New research, carried out by Sustainable Energy Advantage (SEA), on behalf of the New York Solar Energy Industries Association (NYSEIA) and Alliance for Clean Energy New York (ACE NY), has shown the potential benefits of standardizing renewable energy property tax approaches in New York State.
The full report, ‘Standardizing Renewable Energy Property Tax Approaches In NY State: Economic Benefits to Host Communities’, is available to download here. An executive summary of the report can be found here.
Economic Benefits for Host Communities
Analysis from the report shows that, with both distributed solar and large-scale renewables deployment accounted for, local jurisdictions throughout NYS could receive $116 million to $348 million more in the net present value of payment in lieu of taxes (PILOT) agreements over project lifetimes if renewable energy tax standardization were to be adopted. This projected increase in tax payment receipts would result from the additional deployment of renewables by 2030 if the barriers to negotiating PILOTs were mitigated.
Furthermore, under this proposed model of renewable energy tax standardization, increased renewable energy deployment could result in the creation of anywhere from 2,300 to 20,600 additional jobs by 2030. On top of this, total business sales could increase by $6.9 billion to $11.6 billion, with gross state product potentially increasing by $3.9 billion to $6.5 billion. This increased expenditure on goods and services, coming from developers, suppliers, and employees, would benefit a wide range of industries.
Impacts For Distributed Solar & Large-Scale Renewables
With regards to the distributed solar segment in particular, total cumulative deployment by 2030 would be 25% higher with tax standardization than it would under the status quo. For large-scale renewables, total statewide cumulative deployment would be 32% higher with tax standardization than under the status quo.
Why Would Property Tax Standardization Have a Larger Impact on the Large-Scale Renewables Segment?
There are a number of reasons why the adoption of a standardized renewable energy property tax approach in NYS would have a greater impact on the large-scale renewables segment than on the more specific distributed solar segment.
Research revealed that large-scale renewables developers were more likely to suggest that challenging PILOT negotiations could lead to the cancellation of a project. Distributed solar developers, on the other hand, indicated that negotiation challenges could slow down projects, or draw resources away from other projects, but it was not likely that these challenges would ultimately lead to the cancellation of a project.
The report shows that large-scale renewables developers anticipated longer lags from PILOT negotiations than distributed solar developers. Thus, large-scale renewables developers could expect greater acceleration in project timelines if tax standardization approaches were to be adopted.
In New York, large-scale renewable energy projects compete on price for REC contracts. As a result, they can be highly sensitive to project cost increases. Resolution of a property tax or PILOT obligation at a value higher than estimated, or an inability to reach a resolution on PILOT value, could make a project unfinanceable.
Generally speaking, taxing jurisdictions face higher stakes on large projects because of increased visibility and greater impact to host communities. Elected officials and representatives in the locality may hold a different stance than project developers with regards to what is reasonable for a PILOT or Host Community Agreement deal. As a result of these higher stakes, it may be more challenging to negotiate a resolution between the parties.
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