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Legal complications of financing and developing solar panels on commercial real estate


To meet the goals of the Paris Climate Agreement, an increasingly large number of solar PV projects are currently under development in the Netherlands. The Dutch House of Representatives has expressed concern, however, about a downside to this development: namely, that ground-mounted solar PV is being realised at the expense of agricultural land and may have a negative impact on nature and soil life. Therefore, the following solution has been proposed: local policies on spatial integration of solar PV should focus on unused rooftops and other non-agricultural areas. Accordingly, the municipality of Amsterdam recently announced its “no roof unused” policy, which aims to have solar panels installed on 60% of the available large (company) rooftops by 2030. Due to unclear regulations, however, developers are encountering legal and fiscal complications regarding the financing and development of solar PV on commercial real estate.

Rooftop projects

Rooftops are an obvious location for realising solar panels since they are often not used and are not suitable for any other purpose. Moreover, the electricity will be generated on the location of demand: the building. Consumers with solar PV panels on their roofs have a relatively simple business model: a developer installs the panels and the consumer earns back his investment by setting off the electricity generated by the panels and fed into the grid with electricity bought from his energy supplier. This arrangement, however, only applies to small-scale electricity users (i.e. consumers and small businesses with a connection not exceeding 3x80A).

Parties that wish to realise a large-scale solar PV rooftop project (on commercial real estate for example) face legal and fiscal obstacles that may affect the project’s business model, particularly when owners of commercial real estate wish to engage a third party with the required expertise to finance, construct and operate a rooftop installation.

This party will then take care of all aspects of realising and operating the solar PV installation and will make the installation available to the building's owner by way of a financial or operational lease. In this situation, it will be important for the project’s business case that the third party realising and financing the solar PV installation will receive subsidy (as lessor) and that the building owner (as lessee) will be exempt from paying energy tax (energiebelasting). Acquiring the advantages of both incentive schemes, however, may turn out to be difficult due to legal and fiscal complications.

Below we address both the subsidy and the tax exemption.

SDE+ subsidy

The main subsidy scheme for renewable energy in the Netherlands is the Stimulation of Sustainable Energy Production (SDE+) scheme. SDE+ subsidy is an operating subsidy for producers of renewable energy that aims to incentivise the roll out of renewable energy technologies by compensating producers for the difference between the cost price of renewable energy and the market price of grey energy (with the difference representing the unprofitable part). From the autumn 2020 subsidy-application round, the SDE+ scheme will be broadened and transformed into the Sustainable Energy Transition Incentive scheme (or SDE++), which will focus on the reduction of CO₂ and other greenhouse gas emissions. Similar to its predecessor, the SDE++ scheme aims to cover the unprofitable surplus for large-scale solar PV projects.

Who is entitled to receive subsidy?

Under the SDE+ scheme the party that is eligible for the subsidy is ‘the producer’. Assuming that this will not change under the SDE++ scheme, a party can qualify as producer if it is ‘maintaining’ (instandhouden) the installation, which unfortunately does not offer much guidance. In general, it may seem obvious who the producer will be, but particularly in cases of lease constructions that offer full-service concepts aimed at unburdening owners or tenants of buildings, the party that qualifies as the producer may not always be clear. Is the producer the party with the legal and economic ownership of the solar PV installation? Or is it the party responsible for the O&M services and insurance of the installation? These parties are not necessarily one and the same.

Neither legislation nor case law clearly defines ‘maintaining’ the installation. Market parties at present often assume that the (legal) owner of the installation is regarded as the ‘producer’. However, it remains unclear whether this criterion is decisive or whether other factors can overrule it.

Who is eligible for the energy tax exemption?

A party that consumes electricity is subject to energy tax. To stimulate the production of renewable energy, the Environmental Taxes Act (Wet belastingen op milieugrondslag) provides an exemption from energy tax in cases of ‘self-generation’. Hence, a party that consumes renewable energy that it has generated with a solar PV production installation is exempt from paying energy tax. As the energy tax provides for a substantial portion of the energy bill, it will be important to ensure that the exemption is successfully invoked.

According to Dutch Tax Authorities, self-generation in principle does not require the party consuming the electricity to have (legal) ownership of the installation. Self-generation can also occur if the installation is rented or leased, as long as the electricity is generated for the party’s own ‘risk and account’. To determine whether a party is eligible for the self-generation exemption, the terms and conditions of the operational or financial lease agreement will play an important role. It is relevant, for example, whether the lease instalments paid by the lessee or electricity consumer consist of a fixed price or depend on the quantity of electricity generated by the installation. In case of the latter, electricity generation is not deemed to be for the risk and account of the electricity consumer and thus the consumer may not successfully invoke the exemption. 

In practice

As the third-party lessor will finance the solar PV installation, it may want to qualify as the producer in order to receive the SDE+ or SDE++ subsidy. At the same time, the building owner (as the lessee) may wish to qualify as the party for whose risk and account the electricity is generated in order to be exempt from paying energy tax, even if the building's tenants are the actual users of the electricity. This illustrates that acquiring the advantages of both incentive schemes could in practice turn out to be a challenge.

Current legislation does not seem to take these complexities into account nor does it ensure that the desired result will be achieved. Now that rooftop projects are considered the future of solar PV and that lease constructions aimed at unburdening owners and tenants of the buildings will undoubtfully play an important role in achieving our renewable targets, market parties should be provided with better guidance on these aspects to stimulate the financing and development of solar PV rooftop projects.

For more information on the legal and fiscal structuring of solar PV (rooftop) projects in the Netherlands and solar PV in general, contact your regular CMS advisor or local CMS experts.


Portrait ofCecilia Weijden
Cecilia van der Weijden
Portrait ofMaurits Rabbie
Maurits Rabbie