Virginia Makes Progress Toward More Favorable Solar Market

3 Mar 2014

Will the Old Dominion welcome the solar industry? Though progress has been slow, solar momentum is picking up in the Commonwealth.

Will the Old Dominion welcome the solar industry? Though progress has been slow, solar momentum is picking up in the Commonwealth.

It is no secret that Virginia lags far behind in its track record on solar energy, especially compared to neighboring states such as D.C., North Carolina, and Maryland. Thanks largely to the development of robust solar renewable energy credit (SREC) markets, Maryland ranks fourteenth in the country in installed solar capacity, and the latest Solar Jobs Census puts D.C. third in solar jobs per capita. Even North Carolina, which has caught headlines recently for its extremely conservative state legislature, is #3 in solar capacity with approximately 388 MW of solar capacity, thanks largely to a generous state tax credit that has fueled the development of a robust solar economy.

Unlike these other markets, an unfavorable regulatory and political climate is the clear missing link for Virginia. As of November 2013, Virginia had installed a mere 15 MW of solar capacity, ranking #34 in solar jobs per capita in the United States. Since there is no solar carve-out in the state renewable portfolio standard (RPS), Sol Systems must sell Virginia customers’ SRECs into Pennsylvania, an already over-saturated market. As for commercial solar, through our solar investment business, we have noted little investor interest in the state of Virginia due to its unfavorable regulatory environment for solar project development, which includes a “C” rating for its underwhelming net metering policies.

There may, however, still be an opportunity to expand the solar market in the Old Dominion. After a string of solar bills was introduced this legislative session, solar supporters are optimistic that Virginia is making strides to support the growth of the solar in the state.

One such piece of good news was an update to solar’s qualification as pertaining to the machinery and tools tax. Previously, solar has been discouraged in the Old Dominion through a machinery and tools tax which taxes solar companies for the solar equipment used in installation, making it costly and unprofitable to install solar in Virginia. At the end of February, however, the Virginia General Assembly passed legislation to exempt “business owned or operated solar energy equipment, facilities, or devices that collect, generate, transfer, or store thermal or electric energy” from this prohibitive tax for all projects under 20 MW. This amendment to exempt solar from the machinery and tools tax will now categorize solar equipment as “pollution prevention control” and will go into effect beginning January 2015.tian xiao cheng

While the industry made progress in removing a burdensome tax on solar equipment, the industry failed to make progress on implementing a state tax credit, a powerful market incentive which would expedite the growth of Virginia’s solar workforce. Tax credits have been popular for driving solar project development in strong solar states such as Hawaii and North Carolina. In January, Delegate Villanueva introduced HB 910 to create a state tax credit, but this unfortunately failed to move forward.

However, HB 910’s corresponding Senate Bill, SB 653, passed through the General Assembly as a $10 million renewable energy grant for fiscal year 2016. As written in the legislation, the grant would “equal 35 percent of the costs paid or incurred to place the renewable energy property into service, not to exceed $2.5 million for any individual piece of renewable energy property.”

This legislation marks tremendous progress for solar in coal-dominated Virginia. Despite the legislation’s landmark passage, funding in the budget for the grant still remains to be found, and solar supporters have until March 8 to locate funding in the budget before they begin to pursue other options to advance the solar grant in Virginia. To make matters even more complicated, Virginia budget negotiations have stalled as lawmakers attempt to hammer out a deal on Medicaid.

Though there is still much work to be done, Virginia solar advocates feel tremendous optimism that this momentum will continue. Stay tuned.

About Sol Systems

Sol Systems is a boutique financial services firm that offers investor clients direct access to the solar asset class and provides developers with sophisticated project financing solutions. Founded in 2008, Sol Systems focuses on meeting the most critical needs of the industry, including SREC monetization, capital placement, tax equity, and New Market Tax Credits. To date, the company has facilitated financing for thousands of projects and facilitated hundreds of millions in investment on behalf of Fortune 100 companies, private equity, family offices and individuals. For more information, please visit

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Sara Rafalson

Sara Rafalson