The tax and legal interplay in (renewable) energy projects

Particularly from an energy-tax perspective, many aspects together define the tax burden on the project. While the law on energy tax provides for exemptions and tariff structures intended to accommodate especially renewable energy sourcing, oftentimes these are rendered ineffective due to (legal) structuring of a project.

The energy tax burden on a project depends amongst others on:

• the types of agreements used (for instance, lease agreements versus PPAs);
• the number of legal entities involved in the project; and
• the physical and technical attributes as well as the locations of the various installations involved (such as a battery, solar panels, power plants, real property, grid connections and the like).

Energy tax exemption for self-generated renewable energy

Specifically for PV projects, we often see that parties (inadvertently) contract in a way that renders this exemption not applicable. This has to do with the fact that parties either entered into a PPA (power purchase agreement) or a lease agreement whereby the PV's aren't (sufficiently) operated for risk and account of the lessee. Such things are often easy to catch in the early stages of a project, but much harder to remedy later in the process.

Key takeaway

When working on (renewable) energy projects, tax and legal implications should be considered early in the process to make sure taxes and levies do not unnecessarily become due.