July 18, 2017

New Solar Laws Expected to Boost Florida Commercial Installations

Mike Mahmoudi, owner of the 32-room New Sun Gate Motel on South Federal Highway in Lake Worth, is pleased that he invested $115,000 in a 40.2 kilowatt rooftop solar system that generates power whenever the sun is shining.

“My electric bill was expensive. It’s saving me some money, and I helped create jobs. I feel good. My property value will go up, and I get a federal income tax break,” Mahmoudi said.

Since Fort Lauderdale-based Advance Solar & Spa installed the 120 commercial LG 72-cell solar panels, at 335 watts each in April, Mahmoudi estimates he is saving $800 to $1,000 a month in electricity costs. Plus, guests at the New Sun Gate have also made favorable comments about Mahmoudi’s decision to use solar power.

“A lot of people like it because it’s green,” Mahmoudi said.

But a successful constitutional amendment intended to make it easier — and more profitable — for people like Mahmoudi to benefit from renewable energy seems more cloudy than clear by rules being implemented in Tallahassee.

Solar energy has received a lot of attention in Florida in the past year. Last November, voters faced two proposed constitutional amendments. They rejected the utility-backed proposed Amendment 1 that would have likely restricted rooftop solar but approved passage of Amendment 4, designed to spur the growth of solar photovoltaic systems.

In June, Gov. Rick Scott signed Senate Bill 90, putting the changes proposed in Amendment 4 into law. The law is most associated with solar energy but it also covers other types of renewable energy devices, such as windmills.

Patrick Altier, president of the Florida Solar Energy Industries Association, and owner of SolarTrek Inc, Ocala, said while the new law appears to offer more consumer protection, it has created a lot of uncertainty and confusion in the industry. While commercial installations will reap a definite benefit, what seems like a benefit for residential solar is, in real life, a step back.

“Amendment 4 was a commercial property tax exemption. There will be no change that will make residential solar more accessible for Floridians. For that reason, I do not anticipate a large increase in residential sales strictly due to the new bill. With the language added by the House, it may actually have the opposite effect on residential installations and slow installations. Only time will tell. We do anticipate an uptick in commercial installations due to SB 90,” Altier said.

Susan Glickman, Florida director, Southern Alliance for Clean Energy, agrees. “Some of the big growth is likely to come in the form of commercial properties, such as beer distributors,” she said. “They are more likely to have the funding.”

Since 2014, homeowners who installed rooftop solar or other renewable energy devices on or after Jan. 1, 2013 have been protected from their property assessments being raised due to the systems.

Here’s what you might not know about the new law:

• It gives no new tax breaks to homeowners who own solar, but extends the exemptions through 2037. However, some say that because the new law requires 31 disclosures in writing to consumers, such as a calculation of energy savings, financing and roof warranties, it could impair residential solar growth.

• The new tax breaks apply only to rooftop solar on commercial buildings and utility-scale solar and only to those systems installed after Jan. 1, 2018. The law is not retroactive, meaning that existing commercial rooftop or utility-scale solar projects cannot receive any of the tax breaks. The exemptions expire on Dec. 31, 2037.

• New utility-scale solar projects will be among the biggest beneficiaries of the tax breaks. But if they are built in one of 30 Florida counties considered “fiscally-constrained,” the developers will have to pay the full taxes.

Tim Hughes, an attorney with Shumaker, Loop & Kendrick, LLP in Tampa, whose clients include utility-scale solar developers, said that for commercial solar and utility-scale solar farms, the new law exempts 80 percent of the taxable value of solar energy equipment, such as solar panels, from county ad valorem taxation until December 31, 2037.

Ownership of the solar equipment determines whether it is characterized as either real property or tangible personal property for tax purposes. If a landowner owns the solar equipment, 80 percent of the value of the solar installation will be excluded from real property taxes. If a tenant on the property owns the solar equipment, 80 percent of the value of the solar equipment will be exempted from tangible personal property tax instead, Hughes said.

“Our clients are definitely seeing value in the exemptions and finding that this helps improve the financial feasibility of projects,” Hughes said.

FPL spokeswoman Alys Daly said that FPL will save millions in taxes over the next 20 years due to the new exemptions, and customers will benefit from the cost savings.

The tax exemption, however, is not without a few exceptions, Hughes explained.

Projects under development in any of 30 Florida counties considered fiscally constrained and that file applications for comprehensive plan amendments or planned unit development zoning in those counties on or before Dec. 31, 2017, will not be eligible for the tax breaks.

While utility-scale solar is moving ahead rapidly, Altier said he has concerns that the new law’s requirement of lengthy disclosures to consumers could be a a turn-off.

“We want to have the highest level of ethics and the best solar installers in the country doing work for Florida residents. The house companion bill, HB1351 had 19 pages of required disclosures,” Altier said. “Although some of the most onerous language was removed, it will add significant confusion to the process of a residential solar installation possibly turning people away.

“It was adopted from Arizona and although we have not had any appreciable number of complaints against solar installers, and it was not part of the voter approved Amendment 4, we will have enough disclosures for a solar system to rival buying a new home. This will not increase the adoption of residential solar,” Altier said.

Maggie Clark, state affairs manager, Southeast, Solar Energy Industries Association, Washington, D.C., said Florida’s new law “includes strong protections and increased transparency for consumers, helping ensure they fully understand solar transactions.”

She said the law also has other benefits.

“The new law reduces tax penalties for businesses who go solar, which had previously made solar less economically attractive,” she said. “Commercial property owners who add new solar systems will pay 80 percent less in property tax penalties than they would have paid before the new law. This is true regardless of whether they purchase or lease their system,” Clark said.

While it has been stated that residential property owners will be exempt from tangible taxes on solar equipment, that has always been the case. Tangible taxes apply only to equipment owned by businesses, such as computers, machinery and solar equipment.

The reason the solar industry pushed for the residential exemption is that, previously, a solar company leasing panels to a homeowner or business would have had to pay the tangible tax. Now the change opens the door for companies to lease panels because they won’t have to pay the tangible tax.

Justin Hoysradt, CEO of Vinyasun in West Palm Beach, said his company plans “to offer leases in 2018 as soon as the implementation language surrounding consumer protection” is in place.

“While ownership of solar is gaining steam, there are many people in Florida, who will benefit from lease options,” he said. “These are primarily, middle-income families and folks on fixed incomes who do not pay enough or any federal income taxes, making it impossible for them to monetize the tax credit,” Hoysradt said.

Florida law prohibits power purchase agreements, but not leasing, and the two are commonly confused, Hoysradt said.

Both are forms of “third party financing” models. Florida is one of only four states that explicitly ban the third-party sale of retail electricity, via a PPA, Hoysradt said.

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