Installing a solar energy system on a home in Florida may soon be less of a financial headache for residential property owners. That’s because the Florida legislature recently passed House bill 277. It exempts the value of renewable energy devices from the assessed value of new and existing residential property. The bill awaits the governor’s signature to become law. The exemption not only applies to solar energy systems, but also exempts wind energy and energy derived from geothermal systems. Once signed into law, any increase in the value of residential property, for property tax purposes, can’t be attributed to the value of a newly installed renewable energy device. It applies to assessments beginning January 1, 2014. That removes homeowners’ worries that the installation of solar thermal or solar photovoltaic (PV) system will inadvertently play a role in increasing their property taxes.
The legislation has been a long time coming. Article VII, Section 4 of the Florida constitution requires county property appraisers to assess all property at market value. An exemption for residential renewable energy devices was approved by 61 percent of Florida voters by ballot referendum in 2008. This bill simply implements that constitutional amendment. Similar legislation implementing the 2008 constitutional amendment passed the Florida House of Representatives in the three years following the amendment, but none of those bills passed the Florida Senate. The fourth time was a charm. It was the only renewable energy-related bill to pass this legislative session.
There is currently no similar exemption for renewable energy devices on commercial property. Placing a referendum on the 2014 ballot creating an exemption for commercial property should be on Florida lawmakers’ radar as they head into next year’s legislative session.
Unfortunately, the Sunshine State continues to lag embarrassingly behind other states in customer-sited solar energy systems. In Florida, for instance, there are over 9 million residential, commercial and industrial electric utility customers. Yet there are only 3,994 customer-sited renewable generation systems. That number primarily represents residential and commercial customers with solar PV systems that have entered into an interconnection and net metering agreement with a Florida utility. The total generating capacity of the Florida customer-sited systems is 29.3 megawatts (MW).
By contrast, there are currently 148, 989 customer-sited solar energy systems accounting for over 1,500 MW of installed capacity in California, as reported by the California Solar Initiative (CSI). Now, that may not be a fair comparison since California has nearly twice the population of Florida, and the renewable energy policy differences in the states are greater than the geographic distance that separates them. Let’s instead make the comparison to say, New Jersey, which has less than half the population of Florida and a much weaker solar resource than the Sunshine State. In this case, New Jersey has over 21,000 customer-sited installed PV projects; more than five times that of Florida.
So what gives? Why does Florida, the third largest state – by population – in the country and with some of the best solar resource potential east of the Mississippi River, come up short on the number and capacity of customer-sited PV systems?
In large part this is because Florida has no comprehensive renewable energy policy that promotes solar development.
There is, however, a simple policy measure that Florida lawmakers should also consider – that’s the third party ownership model. Third-party ownership financing is a rapidly growing solar market trend, where commercial companies own and operate customer-sited PV systems and lease PV equipment or sell PV electricity to the building occupant. Third-party financing can reduce or eliminate up-front adoption costs, reduce technology risk and complexity by monitoring system performance, and can repackage the solar value proposition by showing cost savings in the first month of ownership rather than payback times on the order of a decade. Third-party financing of PV has become the predominant business model in some of the largest residential markets in the U.S.; comprising greater than 50 percent of new residential PV capacity in California, Arizona and Colorado in 2012 alone, and gaining increasing market share in nearly all states with significant PV capacity, such as New Jersey. It’s estimated that this type of solar ownership structure contributed more than $938 million to the California economy in 2012. The state of Florida could benefit from those levels of private investment.
Yet, this model is severely discouraged by Florida law in its definition of a utility. Florida is one of 4 states that explicitly prohibit the retail sale of electricity by any entity, other than a utility. Although Florida technically allows third party “leases” of energy equipment, as opposed to the actual sales of third party generated energy, explicit language in Florida laws and rules against third party sales creates risks and contract complexities that have prevented most third party providers from entering the Florida market. Removing this regulatory burden on third party ownership is one tool in the policy toolbox that could significantly jump start investment into the state and dramatically breathe new life and jobs into the Florida residential and commercial property solar market.
However, the passage of House bill 277 is a promising first step to a sunnier future for Florida’s residential solar industry. But, significant barriers remain to meaningful solar development in Florida.
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