Florida: Don’t Tax the Sun

Guest Blog | February 10, 2014 | Energy Policy

This guest blog comes courtesy of John K. Porter, Managing Director of Clean Footprint – Solar Development and Financing

There has been a lot of talk coming out of Tallahassee about eliminating burdensome taxes on individuals and businesses to encourage economic development in the state. Yet, when it comes to solar energy, a Florida tax burden has yet to be meaningfully addressed by the governor and legislature. The tax significantly discourages private investment in Florida for customer-sited distributed solar power development – and that’s just unacceptable for the Sunshine State.

Public support for solar power is strong in the Sunshine State. The challenge encountered by small business and residential customers is the upfront cost and ongoing operations and maintenance for the system. Luckily, those barriers have been overcome by the third-party ownership model. Third-party ownership financing refers to a model where a company owns a solar PV system on another’s commercial or residential property, and the host property in turn pays for either the power the system produces, or leases the system at a monthly rate while taking advantage of the energy it produces.

The third-party ownership financing model – which is legal in Florida via third party “leases” – accounted for over 50% of all new residential solar installations in most major U.S. residential PV markets in 2012 and 2013. The ability of third-party financing to remove upfront costs for PV systems and create immediate savings on electricity bills has resulted in an expansion of solar markets to younger, less affluent and underserved populations. Just as with other large purchases like homes and cars, the option to lease a solar system is enabling more people to benefit from this clean renewable resource.

So, why is this model not prevalent in Florida?                

Under current law, leased solar energy systems are subject to the “tangible personal property” (TPP) tax. The tax subjects residential third-party owned solar systems in Florida to significant cost outlays – $300-$400 for a typical residential system – in the first year alone.

As a solar energy system developer, I can tell you that solar is approaching retail grid parity in Florida. So every penny added to the levelized cost (the cost to own and operate the system over its life) is a roadblock to customer-sited development. The TPP tax adds 2.5 cents per kWh up to 5.0 cents per kWh to the cost of energy from a leased solar PV system.

This is one reason that the Sunshine state has over Florida has over 9 million electric utility customers, but has a mere 5,296 customer-sited renewable generation systems – mainly solar. By contrast, New Jersey, with albeit higher retail rates, has over 25,000 customer-sited installed PV projects. That’s almost five times that of Florida – with half the population and a much weaker solar resource.

If state leaders are serious about expanding economic development and diversifying the State’s economic base, then they ought to be working right now to eliminate this burdensome tax on solar power. Customers want the freedom to utilize this God-given resource.

Governor and legislators, don’t tax the sun -free the sun!

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