Tag Archives: Solar energy

Workgroup Seeks Compromises to Move Solar Forward

The consensus-building workgroup that fostered 2017 legislation to promote community solar energy in Virginia reconvened Monday to grapple with more intractable issues that stand in the way of widespread adoption of solar power.

Participants in the Solar Policy Collaborative Workgroup had clashed repeatedly in the General Assembly over the years, but decided to pursue a different approach in 2016. Mediated by Mark Rubin, executive director of the Virginia Center for Consensus Building at Virginia Commonwealth University, they worked out a compromise proposal that will allow Virginians to purchase renewable electricity generated by local, independent solar developers and marketed by electric utilities.

The General Assembly enacted the law in the 2017 session, and participants hope to build on the success, tackling issues that they could not resolve last year. “A level of trust and respect has been established among members of the steering committee,” said Rubin when convening the Monday meeting.

This year the ad hoc organization is seeking input from a broader array of stakeholders and inviting the public to attend meetings. Sub-groups will discuss issues relating to land use, large developers, large customers, community development and net metering. Of the five topics net metering — in which utilities pay owners of solar facilities for surplus electricity they supply to the grid — stimulated by far the most interest, inspiring numerous comments from the audience.

“No ideas are off the table,” said Sam Brumberg, counsel for the Virginia, Maryland & Delaware Association of Electric Cooperatives, and a leader of the net metering sub-group. He cited time-of-use rates, charging for usage of the grid, feed-in tariffs (which enable long-term contracts for solar generators) and other options that might be considered to encourage distributed solar development. “No idea is off limits.”

Brumberg was joined by Scott Thomasson, southeast director of Vote Solar. His organization has engaged in some “fierce battles” in other states over solar policy, he said. By participating in the Virginia solar workshop, he added, he hopes to “get better outcomes through dialogue. We want to avoid the melt-downs in other states.”

Net metering. One thing most audience members agreed upon is that the existing net metering law, designed to protect electric utilities, is a hindrance to widespread adoption of solar energy by homeowners, small businesses, and other small users. Current law limits net metering to residential systems up to 10 kW and commercial systems up to 500 kW, with a program cap if generating capacity reaches 1% of an electric utility’s peak load for the previous year. The benefit to generators is that their surplus electricity can be used to offset electricity purchases from the utility during off-peak periods.

Dominion Energy has sought to limit the surplus that generators could use to offset their electricity sales, while both Dominion and Appalachian Power have insisted upon stand-by charges to compensate them for the cost of maintaining the electric grid that solar-generating residences would draw upon for backup. Builders, environmentalists and other advocates say the restrictions make solar less attractive to install and give small, distributed generators no credit for the load they take off the transmission and distribution grids.

The interests of the electric utilities and the others seem starkly opposed, and there is no obvious way to reconcile the two. But Katharine Bond, senior policy adviser for Dominion, sounded an optimistic note, suggesting that new technology and novel rate structures might make the utilities “more agnostic” about solar initiatives that cut into utility revenues.

Another complication is that net-metering advocates are a diverse group and do not agree amongst themselves on the best approach. Charles Guarino, a Richmond-area resident, made a plea for simplicity in the net metering law. “If people don’t understand it, they won’t participate,” he said.

But Tom Hadwin, with Waynesboro-based ACN Energy Solutions, advocated a value-of-solar tariff based on the premise that it made more sense from the perspective of balancing load on the electric grid to put solar in some locations than in others. Electric rates would be less favorable for solar located near where the grid was congested than for locations where grid congestion was not an issue.

“Simplicity is good, but there are trade-offs,” said Thomasson with Vote Solar., who suggested that a tariff that varied by time of day and load demand might suit some better.

“Not everyone can get what they want,” said Brumberg, but “if we’re successful, folks will get some of what they want.” Continue reading

Why Panda Power Loves Natural Gas

Bechtel, which helped build the Stonewall station, used a 500-tire trailer the length of a football field — to deliver manufactured components to the construction site.

Yesterday I wrote about the 778-megawatt gas-fired Panda Stonewall power station starting up near Leesburg. Against the backdrop of ongoing debate over gas versus solar here in Virginia, I wondered why the Dallas, Tex., investors behind the plant were willing to risk more than half a billion dollars in equity and debt on a merchant generating facility that would sell into the wholesale electricity market.

How did these newcomers to the Virginia energy scene see the future of electricity? Aren’t they worried that solar energy will displace gas in a few years as the price of solar continues to drop and the cost of natural gas is expected to rise? Aren’t they worried their big investment will be rendered valueless? Remember, Panda has zero political influence in Richmond, and the company can’t go running to the State Corporation Commission to bail it out if the bet on natural gas goes sour.

Bill Pentak, vice president of public affairs, says Panda Power Funds owns both gas and solar facilities. “We understand solar,” he says. “We built the largest solar project in the northeastern United States, covering 100 acres in southern New Jersey.”

Panda Power Funds will invest in projects that make economic sense, Pentak says, and right now the economics tend to favor natural gas. Take that New Jersey solar facility — it produces 20 megawatts of electricity. “That’s gross. But you’ve got to convert [the electricity] from DC power to AC. You lose 10 percent in the conversion. In the real world, it produces 18 megawatts.”

Then there’s the land use to consider, he says. Solar requires lots of acreage, and it takes up land that has alternative economic uses such as farming. The Stonewall plant takes up a fraction of the space and produces far more energy — 62 times as much on one fifth the land.

Then factor in solar’s intermittent production. Solar does not generate electricity at night, and it fluctuates during the day. The more solar installed, the more gas is needed as a backup. Says Pentak:

If you have ton of solar or wind on your grid, you make it less stable. If the wind dies down or the sun stops shining, the grid operator will have to call upon power that can be quickly dispatched. It won’t be coal fired, which takes three days to ramp up. It won’ t be nuclear, which takes three weeks. All that’s left is natural gas. A combined-cycle plant can cycle up in an hour and a half. A combustion turbine can in 30 to 40 minutes.

Thus, gas will be needed both as a base-load energy source and a back-up energy source. “We think Stonewall will operate as a base-load plant,” he says. But technology has blurred the distinction between peak load, intermediate load and base-load. Combined cycle plants — which generate electricity with gas-burning turbines and recycle the waste heat to run steam turbines — can operate as a base-load power source if need be, and also can dial output up and down as required.

Battery technology is not at the point where batteries can store enough energy to meet large-scale power needs, Pentak says. Moreover, batteries are not environmentally friendly. “Where do you put spent batteries? Solar technology is promising, but it’s not there yet.”

McAuliffe Moves to Cap Utility Carbon Emissions

Governor Terry McAuliffe. Photo credit: Associated Press

Big news yesterday: Governor Terry McAuliffe issued an executive order to cap greenhouse gas emissions from Virginia power plants. Unfortunately, I’m out of town on personal business today, so I don’t have time for anything more than a cursory analysis.

Said McAuliffe in a press release: ““The threat of climate change is real, and we have a shared responsibility to confront it. Once approved, this regulation will reduce carbon dioxide emissions from the Commonwealth’s power plants and give rise to the next generation of energy jobs. As the federal government abdicates its role on this important issue, it is critical for states to fill the void. Beginning today, Virginia will lead the way to cut carbon and lean in on the clean energy future.”

McAuliffe’s press release cited the job-creation benefits that would come from a shift from fossil fuels to solar energy. Last year, as solar production took off in Virginia, the solar industry employed 3,236 workers — twice the number supported by coal. McAuliffe said also invoked sea level rise to justify his move:

Virginia is already experiencing the effects of climate change in its coastal regions due to rising sea levels. The threat from frequent storm surges and flooding could cost the Commonwealth close to $100 billion dollars for residential property alone. The impacts extend far beyond our coast, as half of Virginia’s counties face increased risk of water shortages by 2050 resulting from climate-related weather shifts.

The action now moves to the Department of Environmental Quality, which the governor ordered to write the regulations.

Bacon’s bottom line: McAuliffe’s move will generate headlines and plenty of political heat — Republicans have already announced their opposition to what they call the governor’s executive overreach — but it’s far from clear what practical impact the move will have. Acknowledging that the cost of solar energy has plummeted, Dominion Energy and Appalachian Power already have forecast that they will move heavily toward renewable energy sources over the next 25 years.

The press release spoke of a “cap” on greenhouse gases and new regulations that will “reduce” carbon emissions — not merely reduce carbon intensity (carbon dioxide emitted per kilowatt of energy produced). It is possible to reduce the carbon intensity of the electric generating fleet while allowing total carbon emissions to increase, albeit it at a much slower rate, as the economy grows. If Virginia caps carbon emissions, Dominion and Apco might be required to close additional coal-fired power stations, and it is unlikely that Dominion would build a planned gas-fired power plant in the early 2020s. Cancellation of that facility could undermine the economics of the proposed Atlantic Coast Pipeline, construction of which McAuliffe has said he supports.

Expect trench warfare between utilities, environmentalists and consumer advocates in the DEQ hearings discussing how to implement the carbon caps. Also expect General Assembly Republicans to challenge McAuliffe’s legal authority to implement a cap.

Update: Apco spokesman John Shepelwich submits the following correction: “Appalachian Power no longer operates any coal-fueled power generation in Virginia and has not since 2015. Two of the three units of our Clinch River Plant in Russell County were converted from coal to natural gas; that plant is scheduled to be retired in 2026.”

Bristol Home Builder Proposes Solar Subdivision

Developer Aaron Lilly is seeking Bristol planning commission approval to construct 30 upscale townhouses using solar power to offset electric bills. He envisions the project as the first solar-powered subdivision east of the Mississippi, reports the Bristol Herald-Courier.

The project would be built on 12.5 hillside acres near an Interstate 81 exit. The townhomes would have 1,600 square feet of living space plus a 400-square-foot garage. Units can be configured with “smart home” technology for monitoring and control that, among other benefits, can provide medical information to a caregiver. Lilly sees the houses as “age in place” residences. He intends to price the properties in the $200,000 to $250,000 range. Said Lilly:

After seeing solar was at least possible, we’ve been working on this for over a year. It is more affordable than ever before and the price of electricity goes up every year. … There would be two meters on the house – one telling how much power we consume from [Bristol Virginia Utilities] and the other how much power is produced and the person would pay the difference.

If power keeps going up and solar keeps coming down, we’re there. If we’re not there yet, we’re close enough. This is our goal and we’re working feverishly to make sure it happens. … The first ones are an experiment. We don’t know how much power we can make.

Planning commissioners were supportive of the proposal and granted preliminary approval.

Bacon’s bottom line: It’s hard to imagine that this is the first time a developer east of the Mississippi has proposed building new townhouses with solar panels on the roof. But I haven’t heard of anyone doing it in Virginia, so, who knows. If Lilly says it’s true, maybe it is. If so, good for him.

Economically, it may make more sense for home builders to install solar during the construction phase — Lilly will build nine connected units in Phase 1 — than for individual homeowners to outsource the project to solar installers one project at a time. Also, Lilly can pocket the solar credits, which might be worth more to him than to individual homeowners. Another selling point is that homeowners can amortize the construction cost over the life of a 30-year mortgage.

Home builders are always looking for a competitive edge. I’m surprised that we haven’t seen more of this kind of activity.

McAuliffe Signs 11 Renewable Energy Bills into Law

Governor Terry McAuliffe has signed 11 solar and renewable energy bills into law.

Quasi-community solar. The most significant is SB 1393, which creates a mechanism for Dominion, Appalachian power Co. and Virginia’s electric cooperatives to sell solar-generated electricity to subscribers. While the law does not provide everything that solar enthusiasts would like, it does open up economic space for more local, small-scale solar development, and it provides consumers a green-energy option they didn’t have before.

Agricultural solar. HB 2303 and SB 1394 create a framework whereby farms can generate renewable energy and sell it to utilities.

Energy-efficiency. HB 1565 allows localities to establish “green development zones” providing special zoning and tax treatment for buildings and facilities that are deemed to be energy efficient or manufacture products beneficial to the environment.

Battery storage. SB 1258 expands the mission of the Virginia Solar Energy Development Authority to include promotion of battery storage technology.

The Fauquier Times enumerates all 11 bills here.

Please, Norge, Don’t Go NIMBY on Solar Project

Norge residents gather to learn more about a proposed solar farm in their neighborhood. Photo credit: Virginia Gazette.

Report from today’s Virginia Gazette: Members of the Norge community of James City County are “concerned” that a proposed solar farm will impact their neighborhood negatively.

The James City County planning commission approved in April an application to build a solar farm on a 225-acre property on Farmville Lane. The developer, California-based SunPower, said that the lane would have to be widened and trees removed in order for trucks to be able to turn properly.

Residents expressed concerns about traffic and noise said Amanda Beringer, who organized a neighborhood meeting to educate neighbors. “As we did more research and watched the planning commission meeting we realized a lot of people didn’t know about the proposal.”

Bacon’s bottom line: Well, if someone proposed a major construction project near where I lived, I’d want to know more about it, too. So the Norge neighbors can’t be criticized for wanting to learn more about the project. But if concern morphs into opposition, I’ll have “concerns” of my own, but entirely different ones. I’ll be concerned how NIMBYs inevitably arise to block any kind of energy-related project in Virginia, be it electric transmission lines, gas pipelines, wind turbines or even solar farms that hum quietly behind hedges while — outside the construction phase — creating little traffic or human activity of any kind. Some energy projects are intrusive and resistance is understandable. But opposition to solar projects is incomprehensible to me.

Look, people, solar energy is coming. Dominion and Appalachian Power have both announced commitments to massive increases in solar generation over the next 25 years. While some of that solar capacity will be small-scale, distributed rooftop solar panels, most of it will be utility-scale solar farms like the one SunPower wants to build. Leasing land to a  power company is great news for suburban and exurban landowners struggling to make ends meet in farming, and the tax benefits to localities are significant — even after taking into account the 80% discount on property tax assessments.

Local governments across Virginia need to get proactive and update their zoning codes and comprehensive plans to prepare for the upcoming solar bonanza. They need to work out potentially conflicting issues ahead of time. The quicker solar projects sail through the regulatory process, the more that will get built to the benefit of all.

Dominion Sings New Tune, Embraces Solar

Dominion’s White House Solar farm in Louisa County

Dominion expects to install up to 5,200 megawatts of solar generating capacity by 2042 — about thirteen times its current commitment and enough to power 1.3 million homes — according to forecasts contained in its 2017 Integrated Resource Plan (IRP). That represents a dramatic shift from forecasts in previous versions of the long-range planning document, which is filed annually with the State Corporation Commission.

Natural gas emits half the carbon dioxide per unit of electricity than oil and coal, and solar produces no carbon emissions at all. Increasing reliance upon those two energy sources will shrink a typical Dominion Virginia Power customer’s carbon footprint (carbon dioxide emitted per customer) by 25% over the next eight years, the company stated in a press release.

“The ‘installed cost’ of large-scale solar facilities … has dropped 50 percent over the past four years,” said Paul D. Koonce, CEO of the Dominion Generation Group. “Our customers want more renewable energy, and changing economics make the transition to renewable resources easier.”

Dominion has been slow, compared to many other utilities, to embrace solar power. In past years, the company stressed that solar produced electricity only when the sun was shining, which made necessary extensive backup capacity, and that solar peak production in the mid-day did not match up well with peak demand for electricity on late summer afternoons or early winter mornings. Until now, the company had committed to building only 400 megawatts by 2020.

Environmental groups have been highly critical of the utility’s approach to renewable energy for years, and Dominion’s latest announcement changes little. The Sierra Club Virginia Chapter today attacked the utility’s continued reliance upon “dirty” “fracked” natural gas and criticized the proposed Atlantic Coast Pipeline.

“Dominion’s actions don’t match its words when it comes to promoting renewable energy,” said Kate Addleson, director of the Virginia Sierra Club, said. “Despite the fanfare, this does not appear to be a sharp change from what we have seen in the past.”

“Rather than deliver a clear energy plan, this document only serves to raise more questions about what Dominion really wants to do over the long-term and who really stands to benefit,” said Will Cleveland, Southern Environmental Law Center (SELC) attorney. “While Dominion is taking a good step toward expanding solar, they are simultaneously taking two steps back by doubling down on dirty fossil fuels.”

In related news, Appalachian Power Company also filed its IRP, forecasting the addition of 500 megawatts of universal solar by 2031, 1,350 megawatts of wind energy by 2031, and 10 megawatts of battery storage resources by 2025. “Universal” solar is the term for generating capacity that feeds into the broader system, not reserved for the use of a single customer or set of customers.

Dominion executives attributed the company’s rhetorical about-face to continued improvement in the economics of solar energy and a conviction that, despite the Trump administration’s antipathy toward the Clean Power Plan, some form of CO2 regulation will remain in place.

“We believe this balance … of solar, natural gas, and nuclear hits the sweet spot in terms of cost, environmental performance, and reliability for our customers,” Koonce said.

Dominion graphic shows the declining carbon footprint as the company’s four gas-fired power plants came online, replacing coal units and displacing out-of-state energy purchases.

Modernizing the grid. Aside from boosting the efficiency of solar panels, new technology enables utilities to better handle fluctuations of frequency and voltage on the electric grid caused by variable solar output.

“For the first time, our long-range plan discusses the need to modernize the energy grid in order to accommodate the changes in how power will be produced as well as to meet the needs and desires of our customers,” said Bob Blue, CEO of Dominion Virginia Power.

The existing transmission and distribution grids were built to facilitate a one-way flow of electricity from a handful of large power plants to millions of distributed customers. “The energy company produces a large amount of electricity at a relatively small number of locations,” Blue explained. “It then sends that power across big wires, then medium-sized wires, then small wires.”

Solar output will be more distributed. “When solar is connected, the distribution grid must become a two-way network so we can deliver energy seamlessly to everyone, including people with solar panels on their rooftops,” Blue said.

Continue reading

Follow Ups: Fracking and Taxes

Fracking does not, repeat, does not harm underground water. But it can pollute surface water.

Frack me a river. A week ago, I noted how American Rivers had designated the Rappahannock River the fifth “most endangered” river in the United States on the grounds that the gas industry was showing interest in drilling in the Taylorsville shale basin beneath the river. Environmentalists claim that fracking is a hazard to drinking water, while industry groups say it is not. My take at the time: Who knows?

Now a Duke University study using sophisticated chemical tracing techniques has demonstrated that fracking has not contaminated groundwater in sample of 112 drinking wells in West Virginia, although accidental spills of fracking wastewater have polluted surface water. Fracking, or hydraulic fracturing, is a technique in which drillers inject pressurized sand, water and chemicals deep underground to fracture shale in order to release the oil and gas it contains. Environmentalists have long claimed that the procedure can contaminate water in underground aquifers.

“Based on consistent evidence from comprehensive testing, we found no indication of groundwater contamination over the three-year course of our study,” said Avner Vengosh, professor of geochemistry and water quality at Duke, co-author of a peer-reviewed study. States the press release:

Samples were tested for an extensive list of contaminants, including salts, trace metals and hydrocarbons such as methane, propane and ethane. Each sample was systematically analyzed using a broad suite of geochemical and isotopic forensic tracers that allowed the researchers to determine if contaminants and salts in the water stemmed from nearby shale gas operations, from other human sources, or were naturally occurring.

The tests showed that methane and saline groundwater were present in both the pre-drilling and post-drilling well water samples, but that they had a chemistry that was subtly but distinctly different from the isotopic fingerprints of methane and salts contained in fracking fluids and shale gas. This indicated that they occurred naturally in the region’s shallow aquifers and were not the result of the recent shale gas operations.

What’s true of West Virginia is not necessarily true of Virginia — geologies differ. And the Duke study warned that impact of fracking on groundwater might take longer than the three years of the study period to take place. Still, with its sophisticated science, the study undermines the endlessly repeated claim that fracking is a threat to underground water.

Solar farms: no longer a money-loser for local government.

Fixing a tax quirk. Three weeks ago, I blogged that a quirk in the way the state treats the value of solar energy projects for tax purposes could throttle Virginia’s solar industry in its infancy.

Under state law, solar farms qualify for an 80% tax exemption on projects exceeding 25 megawatts — an inducement for developers to build large solar facilities in Virginia. The exemption significantly reduces local government revenue from the project. At the same time, the Secretariat of Treasury has not taken the exemption into account when calculating the local tax base for purposes of distributing state aid for education. The perverse result is that local governments could lose tax dollars from a big solar investment, creating disincentives for them to provide needed permits.

Reston-based solar developer SolUnesco brought the discrepancy to the attention of state officials. After reviewing the matter, the Tax Commissioner issued a ruling to eliminate the discrepancy: “The actual assessed value will be reported by the Department to the Department of Education (DOE) as the true value of property to be used by DOE to calculate the amount of state educational funding.

“The So What,” says Francis Hodnall, CEO of SolUnesco, is that “projects over 25 mw … will provide a net revenue to counties.”

A Good Year for Retail Solar in Virginia

It's not everything environmentalists wanted, but a new law will create new retail solar options for consumers.

It’s not everything environmentalists wanted, but a new law will create new retail solar options for consumers. Photo credit: VA SUN

  • A collaborative process involving utilities, solar developers and environmentalists broke the legislative logjam thwarting the growth of retail solar in Virginia.
  • A new law will enable electric customers to subscribe to green electricity built by independent developers.
  • The same process will be used to tackle tough issues like net metering.

So, you want to help save the world from global warming but you’re stymied from installing solar panels atop your house. Maybe you rent the place. Maybe trees are shading the roof. Maybe you’re planning to move soon. Or maybe you just don’t have the money.

There are many reasons why even the most zealous green power advocates are stuck buying the same regular, garden-variety electricity as everyone else. But now, thanks to legislation passed in the 2017 General Assembly session, Virginia energy consumers soon will have a new option — subscribing to solar power rather than owning it outright.

SB 1393 requires Dominion Virginia Power and Appalachian Power to create solar programs in which the utilities bundle electricity from community solar projects — typically small solar farms or large rooftop arrays — and resell it to customers. Under the new plans, customers pay monthly knowing that their dollars are supporting development of solar facilities near where they live. If more customers subscribe, more solar farms will be built.

The scheme benefits small-scale solar developers as well. They don’t have to worry about signing up subscribers and the hassle that goes with billing and collections. It’s up to us to develop a program that’s attractive to subscribers,” says Katharine Bond, senior policy advisor for Dominion. The arrangement even works for rate payers who have no interest in going green. Says Bond: “The only people who bear the cost are those who elect to participate.”

The legislation represents a genuine step forward for retail solar in Virginia. “At the end of the day, I think it’s a really good policy that will benefit Virginians,” says Mike Town, executive director of the Virginia League of Conservation Voters. Equally important is the way in which utilities, solar developers and environmental groups sat down to work it out. “It’s precedent setting. It will lay the groundwork for progress down the road.”

While Virginia’s utilities are building large, utility-scale solar projects, state laws and regulations have made it all but impossible for independent developers to create smaller projects and sell electricity to individual businesses and households. Every year solar backers have submitted bills in the General Assembly to open up the market, and every year the legislation has been beaten back. Utilities have opposed measures that would cut into their monopoly in retail electricity sales.

In the 2016 General Assembly session, legislators submitted several retail solar bills that failed to pass. This time, lawmakers asked the utilities and solar industry to work on a compromise and come back with a proposal that would fare better in 2017. Dominion Virginia Power, Appalachian Power, and Virginia’s electric co-ops sat down with representatives of the solar energy to negotiate legislation that would let independent solar developers into the game.

Mark E. Rubin, director of the Virginia Center for Consensus Building at Virginia Commonwealth University, was hired to facilitate the dialogue. As the industry groups approached agreement, Rubin invited environmentalist groups to join the conversation. They injected important perspectives that would win the support of the environmental lobby.

“I think the general view was that this process turned out to be a helpful way to get together and work through issues,” Rubin says. “Just the idea that you had different stakeholders siting around the table having very candid, very productive discussions was a big deal in and of itself.”

The legislation doesn’t make everyone happy. In theory, existing Virginia law allows independent companies to sell renewable electricity to customers if neither Dominion nor Apco have tariffs to do so. Delaware-based Direct Energy filed a petition last year for declaratory judgment with the State Corporation Commission, asking the regulatory body to clarify the company’s rights under Virginia law to sell electricity to Dominion and Apco customers. The SCC ruled earlier this year that it could, but only as long as the utilities weren’t doing it. If utilities entered the market, Direct Energy could continue serving existing customers but couldn’t sign up new ones.

“It can take months or years of marketing for a third-party supplier to build up enough of a customer base to make the whole effort worthwhile, so the SCC’s ruling makes the Virginia residential market much less attractive,” writes Ivy Main, editor of the Virginia chapter of the Sierra Club’s “Power for the People” blog. Continue reading

Property Tax Assessments Could Sabotage Virginia’s Solar Industry

Outlook murky.

A quirk in the way the state treats the value of solar energy projects for tax purposes could throttle Virginia’s solar industry in its infancy, according to an analysis prepared by SolUnesco, a Reston-based developer of solar energy projects.

In theory, a major investment in solar energy should benefit the jurisdiction where the project is located by generating significant new property tax revenues. But under current practice, any gain in revenue for a locality would be more than offset by cuts in state support for public schools. If local governments calculate that solar projects will cost them revenue rather than boost their tax base, they will have a strong incentive to deny necessary permits rather than approve them.

“Bureaucratic bookkeeping might grind solar development to a halt,” states a SolUnesco white paper, “The Composite Index and How It Relates to Solar Development in Virginia.”

SolUnesco has proposed building an 11-megawatt solar facility in Albemarle County, but the county zoning code prohibits solar farms. The Board of Supervisors has asked the county planning commission to study the issue. A repeal of the restriction might encounter opposition from NIMBYs intent upon protecting the rural character of the county, as I blogged here. Albemarle’s decision could well hinge on its calculus of whether the project will benefit or hurt the county fiscally.

Under state law, solar energy projects are assessed for property tax purposes as “certified pollution control equipment.” That qualifies solar farms for an 80% reduction in property taxes. That exemption improves the economics of solar projects but it reduces the tax benefits to local governments.

By contrast, the state Department of Taxation counts the full market value of solar farms when calculating the Composite Index (CI), which is used to measure local governments’ relative fiscal health and ability to support public K-12 education. The state distributes state support for education on a sliding scale that gives a higher share to localities with a low CI (a smaller real estate tax base per capita) and a smaller share to wealthier jurisdictions. As SolUnesco summarizes: “Increased taxable property increases the Composite Index, which reduces the share paid by the state.”

So, how does that work out in practice? SolUnesco provides the hypothetical example of a solar project that creates taxable value of $100 million. Here’s how the numbers work out for a “representative county.” The county generates $80,000 in new tax revenue on $20 million of assessed value. But the county would lose $147,597 in state funding for schools based on the full $100 million added to the Composite Index. The net loss: $67,597.

If the Department of Taxation used the same value as the local government in calculating the Composite Index, our hypothetical county would experience a $52,083 revenue gain.

“Counties that have permitted utility-scale projects may regret their decision if they believe these projects will result in a net revenue loss,” states the white paper “Many projects have received their county [conditional use] permit, but many have yet to file for their building, electrical and other construction permits.”

“The state is aware of this inconsistency in their treatment of tax exemptions,” says SolUnesco. The Department of Taxation, Department of Education, and the State Corporation Commission “are all working together on a resolution.”