2025 Draft Solar and Wind Valuation Model Under Real Property Tax Law § 575-b Released for Public Comment

On January 10, 2025, the New York State Department of Taxation and Finance (“DOTF”) released the draft 2025 solar and wind valuation model and updated discount rates (the “Draft 2025 Model”) for public review and comment. DOTF developed the Draft 2025 Model in consultation with the New York State Energy Research and Development Authority (“NYSERDA”) and the NYS Assessors Association to update the 2024 Model. Under Real Property Tax Law § 575-b, these discounted cash flow models are mandatory for local assessment of wind and solar energy systems over 1 megawatt AC. 

The State statute requires that the Model be updated as appropriate and discount rates be updated annually. While the DOTF could issue a multi-year model, to date each draft has been for one year at a time.

The proposed changes in the Draft 2025 Model relate to updates in discount rates, revenue forecasts, and expense forecasts. Additionally, wind capacity factors have been revised to reflect technology improvements. As with prior versions, the Draft 2025 Model continues to exclude stand-alone energy storage and the storage portion of wind/solar plus storage projects, leaving the valuation of such systems open to debate and challenge. 

The proposed discount rates are based on weighted average cost of capital (“WACC”), which the Draft 2025 Model separates into two distinct categories based on investment risk associated with: 1) solar projects and 2) land-based wind projects.  The Draft 2025 Model also acknowledges inflation’s impact by calculating the real and nominal discount rates, assuming 2.5% anticipated rate of inflation. This is consistent with the 2.5% inflation rate used for the 2024 Model.  The proposed discount rates for the WACC are separated by nominal WACC and real WACC. 

For solar projects, the nominal WACC is proposed at 9.25% and the real WACC is proposed at 6.59%. This is compared to the 2024 Model discount rates for solar, which were 9.34% for nominal WACC and 6.68% for real WACC.    

For land-based wind, the nominal WACC is proposed at 10.40% and the real WACC is proposed at 7.71%. This is compared to 2024 Model discount rates for land-based wind, which were 10.38% for nominal WACC and 7.69% for real WACC.

Distinguishing between nominal dollars and real dollars does not affect the output value in the Draft 2025 Model (like the 2024 Model). Nominal dollars include inflation while real dollars do not. 

The reductions in the discount rates for both solar and land-based wind projects in the Draft 2025 Model are minor compared to the 2024 Model.  Yet, in comparing identical project inputs in the 2024 Model to the Draft 2025 Model, the value output under the Draft 2025 Model is notably higher.  At first glimpse, the slight difference in discount rate would not generate such a significant change in value. This change appears to be attributable to the Model’s increase in revenues and reduction in expenses as compared to the 2024 Model. It is not clear what drove the change in the treatment of income and expenses as compared to previous models. As in prior models, the Draft 2025 Model assumes an inverter replacement in year 15 of the project’s life. However, the Draft 2025 Model has a lower cost of the inverter in year 15, which also impacts the overall discounted cash flow value. The Model continues to ignore the reality that most inverters do not have a 15-year life.  And the Model is still only for a 25-year period.

The Draft 2025 Model can be viewed at  https://www.tax.ny.gov/research/property/renewable-appraisal.htm. The updated instructions for the Draft 2025 Model are available at  https://www.tax.ny.gov/pdf/ORPTS/Solar-Wind-Appraisal-Model-User-Guide.pdf. DOTF has also made available information on the formulas used, https://www.tax.ny.gov/research/property/renewable-appraisal.htm, but be aware that these unlocked formulas will be available only during the 60-day public comment period.

DOTF is accepting public comments to the Draft 2025 Model until March 11, 2025, by email at renewables.model.comments@tax.ny.gov to the attention of Michael St. Germain. After the 60-day public comment period, DOTF will make any changes it deems necessary and publish the final model and discount rates to be used by local assessors to value affected solar and wind energy systems in the next tax assessment cycle.

Until the Draft 2025 Model becomes final, the existing 2024 Model should still be relied upon by local assessors. Developers should work with local assessors to confirm the accuracy of Model inputs.

For questions regarding the Draft 2025 Model or submitting public comments, please contact Daniel Spitzer (716.848.1420), Amy D’Ambrogio (585.613.3955), Henry Zomerfeld (716.848.1370), Michael Risman (716.848.1291), or a member of our Real Property Tax Assessment & Eminent Domain Practice.

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