Katherine E. Ross Parker Poe Adams & Bernstein LLP September 26, 2014 Advance Real Property Seminar: Solar and Wind

 US and NC Facts  Policy Drivers  Local Considerations 2

Nationally 3  During the timeframe of 2008 to 2012, the United States doubled renewable electricity generation from a combination of wind, solar, and geothermal technologies.  Renewable electricity was 12.4% of total annual generation in the United States in 2012.

 Since 2000, cumulative renewable electricity installations in the United States have nearly doubled.  Wind and solar photovoltaics are the fastest growing renewable electricity sectors.  In 2012 in the United States, installed wind capacity increased by nearly 28% and installed solar photovoltaic capacity grew more than 83% from the previous year. Cite: NREL Renewable Energy Data Book available at: 4

5 Solar photovoltaics and wind dominate renewable capacity growth

 Duke Energy reveals partners for US$500 million North Carolina solar push Duke Energy reveals partners for US$500 million North Carolina solar push  First Solar to supply 105 MW of PV modules for North Carolina projects First Solar to supply 105 MW of PV modules for North Carolina projects  NC’s rise in solar power must accelerate NC’s rise in solar power must accelerate  Duke Energy goes big on solar in North Carolina, plans to drop $500M Duke Energy goes big on solar in North Carolina, plans to drop $500M  Solar energy generates interest in Orange County Solar energy generates interest in Orange County 6 NC Headlines September 2014

FUN FACTS ON SOLAR IN NC There are currently more than 140 solar companies in North Carolina, employing 3,100 people. 7

In 2013, North Carolina installed 335 MW of solar electric capacity, ranking it 3rd nationally. There are now over 15,900 MW of cumulative solar electric capacity operating in the U.S., enough to power more than 3.2 million average American homes. 8

The 627 MW of solar energy currently installed in North Carolina ranks the state 4th in the country in installed solar capacity. There is enough solar energy installed in the state to power 68,300 homes. 9

In 2013, $787 million was invested in North Carolina to install solar for home, business, and utility use. This represents a 156% increase over the previous year and is expected to grow again this year. Average installed residential and commercial photovoltaic system prices in North Carolina have fallen by 9% in the last year. National prices have also dropped steadily — by 8% from last year and 39% from

Rules of Thumb… Developers Vary  1 MW about 5 to 6 acres.  5 MW is most popular size… right now.  $10 to $15 million investment.  3 to 6 months construction for 5 MW.  60 to 100 jobs during construction for 5 MW.  Racking, modules and inverters. 11

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U.S. Wind Generation Increased 27% in Source: US Energy Information Association, March 12, 2012

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FUN FACTS ON WIND  Over 550 manufacturing facilities in the United States.  Blade, tower and nacelle assembly facilities, raw component suppliers (e.g. fiberglass and steel). Cite: AWEA North Carolina State Fact Sheet, available at 28

Wind Related Manufacturing 29

30 Facilities in NC

North Carolina’s onshore wind potential at 80 meters hub height is 808 MW. North Carolina’s offshore wind potential at 90 meters hub height is 297,456 MW. Onshore and offshore wind power are capable of meeting more than 7.5 times the state’s current electricity needs. 31

In the United States, installed wind electricity capacity increased more than 23 fold between 2000 and In the United States, wind experienced strong growth in 2012, and more than 13 GW of new capacity was added. Texas led the United States in wind installations in 2012, installing 1,826 MW of wind capacity. 32

Although global cumulative installed offshore wind capacity surpassed 5 GW in 2012, no commercial offshore wind turbines have been commissioned in the United States thus far. 33

NORTH CAROLINA LAND BASED One fully permitted project: 300 MW in Pasquotank and Perquimans counties. Multiple developers are active in the eastern part of the state. 34

Senate Bill 3: North Carolina’s Renewable Energy and Efficiency Portfolio Standard  On August 20, 2007, with the signing of Senate Bill 3, North Carolina became the first state in the Southeast to adopt a Renewable Energy and Energy Efficiency Portfolio Standard (REPS).REPS  Each investor-owned public utility that sells electric power to retail electric customers in North Carolina must meet the REPS according to the following schedule: Calendar Year REPS Requirement % of 2011 NC retail sales % of 2014 NC retail sales % of 2017 NC retail sales 2021 and thereafter 12.5% of 2020 NC retail sales N.C. Gen. Stat (b)(1). 35

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States with Operating Wind Projects 37

Senate Bill 3  Each electric membership corporation and municipality that sells electric power to retail electric customers in North Carolina must meet the REPS according to the following schedule: Calendar Year REPS Requirement % of 2011 NC retail sales % of 2014 NC retail sales 2018 and thereafter 10% of 2017 NC retail sales N.C. Gen. Stat. § (c)(1). 38

Senate Bill 3  The investor-owned public utilities may meet the REPS requirement through: (1) generating electric power at a new renewable energy facility; (2) using a renewable energy resource to generate electric power at a generating facility; (3) reducing energy consumption through the implementation of an energy efficiency measure; (4) purchasing electric power from a new renewable energy facility; (5) purchasing renewable energy certificates (RECs); (6) electricity demand reduction. N.C. Gen. Stat. § (b). 39

Avoided Costs  PURPA: Federal Law  North Carolina Implementation  Utilities Commission sets avoided cost rates every 2 years  Standard Offer for 5 MW and below  5, 10 and 15 year terms  Negotiated terms above 5 MW  Uncertainty on future terms 40

NC Renewable Energy Tax Credit  Tax credit equal to 35% of the cost of “renewable energy property.”  The credit is taken against NC income tax or franchise tax.  The credit is taken in 5 equal installments beginning in the year in which the property is placed in service. 41

 The maximum credit is $2.5M per installation placed in service for a business purpose.  An “installation” is “renewable energy property” that, standing alone or in combination with other machinery, equipment or real property is able to produce usable energy on its own.  The allowable credit cannot exceed 50% of the taxpayer’s tax liability for the year, reduced by the sum of all other credits. 42

 NC Tax Credit sunsets January 1,  Discussions in last Legislative session of extending, extending at lower levels and a safe harbor. 43 The Future of the NC Renewable Energy Tax Credit

Federal Tax Credits  Investment Tax Credit  Dollar-for-dollar offset against the taxpayer’s income tax liabilities  “Energy property” includes solar equipment (i.e., “equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat....”).  The “energy percentage” is currently 30% for solar equipment used to generate electricity, but the percentage will revert to 10% for periods ending after December 31,

Federal Tax Credits  “Renewable Electricity Production Credit”  An amount equal to the product of 1.5 cents, multiplied by the kilowatt hours of electricity (i) produced by the taxpayer and (ii) sold by the taxpayer to an unrelated person during the tax year, subject to various limitations and adjustments  The electricity must be produced by the taxpayer from “qualified energy resources”, which expressly include wind.  Timing: placed in service after December 31, 1993, but only if construction of the facility begins before January 1, There is a lot of guidance an discussion on when constriction begins. 45

Local Considerations  Zoning  Infrastructure  Economic Development Incentive Grants 46

Questions? 47 Contact: Katherine Ross (919)