However, making the switch isn’t just about installing panels or turbines. Companies must be well-versed in solar and wind energy law in Texas, which includes regulatory compliance, permitting, contractual obligations, and incentive programs such as the Renewable Energy Systems Property Tax Exemption.
This article offers a comprehensive overview of the legal considerations for solar and wind energy in Texas, equipping businesses with the insight to make strategic, compliant, and profitable decisions in an evolving energy landscape.
Understanding Solar and Wind Energy Law in Texas
Senate Bill 7 (1999) – Introduction of the RPS and Deregulation Framework
Enacted on June 18, 1999, SB 7 formalized Texas’s Renewable Portfolio Standard (RPS), mandating utilities to deploy 2,000 MW of renewable energy by 2009 collaboratively, and authorized retail competition in the electricity market. It also enabled the creation of a Renewable Energy Certificate (REC) trading system under PUCT oversight, anchoring market-based incentives for renewable generation.
Senate Bill 20 (2005) – RPS Expansion and CREZ Development
In 2005, SB 20 expanded Texas’s RPS to 5,880 MW by 2015, with a non-wind carve-out of 500 MW, and set a 10,000 MW goal for 2025, which was exceeded significantly ahead of time. SB 20 also authorized Competitive Renewable Energy Zones (CREZ) to connect West Texas wind resources to demand centers, addressing transmission bottlenecks. These measures strengthened both solar laws in Texas and wind energy development infrastructure.
Senate Bill 819 – Proposed Permitting and Development Restrictions
SB 819 would require solar and wind projects of 10 MW or more to obtain permits from the Public Utility Commission, undergo environmental impact reviews, meet setback requirements, and provide public notice. It also proposes eliminating specific property tax incentives, potentially impacting project financing.
Renewable Energy Certificate (REC) Program
The REC system incentivizes renewable generation by awarding certificates for each megawatt-hour produced, supporting compliance under Texas wind energy law while boosting investment in clean power.
Solar and Wind Energy Incentives for Businesses
Federal Incentives: ITC, PTC & Accelerated Depreciation
Investment Tax Credit (ITC): Businesses can claim a 30% federal tax credit on solar system costs, courtesy of the Inflation Reduction Act, one of the most significant incentives under Texas solar laws.
Production Tax Credit (PTC): Eligible for electricity generated by renewable sources, including solar and wind. The credit amount varies by facility size and type and is calculated per kilowatt-hour generated.
MACRS (Modified Accelerated Cost Recovery System): Enables businesses to recover solar installation costs over five years through accelerated depreciation.
Texas State-Level Benefits: Tax Exemptions & Deductions
Property Tax Exemption: A 100% exemption on increased property value resulting from the installation of solar, wind, or biomass systems available to commercial entities.
Franchise Tax Incentives: Businesses solely engaged in manufacturing, selling, or installing solar/wind energy devices may qualify for a full franchise tax exemption (Section 171.056), or deduct system costs from taxable capital or income (Section 171.107).
Innovative Financing: PACE & Public Grants
Property Assessed Clean Energy (PACE): Authorization under state law allows commercial properties to leverage long-term, property-tax-assessed financing for solar and energy efficiency upgrades—the repayment obligation transfers with the property upon sale.
USDA REAP Grants & Loans: The Rural Energy for America Program offers grants and guaranteed loans (up to 50% cost coverage) to rural businesses and agricultural producers for renewable energy installations.
Utility & Local Incentives
Rebate Programs: Utilities such as Austin Energy and Oncor offer tangible rebates for commercial solar installations, ranging from performance-based credits to upfront cash incentives.
Net Metering (Utility-Level): No statewide net metering policy, but several utilities (e.g., Austin Energy, CPS Energy, Oncor-area retail providers) provide programs allowing businesses to receive credit for surplus energy fed back into the grid.
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Permitting and Compliance Requirements
Permitting & Regulatory Overview
Under proposed legislation like Senate Bill 819 (SB 819), renewable projects with a capacity of 10 MW or more would be required to obtain a permit from the Public Utilities Commission of Texas (PUC) before interconnecting to the grid. Applications must include environmental impact assessments, conducted by the Texas Parks and Wildlife Department, and the PUC must also review compliance history.
Public Notice & Siting Standards
SB 819 outlines public engagement and setback requirements, 100 feet from property lines and 200 feet from habitable structures for solar; wind farm legal compliance mandates 3,000-foot setbacks unless waived.
Environmental Monitoring & Fees
Once operational, facilities must continuously monitor and report environmental impacts, including wildlife interactions. An environmental-impact fee will fund a “Renewable Energy Generation Facility Cleanup Fund” for project decommissioning and site restoration.
Decommissioning & Financial Assurance
Beyond permitting, Texas law mandates robust decommissioning obligations under the Utilities Code, requiring developers to dismantle infrastructure (including foundations, cables, roads, etc.) and restore the land, including below-grade removal and soil replacement. Financial assurance must cover removal and restoration costs, net of salvage value, and must be maintained throughout the project’s operational life.
Corporate Power Purchase Agreements (PPAs)
- Corporate Power Purchase Agreements (PPAs) are long-term contracts between a business and a renewable energy provider, allowing companies to secure stable, often lower-cost electricity rates.
- Physical PPAs involve direct delivery of energy to the buyer through the grid. In contrast, virtual PPAs are financial agreements in which the business purchases renewable energy credits without taking physical delivery, thereby offsetting its carbon footprint.
- Some Texas utilities also offer green tariffs, allowing businesses to purchase renewable energy at competitive rates without the need for complex negotiations. PPAs can also serve as energy hedging tools, protecting companies against market price volatility.
- Contract terms typically range from 10 to 25 years, with pricing models based on fixed rates, market-indexed rates, or hybrids.
- Selecting the proper PPA structure requires careful legal review to ensure compliance with Texas wind energy law and other regulatory requirements.
Landowner Rights and Leasing Agreements
- Typical leases run 20 to 30 years, often with renewal options, and include fixed annual payments or revenue-sharing based on energy production.
- In addition to the lease, easements are frequently granted to allow developers to install transmission lines, access roads, and related infrastructure. These agreements must clearly define land-use boundaries, maintenance obligations, and restoration responsibilities after project completion.
- For landowners, negotiation is critical; favorable terms can include escalator clauses for inflation, compensation for lost agricultural use, and precise decommissioning requirements.
- Engaging an attorney familiar with Texas solar laws and wind energy compliance helps ensure the lease and easement contracts protect property rights, provide fair compensation, and prevent future disputes with developers or utility companies.
Conclusion
In Texas’s evolving renewable energy landscape, strategic legal guidance is crucial for securing favorable agreements and ensuring long-term compliance with solar and wind energy laws in Texas. At Mazurek, Belden & Burke, P.C., our attorneys combine deep industry knowledge with hands-on experience in solar and wind energy law. Whether structuring PPAs, managing permitting, or addressing compliance challenges, our Texas Solar and Wind law firm provides tailored, results-driven counsel to protect your interests and advance your clean energy goals with confidence.