Bright Year Ahead for Solar in the Sunshine State

Those who are interested in participating in the roll-out of solar power in Florida have reason to be optimistic heading into the New Year. Here are a few of the salient developments:

  • The legislature is poised to implement a commonsense property tax exemption for solar equipment;
  • National solar installers have recently been locating operations in the state; and
  • Florida utilities are taking steps to add substantial amounts of solar to their portfolios.

The United States is experiencing a record-breaking wave of solar installations, and Florida is poised to expand its participation in the new year.

Implementing the Solar Property Tax Exemption

Senator Brandes of St. Petersburg, Florida, championed a constitutional referendum that garnered landslide voter support. The referendum authorized the legislature to implement a commercial property tax exemption for renewable energy equipment. The exemption would prevent tax appraisers from adding the value of solar equipment to property tax assessments, whether real or personal. The real property tax exemption applies to landowners who also own the solar equipment, and the tangible personal property tax exemption applies to equipment owners who do not own the underlying real property, as is the case when a developer leases land and constructs a solar farm on the land.

Given 73% voter support of the measure, Florida voters do not anticipate that legislators will do anything less than carry out the express will of the people and fully implement the exemptions. Solar power pricing is so competitive, and profit margins are so tight, that if the solar equipment remains taxable, the tax would continue to prevent investors from building solar farms, and the resulting tax revenues would be zero because no solar farms would be built. Rather than a revenue-mechanism, the tax has operated primarily to discourage the adoption of solar power. Similarly for commercial rooftop installations, a tax hit reduces the cost savings that the solar equipment owner would otherwise realize, putting downward pressure on the adoption of rooftop solar and therefore any property tax revenues that would have come from those improvements. Therefore, the property tax revenue impact of implementing the exemption will be nominal, while all the added jobs, construction activity, and other economic benefits make implementing the exemption a wise move. (See Shumaker’s coverage of the referendum and property tax impacts here.)

Potential funny business that could arise during the exemption’s implementation in the legislature include applying the exemption only to certain types of commercial installations, such as rooftop installations, and not applying the exemption to solar farms built on large tracts of land. This would result if, for any reason, only the real property tax exemption, and not the tangible personal property tax exemption, is implemented. Also, existing solar farm owners could seek to apply the exemption retroactively. Funny business is unlikely, however, given not only the voters’ clear will to fully implement the referendum, but also because voters roundly roundly rejected Amendment 1, sending a clear signal that anything short of fully implementing the exemption would be met with fierce push-back from voters, who would question the motives behind a partial implementation.

Upcoming Utility-Scale Solar Projects

Florida’s investor-owned and municipally owned utilities have given indications that 2017 will see a substantial step in the direction of meaningfully adopting solar power. For example, in Florida Power & Light Company’s rate-case settlement, FPL committed to bring online three hundred megawatts of solar power per year for the next four years. If all three hundred megawatts are built in seventy-five-megawatt chunks (which is the largest that a solar farm can be without having to seek competitive bids for the solar farm’s construction), then together with FPL’s previous solar projects, that would mean that FPL alone could contribute close one and a half gigawatts to the state’s total installed solar capacity.

Also, several of Florida’s municipally owned utilities, through the Florida Municipal Power Agency (“FMPA”), are considering pooling resources to purchase solar power. FMPA has been conducting a survey of its utility-members’ customers in connection with a potential request for proposals to purchase solar power. Thus far, member-utilities have expressed interest in potentially purchasing power from such a facility with a nameplate capacity of sixteen megawatts. Other individual municipalities, such as Jacksonville Electric Authority, Orlando Utilities Commission, Lakeland Electric, and the Tallahassee Utilities Department, have recently entered into solar power purchase agreements.

A Bright Year Ahead

With the likelihood of the full implementation of the solar property tax exemption, which will benefit both commercial rooftop installations and utility-scale solar farms, together with utilities seeking mostly to build and own solar farms, but also to enter into power purchase agreements, 2017 is shaping up to be a strong year for solar in the Sunshine State.

Tim Hughes is an attorney in the Solar Industry Practice Group at Shumaker, Loop & Kendrick, LLP, where he monitors regulatory developments and market trends and provides experienced counsel and representation in the development, financing, and construction of solar power systems.