Manufacturing Competitiveness from high as 180 degrees. Hot water is then stored in heavily Renewable Energy & Energy Efficiency insulated 25,000-gallon tanks and eventually sold to the he economic development benefits that accrue processing plant at a price well-below that of the fossil fuel from producing and selling renewable energy upon which they formerly relied. Tand energy efficient equipment are reasonably straightforward. However, a new trend is emerging across the spectrum of North Carolina’s more traditional stalwart Beyond Oil – Fuel from the Fields industries – using renewable energy and energy efficiency ovozymes AS, a Danish enzyme producer with technology to reduce costs and increase competitiveness. its North American headquarters in Franklin- Nton, introduced the first commercial enzyme for Raleigh-based Kyma Technologies, Inc. is a manufac- turning biomass pulp into the fermentable sugars neces- turer of gallium nitride-, aluminum nitride-, and alumi- sary for the production of ethanol in 2010. While biofuel- num gallium nitride-based semiconductor materials and related sales only account for about 16% of Novozymes products that may bring to mind some high-tech solar de- nearly $2 billion in annual revenue, the company’s new vice. While the company may well supply the solar mar- CEO, Peder Holk Nielsen, sees a future where 90% of ket, its news of the day is the 35% overall reduction in util- the company’s revenue may come from biofuel producers ity bills the company realized following installation of a within two decades. 30-ton geothermal HVAC system and a 20-ton energy-efficient chiller, which is thought to be the largest geothermal The company’s enzymes turn inedible crops, waste air-handling HVAC system for a cleanroom in the state. by-products such as corn stover and forestry debris, and even municipal solid waste into sugary liquids which can Advanced materials are not the only technology in- then be turned into fuel. The company estimates that in dustry taking advantage places with sufficiently abundant biomass resources, the of the cost savings and cost of producing ethanol using its technology is around improved performance of $2 per gallon. To-date, Novozymes is just about the only green energy. Pfizer recent- ethanol success story to emerge from North Carolina. ly completed a $7.9-million combined heat and power Ethanol production and North Carolina have a de- biomass boiler that gener- cades-long history – one notable for the many misguided ates electricity, heat, and attempts at using corn to produce ethanol and one marked steam using wood chips in- by numerous bankruptcies, lawsuits and other undesirable stead of natural gas or oil. Field of FLS Energy’s solar outcomes. The latest failure in this saga was the bankrupt- The Sanford, NC facility thermal panels providing 100,000 cy and auction of Clean Burn Fuels $100-million produc- currently produces vaccine gallons of hot water to Prestage tion facility located near Fayetteville in August 2011. components for the compa- Foods per day since Feb. 2012. Image Credit: FLS Energy ny’s pneumococcal bacteria Where many have failed, Clean Burn Fuels attempted vaccine and will become Pfizer’s primary site for launch- to succeed by leveraging economies of scale from what ing new vaccines in the late and early clinical stages. The was intended to be the nation’s largest corn-based ethanol biomass boiler, which costs less to operate than fossil fuel- production facility. After less than a year of operating in based alternatives according to a company spokesperson, North Carolina – a state with comparatively high natural provides 20,700 pounds of steam per hour from wood gas prices, whose animal feeding operations already create a substantial net deficit of corn, and with practically no capacity to blend ethanol into gasoline – the company and

Spring 2013... 7 News & Headlines its investors learned one business lesson the hard way: if - precision-managed power use with self-contained it costs more to produce a gallon of ethanol than you get cooling pods, motion sensor-activated LED lighting, and from selling it, producing world-record volumes will only a white cool-roof to maximize solar reflectivity. yield world-record losses. The design features however impressive, are just the However, given the state’s abundance of biomass re- tip of the iceburg where this facility’s innovative approach sources, the state’s substantial land-based rural economy, to energy is concerned. The 11.5-acre data center in Maid-

the prevalence and expertise of its biotechnology cluster, en is also home to two firsts. Apple’s 100-acre 20-MWac and the state policy to source 10% of its liquid transporta- PV generating plant is the largest solar power facility ever tion fuel from in-state resources by 2020, the pursuit of built in North Carolina. The solar plant, which features an ethanol production industry is a long way from over in a North-South single-axis tracking mount - is expected North Carolina. Almost a year to the date from the auc- to generate 42 million kWh (42,000 MWh) of renewable tion of the Clean Burn Fuels facility, the U.S. Department electricity annually. of Agriculture announced a $99-million loan guarantee and partnership with Italy-based Chemtex International While impressive, the accomplishemnt of the solar to develop a cellulosic ethanol plant in Sampson County. power plant pales in comparison to the company’s fuel cell installation. Apple has also installed a Bloom Box fuel cell The $170-million plant intends to begin production generator that will use hydrogen from natural gas to gener- in 2014 and use grasses and crop stalks from as many as ate as many as 80 million kWh of baseload electricity. The 30,000 acres as feedstock to produce about 20-million gal- 10-MW fuel cell system is the largest installation of fuel lons of ethanol per year. It is expected to employ about 65 cell technology in the country. people directly at an average wage of more than $48,000 per year and support an additional 250 jobs in the nearby Although the fuel cell system is fueled with natural area providing a total economic gain of between $15- and gas, a fossil fuel, the power it generates will still be consid- $20-million annually. ered renewable energy because the company is offsetting its purchase of fossil-based natural gas by using “directed It is no accident that the Chemtex facility is slated for biogas” that it purchases from a landfill (see NC Utilities North Carolina - the state has an abundant resource of cel- Commission Docket No. SP-100, Sub 29 for more infor- lulosic feedstock material, world-leading clusters of bio- mation on “directed biogas”). Basically, refined landfill technology and chemical companies, and an unparalleled gas will be delivered to a natural gas pipeline and Apple research capacity. Based on these factors, the presence of will purchase the renewable attributes of the refined land- Novozymes (whose enzymes will be used at the plant), the fill gas - much like Duke Energy purchases the renewable Chemtex facility in Wilmington (where the technology to attributes from renewable electricity projects - and by do- grind and prepare raw feedstock for enzymatic treatment ing so claim use of a renewable fuel to power its fuel cells. was developed), and the Biofuels Center of North Caro- Overall, there are many lessons to be learned from Apple’s lina’s networking, research, and policy support, it appears Maiden facility. The company found ways to reduce its that the first-of-its-kind domestic commercial-scale corn- overall energy use as well as optimize the timing of its free ethanol production facility would be hard pressed electricity purchases from the power grid. to find a location offering a greater chance of successful commercialization. ABB Expands Into NC Energy Hub BB, Inc. opened its $90-million very-high-voltage Apple Keeping the Pollution Away cable manufacturing plant in Huntersville, NC upertino, CA-based Apple, Inc.’s billion-dollar Awith a formal ribbon cutting in September 2012. data center in Maiden, NC is perhaps the most The 240,000 ft2-facility will employ about 105 people at an Cenvironmentally friendly facility of its kind in the average salary of $64,000 to produce power lines to meet world. First, the 2011-commissioned facility was built to growing demand for new transmission lines in the U.S. the highest green building standard - LEEDTM Platinum. In addition to using 14% recycled materials, diverting 93% This facility is just the latest investment by the compa- of construction waste from landfills, and sourcing 41% of ny in North Carolina whose North American headquar- construction materials from within 500 miles of the facil- ters moved to Cary, NC in 2010. Over the past three years ity, it has many high-efficiency design features, including: ABB has doubled its operations in the state, and today has about 2,000 employees in North Carolina. ABB’s Chief - chilled water storage to allow the transfer of 10,400 Executive Enrique Santacana attributes this growth to the kWh of electricity consumption to off-peak hours and out- state’s established leadership role in the U.S. energy indus- side air cooling to further reduce electricity use; and, try, citing the power generation cluster in Charlotte and the smart grid hub in Raleigh.

8 ...Economic Developer’s Guide to the Renewable Energy Industries Biofuels industry development Top: The Biofuels Center of North Carolina provides funding for a wide For more information about the Biofuels Center of North Carolina, see their website at variety of projects that are both located www.biofuelscenter.org in and impact all counties of the state for the purpose of meeting the state’s goal of 10% of liquid transportation fuels Total Amount of Biofuels Awards Impacting County, $ produced within North Carolina using local feedstocks by 2017. Much of the Center’s work has been focused on the development of new feedstock crops, including cellulosic biomass such as switchgrass and other perennial grasses than can be grown on marginal crop land without adversely impacting other farming interests. $5,182 - $9,727 $9,728 - $37,175 $37,176 - $92,079 As a result of this NC-centric approach, $92,080 - $179,719 a large number of the Center’s funded $179,720 - $468,968 activities have been focused on research $468,969 - $889,804 at N.C. State University and in the $889,805 - $1,405,443 Data Source: Biofuels Center of North Carolina farming-intensive eastern portion of the state. The notable exception is a large multi-stakeholder collaboration in Total Number of Biofuels Awards Impacting County, $ Western North Carolina, organized by the AdvantageWest Regional Partnership, that was recently funded with TVA Settlement money.

Bottom: The Biofuels Center funds a variety of project types, as shown in the map below. Projects targeting development of new feedstocks and 10 - 12 scientific research have impacted nearly 13 - 15 every county in the state, while biofuels 16 - 19 production and distribution funding has 20 - 27 largely been concentrated in areas with 28 - 36 Data Source: Biofuels Center of North Carolina existing biofuel producers. Share of Awards Impacting County by Biofuels Topic

New Feedstocks Production & Distribution Data Source: Biofuels Public Policy Center of North Carolina Scientific Research

Spring 2013... 9 Biofuels Center’s Vision for a Future Biofuels Industry Landscape

10 ...Economic Developer’s Guide to the Renewable Energy Industries Biofuels Center’s Vision for a Future Biofuels Industry Landscape

Image Source: Biofuels Center of North Carolina, May 2012

Spring 2013... 11 Growing Pains of a GLOBAL By: Jason W. Hoyle, Editor Industry

rade complaints over protec- lion by 2012 – an impressive projected of solar technology adoption were of- tionist policies and unfair trade growth rate, but one that fell far short ten parallel efforts to capture the eco- Tpractices in the renewable en- of the actual mark. The global solar nomic benefits from solar manufactur- ergy sector that began as a slow sim- market actually exceeded the 2002 pro- ing, particularly jobs. mer a couple of years ago are quickly jection in 2008 when it reached $29.6 approaching a rolling boil. Currently, billion, and by 2012 Clean Edge re- The result on one side was a rap- there are almost a dozen ongoing solar search reported a global solar market id influx of new entrants to the solar power trade disputes, and half as many worth nearly $80 billion. manufacturing sector, and on the other other renewable energy-related trade was the proliferation of national and disputes. The wellspring of trade dis- As countries sought to support provincial policies that sought to le- putes is somewhat unsurprising consid- solar power generation within their verage incentives and other support ering the phenomenal growth in these borders via tax incentives, premium mechanisms for the deployment of so- industries during the past decade. payments for solar electricity through lar power technology as a tool to drive feed-in-tariffs and other programs, and local solar manufacturing. Therein lay In 2002, the global market for so- portfolio standards that require increas- the source of the current trade dispute lar power was estimated by Clean Edge ing amounts of solar power generation, proliferation. research to be worth about $3.5 billion the solar market ballooned. Accompa- and was projected to grow to $27.5 bil- nying these efforts to increase the rate 12 ...Economic Developer’s Guide to the Renewable Energy Industries Policies in which incentives for gen- China Polysilicon Dumping Probe which, in part, aims to end coal-fired electricity generation in the province erating electricity with solar technology In response to the U.S. and EU cas- by 2014. The WTO panel report de- are linked to domestic content require- es, China initiated its own antidumping termined that this practice undermines ments are considered discriminatory probe against the U.S., EU, and South competition by favoring domestic sup- under international trade rules. Like- Korea. At issue in China’s investiga- pliers, or, in other words, discriminat- wise, national and other government tion is whether the respondent coun- ing against foreign suppliers. support and subsidization for manufac- tries are illegally dumping polysilicon turers also violates international trade – a raw material used in manufacturing rules. The incentives, which are the silicon-based solar cells – and whether U.S.-India Local Content Dispute basis for most of the current trade dis- retroactive duties should be imposed. In February 2013, following three putes, take a variety of forms, includ- According to Bloomberg News, Chi- years of discussion, the U.S. requested ing: local content requirements, direct na announced its probe in November dispute settlement by the WTO with support of domestic manufacturers, tax 2012, shortly after the ITC formalized the government of India concerning bonuses, guaranteed loans, and nation- U.S. AD/CVD tariffs and the EU af- local content provisions in India’s na- al policies of support for state-owned firmed its own investigations. tional solar policy, called the Jawa- producers. harlal Nehru National Solar Mission China-EU (Italy, Greece) (JNNSM). The JNNSM policy is a multi-part effort under which Batch 1 Solar Trade Disputes In early November 2012, China of the first Phase requires developers of initiated a WTO complaint against U.S.-China Solar Trade Case solar photovoltaic projects using crys- the EU and member states Italy and talline silicon technology to use mod- At the head of the pack of renew- Greece regarding the local content re- ules manufactured in India. The second able energy trade disputes is the impo- quirements of various feed-in-tariff portion of the first Phase expands the sition by the U.S. International Trade programs in EU member states. Commission (ITC) of antidumping policy from only requiring India-made (AD) and countervailing duties (CVD) modules to also requiring that India- Ontario, Canada’s Feed-In-Tariff on crystalline-silicon (c-Si) solar cells made crystalline solar cells be used in originating from China. These duties On December 19, 2012 the World the modules. were imposed in late 2012, and range Trade Organization’s (WTO) Dispute Perhaps most disturbing to U.S. from a combined 22.5% to 255.4%. At Settlement body approved a report on interests is the proposed modification issue in this case was government sub- Ontario’s Feed-In-Tariff (FIT) green to Phase 2. In draft form, the second sidization of solar cell manufacturers energy program, holding that the lo- phase of the JNNSM is exploring the by the Chinese government deemed to cal content provisions of the program expansion of the local content require- constitute an unfair trade practice that violate two WTO provisions. The rul- ments to include thin-film technologies, injured U.S.-based solar manufacturers. ing was appealed by Canada on Febru- ary 5, 2013. The case was brought to which represent the bulk of U.S. solar the WTO by Japan and the EU in mid- exports to India. Under the JNNSM, EU-China Solar Trade Case 2010 and mid-2011, respectively. the Indian government is offering par- Following on the heels of the de- ticipating solar power developers guar- cision by the U.S. ITC, the European Ontario’s FIT pays above-market antees to purchase a certain amount of Commission’s more-than-year-long rates to generators when at least 60% solar power at highly subsidized tariff case against China gained momentum, of the cost of goods and labor for a rates, but only if the developers use In- and in early May 2013 the Commission solar project are sourced from Ontario dia-made solar equipment rather than recommended duties on Chinese solar (25% for wind energy projects), pursu- imports. panels of between 37.3% and 47.6%, ant to the province’s Green Energy Act as reported by the Wall Street Journal. The formal release of the Commis- sion’s preliminary antidumping decision, expected in June 2013, will be Final U.S. Antidumping (AD) & Countervailing Duty followed by a preliminary antisubsidies (CVD) Tariffs on Imported Chinese Solar Equipment ruling in August, with both determina- Trina Solar: 23.75% Total, includes 7.78% AD + 15.97% CVD tions expected to be finalized by De- cember 2013. Expanding on the solar Suntech: 35.97% Total, includes 21.19% AD + 14.78% CVD panel case is an additional complaint which spurred an antidumping and an- Separate Rate: 30.66% Total, includes 15.42% AD + 15.24% CVD tisubsidy investigation into imports of solar glass from China, independent of All Others: 254.66% Total, includes 239.42% AD + 15.24% CVD the solar panel matter.

Spring 2013... 13 India-U.S., Malaysia, China, other green energy technologies has not tungsten and molybdenum. The com- and Chinese Taipei Antidumping been forgotten. These other complaints plaint addresses the imposition and Investigation span from trade in biodiesel to rare administration of export restrictions by The Ministry of Commerce & In- earths to wind turbine components. China, including: export duties, export quotas, minimum export price require- dustry of the Government of India As of December 2012, wind tur- initiated an antidumping investigation ments, export licensing requirements, bine towers imported into the U.S. and other activities related to quantita- into solar cells, modules, and panels from China and Vietnam are subject to imported from the U.S., Malaysia, and tive restrictions. (WTO Dispute DS431, duties of up to 71% as a result of the DS432, DS433) China in November 2012. The inves- U.S. Department of Commerce investi- tigation was initiated in response to a gation into turbine tower dumping and The United States initiated a WTO complaint from the Solar Manufac- illegal subsidies by these countries. complaint against China in December turer’s Association that alleged domes- 2010 over alleged Chinese domestic tic producers had been injured by the The EU and member state Spain is content requirements for suppliers of dumping of solar photovoltaic products the subject of a WTO complaint initi- various wind turbine components. The at below factory costs into the Indian ated in August 2012 by Argentina over complaint alleges Chinese support in market. Duties on imports of products the Spanish Ministerial Order regulat- the form of grants, funds, or awards to originating or exported from the named ing allocation of biodiesel quantities wind power equipment manufacturing respondent countries are being sought, required to meet the mandatory re- enterprises in China that were contin- as are retroactive duties. newable energy target (WTO Dispute gent upon the use of Chinese domestic DS443). goods over imported goods. Other Green Energy Disputes China is the subject of a WTO While solar technology has re- complaint initiated by the U.S. in Gaining Some Perspective ceived the bulk of attention in global March 2012 and joined by 18 third par- green energy trade disputes, trade in Solar photovoltaic technology is ties over China’s export of rare earths, largely commoditized and while there remains some competition between differing solar technology Renewable Energy-Related World Trade Organization Disputes platforms (e.g., thin-film and Details and more at http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm crystalline silicon) most solar systems use crystalline silicon DS443 European Union and a Member State - Certain Measures Concerning and compete in the global mar- the Importation of Biodiesels (Argentina, Complainant | European Union and ketplace based on price. As has Spain, Respondent) been the case for years, solar DS431 Measures Related to the Exportation of Rare Earths, Tungsten and manufacturing is dominated by Molybdenum (United States, Complainant | China, Respondent) Chinese companies which represented 7 of the top 10 manu- DS452 European Union and Member States - Certain Measures Affecting the facturers in 2012. However, Renewable Energy Generation Sector (China, Complainant | European Union, output from the 10 largest solar Italy, Greece, Respondent) suppliers supported less than half of global demand in 2012, DS456 India - Certain Measures Relating to Solar Cells and Solar Modules an indication of the intense de- (United States, Complainant | India, Respondent) gree of competition in the global market. DS437 United States - Countervailing Duty Measures on Certain Products from China (China, Complainant | United States, Respondent) On the opposite end of the spectrum is the highly consoli- DS449 United States - Countervailing and Anti-dumping Measures on Certain dated market for photovoltaic Products from China (China, Complainant | United States, Respondent) technology. According to NPD DS419 China - Measures Concerning Certain Wind Power Equipment (United Solarbuzz, 86% of global de- States, Complainant | China, Respondent) mand was located in the top 10 PV markets during 2012. DS426 Canada - Measures Relating to the Feed-In-Tariff Program (European Europe, led by Germany, ac- Union, Complainant | Canada, Respondent) counted for about 46% of global

DS412 Canada - Certain Measures Affecting the Renewable Energy Genera- tion Sector (Japan, Complainant | Canada, Respondent)

14 ...Economic Developer’s Guide to the Renewable Energy Industries demand, followed by China with 16% practices by stakeholder governments Another potentially harmful ef- and North America with 12%, during seeking to maintain employment in a fect could play out as tariffs stifle the 2012. growing industry. transhipment of silicon wafers, cells, and modules back and forth across So, with hundreds of manufactur- One view is that this cycle is little the globe. Domestic manufacturers ers competing on price to gain share more than the result of natural market in countries with protectionist tariffs in a very limited number of markets, forces at work in an emerging high tech- could well suffer from the unavailabil- the natural result is price competition. nology industry, and that over time the ity of competitively price intermediary Declining prices coupled with a global supply and demand would balance as solar materials as tariffs effectively halt- industry shakeout has resulted in solar ever more producers fall away from the ed the common practice of rebranding manufacturers modules or assembling solar cells into being propped up modules locally, thereby undermining by government Chinese companies the viability of the very domestic com- loans or seek- panies for whom protection was origi- ing bankruptcy represented 7 of the nally being sought. protection. This industry consoli- Likewise, there could be a dramat- dation has been world’s top 10 solar ic shift in the market leadership in solar evidenced in the as the world divides itself into China- U.S. with sev- manufacturers in 2012 supplied and non-China supplied por- eral high-profile tions. This result would create signifi- bankruptcy cases cant supply/demand distortions as the and the recent bankruptcy filings and market until those remaining achieve China-supplied portion of the global loan repayment troubles of some of the the necessary scale to operate profit- market would inevitably be oversup- largest solar manufacturers in China ably on a sustainable basis. Whether plied for years as demand grew, while during the past year. A representative that would be the eventual outcome we the non-China supplied portion would of the China Photovoltaic Industry may never know. be woefully undersupplied, especially Alliance, according to China Daily, given the current dominance of Chi- reported that the number of manufac- nese solar manufacturers. An Occluded Future turers in China fell from 262 in 2011 to 112 during 2012 – and the immediate The trade disputes and their even- Basically, the commonality among outlook remains bleak. tual outcomes have the potential to virtually all possible futures in a global drastically alter the solar manufactur- market constrained by artificial protec- At first glance, claims of dumping ing value chain and could have delete- tionist tariffs is higher-priced solar gen- solar cells and modules at prices below rious effects in the global marketplace. erating equipment. Given the strong factory cost appear to have some merit Some possible outcomes include: desire for many countries to support given the number of solar manufactur- increased adoption of solar technology, ers going bankrupt, which is the expect- A downward spiral triggered by the only possible response would be ed result from selling products for less tariffs artificially increasing prices at for those countries to correspondingly than they cost to produce. Likewise, dis- every step of the value chain, starting increase incentives to offset the tariff- tressed solar companies being propped with potential Chinese-imposed tariffs driven increase in price, if solar were up by stakeholder governments seeking increasing the cost of raw polysilicon to maintain its current level of com- to maintain employment within their imports that would flow through as petitiveness and those countries were territory also appear to support some higher costs for Chinese-produced sili- to avoid the loss of tens or hundreds of claims of unfair trade practices. con wafers and cells, the costs of which thousands of solar industry jobs that would in turn be raised again via im- support installation, project develop- However, much of these results port duties when exported to a major ment, and balance of system compo- may be completely market driven. Con- market like the EU or U.S., thus raising nent manufacturing. sider that the rapid growth of the in- the costs of cell or module production dustry naturally would attract new sup- in those markets. The end result of this Alternatively, there is the possibil- pliers. This growth in suppliers results possible series of layered compounding ity of some sort of global solar trade ac- in an overly large production capacity tariffs could well be tariff costs mul- cord, similar to the resolution of semi- relative to the market demand, and so tiplying through the value chain and conductor trade disputes that arose at selling any solar panels at all requires causing rapid contraction in solar de- the start of the information age. Re- highly competitive pricing. This pric- mand, which would then further shrink gardless of the eventual outcome of ing strategy then undermines the fiscal the market and result in continued pro- these disputes, it seems as if the nature health of the business and, in turn, reduction overcapacity, and so on. of free-market competition in the glob- sults in subsidies and other unfair trade al solar market will be forever changed.

Spring 2013... 15 SOLAR PV: Changing the Landscape Pictured here: Duke Energy’s 1-MW Martins Creek Solar Project is located on the property By: Jason W. Hoyle, Editor of the Martins Creek Elementary School in Cherokee County, NC. The site’s 4,400 ground- mounted panels supply electricity to the Tennessee Valley Authority through Blue Ridge Mountain EMC under a 10-year power purchase agreement. As part of the power purchase agreement, the school receives annual revenue from the system that is roughly equivalent to the cost of two full-time teachers. Photos Courtesy of ESA Renewables and Duke Energy

16 ...Economic Developer’s Guide to the Renewable Energy Industries ive short years ago, North Car- are bringing manufacturing jobs and From Spark to Flame olina and the Southeast were other benefits to communities across The REPS was indisputably the described as a backwater for the the state. Three of the most notable so- F catalyst for the phenomenal growth in solar industry. As of the end of 2012, lar manufacturing business successes in solar installations North Carolina has North Carolina ranked 6th among the state are Asheville-based FLS Ener- experienced since 2007, in part due to states for total installed solar photovol- gy, Durham-based Semprius, and Shel- the specific solar set-aside in the stan- taic generating capacity with 229 MW by-based Schletter. Together these three dard which requires power providers to installed, according to a recent report sector-leading manufacturers represent use solar energy to meet a small portion from the Solar Energy Industries As- more than 630 jobs and more than $300 of their retail sales – currently, 0.2% by sociation (SEIA) and GTM. Last year million worth of investment. 2018. In order to meet this obligation, alone, 131.9 MW of solar was installed utilities purchase Renewable Energy in the state, making North Carolina the As a solar market, North Carolina Certificates (RECs) from solar project 5th largest state market for solar dur- is somewhat of a surprising national owners providing a premium payment ing 2012, and projections indicate that leader. The leading solar state is Cali- in addition to what the utility pays 2013 will see North Carolina continue fornia where power reliability, air qual- for the electricity itself. However, the its meteoric climb to become the 4th ity, and other environmental issues amount of solar installed since the 2007 largest solar market in the U.S. made it the first mover in renewable energy and where a variety of innova- enactment of the REPS requirements As recently as 2006, reports filed tive incentives programs are available far exceeds the set-aside minimum and with the North Carolina Public Utilities to support continued development of is indicative of a market environment Commission (NCUC) by the state’s in- renewable energy. Second to California that is driven by far more than a policy vestor-owned utilities indicated about is the sunniest state, Arizona, where requirement. 10 solar power projects under contract the greatest solar resource in the conti- The groundwork for North Caro- with a total capacity of about 37 kW. nental U.S. makes it a natural leader in lina’s current solar industry leadership Two years later these same three utili- solar power and fourth on the list is Ne- position was built over several decades, ties reported more than 15,854 kW of vada, which also has a significant solar starting with corporate and personal solar projects under contract to sell their resource. Sandwiched between Nevada investment tax credits. Although these output – the state’s solar market grew and Arizona, ranked as the third largest credits were first established in 1977, by 2.5 orders of magnitude in a two- solar state is New Jersey where aggres- they were little-used until the last five year period between 2006 and 2008. By sive incentives and a dedication to sup- years. The tax credit is equal to 35% early 2013, the utilities had more than portive policy have firmly established of the cost of the renewable energy 134,000 kW of NC-based solar power the industry. system and is claimed in equal install- under contract – about 750% more than ments over five years, and is one of the in 2008. So, how then does a state such as North Carolina that is more than 80% highest-value credits of its type in the During the period from 2007 powered by very low-cost coal and nu- nation, exceeding even the 30% federal through 2012, approximately $1.04 bil- clear gain a leadership spot in the solar investment tax credit. lion was invested in 1,620 new renew- industry? North Carolina doesn’t have According to reports from the N.C. able energy generation facilities across competitive wholesale markets, tightly Department of Revenue, about $58,700 North Carolina, according to a recent constrained peak power capacity and in tax credits for solar electric systems North Carolina Sustainable Energy infrastructure, extreme air quality re- were claimed in 2006 by 26 non-busi- Association-commissioned report pre- strictions, or a solar resource even close ness projects with an investment value pared by RTI International. Combined, to that of states located in the desert in that year of $187,476. One year later, these facilities generated more than 5.7 Southwest. There is no single answer, or in 2007, solar electric projects rose from million MWh of renewable electricity one specific factor to which our state’s a 4.4% share of renewable energy cred- between 2007 and 2012. Solar photo- leadership in solar can be attributed; its claimed to nearly 16% of renewable voltaic projects represented more than rather, it is a combination of policies, energy credits claimed with more than 71.5% of the total investment in new incentives, interest, and regulations de- $174,000 in credits claimed on projects renewable energy facilities, accounting veloped over many years by dedicated valued at almost $600,000. This trend for $743 million – more than all other people and organizations that created of rapidly rising use of the tax credit technologies combined. a tinderbox-like market environment continues through the present. and in 2007 the spark was provided via However, installations and proj- enactment of the Southeast’s first Re- In 2008, 74 taxpayers claimed more ect investment are only half the story newable Energy & Energy Efficiency than $544,000 in state tax credits on in- in our state’s emerging solar industry. Portfolio Standard, or REPS for short. vestments worth nearly $1.8 million. In Innovative businesses and technology 2009, $3.67 million in tax credits were development have also taken hold and claimed on projects valued at $11.4 mil-

Spring 2013... 17 lion, and solar tax credits represented Prior to the solar access law, resi- ing renewable electricity. The North 37% of all renewable energy tax cred- dential projects’ main benefit came Carolina Public Utilities Commission its. Solar continued to dominate renew- from net metering regulations that also requires standard-offer purchase able energy investments with credits of were established in 2005. Net metering rates for renewable energy generators nearly $5.5 million generated by proj- is a billing arrangement under which be determined every two years and ects valued at almost $16.3 million in an electric utility customer installs a re- published by each investor-owned util- 2010, and in 2011 solar represented newable energy system and the power ity; these rates establish the price that 44% of renewable energy tax credits it produces in excess of what is being utilities pay for electricity generated by claimed with more than $18.4 million used on-site is credited against the util- a renewable energy project that has 5 in credits generated from projects val- ity customer’s electricity purchases. So, MW or less of capacity. ued at over $53.4 million. under net metering, a utility customer could generate electricity during the The standard-offer power purchase Tax credits, while a major con- day which would be netted against elec- rates, called avoided cost rates, are an tributor to the financial viability of so- tricity they consumed at night. Also, for essential planning tool relied upon lar technology in the state, are not the small renewable energy system owners, by project developers in determining whole story by any stretch. Equally starting in 2003, the North Carolina whether or not to go forward with in- important and far more critical to the Green Power program allowed util- vestments. The published standard- physical feasibility of solar projects ity customers to voluntarily purchase offer rates are available for a variety of are the policies enabling the physical blocks of renewable energy at a 4¢/ term lengths, ranging from the variable solar power installation and intercon- kWh premium with the bulk of the pre- rate which changes biennially with each nection with the grid. Accompanying mium payment passing directly to the new avoided cost proceeding before the the REPS bill in 2007, the legislature renewable energy producer. Commission to a fixed rate over a 15- also passed a statewide solar access year term. The contracts, called power law which, according to the N.C. Solar North Carolina also has intercon- purchase agreements, through which Center’s Database of State Incentives nection standards that apply to the utilities are required to purchase power for Renewable Energy website, gener- state’s investor-owned utilities. These from small producers like solar projects ally prohibits cities or counties from standards prescribe the process and re- are reported as non-utility generators to adopting ordinances that prohibits the quirements for independent generators the N.C. Public Utilities Commission. installation of solar equipment on resi- of certain sizes to connect their projects dential property. to the grid – a basic prerequisite to sell- Duke Energy’s latest Commission filing detailing the company’s contracts For more information on local, state, and federal incentives, see www.dsireusa.org with non-utility generators shows nearly 123 MW of capacity under contract, 81.6 MW of which is from solar photo- REC Markets Available to NC Solar Projects voltaic projects. Of the 30 MW of PV under contract with Duke Energy that NC Green Power is a voluntary program that allows electricity consumers in North had finished construction and were de- Carolina to purchase green power from renewable energy generators. As of early livering power at the time of the report, 2013, the program supported 616 small-scale PV generators with a combined gen- nearly 2/3 had opted for a rate term of eration capacity of 2.84 MW and annual output of about 4,000 MWh/yr. See www. five years or less, meaning that the price ncgreenpower.org those project owners receive for their power generation will change either ev- The NC-RETS registry maintains accounts for renewable generators in the state to ery two or five years. track and sell their RECs. As of early 2013, the registry held records for 234 solar PV projects with more than 144 MW of generating capacity. The avgerage solar project There is a clear trend in small size was 616.8 kW, and the median size was 159 kW. The registry also had 39 proj- power producers’ choice of rate term – ects of with 1 MW or more of capacity, which together represent about 16% of regis- small-scale residential projects tend to tered projects but account for more than 70% of registered capacity. See www.nc-rets. opt for the short-term contracts under org which the price they are paid for their output changes every two-to-five years, North Carolina project owners interested in selling their solar RECs to buyers located while large-scale projects, like many of in the Northeast where higher renewable portfolio standards may mean higher prices, those included in the nearly 52 MW un- register their project in the PJM GATS registry. As of early 2013, the PJM-GATS der contract, but not operational at the registry held 86 solar PV projects located in North Carolina with a combined capacity time of the report’s filing, almost uni- of 1.77 MW. These projects had an averge size of 2 kW and between November 2008 versally opt for long-term fixed rates, and May 2013 had been issued 20,182 RECs, 7,568 of which had been traded, and typically 15-year terms or negotiated 13,504 were retired. PJM-GATS prices for NC-based projects ranged from 26.4¢/kWh rates over similar or longer periods. to 36.2¢/kWh during 2012.

18 ...Economic Developer’s Guide to the Renewable Energy Industries Solar Value Proposition > Retail power providers pur- system would cost $427,000 at these chase RECs in order to comply with average prices. This hypothetical sys- The avoided cost rate that solar North Carolina’s portfolio standard tem could generate a federal tax credit generators are paid for their electricity law which requires a minimum per- worth $128,100, and a state tax credit output is the primary means through centage of renewable energy in the (net of federal tax) worth a nominal which a project earns revenue. Larger, utility’s power supply. RECs that are $107,604 – a combined tax credit value multi-million-dollar projects typically sold to utilities for compliance with of $235,704, about 55% of the project’s have more complex financing struc- the REPS law are registered in the NC cost, leaving $191,296 in overnight cost tures that may include a mix of tax Renewable Energy Tracking System to be recovered by the system owner equity, secured or unsecured debt, and (NC-RETS) and when sold are trans- just to break even. If power produced investor equity within a variety of cor- ferred to the utility’s account where by this 100 kW system was purchased porate ownership structures. These so- they are retired once submitted, or by a utility at a nominal average rate phisticated projects tend to select long- claimed, by the utility for compliance. of $0.08/kWh over a 20-year period term rates to lock in a price and reduce annual sales of 119,560 kWh would financial risk from unanticipated future > RECs generated by projects in be necessary to recover the remaining price movement. While some projects North Carolina can also be sold to portion of the system’s cost. This level are far more complex than others, the buyers in other states. Some buyers of generation implies that the system basic value proposition is essentially make voluntary purchases in order would operate with an average effective the same. to claim they use renewable energy capacity factor of 13.65%. or green power, while others may Solar systems earn revenue by sell- purchase RECs for compliance with While the above scenario is not ing electricity into the power grid and their own state’s renewable portfolio completely unrealistic in terms of sys- by selling the environmental attributes standard. Aside from the NC-RETS tem performance, it is a bit optimistic. of the renewably generated electricity registry, solar power producers may Furthermore, the performance of a in the form of assets called solar-RECs. also register with the PJM Generation typical system degrades slightly from In addition, project owners can claim Attribute Tracking System (GATS), year to year, and the inverter and possi- tax credits equal to 35% of eligible ex- which functions much like the NC- bly other electronic components would penditures against state tax liability and RETS but is used by utilities located likely need to be replaced at some 30% against federal tax liability; after in the PJM regional transmission or- point. Add to these expenses the cost of accounting for federal taxes on the state ganization wholesale market. capital, the time value of money, and credit and discounting the state credit soft costs such as legal and accounting to the present day the combined value fees and insurance, and the financial of these tax credits can equal 50% or The View Forward viability of even a heavily incentivized more of a project’s cost. Although North Carolina’s poli- PV system is eroded rapidly. Plus, a With the tax credit value and the cies and regulations set the stage for the nominal $0.08/kWh is a higher price price paid by utilities for electricity ba- rapid rise of the solar industry within than a system installed in North Caro- sically fixed to a limited number of op- the state, some acknowledgement must lina could expect to receive over a 20- tions, the largest wildcard in determin- be made of the contribution provided year period after adjusting for inflation, ing a solar project is the value of the by broader trends in the global solar so when these factors are considered, RECs. The renewable or environmen- value chain. In particular, the rapid re- the value of non-electric assets like the tal attributes represented by the RECs duction in the cost of solar panels has RECs takes on a very important role in are sold separately from the underly- been a fundamental driver of increased establishing and supporting the market ing electricity, and need not be sold as market growth. Between the end of for solar. a bundle with the electricity. In North 2011 and the end of 2012 the price of Yet, in many states, North Caro- Carolina there are several main options solar modules declined by more than lina included, the requirements of the for selling RECs, including: 40% from $1.15/Watt to $0.68/Watt, according to a recent report by the So- renewable portfolio standard policies > N.C. Green Power purchases lar Energy Industries Association. The that have driven demand for RECs RECs at a standard tariff rate, current- reduction in module cost helped reduce and renewable energy in general have ly 8¢/kWh, to supply the program’s the overall cost of a PV system during largely been met. For example, Duke voluntary market demand, but this 2012 to $5.04/Watt in the residential Energy already has enough renewable rate is only available to PV projects market, $4.27/Watt in the non-residen- energy under contract to generally re- with less than 5 kW of capacity; larger tial sector and $2.27/Watt in the utility main in compliance through the end projects are required to submit bids segment. of this decade, and the company re- and compete with other projects using cently announced that it will rebate any eligible renewable energy resource However, even at these lower costs, residential customers some of the few including landfill gas, biomass, and a PV system remains expensive. For cents it charged per month to pay for small hydroelectric, among others. example, a 100 kW non-residential the costs of meeting the portfolio stan- Spring 2013... 19 dard. While utilities achieving compli- Expanding the Opportunity Solar REIT ance with the portfolio standard years Whether due to limits imposed by Another approach to increasing in advance and at a much-lower-than- financing, access to solar resources, or access to the solar market is to expand expected cost is surely a success for the electricity industry/market regulations, the access to finance for solar projects. technology, the potential sudden drop- there remains a number of potential The first Real Estate Investment Trust off in demand for RECs could rapidly participants in the solar market who are (REIT) for solar energy had its initial undermine renewable energy as an eco- unable to meaningfully engage. These public offering on the New York Stock nomic growth driver. and other barriers are being reduced Exchange in April 2013 (Hannon One option to avoid the disruption and eliminated in a variety of ways Armstrong Sustainable Infrastructure from demand for new renewable proj- through inovative policy approaches. Capital, NYSE:HASI), signalling that ects selected by pol- the IRS had provided a private letter icy makers in many ruling allowing the use of states where portfo- 71.5% of the $1.04 billion this structure for a renew- lio standards were able energy project for the rapidly met was first time. Using the REIT simply to increase invested in NC renewable structure allows practically the requirements, or any investor to participate alter the timing. Al- energy projects since 2007 in a renewable energy proj- though North Caro- ect by buying shares of the lina’s utilities have was invested in solar PV REIT much like shares in a already contracted publicly held company. more than enough solar projects to meet their obligation Third-party Sales Summary under the state’s portfolio standard for Electricity remains a heavily reg- North Carolina has become a na- the next 5 years, there are indications ulated industry, and in most states tional leader in the solar energy space, that renewable technology, and solar electric utilities are granted monop- and as a result has reaped nearly a bil- in particular, continues to have unmet, oly rights as part of a retail franchise, lion dollars in investment, attracted pent-up demand that exists indepen- meaning that only the utility may sell dozens of companies, and redefined the dently of the portfolio standard. electricity to a retail user. The concept nature of competitiveness in renewable of third-party solar electricity sales en- One source of demand is corpora- energy. The state’s success is attribut- ables a developer to install, own, and tions, particularly data centers. Duke able to strong support from incentives, operate a solar system on a customer’s Energy and Google announced plans but also by ensuring fair and equitable property and directly sell that customer for an industrial clean energy electricity access to markets, and enabling com- the electricity output from the system. rate, the proposal for which is expected petition among electricity generation sources to occur. to be filed in mid 2013. Also, many House Bill 657 was recently intro- states are increasingly recognizing the duced in Georgia, whose electricity Some may say the state’s market is restrictive nature of a largely tax-based market is structured similar to North saturated and facing stagnation. Oth- incentive structure that eliminates Carolina’s, to allow just such an ar- ers, though, may point to recent news many potential solar power generators rangement. The bill cites the public in- announcing 75 MW solar projects and or investors from participating in the terest in encouraging broader participa- increasing involvement of the state’s market. Since tax incentives are only tion in the deployment of solar electric utilities in the industry as a harbin- useful to individuals or businesses that generation and obstacles such as: lack ger of continued movement toward have both a sufficient amount and the of property rights or solar resource, in- greater market competition, support proper type of tax liability non-profit ability to bear the up-front costs, diffi- for innovation, and greater access to businesses, local governments, schools, culty in meeting contiguous real prop- the marketplace. These trends could hospitals, and many other potential erty requirements to operate shared usher in a new era of solar energy com- market entrants are essentially penal- solar generation facilities, and the lack petitiveness if individuals, businesses ized by being unable to take advantage of opportunities to own or purchase and other organizations are freed from of tax-based incentives. In addition to output from solar generation facilities. artificial barriers, given the freedom to finding creative ways around the tax- The proposed solution is a solar utility act according to their desires, and em- based incentive limitation, policies are through which Georgia residents could powered to choose. also being developed to remove other purchase electricity from a solar facil- barriers such as lack of space or lack of ity located remotely and reduce their sunshine on available space. electric bill by the equivalent amount of solar generation.

20 ...Economic Developer’s Guide to the Renewable Energy Industries INDUSTRIES UPDATE: Solar, Biofuels, Efficiency & WIND

Duke Energy’s North Allegheny Windpower Project is located in Blair and Cambria counties, Pennsylvania – approximately 95 miles east of Pittsburgh. North Allegheny’s 35 Gamesa wind turbines are capable of producing 70 megawatts of electricity, enough to power roughly 21,000 average-sized homes. All of the clean, renewable energy generated at North Allegheny is delivered to FirstEnergy under the terms of a long-term power purchase agreement. Image Credit: Duke Energy Renewables

Spring 2013... 21 Bio-based fuel

he past several years have seen Ethanol biofuels markets become larger Year-over-year domestic ethanol Overall, at the end of 2012 there than ever and, in the case of T production declined in 2012 by an es- were 211 ethanol production plants lo- ethanol, equally as ubiquitous as invis- timated 4.6% from 2011’s record levels cated in 28 states with the capacity to ible. Nearly every gallon of gasoline to an estimated 13.3 billion gallons – produce as much as 14.7 billion gallons sold in the U.S. today contains ethanol, the first such decline since 1996. With per year, according to the Renewable often as much as 10% of the biofuel. average annual production growth of Fuels Association. The ethanol market Where the adoption of biofuels is con- about 37% per year during the past de- in 2012 is estimated to be worth about cerned, the issue is no longer a question cade, ethanol has become a mainstay $30 billion – a 50% increase over 2009’s of “Will we use biofuels?” but instead a in the domestic fuel supply and most market value, and about 2.5 times the question of the extent to which biofuels gasoline sold today contains about 10% 2006 value. production technology may reduce the ethanol, or E10. cost of gasoline and diesel and function as a hedge against future price increas- esd and oil market volatility and supply Annual US Ethanol Production, million gall. per year instability. Data Source: Renewable Fuels Association, 2013 Ethanol Industry Outlook

15,000

Top right: Ethanol production held 12,000 steady in 2012 at more than 13.3 billion gallons in spite of adverse weather and market conditions, largely due to 9,000 record-level corn planting. An economic impact study commissioned by the Renewable Fuels Association estimated the ethanol industry spent nearly 6,000 $39.2 billion dollars, or about $2.95 per gallon, in production expenses during gal. 13,330 mill 2012 - more than 84.4% of which was 3,000 for corn, the primary ethanol feedstock. The ethanol industry accounted for an estimated $43.4 billion of GDP dur- 2002 2004 2006 2008 2010 2012 ing 2012, employing nearly 87,300 people directly and supporting almost 296,000 additional jobs which provided Renewable Fuel Standard (RFS), billion RINs per year an estimated $30.25 billion in personal Data Source: Energy Independence and Security Act of 2007, RFS Schedule income. 40 36 billion RINs Cellulosic Biofuel total in 2022 Bottom right: The Renewable Fuels 35 Standard (RFS) establishes targets Undifferentiated Advanced Biofuel for the blending of fuel produced from 30 non-petroleum, renewable sources Renewable Biofuel for major fuel distributors. Since its 25 16 billion introduction in 2008, the standard has RINs by 2022 largely focused on more-traditional 20 ethanol and biodiesel, but in the coming years the RFS increases the target 15 level for next-generation advanced biofuels, such as ethanol made from 10 cellulosic material and other non-food 15 billion RINs per fedstock sources. Fuel suppliers either 5 year after 2015 purchase renewable fuel directly, or buy renewable fuel credits called RINs which are submitted for compliance. 2008 2022 22 ...Economic Developer’s Guide to the Renewable Energy Industries The slight decline in ethanol pro- consumption will be highly correlated The U.S. Department of Agricul- duction in 2012 is attributable to the with gasoline demand that are, in turn, ture anticipates this year will see corn combined effects of a variety of forc- driven largely by economic output and acreage increase from last year’s record es – economic-, technological-, and oil prices. level to the most acres in 77 years. This weather-related. Severe drought in the increase in domestic production is being Midwest reduced corn yields by about Possibly the largest influence on the mirrored globally, with the result being 16%, and although the drought’s effects domestic ethanol industry’s outlook for declining U.S. exports as evidenced by were partly offset by the largest corn the current year will be the wildly vola- the drop in the U.S.’s share of the global crop planted in half a century the de- tile corn market. Last year’s drought market from 33% a year ago to less than cline in corn yields resulted in higher – the worst since the 1930s according 25% currently. The increased supply of prices for ethanol’s corn feedstock. to Bloomberg – drove corn prices to available corn in the domestic market Also, industry growth is beginning to an all-time high and saw a handful of has driven prices down from their 2012 bump against the E10 blend wall con- ethanol distilleries shuttered. However, high in excess of $8 per bushel to less straint, and until the 10% blend con- market indications during the first few than $6.50 per bushel as of early April straint is overcome changes in ethanol months of 2013 appear positive for eth- 2013 and futures contracts indicate anol producers. prices could continue to decline by as much as another dollar per bushel be- Clockwise from top: fore the year’s end. The biodiesel process line inside Appalachian State University Energy Center’s Biodiesel Re- Production and profits in the etha- search Facility located at the Catawba County nol industry are highly sensitive to the Eco-Complex. Process line components price of corn, which in 2012 repre- include the methoxide tank, reactor, wash, set- sented almost 85% of production costs. tling tanks, and feedstock pump and plumbing With abundant feedstock available at fixtures. prices in line with the 2011 level and continued low natural gas prices (the Oilseed presses and hopper pressing Canola second highest-cost production input), crop in Catawba County’s new feedstock pro- the ethanol industry could see another cessing station. record setting year in 2013.

Outside view of the newly constructed feed- In the coming years the industry stock processing station. The station is de- will benefit from increased feedstock signed to produce as much as 50,000 gallons diversification that should further re- of feedstock oil per year, and currently has 2 duce feedstock [and production] costs of a possible 16 oilseed presses installed for a and somewhat insulate the industry capacity to process 1 ton per day of oilseed. from commodities market volatility. Image Credit: Biodiesel Research Facility Annual US Biodiesel Production, million gall. per year Biodiesel production reached a Data Source: National Biodiesel Board Annual Estimates milestone in recent years, exceeding 1,200 one billion gallons. Current levels of production is far in excess of the Re- newable Fuel Standard’s 800-million- 1,000 gallon target. A recent National Biodiesel Board- 800 commissioned study found that production of a billion gallons of biodiesel supports more than 39,000 600 jobs across the country and more than $2.1 billion in household income. According to the study, continued 400 industry growth and the extension of 1,100 mill gal. the biodiesel production tax incen- 200 tive could support creation of nearly 11,700 additional jobs by the end of 2013. 2002 2004 2006 2008 2010 2012

Spring 2013... 23 The most immediate opportunity on Biodiesel is made by reforming Many of these stations offer bio- the horizon for traditional ethanol pro- natural fats and oils using catalyst ma- diesel as a result of local community- ducers is the proposed Sugar to Ethanol terials. Over 70% of biodiesel is pro- oriented biodiesel businesses and sell Rule, under review by the White House duced from raw vegetable oils – in 2012 biodiesel that is produced locally. Ac- as of early April 2013, which would al- more than 4 billion pounds of soybean cording to the Energy Information Ad- low excess sugar to be purchased by the oil was used as feedstock for biodiesel ministration, North Carolina is home federal government and resold to bio- production and represented 55% of all to 4 biodiesel producers with a com- fuel manufacturers under the Feedstock biodiesel feedstock by weight. More bined production capacity of 10 mil- Flexibility Program for Bioenergy Pro- than 1 billion pounds of animal fat, rep- lion gallons per year; however, industry ducers. resenting 13% of feedstock by weight, sources report 5 producers in the state was used to produce biodiesel in 2012, with a combined production capacity as was about 900 million pounds of re- of about 20 million gallons per year. Biodiesel cycled cooking oil. Much like the ethanol industry, Notably, the state’s only BQ-9000 biodiesel production remained com- While the ethanol industry is high- certified producer, Piedmont Biofuels, paratively flat from 2011 into 2012 at ly centralized and increasingly inte- is also a major supplier of equipment, 967 million gallons and 969 million gal- grated as a component of mainstream education, and research that sup- lons, respectively. As of January 2013, gasoline – nearly all gasoline sold to- ports the industry’s continued growth the 110 U.S.-based biodiesel producers day has some ethanol – the biodiesel throughout the state. Among its many had a combined production capacity industry is much more amenable to a innovative activities, Piedmont Biofu- of 2.1 billion gallons per year. One no- distributed model featuring local feed- els has developed an enzymatic bio- table shift in the biodiesel industry was stock sources, local producers and local diesel production process that both the increase in sales of 100% biodiesel, sellers. As of early 2013, the National enables continuous processing (rather called B100 – in 2011 B100 sales ac- Biodiesel Board reported that North than currently used batch processing) counted for about 2/3 of the biodiesel Carolina was home to 43 retail biodies- and offers production cost reductions market, and in 2012 that share in- el locations that serve the public. by using enzymes to replace caustic ac- creased to about 78% of biodiesel sales. ids used in more traditional esterifica- tion methods.

Piedmont Biofuels: A Small Business Piedmont is also a B-Corporation (see www.bcor- with Big Innovations poration.net), which is a type of corporate clas- sification denoting a business’ goal of addressing Piedmont Biofuels is a small Pittsboro-based social and environmental problems via their busi- company that produces biodiesel using mostly ness activities. waste cooking oil and grease. The company does much, much more. With Piedmont’s expansive scope of activities and its relentless pursuit of supporting the in- Piedmont has taken a unique approach to the dustry’s growth in communities across the state, idea of business, producing equipment such as saying that Piedmont Biofuels produces biodiesel The Cavitator (pictured at right), seed presses, is a gross understatement - Piedmont Biofuels is and the enzymatic FAeSTER reactor (developed really producing a biodiesel industry. as part of a collaborative research effort with Novozymes AS, pictured below) that is supplied Learn more at www.biofuels.coop to other small-scale biodiesel producers. Piedmont also does research, education, and is at the core of the state’s growing and well- organized community-scale biodiesel industry.

24 ...Economic Developer’s Guide to the Renewable Energy Industries Energy Efficiency & Green Building n the abstract, energy efficiency is subject of efforts under the USI pro- by a third-party independent review, a easy to define – it is simply using gram been initially designed as high-ef- building is awarded a LEED™ rating Iless energy to accomplish the same ficiency or high-performance structures ranging from the minimum achieve- amount of work or perform the same at the time they were constructed, then ment of Certified to the maximum function. In practical terms however, these savings would have been real- achievement of Platinum. energy efficiency includes the subset of ized continuously throughout the life all energy-using devices, facilities, and of the building. Several programs (e.g., The six dimensions of LEED™ equipment that are more productive ENERGY STAR and L.E.E.D.) that certification are: strategies related to per unit of energy consumed than their have emerged over the past couple of site selection and design called Sustain- peers. decades strive to ensure efficiency is a able Sites, use of strategies to reduce design feature rather than a retrofit. indoor and landscaping water usage The State of North Carolina’s com- called Water Efficiency, use of energy prehensive, lead-by-example efficiency efficiency and renewable energy called program, called the Utility Savings Ini- Leadership in Energy & Energy & Atmosphere, measure of the tiative (USI), was begun in fiscal year Environmental Design use of recycled or renewable materials 2002-2003. The program, as directed (LEED™) called Materials & Resources, and a by statute, has a target of reducing en- The U.S. Green Building Council’s weighted measure of the contribution ergy consumption per gross square foot Leadership in Energy and Environ- to reduced greenhouse gas emissions in all state buildings by 30% below the mental Design (LEED™) rating system called LEED GHG Index. 2002-2003 fiscal year level by 2015. is a building performance evaluation system to promote and recognize the As of March 2013, the U.S. Green At the end of 2012, a decade into use of high-performance green building Building Council recognized 77 Chap- the program, the $12 million invest- practices in the design and construction ters, 30,000 individual members; nearly ment of state appropriated funds have of new buildings. The system includes 200,000 LEED™ credentialed profes- leveraged nearly $161 million in private required prerequisites and optional ele- sionals; almost 185,000 projects; and investment to produce total savings of ments called credits across six dimen- 10.6 billion square feet of projects. The about $553 million – roughly $3.20 in sions which a building must meet, and program has also begun to be adopted savings per dollar of total investment. based on the extent of achievement in internationally, with 22 associated in- In fiscal year 2011-2012 alone, estimat- meeting these standards, as determined ternational groups, ongoing discussion ed energy savings were more than $105 million. Cumulative Gross Square Footage of LEED-Certified 2 Energy efficiency improvements Buildings in North Carolina, thou. ft not only reduce energy costs, but ef- Data Source: U.S. Green Building Council Project Database ficiency also acts as a hedge against 50,000 2 rising prices. When the USI program 44,777,000 ft began, the cost of energy in state buildings was $12.57 per million metric Btu 40,000 (mmbtu) but by the end of fiscal year 2011-2012 the cost of energy has risen Platinum Level 47% to $18.43/mmbtu. Over the same 30,000 period, the USI program reduced ener- Gold Level gy consumption by 27%, from 164,147 Silver Level Btu per square foot in fiscal year 2002- 20,000 2003 to 119,822 Btu per square foot in Certified Level fiscal year 2011-2012. Through the year 2020, the USI program is expected to 10,000 save a cumulative $1.5 billion of tax dollars spent on energy at state facilities. 2002 2012 These savings are substantial, but By the end of 2012, nearly 44.8 million ft2 of building space in North Carolina had the fact that they are relatively easy achieved some level of LEED™ certification. The cumulative certified square feet in to obtain and so large in comparison the state has doubled annually during 7 of the past 10 years. Among certification- to the level of investment highlights level achievement, Silver and Gold are basically tied for the lead market share with the abundance of inefficiency in the 38.5% and 37.5% respectively, while the top-tier certification level of Platinum held way we use energy. Had the buildings, 7.8% of the cumulative square footage certified despite the fact that the state’s first equipment, and facilities that are the Platinum-certified facility was a 21,000 ft2 project certified only 5 years ago in 2007.

Spring 2013... 25 Energy Efficiency & Green Building with 42 counties about development of The North The Alliance is dedi- green building councils, and member Carolina Energy cated to educating councils in 28 countries. North Caroli- Efficiency Alliance stakeholders in the na is home to three regional chapters of is a collective of home building industry the U.S. Green Building Council: Pied- organizations and about the benefits of mont Triad North Carolina Chapter, businesses working to stimulate ENERGY STAR homes. For more North Carolina Triangle Chapter, and the market for energy efficient information on the NCEEA, visit the Charlotte Regional Chapter. construction throughout the state. www.ncenergystar.org As of early 2013, the 451 projects in North Carolina that had achieved includes tens of thousands of products North Carolina also ranked 11th a LEED™ credential since 2002 had ranging from major appliances and of- among states with the highest share a combined area of nearly 47.2 mil- fice equipment to new homes and com- of new homes receiving the ENERGY lion square feet – about 77% of which mercial/industrial facilities and plants. STAR® Homes label, with 29% of new were certified either LEED™ Gold or homes constructed during 2011 receiv- Silver. Market indicators demonstrate According to the latest awareness ing the label. As of early 2013, the EPA a strong near-term future for the high- survey, more than 80% of Americans reports a cumulative total of 42,711 performance green building industry recognize the ENERGY STAR® label. ENERGY STAR-certified homes in in North Carolina with the LEED™ The program has been widely touted North Carolina – 35% of which were program database showing more than as quite possibly one of the most twice as many projects and square feet successful governmental campaigns in in the pipeline as have been creden- history, and in 2012 alone claimed to tialed during the past decade. have delivered energy and cost savings worth $24 billion to the U.S. economy. ENERGY STAR % ENERGY STAR The program’s impact is increasingly Homes 2011 by state apparent as evidenced by the milestone Source: ENERGY STAR, U.S. EPA Unlike the more comprehensive achieved in 2010 when 25% of all LEED™ program, the U.S. Environ- single-family homes built in the U.S. mental Protection Agency’s (EPA) EN- earned the ENERGY STAR® label. ERGY STAR® certification is more narrowly focused on energy usage. Charlotte, N.C. was recently recog- Last year marked the 20th anniversary nized by the EPA as one of the Top 25 for the ENERGY STAR® program; Cities for ENERGY STAR® buildings, the program initially labeled comput- ranking #14 out of all U.S. cities with ers and monitors, expanded to include 133 buildings occupying 17.2 million residential housing in 1996, and today square feet of floorspace certified in 2012. These certified buildings are pro- North Carolina is among the top states jected to realize annual cost savings of for the portion of new homes built to more than $15 million, and prevent the the ENERGY STAR standard, and is emissions equivalent to 10,800 homes’ far and away the leader in the South- electric use. east region.

Cree’s Reinvented Light Bulb The Durham-based N.C. State-spinoff announced its $10 LED light bulb in early 2013. The glass-domed bulb looks similar to the traditional 60W incandescent bulb it is intended to replace, but unlike traditional bulbs, Cree’s comes with a 10-year warranty, has an expected lifetime of 25,000 hours, and uses about 85% less energy than an incandescent bulb. Cree’s new bulb is considered the first affordable LED lamp, and is expected to drive the consumer transition from incandescent bulbs to high-efficiency LED lamps over the next decade. The company has already hired about 200 people to manufacture the new bulb in Durham, increasing its workforce of 2,335 by about 8.5%.

26 ...Economic Developer’s Guide to the Renewable Energy Industries built in 2011 or later. In the non-resi- square footage tend to be in either a As demonstrated by the zip code dential building sector, North Carolina major urban area such as Charlotte, maps, the highest concentrations of is homes to 1,114 ENERGY STAR- the Triangle, or the Triad; or in an area credentialed buildings tend to be in certified buildings – nearly 44% of with a concentration of government fa- zip codes so small that they are almost which have been certified since 2011. cilities such as the Great Smoky Moun- not noticeable in a state-wide map, but tains National Park, Ft. Bragg, and these zip codes typically represent high Camp Lejeune. density developed areas. Green Building Geography The LEED™ certification program has been most readily adopted in the commercial building Number of LEED-certified Buildings by Zip Code sector, including corporate offices and government buildings. As a result, most zip codes in the state have no LEED™-credentialed buildings, as evidenced by the grey-colored zip code areas in the maps below.

The isolated pockets of the 1 - 3 4 - 11 state where there are a substantial Data Source: U.S. Green 12 - 29 Building Council LEED number of credentialed buildings 30 - 53 Database and the most credentialed gross 54 - 93

Gross Square Footage of LEED-certified Buildings by Zip Code

140 ft2 - 341,000 ft2 341,001 ft2 - 1,012,493 ft2 2 2 1,012,494 ft - 2,227,477 ft Data Source: U.S. Green 2,227,478 ft2 - 3,721,000 ft2 Building Council LEED 3,721,001 ft2 - 11,529,077 ft2 Database

Central/South-Central NC Charlotte Area Left: The center city zip code in Charlotte is among the top three zip codes in the state for LEEDTM- credentialed gross square footage. Surrounding zip codes also have large amounts of credentialed square footage.

Right: In the central part of the state, zip codes in Winston-Salem and Ft. Bragg are two of the three zip codes with the most LEEDTM- credentialed gross square footage.

Spring 2013... 27 Photovoltaic Cells olar energy is the fastest grow- commercial market segment for the bankruptcies and plant closings as well ing energy source in the U.S. first time. Not surprisingly, large-scale as mergers and acquisitions announced Sbar none. In fact, according to a utility projects featured installations during 2012 – all within a global trade recent report from the Solar Energy In- with the lowest cost rate with the aver- context where tariffs and international dustries Association (SEIA), the indus- age utility project reaching an installed trade organization complaints seem to

try has set a record for annual installa- cost of $2.27/Wdc by the fourth quarter have become as commonplace as, well, tions every single year for more than a of 2012 – nearly 30% lower than the in- sunshine.

decade. A reported 3,313 MWdc of pho- stalled cost at the end of 2011. tovoltaic (PV) capacity was installed in Upstream solar manufacturing – 2012, bringing cumulative installed PV Overall, the low cost and large from raw polysilicon to wafers and cells capacity to nearly 7.3 GW. price decline driven by utility projects – is very capital intensive and highly drove the U.S. average price down automated, meaning that it can occur

The $11.5 billion solar market is by 26.6% from $4.10/Wdc in 2011 to virtually anywhere. Chinese compa-

slowing down, relatively speaking, with $3.01/Wdc by the end of 2012. Prices nies, however, represented about 1/5 year-over-year growth declining to 76% in the residential market segment fell of global PV cell production capacity

above 2011 installations in 2012. While by about 18% to $5.04/Wdc, and by in 2010, according to a report from the the industry is expected to continue set- 13.5% in the commercial segment to Congressional Research Service (CRS).

ting new installation records in coming $4.27/Wdc during 2012. Quite possibly years, the compound annual growth the most startling price drop was the Domestic manufacturing activi- rate (CAGR) is projected to decline 41% decline in module prices which fell ties in the PV industry included about two dozen facilities involved in up- substantially from the 82% CAGR ex- from $1.15/Wdc in 2011 to $0.68/Wdc in perienced during the 2009-2012 period 2012, due to intense global competition stream production of raw materials to a more modest and sustainable 28% and the persistent global oversupply of or wafers (precursors to PV cells) in CAGR for the 2013-2016 period. That polysilicon. 2011, according to data from the Solar is, however, hardly a concern for solar Energy Industries Association. Since proponents and industry stakeholders then about 10 production facilities have Manufacturing & Trade as new installations in 2015 are pro- announced closures, while about the jected by SEIA to equal the current While there are a variety of dif- same number of new facilities have an- cumulative installed capacity of about ferent technologies that fall under the nounced plans to open, according to 7,000 MW. heading photovoltaic, crystalline sili- the CRS report. The overall outcome con forms of PV have dominated the is an import-dominated industry, with Growth in the solar PV market is market to such an extent that PV cells the U.S. importing almost $5.1 billion being largely driven by utility installa- have become practically commod- worth of PV cells and modules in 2012 tions which accounted for almost 54% itized. This intense price-based compe- and exporting only about $468 million of 2012 installations with 1,781 MW, tition has led to substantial supply-side that same year, according to the latest and realized year-over-year growth of turmoil in the industry with numerous data from the U.S. International Trade 134% to surpass installations in the Commission.

Solar power capacity continues to grow U.S. Annual Solar PV Capacity Installations, MW at a breakneck pace in the U.S. and North Carolina. Spurring the industry’s Data Source: GTM and Solar Energy Industries Association exponential growth experienced during 3,500 the past three years is the rise of installations attributable to the utility 3,000 market segment. The chart at right shows annual capacity installations of 2,500 PV systems in the U.S. over the past decade, divided between installations 2,000 by the utility segment and non- 1,781 MW utility segments (i.e., residential and commercial). Although utilities have 1,500 Annual Utility Installations been increasingly active in the solar Annual Non-Utility Installations market over the past three-to-four 1,000 years, last year was the first time in the industry’s history that electric utilities 500 1,531 MW represented more than half the market for solar PV. 2002 2004 2006 2008 2010 2012

28 ...Economic Developer’s Guide to the Renewable Energy Industries Within the PV manufacturing val- National Solar Jobs Census, Jobs by State ue chain, the most common domestic Source: The Solar Foundation activity is the relatively labor-intensive Solar energy is the fast- module assembly, for which facilities est growing source of new existed in about 25 states during 2011. electricity generating capac- Also, commonly sourced domestically ity in the U.S. - a fact that is are balance-of-system and -plant com- well reflected in the industry’s ponents such as wiring, inverters, and employment figures. As of Fall mounting equipment. Trade assess- 2012, The Solar Foundation’s ment data reported by the CRS indi- National Solar Jobs Census cated that the amount of U.S.-sourced reported more than 119,000 content in inverters was about 45% in solar jobs nationwide - a 13% 2010, mounting structures were about increase from 2011 figures. 94% U.S.-sourced, and miscellaneous For purposes of the census, a electrical components were almost 60% solar job is one where solar- domestically sourced in 2010. related work represents at as 20,000 jobs during 2013, bringing the total least 50% of the employee’s to nearly 140,000 solar jobs nationwide - the Production of these balance-of- time. vast majority of which represent new positions system and -plant components as well The Solar Jobs Census rather than the addition of solar responsibilities as module assembly operations sup- reported the industry was to existing positions. The majority of employers port many of The Solar Foundation- expected to grow employ- require some solar work experience at least a estimated 25,000 manufacturing jobs in ment by 17%, adding as many 4-year college degree for new hires. the PV sector.

FLS Energy Named #1 Top-100 NC Companies by INC. Magazine and #7 Top 100 Energy Companies FLS Energy was recognized by Inc. magazine in 2011 as the 46th fastest growing company in the U.S., and in 2012 was ranked 109th on the Inc. 5000 list based on the company’s 3-year growth 2,727%. The company, which mostly builds, owns, and operates solar thermal systems at industrial, agricultural, and commercial facilities and then sells the heat output to the company to displace purchases of fossil fuels. The company has also been recognized as #7 of Inc.’s Top 100 Energy Companies and #1 of the Top 100 North Carolina Companies in 2012. Asheville-based FLS Energy’s owned-and-maintained Evergreen Leading Solar PV Mounting Equipment Manufacturer Solar Farm located in Canton, NC. Locates Facility in Shelby, NC This 550-kW project has 2,340 so- In August 2012, Schletter, Inc. announced a new production and lar panels and has been in opera- distribution facility to be located in Shelby, NC. The $27-million tion since December 2009. facility is expected to employ 305 people by 2016 at nearly 25% A close look at the base of the more than the average county wage, and serve as the hub of the solar panel mounts reveals an company’s east coast operations. Schletter is a leading producer unusual style of ground mount. of solar mounting equipment and produces about one-quarter of Ballasted mounts are typically all domestically produced and sold solar mounting systems at its used for rooftop installations where Arizona facility. penetrating the roof isn’t an option, but in this case the solar farm is ake orest niversity anotech enter olar constructed atop a closed landfill W F U N C S pinoff and regulations prohibit the mount- S ing footers from penetrating the Camel City Solar was spun off from Wake Forest University’s landfill cap. Center for Nanotechnology and Molecular Materials and has plans to commercialize a three-dimensional solar cell design thought to Image Credit: FLS Energy yield as much as three times the power of more traditional solar cell designs.

Spring 2013... 29 Wind Turbines ith a record-setting 13,131 turing-related jobs at 559 facilities in 44 other technological improvements have MW of new wind power states which are supported by the wind contributed to ever-increasing output; Wcapacity installed in 2012, industry were placed in jeopardy. The both Iowa and South Dakota now pro- cumulative wind capacity in the U.S. last-minute renewal of the PTC ap- duce more than 20% of their electricity grew nearly 28% year-over-year, and pears to have staved off the most dev- from wind, and 10% of the electricity surpassed the 60 GW mark. Wind astating effects as new projects have en- on the Texas grid is from wind. markets remained relatively unchanged tered the pipeline and orders are being in 2012, with Texas remaining firmly placed – at least until the next round of Wind has also shown itself to be entrenched as the top wind power PTC-related uncertainty rears its head a least-cost resource. A subsidiary of state with 12.2 GW of wind capacity later this year. American Electric Power, a top coal- installed, and followed by California, burning utility nationally, began pur- Iowa, Illinois, and Oregon – these top 5 chasing 359 MW of wind power from Technology & Performance states combined represent almost half projects located in Texas, Oklahoma, of installed capacity in the U.S. Wind technology has continued to and Kansas to supply retail demand in climb into the sky, literally, with the av- Louisiana. As a result, the utility’s cus- However, the outlook for the in- erage hub height exceeding 80 meters tomers will experience an average de- dustry in 2013 – possibly even well into and 1,071 turbines installed during 2012 crease in cost of 0.1¢ per kilowatt-hour 2014 – is far bleaker. After experienc- resting on 100 meter towers. These and over the next decade. ing several years with a fairly certain policy environment, expiration of the Wind Energy Project Installations by completion industry’s primary incentive – the Pro- duction Tax Credit (PTC) – loomed on date and project size Source: American Wind Energy Association the horizon throughout 2012. The PTC was only renewed in early January 2013, and then only through the end of this year, albeit with a “begin construction” safe harbor rather than the typical placed-in-service requirement.

Nonetheless, policy uncertainty driven by the on-and-off-again PTC has confounded an industry that saw more than $25 billion in private capital invested to construct new wind projects during 2012, bringing new wind project construction to a virtual halt during the last half of 2012. As a result of this policy instability, the 25,500 manufac-

Project Installations (top right): Wind turbines continued to be installed at 80,000 U.S. Installed Wind Energy Capacity, MW a record pace across the U.S. during Data Source: American Wind Energy Association 2012, with projects ranging in size from 70,000 hundreds of kilowatts to hundreds of megawatts. While the Southeast has 60,000 only 3 wind installations, one of which is 50,000 Appalachian State University’s 100-kW Annual Capacity Additions 13,078 turbine, other areas such as west Texas, 40,000 Cumulative Capacity at Start of Year Idaho and Wyoming have strong project pipelines that are constrained by limited 30,000 transmission capacity and awaiting planned transmission construction. 20,000 Installed Capacity (right): A record-setting 13,100 MW of wind was installed in the 10,000 U.S. in 2012, bringing the cumulative total 46,929 MW to about 60 GW of installed wind capacity. 2002 2004 2006 2008 2010 2012 30 ...Economic Developer’s Guide to the Renewable Energy Industries Manufacturing Wind Energy Manufacturing Turbines from more than 59 manufacturers have been installed Facilities in the U.S. to-date. General Electric is by far the leader, cumulative- Source: American Wind Energy Association ly having provided more than 24 GW – 40% – of wind turbines in the U.S. market. Vestas holds the second largest cumulative market share of the U.S. market with 11.4 GW of turbines installed, and Siemens is ranked third with about 8.5 GW of turbines installed, as of the end of 2012; combined these top three manufacturers represent more than 73% of cumulatively installed domestic wind turbine capacity.

Perhaps, an even more encouraging signal for the American economy is that the domestic content of installed wind turbines reached about 67% in 2011, according to the U.S. International Trade Commission and the U.S. Department of Energy. This represents a rapid expansion of manufacturing capacity which saw the domestic content of wind turbines at only 25% as recently as 2005. During 2012, 44 states hosted at least one of the 559- Today, the wind turbine supply chain has an American Wind En- plus manufacturing facilities actively serving the U.S. ergy Association-estimated 13 utility-scale blade facilities, a dozen wind turbine production supply chain. Production facili- facilities to produce wind turbine towers, and a dozen turbine na- ties in 18 states provided key subassemblies, including celle assembly facilities located across 18 states. Downstream and 12 nacelle assembly sites, 12 tower facilities, and 13 specialized component production occurs in 44 states. utility-scale blade plants. Today, all 50 states have either a wind project, a related manufacturing facility, or both.

Offshore Wind for the Atlantic Wind Connection Schematic Mid-Atlantic Region Source: Atlantic Wind Connection

The first offshore backbone electricity transmission system proposed in the U.S. will start with development of the New Jersey Energy Link. The project is being developed by a consortium of industry that includes Trans- Elect, one of the country’s first independent transmission companies, Good Energies, Google, and Marubeni Corporation. When complete, the AWC backbone is expected to connect 7,000 MW of offshore wind power using High Voltage Direct Current (HVDC) technology, and could result in as many as 43,000 permanent operations and maintenance jobs according to an AWC-cited Department of Energy study. Following a Dept. of Interior determination in May 2012, AWC announced the NJ Energy Link as the first phase and selected Bechtel and Alstom to provide engineering and construction support in January 2013. For more information and project updates, visit www.AtlanticWindConnection.com

Spring 2013... 31 NONPROFIT-ORGANIZATION US POSTAGE ASU Box 32131 PAID Boone, NC Boone, NC 28608-2131 PERMIT NO.36

Appalachian Energy Center Workshop Series 2013June 8 Distributed Wind Energy June 21 2012 North Carolina Energy Code Training June 27-28 Understanding Electricity Rates to Maximize Energy Savings July 12 Green Guidelines & Certifications for Homes August 8-9 The Markets of Sustainability: Tapping the Value of RECs and Carbon Offsets August 23 Solar Thermal Water Heating September 13 Building Envelope & HVAC Design for Efficient Buildings September 21-22 Design & Construction of Synergistic Small-Scale Biofuel Systems September 27 Returning to a Common Sense Architecture October 4 Building Energy Efficiency & Indoor Environmental Quality for details and to register: October 11-12 Micro Hydro System Design and Installation energy.appstate.edu See website for continuing education credits Janet Miller (AIA, NCBEEC, BPI, PE, REALTORS, Appraisers) [email protected] 828.262.8913