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Solar Advocates, Audubon Trumpet Bill to Let Nonprofits Reap Savings

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Adam Fogleman has worked for years to reap solar energy savings for taxpayers footing Pulaski County’s $1.2 million annual utility bill, but a rare feature in Arkansas law blocked his sun.

“In Arkansas, you have to be an owner of the energy facility to be on net metering,” said Fogleman, Pulaski County’s attorney, referring to the program that lets homes and businesses with solar arrays get credit against their bills for excess energy put onto the electrical grid.

Tuesday morning, at an Audubon Society news conference next door to the State Capitol, Fogleman joined a wide-ranging coalition of counties, environmentalists and renewable energy industry players in backing new legislation to change that.

The measure, Senate Bill 145, is sponsored by Sen. David Wallace, R-Leachville, and Rep. Aaron Pilkington, R- Clarksville, who filed the legislation last week.

Net-metering is one factor in return-on-investment calculations that make solar arrays affordable for homeowners and businesses; another is a 30 percent break on federal income tax that homes and businesses can reap through next year. (In 2021, the tax break begins to get smaller in increments.)

And non-taxed entities like counties, cities and nonprofit groups are prohibited by the state constitution from partnering with private firms in agreements that would let the private partner reap the tax break while the non-taxed entity got the energy savings.

The county would also like to generate its own solar power, but there’s yet another catch. “We initially explored a partnership arrangement with a private entity,” Fogleman said, “but the constitutional prohibition in Arkansas prevents a local government from lending its credit or entering into a partnership with a private entity.”

Pulaski County owns 14 buildings totaling more than 800,000 SF, including the largest county jail in Arkansas. Using about 15 million kilowatt-hours of electricity a year, the county government spends roughly $1.2 million on power annually. It has asked energy services contractors for ideas on structuring a county solar project, both technically and financially. But the ownership requirement remains a sticking point.

SB 145 would “recognize there’s a safe-harbor provision in the federal tax code that simply provides a path forward so that non-taxed entities like your church or county government can harbor with a for-profit entity,” Fogleman said. “The for-profit entity gets to realize the investment tax credit, and the nonprofit or governmental partner basically gets to save money on their energy bill.”

The coalition at Tuesday’s event represented Audubon Arkansas, Walmart Inc. of Bentonville, the Arkansas Association of Counties and the Arkansas Advanced Energy Association, a trade group.

Wallace, a co-owner of Wallace Rush Schmidt Inc., a Leachville staffing company, said the legislation would create jobs and spur economic development, two of his top legislative priorities. “It’s a great bill,” Wallace told the crowd, adding that Arkansas ranks 11th in the amount of available sun energy, but lags in solar jobs and growth.

“This will be a great economic development tool,” said Katie Laning Niebaum, director of the energy association. “There’s a real growing demand from municipalities, counties and nonprofits to take advantage of solar savings. The ability to control costs is significant.”

Gary Moody, interim director of Audubon Arkansas, said he expected the state’s utilities to lobby against the bill. “The utilities love solar, as long as they own it,” he told Arkansas Business. “They don’t want to give up market share.”

The law would allow third-party purchasing options in net metering, a popular solar financing tool that allows residents or businesses to access power from generation units owned by a solar company. The idea is to let more people adopt solar by removing upfront barriers like installation costs. Arkansas is one of only five states that prohibit third-party models, Moody said, and that has put those states significantly behind.

Beyond letting nonprofits, government buildings, schools and churches benefit from federal solar incentives via a third party, the legislation would increase a state limit on the size of net-metered solar installations.

Arkansas limits net metering to 25-kilowatt arrays for residential customers and 300 kilowatts for commercial customers. States like New Mexico and Massachusetts allow systems 400 times Arkansas’ limit, and Ohio and New Jersey have no size limits at all, solar proponents said. “Raising our system size limit to 1 megawatt is a reasonable step to encourage more and larger projects in Arkansas,” Moody said.

Pilkington, a proponent of free-market principles, issued a statement: “Expanding access to solar is common sense, and more competition in the market benefits consumers. This legislation accomplishes these goals and I’m proud to sponsor it.”

No Walmart executives were present at Tuesday’s conference, but Steve Chriss, the company’s director of energy and strategy analysis, said solar is playing an ever-larger role in Walmart’s energy mix. “Expanding access to reliable renewable energy is the right thing to do for our customers, our associates and the communities we serve in Arkansas,” he said in a prepared statement.

Moody said increasing access to solar power will help Arkansas’ people and birds. Environmental benefits from renewable power are one goal, but the society also hopes to put a solar installation at the Little Rock Audubon center. It found that without factoring in the benefits that will be allowed under SB 145, the installation would cost 35 percent more.

“We had hoped to realize the energy savings, of course, and to promote the environmental benefits, but we also hoped the solar project would serve as an educational tool that we could show to the thousands of schoolchildren who visit,” Moody said.

Entergy Arkansas representative Kerri Jackson Case said the invest-owned utility was following the bill but had not yet taken a stance. “Our interest is that non-net-metering customers do not end up subsidizing the costs of net-metering customers without enjoying the benefits of generating their own power,” she told Arkansas Business.

Arkansas Electric Cooperatives Corp. had no immediate response to questions about SB 145.

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