VOLUME 6 - 2013-2014 - ISSUE 2

Staring at the Sun: How Property Tax Incentives and Third Party Ownership Can Stimulate the Residential Solar Energy Market

Dillon Nichols

6 Ky. J. Equine, Agric. & Nat. Resources L. 401 (2014).

Scientists have documented that, as of May 2013, carbon dioxide levels surpassed the 400 parts-per-million level, which is ten percent greater than what some believe is environmentally sustainable over the long-term. Many of those emissions come from the continued reliance on electricity generated from coal-fired power plants, and from fossil fuels in general. Meanwhile, business interests and cynical government officials who dispute anthropogenic climate change, have systematically eroded the nearly unanimous conclusion by many in the scientific community of humankind’s role in climate change. As a result, the climate change debate has been distorted and politicized to such an extent that our policymakers have failed to work together in developing an energy policy that can effectively curb climate change. Fortunately, there are multiple avenues through which other shareholders can influence energy innovation even more effectively than the government, specifically within the solar power industry.

Rooftop solar photovoltaic (“PV”) panels hold great potential for distributed energy production across the country. One study estimated that rooftop PV alone could produce up to twenty-two percent of the energy supply in the United States. Another study concluded that solar energy could provide a third of the energy supply for the western United States by 2040. Unlocking that renewable energy potential is vital, given how much energy residential buildings currently consume. In 2011, for example, residential energy consumption accounted for roughly twenty-two percent of total energy consumed in the United States, even more energy than commercial buildings. Despite its vast potential, solar energy accounted for roughly 0.3% of total energy generation in the United States in 2013.

In broad strokes, this Note aims to demystify the solar power industry and to propose a new program that will increase residential solar energy production. Part II analyzes the current state of the solar industry. Part III discusses the disparate state and federal incentives and regulatory schemes that govern the solar industry and examine the growing importance of, and potential legal complications with, third party solar financing. Finally, Part IV proffers an innovative new solution that will dramatically expand onsite solar energy installation and production. That solution combines the emerging industry of third-party solar financing with a property-tax-moratorium-incentive program that seeks to correct abnormal consumer behavior as it relates to energy efficiency investments. The lower transaction costs and economies of scale derived from industrializing residential, onsite PV energy production through third-party ownership, plus the direct economic benefits that homeowners would theoretically receive, make this solar-energy-for-reduced-property-tax scheme a highly attractive method to spur residential PV installations.