Does Solar Power in Virginia Still Need the M&T Tax Break?

by James A. Bacon

Solar energy is the cheapest source of electricity now available, solar advocates tell us, and that’s a big reason we should build more of it in Virginia. At the same time, says the solar lobby, the industry needs local-government tax breaks, in particular a state-mandated 80% exemption from local machine-and-tool taxes.

“If that tax incentive was not in place, you could not have the had the kind of development that was necessary,” David Murray, executive director of the Maryland-DC-Delaware-Virginia Energy Industry Association, tells the Register & Bee website at GoDanRiver.com.

So, which is it? Is solar the cheapest electricity source available, or the cheapest just when poor rural local governments are compelled by the state to grant massive tax breaks?

Pittsylvania County, the county adjacent to the City of Danville, has one solar farm in operation and has granted permitting for eight others. The county expects to benefit from two revenue streams: property taxes and machine & tool taxes. Under legislation in effect since 2016, small solar projects (less than 20 megawatts capacity) are entirely exempt from the M&T tax, while larger projects are 80% exempt. Moreover, under the State Corporation Commission depreciation schedule, utility-scale solar is taxed at 90% of value in the first five years but only 10% of value by year 25.

“We only getting 20% of that 10%,” said Scott Simpson, county administrator for neighboring Halifax County where six utility-scale solar projects have received local approval.

Solar projects also benefit from a Federal Solar Tax Credit which allow companies and individuals to deduct 26% of the installation cost from federal taxes. That number is scheduled to decline to 10% over the next few years.

Although it has encountered heavy local resistance in some localities, the solar industry hasn’t had much trouble finding sites to build vast new solar farms. Here’s the interesting issue to me: Is the M&T exemption really necessary to advance the solar industry in Virginia, or does the tax break represent a forced subsidy by rural areas (where the solar farms are located) to urban areas (where the green consumers are located)?

To be sure, the machine & tool tax is a baneful, anti-business tax, and I share the view of many others that local governments should phase it out entirely — assuming they can find an alternate revenue source. But the tax isn’t being phased out, it’s being applied in a discriminatory manner. It’s one of the few tools that rural localities have to pay for schools and other local government services, and it’s been taken away by wealth urban elites who want to signal their virtue by bequeathing a tax break (at no expense to themselves) upon a favored green industry.

To be sure, solar is the cheapest form of electricity out there on a raw cost-per-kilowatt-hour basis. The calculation is more complicated if you factor in the intermittent nature of solar production and the necessity of providing backup capacity when the sun isn’t shining. But the promoters of solar have made it crystal clear that cost is not the object. They’re willing to compel electricity consumers to pay whatever it takes to move Virginia toward a 100% clean energy grid. So, a few tenths of a penny per kilowatt more or less to pay the M&T tax is not a serious obstacle to the deployment of solar power in Virginia.

A higher M&T tax could impact the site selection process. A lower M&T tax in Mecklenburg County compared to Pittsylvania County, say, could be the decisive factor that induces a solar developer to locate in the the former and not the latter. But that’s the business of the counties themselves. Who is better positioned to make those kinds of trade-offs than the local boards of supervisors? Certainly not the General Assembly.

I don’t particularly fault the solar lobby for pushing for the statewide tax break. That’s what industry groups do — they lobby for special privileges. The solar lobby is no different from, say, Dominion Energy, which has lobbied successfully for plenty of its own special privileges. My problem is with the virtue signalers who are so free and loose with other peoples’ money. Let no expense be spared to promote clean energy — as long as someone else is paying!

Maybe the tax break was justified at one time to get Virginia’s solar industry off the ground. Well, the industry is off the ground. Indeed, it’s soaring like an eagle. At this point, perpetuating the tax break is Robin Hood in reverse: taking from the poor and giving to the rich.

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12 responses to “Does Solar Power in Virginia Still Need the M&T Tax Break?

  1. Pending legislation extends the exemption to 2030, but is still “in play.” Stand by. The localities are now starting to figure out that what’s next will be a bunch of storage installations, usually fairly close to the solar fields, and I bet tax breaks for those are also coming….

  2. I would assert that the following is a subsidy because the clean-up costs are not included in the price paid for electricity:

    and this:

    ?sfvrsn=0

    and take a look at this:

    ” BHADLA, India—In a dusty northwest India desert dotted with cows and the occasional camel, a solar-power plant is producing some of the world’s cheapest energy.

    Built in 2018 by India’s Acme Solar Holdings Ltd., it can generate 200 megawatts of electricity, enough to power all the homes in a middle-size U.S. town. Acme sells the electricity to distributors for 2.44 rupees (3.4 cents) a kilowatt-hour, a record low for solar power in India, a country that data trackers say has the world’s cheapest solar energy.

    More remarkable, the power costs less to generate in India than the cheapest competing fossil fuel—coal—even with subsidies removed and the cost of construction and financing figured in, according to the Indian government and industry trackers.”

    from WSJ

  3. The tax benefits for fossil fuels are extensive and deeply embedded. Those opposed to solar benefits act as if solar is getting an advantage over other fuels. That could not be farther from truth. If we made fossil fuels fairly return a portion of earnings to the communities (instead of taking tax breaks and moving money out of state, leaving communities to die) and avoid pollution and replace environmental damage and fully fund black lung and pension benefits – without the option of shedding obligations through bankruptcy, there might be a case against solar.

    • which makes one wonder why the “subsidies” for solar keep being pointed to while ignoring the subsidies for fossil fuels…

      why is that?

      it’s like we can’t have a cleaner fuel because it’s “subsidized” and others are not?

      😉

  4. I was reading an article about North Anna and it said this: “According to the report, the North Anna Power Station employs nearly 850 full-time employees

    North Anna provides 1,892 net megawatts of electricity, enough power for 473,000 homes, according to Dominion.”

    Now I don’t have any idea how many employees a natural gas plant might have but I’m betting it’s nowhere near several hundred. 850 employees is some significant O&M costs.

    Which makes me wonder do we really have good data on costs not only for fossil fuels but nukes?

    Do we actually know how much it costs to run each plant, coal, natural gas, nukes?

    Enough solar panels to generate 1800 mwatts would take quite a bit of land – perhaps 6000 or more acres but it would not need several hundred employees to operate and maintain it.

  5. If solar is truly the low-cost product, it should not be subject to tax preferences or tax rebates.

  6. Even if it is the low-cost product, the limitations put on it discourage individuals from investing in it. Until we get rid of all the caps and limits and such, it’s not, for many consumers, something to take a risk on, personally.

  7. Once again,,,, government picking winners and losers,,,
    Read this article on Germany going wind and solar..
    https://www.zerohedge.com/energy/germanys-overdose-renewable-energy
    Not to mention all the lies,,,, generating capacity is one thing, but more important is utilization rate,,,, fact,,, no one has inexpensive storage solutions ,, so you have to have hydrocarbon backups ready to come on line pretty quickly when the wind don’t blow and the sun don’t shine… which pretty much doubles the price of electricity….
    We really should keep government out of this and let the free market decide the best way to supply power…
    One way or another the consumer always pays,,, even the fines that companies incur,,,

  8. Naw. You’re thinking about this the wrong way.

    We ALREADY have those fossil fuel plants – we already use them right now.

    The point is that wind/solar can save money but using them when they are available. When they are available, you don’t have to burn as much fossil fuel.

    That ought to be LESS than if you burned fossil fuels 24/7.

    The more solar/wind we have the less we have to burn fossil fuels.

    But until storage is cost-effective, we will continue to have to have fossil fuel backup.

    Read this article in WSG:

    ” Solar power has entered a new global era. The industry was long dependent on subsidies and regulatory promotions. Now, technological innovation and falling solar-panel prices have made solar power inexpensive enough to compete on its own with other fuel sources in some regions, when it comes to newly built plants. That could turbocharge growth of renewables in the global energy industry, especially in fast-growing Asian markets where much of the world’s energy infrastructure expansion will take place.

    Governments in many solar markets—including China, the biggest—are phasing out or reducing supports. Solar-plant development is going mainstream, with finance provided by global investors like Goldman Sachs Group Inc., Singaporean sovereign-wealth fund GIC and huge Western pension and private-equity funds.

    So far, the renewable-energy push hasn’t halted the growth of global energy emissions. But the success of countries like India in feeding their rising power demands with clean energy will still be key to blunting the growth of global challenges like pollution and climate change.

    The price declines in solar panels and the power they produce are jolting the industry. In the past decade, solar has grown from less than 1% of the world’s electric-power capacity to an estimated 9% by the end of this year, according to the International Energy Agency, an intergovernmental organization focused on energy policy. By 2040, the IEA expects that to grow to 24%, which would make solar the largest single energy source.

    https://www.wsj.com/articles/solar-power-is-beginning-to-eclipse-fossil-fuels-11581964338?mod=searchresults&page=1&pos=2

  9. Here is an article about Florida working out how to charge taxes on solar projects vs. nat gas etc.

    https://www.tampabay.com/florida-politics/buzz/2020/02/19/florida-house-offers-tax-break-to-utilities-for-solar-energy/

    ….says the Utility likes solar because the ratepayers pay the price of installing it. What’s not to like? Sheesh.

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