2024 Draft Update of Solar and Wind Valuation Model Released for Public Comment
Introduction
Walden notes that the U.S Energy Information Administration (EIA) released projections for power generation in its recent Short Term Energy Outlook report, showing that solar and wind energy will lead growth in U.S. power generation for the next two years.
The EIA expects U.S. solar power generation to increase 75% from 163 billion kilowatt-hours (kWh) in 2023 to almost 300 billion kWh in 2025. Wind power generation is expected to increase 11% from 430 billion kWh to 476 billion kWh during the same period.
As renewable energy systems reach the utility marketplace, an increasingly interesting question continues: How much are these utility systems worth?
Walden can help you answer that question.
Relatedly, the New York State Department of Taxation and Finance (DOTF) released an appraisal methodology for solar and wind energy systems in 2021. The model is intended to create a standard method of assessing solar and wind projects to give developers, investors, and taxation officials a clear idea of the assessment protocols. Walden released a blog on this same topic here.
In December of 2023, the DOTF released the draft 2024 solar and wind valuation model (draft 2024 model) for public review and comment. The deadline to provide comments is February 27, 2024. The draft 2024 model was developed by the DOTF by updating the previous solar and wind valuation model with consultation from the New York State Energy Research and Development Authority (NYSERDA) and NYS Assessors Association.
Summary of Changes to the Draft 2024 Model
The major changes seen in the new model include:
- Net energy metering projects have been incorporated.
- Market transition credits/community credits and community adders now default to the highest credit amounts unless overridden by the user.
- Revenue forecasts, expense forecasts, and discount rates have been updated.
Draft 2024 Model Discount Rates
The draft 2024 discount rates are available on the DOTF website here, and are also shown in the table below. Prior to publishing the final 2024 model and rates, the DOTF must allow at least 60 days for public comments, consider any timely comments, and make any changes deemed necessary.
| Solar (1 MW and larger) | |||
| Weighting | Cost | Weighted cost | |
| Debt (pre-tax) | 51.1% | 6.8% | 3.47% |
| Equity (pre-tax) | 48.9% | 8.8% | 5.87% |
| Nominal WACC (pre-tax) | 9.34% | ||
| Real WACC (pre-tax) | 6.68% | ||
| Land-based Wind (1 MW and larger) | |||
| Weighting | Cost | Weighted cost | |
| Debt (pre-tax) | 47.7% | 6.8% | 3.24% |
| Equity (pre-tax) | 52.3% | 10.0% | 7.14% |
| Nominal WACC (pre-tax) | 10.38% | ||
| Real WACC (pre-tax) | 7.69% | ||
How to Review and Comment on the Draft 2024 Model
The draft 2024 model can be found on the DOTF website (see link in the “Draft 2024 Model Discount Rates” section of this blog). Interested stakeholders are encouraged to comment by email, but comments can also be submitted by mail. Comments are due by February 27, 2024.
- Email: model.comments@tax.ny.gov
- NYS Department of Taxation and Finance – ORPTS
Valuation Services Bureau
ATTN: Michael St. Germain
W A Harriman Campus
Albany, NY 12227-0801
Visit Walden’s green energy page to learn more about the sustainability-related services that we offer. If you have questions regarding the draft 2024 solar and wind valuation model, or how to value solar or other renewable energy infrastructure, please contact us by calling 516-701-1681.
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Contact Walden at 516-701-1681 to discuss the draft solar and wind valuation model. Visit our green energy page to learn about sustainable options.