Fiscal Impact on the County: How does Solar Compare to other Land Uses?

 

This post references research and analysis from an original SolUnesco white paper, which can be downloaded in full, here.

 

Much has been said about the recent plummeting costs of solar technology, and the corresponding ability for utility-scale projects to legitimately compete with more conventional forms of generation. While this is certainly a reality, it is also conditional. Solar profit margins are generally still too slim to overcome less-than-ideal project conditions. The most elemental development ingredient is land; in order to make these projects pencil, we developers must target large, open, flat, and relatively inexpensive land. As such, these projects are often sited on land that has historically been used for agricultural purposes.

 

As developers in Virginia, we often find ourselves working with local governments who are wisely weighing the fiscal costs and benefits of changing land from agricultural land use to utility scale solar use. We explain that Solar provides tax and other income to the county while being a passive use that really doesn't require many (if any) county resources. While it seems obvious that this would be more fiscally beneficial land use than agricultural, there are a lot of factors loaded into that statement. It was unclear exactly how much better it would be. It was also unclear how solar would stack up against other uses, such as residential or commercial.

 

For decades, researchers have been completing Cost of Community Services (COCS) reports for rural communities. These reports take an in-depth look at county revenues and expenditures and lay out the true cost of the big three conventional land uses (agriculture, commercial, residential), in dollars-and-cents terms.

 

 

The American Farmland Trust, in partnership with the USDA, recently published a synthesis of all of these reports from across the United States, and came up with the average cost to the locality for each category of land use. It found that residential land use cost more than it benefited the county, across the board. On average, residential land use cost the county $1.16 for each $1.00 generated. This is significant because, from a zoning perspective, residential is generally very easy to get approved (if approval is even needed).

 

Agriculture and commercial, on the other hand, each made money for the county. On average, each dollar generated by commercial only cost the county thirty-seven cents. For agricultural, a dollar only cost thirty cents. An important distinction between the two is the magnitude: In looking at individual COCS reports, both costs and revenues from commercial are several times those of agricultural. In other words, the commercial cost-benefit ratio stems from a large cost divided by a large benefit and the agricultural ratio agricultural involves math between two small numbers. As is the nature of ratios, the results are both small numbers.

 

These studies are, unfortunately, silent when it comes to Solar as a land use. However, by digging into the appendixes of these COCS studies (as we did in our white paper) we can see where it would fit in. In a line by line comparison of county costs and revenues, we find that Solar mirrors commercial use when it comes to revenues. Fees and taxes associated with Solar are significant. They easily outpace agriculture, which contributes very little to county coffers. Conversely, while commercial has high county resource costs, Solar mirrors agriculture with virtually no impact on county resources.

 

In bringing it back to cost-benefit ratios, Solar’s math involves a small cost being divided by a large benefit, promising even lower numbers than commercial (large/large) or agricultural use (small/small).  

 

We always knew that we could promise counties “good county income with low resource use”. Now, we have put it into better context by comparing to the known cost-benefit ratios of alternate land uses. With high revenues and low costs, Solar takes the best parts of all land use scenarios and clearly outperforms residential, agricultural, and commercial land use, giving it the highest value of practical land uses to the county.

 

Download the full white paper, here.

 

Gillespie, Like Many VA GOP, Supports All Energy Forms

 

Under Governor Terry McAuliffe, Virginia has seen a rapid growth of its renewable energy market, particularly with solar energy development. With the upcoming gubernatorial election, it has been unclear how much support renewable growth will continue to receive from Richmond; While Democratic candidate Ralph Northam is committed to the status quo set up by McAuliffe, Republican Ed Gillespie has been silent on renewables – his campaign site only touts a desire to work with the White House in promoting the use of fossil fuel resources.

 

Earlier this week, Virginia expanded into a new frontier of renewables with the announcement of an offshore wind farm. While this technology has proven successful in Europe, it is largely untested in North America. Not surprisingly, Gov. McAuliffe was quick to voice his support. Raising eyebrows, so did Ed Gillespie. In a statement, the Republican candidate said the following:

 

“These new turbines are further proof that renewable energy is becoming increasingly reliable and affordable, and as governor I’ll work to expand the production of all safe, reliable and affordable sources of energy in Virginia.”

Solar Power Southeast: Does Passion + Wisdom = Resilience?

 

Despite scary challenges, strength and optimism

 

While the Suniva trade case – potentially a devastating price increase especially for utility-scale – loomed largely, attendees eagerly packed presentations.  The audience’s questions provided an interesting barometer to the psyche in the room.  Participants focused on where we are going and how to get there.  Further, the evolving business models continue to pry open market segments.  We are tenacious!

 

Even in markets dominated by utilities such as Florida Power & Light, some competitors have created interesting niches.  Not to be cowed, participants strategized on how to open up the Florida market.  Within my aperture, conference attendees did not appear to be hunkering down even in these monopoly-controlled markets.  As an industry, our entrepreneurial ethos and scrappiness continue as enduring strengths.

The Dominion IRP in Four Graphs

 

 

On May 1, Dominion filed its 2017 Integrated Resource Plan (IRP), in which Dominion announced a sharp pivot toward solar. Dominion’s commitment to building out more solar capacity, along with the decisions they make regarding how they participate in development and ownership, will determine market opportunities for those segments of the industry.

 

The Composite Index, Problem Solved!

 

 

We have good news!  On April 6th Virginia’s Tax Commissioner, Craig M. Burns, issued a letter clarifying the valuation of solar projects within the Composite Index. The bottom line: these solar farms will provide a net revenue benefit to the county.  As previously stated, bureaucratic bookkeeping could have inadvertently ground Virginia solar development to a halt by reducing county revenue when new solar farms are built. The following is the third of three installments highlighting SolUnesco’s research on the Virginia Composite Index and its impact on solar electric generation. To download our complete findings, click here.

 

The Composite Index and How it Relates to Solar Development in Virginia, Part Two:

Bureaucratic bookkeeping may inadvertently grind Virginia solar development to a halt.  The State government is assessing this issue, and we understand the state will issue a decision in due course.  The following is the second of three installments highlighting SolUnesco’s research on the Virginia Composite Index and its impact on solar electric generation.   To download our complete findings, click here

 

HOW IS SOLAR TAXED?

 

Covered in Part One of this series, the Composite Index (CI) may ignore the solar tax exemption when determining a county's ability to earn tax revenue. Ignoring the tax exemption likely results in a Net Revenue loss.  Due to solar generation’s non-polluting attributes, the state provides tax exemptions consistent with other pollution control equipment.

 

The Composite Index and How it Relates to Solar Development in Virginia, Part One:

Bureaucratic bookkeeping may inadvertently grind Virginia solar development to a halt.  The state government is assessing this issue and we understand a decision will be issued in due course.  This is the first of three installments highlighting SolUnesco’s research on the Virginia Composite Index and its impact on solar electric generation. To download our complete findings, click here.

 

Are Solar and Electric Utilities Really Cooperating?

Renewable energy can drive enormous job growth, and local investment, with some reports estimating that it will generate over 55,000 additional job-years worked right here in Virginia by 2030.  The key to tapping this potential is integrating new sources of energy into the existing electric grid. Since the grid is heavily regulated, this means finding policy solutions that give new sources of energy the space they need to grow.

That is why many in the solar industry strongly advocate for continuing on a path – utilized between the 2016 and 2017 legislative sessions – that delivered material successes in this past legislative session.  Starting last May the solar industry and the electric utilities – Appalachian Power, Dominion Energy, MD-DC-VA Solar Energy Industry Association, Powered By Facts, and Virginia’s Electric Cooperatives – engaged in an intensive and collaborative dialogue focused on the byzantine rules of these markets and the complex economics of the business models.  (Southern Environmental Law Center and Virginia League of Conservation Voters supported the development of the Bill creating community solar pilot programs discussed below.)

Dear Mr. President…How to Help the Renewable Energy Industry

It seems that every day we see another headline about the incredible growth of renewable energy and its numerous positive effects on the economy. While there is an ongoing discussion about the threat of climate change, there is a growing consensus that renewable energy sources, like wind and solar, are not only good for the planet but good for the economy as well. Increasingly, that consensus is spreading across the aisle, bringing opposite ends of the political spectrum together.

This trend can be seen in action with The Governor’s Wind & Solar Energy Coalition, which is comprised of 20 governors, 8 Republicans, and 12 Democrats. Virginia’s own, Governor Terry McAuliffe, is a member. They published a letter to the new administration on February 13, 2017, touting the benefits of wind and solar energy. The governors’ note their own experiences with renewables and how the Trump Administration can help on the national scale.

"Today’s wind and solar resources offer consumers nearly unlimited electric energy with no fuel costs, no national security impacts, and a number of environmental benefits. The boons of renewable energy can be virtually endless..."

There is no doubt that renewables have a positive impact on the economy. Wind and solar alone already provide more jobs than coal, oil and natural-gas extraction combined. According to figures gathered by the government, the solar industry now represents 43 percent of all jobs in the American electric power sector. Last week, the Solar Foundation released a report that showed 1 in 50 new jobs coming from the solar industry.