SolarCity, Sunrun to sue Arizona over taxes on third-party solar


SolarCity and Sunrun have filed a lawsuit against the Department of Revenue in the U.S. state of Arizona, challenging the agency’s decision to apply property taxes to third-party-owned solar systems.

In April 2013 the Arizona Department of Revenue decided that third-party-owned solar PV is taxable under Arizona law, unlike customer-owned PV systems. According to GTM Research, this will result in US$152 per year in additional taxes for the average system, and will raise the levelized cost of electricity (LCOE) US$0.005 per kilowatt-hour (kWh) to US$0.121/kWh.

This is above the state’s average residential electricity rate; however most PV system owners in Arizona are on time-of-use plans that charge more for electricity during daytime hours. Because of this, GTM Research says that calculations of LCOE from third-party PV versus electricity rates must be done on a customer-by-customer basis.

The law firm hired by SolarCity and Sunrun is arguing that third-party PV systems should not be subject to property taxes as they produce electricity for on-site consumption. SolarCity also says that imposing the tax will limit Arizona’s PV market.

“As with any additional cost, it would reduce Arizonans’ ability to turn to an alternative to Arizona Public Service in order to save money on monthly electricity bills, and would reduce rooftop solar’s addressable market,” SolarCity Director of Public Affairs Will Craven told pv magazine.

Arizona was the nation’s fourth-largest market for residential, commercial and institutional PV in 2013, and as such any changes that happen in the state are significant for the nation’s PV market.

Arizona’s government has already approved utility charges on customers who participate in the state’s net metering program, and GTM Research estimates that property taxes and this charge together raise the LCOE of PV by US$0.01/kWh.