The Ohio legislature recently passed a bill that will significantly lower the cost of producing solar, wind and clean-coal energy, which should make it more palatable for local businesses to invest in the technology.

Senate Bill 232, which overwhelmingly passed the Senate and House of Representatives on June 4, exempts most alternative energy projects from tangible personal property tax and real property tax and instead charges a modest fee. The state tax burden on qualifying projects will be cut from more than $40,000 per megawatt to $6,000 to $9,000 per megawatt.

Governor Ted Strickland trumpeted the bill as a “commitment to growing the advanced energy industry in Ohio.”

Prior to passage of SB 232, Ohio essentially considered everyone who produced and distributed renewable energy to be an “electric company,” which meant they were subject to the same tangible personal property tax as the large, public utility companies. SB 232 removes the tangible personal property tax and the real property tax and replaces them with a “payment in lieu of taxes” of between $6,000 and $9,000 per megawatt.

The bill draws a line between alternative energy projects and utility companies by defining an “energy company” as any person or business that generates, transmits or distributes electricity in Ohio for others to use from a facility with an aggregate nameplate capacity of more than 250 kilowatts.

The tax exemption only applies to energy projects that began production on January 1, 2010 or later and meet certain other criteria:

  • It must employee a certain percentage of Ohio residents in the construction and installation process, and progress reports must be filed regularly during construction.
  • The local fire department must be trained in handling emergencies involving the energy project, and in some cases equipment must be provided. Projects of two megawatts or greater must also include an educational program to train people for employment in the wind- or solar-energy industry.
  • Projects of five megawatts or greater must be approved by the local county commissioners, and all roads, bridges and drainage pipes that are affected by the construction must be restored.

In order to qualify for the tax exemption, the owner of the energy project must apply to the Ohio Director of Development no later than Dec.31, 2011, for renewable energy projects and Dec.31, 2013 for clean coal, advanced nuclear or cogeneration projects.

The new law also expands a government loan program on solar panels to include all owners of real property (not simply home-owners) and a variety of alternative energy technologies (not simply solar panels). The loans will now cover solar photovoltaic and solar thermal energy projects, geothermal energy projects, and customer-generated energy projects such as wind, biomass or gasification facilities.