Graphics courtesy of Botetourt Co.
By Matt de Simone
The Botetourt County Board of Supervisors held a public hearing during its November 26 meeting for the consideration of an ordinance establishing a revenue share for battery storage facilities in lieu of taxation. The board unanimously adopted the ordinance.
The county shared that “because revenue share is highly predictable, electing to use sharing instead of unpredictable taxation makes negotiation of the financial terms of a siting agreement simpler.”
County Attorney Mike Lockaby explained to the board that the General Assembly enacted a partial tax exemption for battery storage facilities. He noted the several tiers of taxation and the complexities with respect to these types of facilities.
The county provided the taxation tiers adopted by the board as follows:
Tier 1 – Facilities below five megawatts are subject to full taxation. For facilities owned by energy suppliers, the fair market value of the facility is determined by the State Corporation Commission (SCC). The Botetourt County Commissioner of Revenue then applies the county real estate tax rate in order to determine the tax bill.
For facilities owned by private persons, the fair market value of the facility is determined by the Commissioner using the general machinery and tools (M&T) assessment methodology and rate.
Tier 2 – Facilities between five and 150 megawatts are partially exempt from taxation. For the first five years of operation, they are 80% exempt. For the next five years, 70% exempt, and the 60% exempt from year 11 until the facility’s retirement.
For energy suppliers, the fair market value of the facility is determined by the SCC. The Commissioner then applies the partial exception. Privately owned facilities will be have their value determined by the Commissioner using the M&T, applies the exemption and rate.
The revenue share for “Tier 2” is $1,400 per megawatt, which increases by 10% every five years beginning July 1, 2026. It would increase to $1,540 then and to $1,694 in 2031, etc. The tax revenue may fluctuate significantly based on its assessed value each year, which tends to start high and decrease over time. The revenue share applies to both privately owned companies and/or the property is owned by public service corporations.
Tier 3 – Facilities above 150 megawatts are subject to full taxation, same as “Tier 1.” The only difference is that all facilities of this size are treated as the property of the “energy suppliers,” like local pumped storage facilities (Lake Moomaw).
In a 2021 special session, the Virginia General Assembly adopted a complex, tiered taxation and revenue system for energy storage facilities declaring that energy storage systems are included in the definition of certified pollution control equipment and facilities, making energy storage systems exempt from state and local taxation. The bill defines “energy storage system” as equipment, facilities, or devices that are capable of absorbing energy, storing it for a period of time, and redelivering that energy after it has been stored. The tax exemption applies only to certain projects with alternating current (AC) storage capacity of more than five megawatts and less than 150 megawatts.
The bill also allows localities to assess the “Tier 2” revenue share of up to $1,400 per megawatt on energy storage systems and provides that on July 1, 2026, and every five years thereafter, the maximum amount of the revenue share that a locality may impose on energy storage systems as well as certain solar energy projects shall be increased by 10 percent.
No increase may be made to any revenue share imposed by a locality on a solar energy project or energy storage systems for which an application has been filed with the locality and such application has been approved prior to January 1, 2021. The bill defines energy storage systems as electric suppliers whose property shall be assessed by the State Corporation Commission.
The Board of Supervisors approved a battery storage facility project in August 2023 with Gateway Grid Battery Farm, a 49.9-acre stand-alone battery energy storage system capable of storing 100MW located off of Lee Highway in Cloverdale. According to the county, no building permits have been issued for the future battery storage facility.
