Friday, May 24, 2024

Hot air

by Edward Martin

Overnight, Chicago’s McCormick Place convention center has become a small city with throngs gathering at the flashy displays of 1,200 exhibitors from around the world — Siemens, General Electric and the like. Energy-industry executives mingle with politicians, including a bevy of Midwest governors. At the May 2009 trade show, two men at one of the floor displays ignore the chaos around them.

Henry Campen, a Raleigh lawyer in tortoise-shell glasses, buttonholes Craig Poff, who mans his company’s exhibit space. An expert on the power industry, Campen is representing his law firm, but he’s also an unofficial evangelist for his home state.

More than 900 miles to the southeast, the emptiness is so vast that some outsiders find it eerie. As Campen and Poff talk in the Windy City, thousands of acres of young corn rustle in the breezes of Perquimans and Pasquotank counties. The government weatherman who watches this area says the soft zephyrs are deceiving. Thirty meters above ground — about 100 feet — the air this time of year wafts along at 5½ meters per second, roughly 12 mph. “When you’re out here working, the wind blows all day long,” says Horace Pritchard, a fourth-generation farmer in Pasquotank. “Then it blows all night long too.”

Tapping that potential is why Campen, head of the energy section of Parker Poe Adams & Bernstein LLP, has come to the American Wind Energy Association conference. He urges Poff, who works for Bilbao, Spain-based Iberdrola S.A., the world’s largest producer of renewable energy, to visit the big-sky country northwest of Elizabeth City.

Six years later, dust trails chase caravans of trucks as they crisscross 60 miles of farm roads. The upgraded roads were set in motion by Campen’s meeting with Poff. A year from now, when the first phase is completed, the result will be 104 wind turbines that, at 492 feet each, will be taller than Raleigh’s landmark BB&T building.

The $400 million Amazon Wind Farm US East is the region’s largest economic-development project, surpassing 1998’s $300 million Nucor Corp. steel plant in nearby Hertford County. It’s the first commercial-scale wind farm in the Southeast. By purchasing the wind-driven electricity from Iberdrola — which then transports the energy to existing transmission lines — Amazon lessens the need for coal, oil and other fuels that emit more carbon dioxide. Perquimans and Pasquotank counties will bask in the spotlight of the nation’s clean-energy stage — and benefit from Iberdrola’s property-tax bill.

But its wind farm is notable for another reason: It is on the front lines of the battlefield of sustainable, or renewable, energy in North Carolina, with a booming industry hanging in the balance. Revenue from more than 1,200 companies in North Carolina that build solar farms, install panels and engage in other renewables work will approach $5 billion this year, says Ivan Urlaub, executive director of the Raleigh-based N.C. Sustainable Energy Association. A Research Triangle Institute study puts full-time equivalent employment at more than 40,000. The state recently topped a landmark one gigawatt in solar electricity production, thanks to favorable laws and what Urlaub calls a robust clean-energy industry. A gigabit is enough energy to power a city of 60,000 people. Now, after mounting legislative threats, the industry is uneasy. “A lot of firms are struggling with the political uncertainty,” he says.

Supporters and opponents wield economic studies like jousting lances. For every dollar in tax breaks, advocates say clean energy generates $1.54 in electricity savings and industrial development, and it has saved North Carolina customers $162 million in the last eight years, according to the RTI study. No, argues a researcher at Utah State University’s Institute of Political Economy, renewable electricity has cost Tar Heel residential ratepayers an extra $149 million, partly through a surcharge that averages about 80 cents a month per customer, according to Duke Energy Corp. spokesman Randy Wheeless.

Figures aside, the widening rifts are based as much on politics as economics, and paradoxes abound, even among environmentalists. One faction touts wind, sun, animal waste, geothermal and other sources as alternatives to coal, natural gas and nuclear power. Contrarian counterparts cite threats to wildlife, the impact of skyscraper-tall industrial wind towers on rural and seaside communities, and large rural acreages devoured by solar farms.

Meanwhile, conservatives argue that public policies favoring renewable energy are anathema to free markets. “I’m against picking winners and losers,” says North Carolina Sen. Bob Rucho, a Mecklenburg Republican. “With these tax credits and all the incentives for renewable energy, the loser is the taxpayer and ratepayer.” Other conservatives aren’t so sure.

On one side, lawmakers this summer refused to extend a 1999 tax credit of up to 35% for rooftop commercial and residential solar systems and more than 20 other sources of renewable energy such as hog waste. It will expire at the end of the year. They snubbed efforts by Republican state senators Jeff Tarte of Mecklenburg and Fletcher Hartsell of Cabarrus, along with Rep. Charles Jeter of Mecklenburg and others, to extend the credit to 2020.

In Fayetteville, Republican Rep. John Szoka has changed his mind on the issue after initially opposing the subsidies. A retired Army officer with a background in operations research and math, “I ran the numbers and stripped away the claims that it’s a government handout and corporate welfare, and went from a disbeliever to a proponent.” He proposed pro-renewables legislation that was shot down in an obscure House committee.

Similarly, Tarte cites a study that concluded the tax credit had sparked more than $3 billion in investments and thousands of jobs. Republican Gov. Pat McCrory has spoken favorably about renewable projects, despite opposition from party colleagues who particularly oppose breaks for solar energy. But in January, he appointed Don Van der Vaart, a renewable energy skeptic, to head the state’s main environmental regulatory agency. The governor, who declined requests for an interview, believes that because “the solar industry has matured, any incentives the state may offer in the future should focus on emerging sources of renewable energy,” according to an e-mailed statement from Department of Environmental Quality spokeswoman Stephanie Hawco.

Among the most contentious fights over clean energy have involved House Majority Leader Mike Hager’s efforts to repeal or freeze a 2007 law that requires Tar Heel utilities to gradually increase renewable energy to 12.5% of their total output by 2021. Called the Renewable Energy Portfolio Standard, it is the key reason making the state the third-largest U.S. producer of solar energy, Urlaub and other proponents say. Hager, a Rutherford Republican who worked for Duke Energy from 1987 to 2003,  did not reply to interview requests. Rucho in May ignited controversy when he overrode Senate Finance Committee members who opposed freezing the mandate at 6%. Opponents of the freeze outnumbered supporters in a voice vote, but Rucho refused a hand count, according to several committee members and observers. The Republican-led House later passed the freeze, but the measure died in the Senate. Asked if he favors changing the mandate, Gov. McCrory’s statement strode the fence, noting he “supports standards that establish a diverse supply of clean, reliable energy that is affordable for ratepayers.”

Rucho and others acknowledge some Republicans are switching sides. Jeter, Szoka and other Republicans deemed soft on sustainable energy have “been captured by the crony capitalists,” says Francis De Luca, president of the Raleigh-based Civitas Institute, which opposes tax breaks for businesses. “Almost all this money flows to Republicans and has coincided with their sudden interest in solar and renewables.” He cites San Francisco-based Energy Foundation, a renewables advocate that has given more than $900,000 to the N.C. Sustainable Energy Association since 2008.

Unbending and featureless, Turnpike, Sandy, 4-Mile Desert and other roads that link communities in this isolated corner of North Carolina seem to vanish straight into the haze of the distant horizon. Iberdrola’s project took more than half a decade of economic, political and legal twists and turns to get this far, and embodies the hurdles facing clean energy. Even its Chicago conception was unorthodox.

Parker Poe’s Campen didn’t wait for the N.C. Department of Commerce to call on Iberdrola. “I’m proud of my state, and we have a lot to offer,” he says. Campen and Parker Poe have long represented Charlotte-based Duke Energy and other utilities, and a previous client had toyed with a potential wind project. In 2007, when the then-Democratic majority legislature and administration passed the 12.5% clean-energy mandate, Campen says Parker Poe “saw an opportunity.”

He found one in Iberdrola and Craig Poff. “I’d been fishing and coming to North Carolina on vacations for years,” Poff says, and in the summer of 2009, at Campen’s behest, he began visiting Tar Heel sites. Windy mountaintops were out after N.C. Attorney Gen. Roy Cooper  issued an opinion that the state’s 1983 mountain ridgetop protection law doesn’t allow turbines. Anyway, Campen was sold on eastern North Carolina. “It’s very flat and protrudes into the Gulf Stream, so we have more energetic winds than most of the East Coast.” Soon, adds Poff, “The Desert site rose to the top.”

In late 2009, Iberdrola began leasing land and holding community meetings to sell the project. In general, there was little opposition, says Wayne Harris, director of the Elizabeth City-Pasquotank Economic Development Commission. For one reason, the region locals call The Desert is “a massive tract without a house on it.” With a combined population of about 55,000, Pasquotank and Perquimans are among the state’s poorest counties. Many here see Iberdrola as a godsend, though it will create only a dozen, $80,000-a-year permanent jobs. Construction will employ as many as 250.

On a fall morning, Pritchard, 66, one of the first farmers to sign leases with Iberdrola, steers along nearly deserted country roads near Greenville, headed to a bankrupt farmer’s equipment auction near Hookerton. “Corn’s $3.80 a bushel this morning,” he says as he drives. “Three or four years ago, it was $8, but your input costs are still the same.” Ed Winslow, a farmer in Belvidere, has leased land to Iberdrola for four towers, and, like Pritchard and about 60 others, he will receive $6,000 a year per tower while able to continue farming corn, wheat and soybeans right up to their bases. “We’re just trying to survive,” he says.

The fight over breaks for renewable-energy projects has a distinct rural-versus-urban flavor. The expiring tax credit disproportionately benefited rural counties. “About $1.9 billion out of $2.6 billion in total investment in the last seven years was in Tier 1 and Tier 2 counties in rural North Carolina,” Urlaub says, referring to the state’s designations of low-income areas. Large agricultural industries also want the credit in order to offset the costs of power systems fueled by swine and other animal waste.

Iberdrola was heartened, Poff says, by the 2007 renewable-energy mandate and the 35% tax credit set to expire at year-end. “Those sent a signal that North Carolina was a place we should be looking at,” Poff says. “We’ll pay about $1 million a year to landowners.”

Winslow was among early skeptics. “We got on the line and talked to a bunch of farmers out in the Midwest that had these towers,” he says. “One carried his telephone out there and held it up while the windmill was running. You couldn’t hardly hear it.” He became a convert.

In early 2011, Iberdrola began the process of seeking dozens of zoning approvals, clearances from federal aviation and military authorities for the tall towers, and federal and state environmental permits. Then clean energy hit the doldrums.

Rapid advances in wind technology such as Iberdrola’s huge, 2-megawatt, Spanish-made Gamesa turbines mean that winds of once marginal strength such as The Desert’s can now be harnessed. But fracking technology also improved, sending natural-gas production soaring in Texas, North Dakota and the Northeast and prices plummeting. Natural gas-fired power plants have proliferated as alternatives to higher-cost coal and nuclear facilities. With wind’s cost advantages shrinking, rumors circulated that Iberdrola’s plan was dead.

Not true, says Poff, Iberdrola’s regional business development manager: “There was never a point that this project wasn’t at the top of my daily work.” But it became mired in routine regulatory mazes that can stretch approval for renewable-energy projects into years. The biggest hurdle, though, was finding a customer for the wind energy.

State records and other sources show that then-Gov. Beverly Perdue urged Charlotte-based Duke, Richmond, Va.-based Dominion Resources Inc., and Raleigh-based Progress Energy Inc., since merged with Duke, and others to sign on. Each utility told Perdue Iberdrola’s electricity would be too expensive.

Duke concluded it wasn’t cost-effective, spokesman Wheeless says. The nation’s largest power company has built or bought wind projects elsewhere, such as Texas, and is a major solar-energy player at home, with four major North Carolina projects recently started. It’s betting the 12.5% mandate will survive politics. “The gloom and doom about solar dying in North Carolina is way overblown,” he says.

Though wending through regulatory channels and confidently signing leases, Iberdrola’s project remained precarious until events across the continent turned its way in late 2014. Seattle-based Inc., began feeling pressure from environmentalists to reduce conventional power consumption. Google, Facebook and Apple had collectively invested more than $5 billion in data centers in western North Carolina, powered all or in part by sustainable sources.

In July, shortly after McCrory helped break ground for the project, praising it as an example of his “all-of-the-above energy strategy,” Amazon emerged as the customer. Harris, the economic recruiter, rejoiced. “Iberdrola slapped that premier brand, Amazon, on the project,” he says. “We just view that as pure public-relations serendipity for us.”

Tar Heel renewable energy finally appeared to have wind in its sails, though Urlaub and Iberdrola executives say traditional regulated, monopoly utilities still hold enormous competitive advantages. Legal challenges and conservative legislators could turn back the renewable mandate and similar policies. “They could largely shut down our ability to continue growing the clean-energy cluster across the state,” Urlaub says.

Within a month or two, convoys of concrete trucks are scheduled to begin trekking from local plants to The Desert. Each base for the 104 towers is an engineering feat, containing more than 60 truckloads of concrete to anchor spindly, 50-story-high towers topped by massive 180,000-pound turbines looming above the black-dirt farm fields below. Legal and political clocks are ticking.

While the project has received no state tax breaks, the Spanish company, one of the world’s largest energy companies, qualifies for a 30% federal credit potentially worth $100 million. That credit will expire at the end of 2016, a year after North Carolina’s ends. The federal subsidy is needed to level the playing field for wind to compete with regulated monopolies, corporate spokesman Paul Copleman says. Iberdrola will also receive tax rebates from Perquimans and Pasquotank counties, though its $520,000 first-year tax bill will still qualify it as their largest taxpayer.

Civitas still hopes to block Iberdrola by supporting the case of Jillanne Badawi and Stephen Owens, a Perquimans couple who live less than a half mile from one of the towers. Their lawsuit contends the N.C. Department of Environmental Quality in March 2015 told Iberdrola it would have to submit to another lengthy permitting step. Less than a month later, the agency reversed itself and cleared the way for the project. Three months later, McCrory wielded a shovel at the Iberdrola groundbreaking and praised the project.

Even as work at The Desert progresses, the winds of the renewables war pick up. In October, Apex Clean Energy, a Charlottesville, Va.-based company, proposed a $300 million wind farm on 15,000 acres in Perquimans and Chowan counties, 10 miles from Amazon’s project. In the face of increasing public queasiness, some prior wind-energy supporters are wavering. Perquimans County commissioners in October slapped a four-month moratorium on new projects, including Apex’s.

Meanwhile, about a half-dozen companies are interested in building turbines off the Tar Heel coast, mostly under federal rules, though opposition is rising from tourism industries and coastal homeowners. Like some residents near the Amazon site, they contend the wind towers will be ugly and diminish the area’s appeal and property values. Offshore projects are probably years away because no one has applied for state permits and significant technology issues persist, spokeswoman Hawco says. “It’s hideously complicated and very expensive to build these big turbines out in the ocean,” Parker Poe’s Campen adds.

On a recent late-fall day, none of those elements plagued The Desert, though Poff worried about shifting politics. “We constantly evaluate the political environment, and though I’m sure the folks in the legislature had good intentions, at least to this developer, it’s a signal that North Carolina is not as attractive as it was.” Experts such as Campen and Urlaub talked about a transecting line of economics in which the cost of renewables is dropping while the cost of conventional power is rising, and speculated when the two will cross. As they have for generations, Winslow and other farmers tended their fields, scuffled through thickets hunting deer, wildfowl and other game, and listened to the change that was in the wind.

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