Final Solar PV Uniform Capacity Tax Study Released

Pursuant to Public Act No. 24-31, the Connecticut General Assembly required the Department of Energy and Environmental Protection (DEEP) in consultation with the Office of Policy and Management (OPM) to “conduct a study concerning the feasibility and potential cost-related impacts of establishing a uniform capacity tax for solar photovoltaic systems installed in the state.” That study was released in final form on January 6, 2025.

The study starts from the premise that the development of solar PV systems should be encouraged to help Connecticut meet its clean energy goals and increase in­-state energy generation. The current patchwork of property tax laws that apply to these systems are confusing, unpredictable and outdated thereby having the opposite effect. The study considers the benefits of replacing the patchwork with a uniform statewide property tax on the systems calculated based on their electricity-generating capacity.

While the study does not propose any specific legislative changes regarding the property tax treatment of solar PV systems, it does make the following noteworthy observations and recommendations:

• The significant majority of stakeholders (including both solar developers and municipalities) that submitted comments in connection with the development of the study supported a uniform capacity tax in the range of $4,000 to $12,000 per megawatt (MW).
• Any proposed legislation should specify the minimum system capacity that will make a project eligible for the uniform capacity tax. Smaller facilities and rooftop systems such as those participating in the Residential Renewable Energy Solutions (RRES) program should be exempted from taxation.
• Under certain circumstances, the amount of the capacity tax can be reduced to help incentivize development of solar PV facilities in preferential locations such as brownfields.
• A mechanism can be built into a uniform capacity tax to allow the tax to be ratcheted up (to compensate for inflation) or down (to compensate for equipment depreciation and obsolescence) over time.
• Any new law would need to address how existing solar PV facilities might transition to a uniform capacity tax and when in the construction process the tax would apply to facilities being developed.
• Any new law would also need to specify whether or not the capacity tax would apply to generated energy used on site (as opposed to that sent to the grid).

The final report has been sent to the General Assembly so that it can be considered during the 2025 legislative session which begins on January 8, 2025.