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In My Words: N.C.'s energy bets driven by ideology, not economic wisdom

Associate Professor Dave Gammon's column for several North Carolina newspapers looks at the way lawmakers support or ignore two forms of energy production in the most recent state budget.

The following column appeared recently in the Fayetteville (N.C.) Observer, the Winston-Salem Journal, the (Burlington, N.C.) Times-News and the Gaston Gazette via the Elon University Writers Syndicate. Views are those of the author and not Elon University.

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Associate Professor Dave Gammon

N.C.'s energy bets driven by ideology, not economic wisdom
By Dave Gammon - dgammon@elon.edu

The North Carolina General Assembly finalized a state budget this fall that promotes fracking and demotes solar.

A popular 35 percent tax credit for new solar installations will now expire at the end of 2015, and the state also approved $500,000 to drill vertical wells in the hopes of finding natural gas for fracking. Neither shift makes sense for North Carolina.

Fracking is not always bad, nor is solar always good. Like most investment decisions, the value of the investment depends on context.

Two decades ago the technologies for both fracking and solar were poorly developed. Today, fracking in the United States is an overall sound economic investment, as evidenced by significantly lower gas prices at the pump. Places like North Dakota are thriving economically because of fracking.

North Carolina, however, is no North Dakota. Search online for images of shale oil maps and you see large reserves concentrated in places like North Dakota, Oklahoma and Pennsylvania. If you are lucky and you squint, the map might show a couple of slivers of shale oil running through North Carolina’s Piedmont. Ideologically driven lawmakers somehow get inspired by these puny slivers.

Pragmatic energy executives likely find no inspiration. The prospects for fracking to provide an economic boost to North Carolina are slim to nil. Industry will almost certainly remain fixated on shale oil in other states, regardless of enticements from North Carolina lawmakers.

On the other hand, the U.S. solar industry has a sunny future with more than a hundredfold growth in new solar capacity over the last decade. North Carolina may be a poor location for fracking, but the solar industry is a different story. We are currently one of the top four states in the country and the leader in the Southeast for installed solar capacity, giving us a wonderful competitive advantage for an economic future that will be dominated by renewable energy.

Some critics, especially Republican critics, argue the government should stay out of the solar industry. As proof they point to the federal government’s failed 2009 investment of more than $500 million into California-based Solyndra, which went bankrupt two years after receiving its massive loan guarantee.

Solyndra was a bad investment because of the company’s faulty business model, not because of market demand. The liberal architects of the federal bet on Solyndra should have known this, but they let ideology guide their decision more than data and sound economic policy.

Betting on the solar industry as a whole continues to make economic sense, especially in North Carolina. Recent technological innovations, economic globalization and, yes, government tax credits and subsidies have all contributed to the extraordinary growth of the solar industry. Even in conservative strongholds like Arizona and Texas the solar industry is taking off, and Republican leaders like Nevada’s Gov. Brian Sandoval are playing a prominent role.

And in some western European nations with a longer history of government support, the price of solar-based electricity is now competitive with electricity from other sources, and governments are actually able to withdraw their subsidies now that the private market is firmly established.

North Carolina may have withdrawn its tax credits, but at the moment, that only means growth in solar will continue elsewhere. Other states will likely leapfrog ahead of the Old North State as solar companies lay off workers and move their businesses to more forward-thinking communities.

One bright spot in the General Assembly’s budget negotiations was the retention of North Carolina’s renewable energy portfolio standards, despite grumblings from some state legislators. These standards are currently set at 6 percent but rise to 10 percent in 2018, and 12.5 percent in 2021. They provide a powerful economic incentive for the solar industry to make investments in our state, although the withdrawal of solar tax credits muddles the overall outlook for this form of renewable energy.

Hopefully in the future our lawmakers will be guided more by facts than by ideology when making decisions about energy.

Dave Gammon is an associate professor of biology at Elon University.

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Elon University faculty with an interest in sharing their expertise with wider audiences are encouraged to contact Eric Townsend (etownsend4@elon.edu) in the Office of University Communications should they like assistance with prospective newspaper op/ed submissions.

 

Eric Townsend,
Staff
10/19/2015 2:20 PM