A Financial and Policy Analysis of Small Photovoltaic Ownership for Investor-Owned Utility Customers in North Carolina

Abstract

As a source of clean distributed generation, small solar photovoltaic (PV) systems for residential investor-owned utility (IOU) customers can yield significant benefits to their owners along with a cleaner energy mix, strengthened economy, and improved environment for all citizens of North Carolina. However, the major barriers to small PV investments on a larger scale remain the high upfront costs and poor return on investment. Yet, North Carolina has significant drivers, including declining costs and strong policy, that may make such investments more attractive in the future. This Master’s Project is split into two parts. Part I investigates the current policies and incentives that impact small PV investment decisions for IOU customers in North Carolina. Part II builds off the research gained from Part I in order to quantify the financial attractiveness of such investments for an average Duke and Progress Energy customer. Part II additionally performs scenario and sensitivity analyses to assess if and when certain factors can significantly alter investment decisions. The results of this project indicate that despite effective policies and incentives in North Carolina, small PV ownership is still a financially unattractive investment—the reference cases yield a net present value (NPV) of less than -$6,000 and -$8,000 for the Progress and Duke customer, respectively. Yet, the impact that such policies and incentives—namely the state and federal investment tax credits—have on these respective NPVs should not be overlooked as they effectively increase the NPVs more than twofold. At the same time, there are many opportunities to further improve the financial attractiveness of such investments, including improvements in net metering policies, the state’s Renewable Energy & Energy Efficiency Portfolio Standard requirements, and demand for Solar Renewable Energy Credits. In such manner, this report does not offer specific policy or financial recommendations. Rather, it is an in-depth analysis of existing policies and economic factors intended to provide both qualitative and quantitative insight for the benefit of small PV investors, the PV industry, and decision makers in North Carolina.