Increase of commercial property rates in Ireland

The taxing regime was a crucial barrier due to the fact that commercial property tax rates have increased and in some cases tripled since 2016. The Valuation Office, which is in charge of commercial property tax rates, initiated a revaluation process that leads to an increase in the tax rates. Therefore, new wind projects should be revalued and this literally nullifies the decrease in capital costs and the argument that energy costs should be decreased. Characteristically, commercial property tax rates have increased by up to 200-300% thus creating an additional cost for the development of wind projects. It should be noted that the definition of those rates depends on local jurisdiction and in some cases such as that of the City of Limerick it can rise up to that percentage. In any case, the result was that the tax rate for wind power was doubled, tripled, and in some cases quadrupled. Logically, this puts wind projects under the feed-in tariff (FiT) in extreme danger as the increase was introduced after their installation and the beginning of their operation. In contrast, the property tax rates for fossil fuels decreased by 50%. Irish wind energy stakeholders addressed the issue to the European Commission (EC). Their main argument is that the property tax is a retroactive measure and should be seen as an indirect “state aid” to fossil fuels (i.e. environmentally harmful subsidy). The EC did not act against it and this is why Irish wind energy stakeholders have gone to the European Court of Justice (ECJ) against the EC. It is estimated that this extra bill due to the increase of the property tax taxes amounts to € 40 million and is still increasing.

The wind energy sector went to the High court so as to object the valuation approach currently employed but to no avail. More or less this unjustifiable increase is seen as an indirect subsidy to fossil fuels as the cost of RES is augmented due to that policy. Now, wind farmers have more knowledge and more data at their disposal concerning the tax process in every region. In case, this tax raise has considerably increased the operational cost of small wind farms especially.

As of 2021, increased commercial rates affect PV projects. Characteristically, for a RESS-1 project, costs associated with rates comprised €9.43/MWh of the €72.92/MWh RESS-1 price. In combination, development contributions and commercial rates could threaten the viability of some projects around the country.