Tax Abatements Could Provide Safeguards, Executive Says

One of the last people who spoke at the battery storage meeting in Warda last Thursday offered an alternative view.

Stefaan Sercu, a retired energy executive who lives in Austin County, said he’s been involved in dozens of battery storage projects around the country. Sercu said he has no ties to the one in Warda.

Sercu said tax abatements, although politically unpopular in Fayette County, could provide safeguards for citizens concerned about the impact of battery storage facilities.

“There is some risk, and it needs to be done right,” Sercu said at the meeting. “Given that the County has one shot to ask for these things, you can be creative with how you levy the taxes.”

A company investing millions of dollars in a battery storage facility on what was previously agricultural land will face a huge increase in property taxes. If they ask for a tax abatement, as Staccato Storage is doing, then the County could require certain concessions from the company.

“It should be a win-win,” he said. “It could provide some guidelines on the project that makes it more appealing to the area.”

According to records from the Fayette County Appraisal District, the property in Warda has an assessed value of $229,400. It brought the County $945 in property taxes this year.

Staccato Storage estimates the capital improvements on the property will amount to $160 million. At last year’s tax rate, those improvements would generate more than $659,000 a year in property taxes for the County alone.

With an abatement, the County could offer Staccato some lower tax payment. The property would generate much more in revenue than it currently does. In exchange, Sercu said, the County could require certain levels of insurance coverage, a bond for decommissioning costs, the construction of a green buffer to mitigate sound and sight concerns, fire suppression equipment, specialized training for local first responders and compliance with safety standards.

“Batteries are going to happen,” Sercu said in an interview with the Record on Friday. “They are building batteries in the middle of cities. The fire risk, the environmental risks, are much bigger there. Big cities like Boston, New York, and Houston are fine with it. Batteries have also become much safer. But it needs to be done the right way.”

“I’m not going to say I’m an expert in Texas property tax abatement,” Sercu said. “I’ve been involved in property tax all over the U.S. Every state, every county, has different guidelines.”

However, Sercu said he has been involved in about 50 battery storage projects around the country. He said local governments that grant tax abatements often impose requirements for the developers to support the local community in various ways.

“For instance, there was a plant in Arkansas that we were planning,” Sercu said, “As part of that, we had a PILOT – what they call a ‘payment in lieu of taxes.’ We had to give the fire department one or two new fire trucks. There was also an annual commitment to the school. Several scholarships were granted every year to the school.”

Sercu said local governments and private property owners need third-party experts to advise them on the complex issues related to electrical systems.

At the meeting Thursday, Flatonia attorney Alex Hernandez spoke about the legal defense fund set up to file nuisance lawsuits against projects like wind turbines, battery storage and even cryptocurrency farms. Hernandez said he was in talks with a potential client about a lawsuit over noise from the bitcoin farm operating on the property.

Sercu said he doubted nuisance lawsuits against battery storage facilities would be successful.

“I had more than 50 battery projects under my supervision,” he said. “I never, ever, had a noise complaint from neighbors. I’m very concerned. They brought up the bitcoin farm. But basically, a bitcoin farm is thousands of servers, and each server has a fan. Typically they are the cheapest servers they can buy because they know in three years, they’ll be obsolete. So they make a lot of noise. But I’ve never heard neighbors complain about noise from batteries.”

Sercu said battery storage projects often seem like a lottery prize for folks who own property next to an electric substation. But Sercu said landowners often leave money on the table.

“Battery storage is very, very complex from a land value perspective,” he said. “It depends on a lot of factors. It depends on how big the substation is and where the substation is. The Texas (energy) market is what they call an LMP market – locational marginal pricing. All over Texas, there is not one energy price. There are like 1,600 electricity prices. Depending on where you are, the price is very different. That is a function of demand, supply, transmission constraints – all of those things.

“If you’re in a point with high price volatility, the facility is worth more,” he said. “It also depends on the substation. Can the substation take it? It also depends on where the lines go. Currently, all the supply needs to go to Houston. It used to be Dallas, but with all the wind and solar, Dallas has enough capacity now. Houston is now in need of capacity.”

Sercu said the value of land near a substation can also depend on whether there are other battery projects nearby.

“It’s first come first serve,” Sercu said. “If there is a substation that can take 150 megawatts, and there’s a project for 125 megawatts, there’s only 25 left. The next project cannot do more than 25. So it would probably not be economical because it would be too small. That means the first landowner is able to capture all the value.”

Sercu said he knows of a property in the Houston area that is located near a substation. Land in the area sells for around $40,000 an acre. A battery storage company offered the landowner a purchase price of $250,000 an acre.

Sercu said leases for battery storage facilities are very different from oil and gas leases that many people around here are familiar with.

“It’s not like oil and gas leases, where neighbors get similar transactions,” he said. “The local lawyers have seen a lot of the transactions and know what the going rate is. With substations, it doesn’t work that way. One substation has one value and you go five miles farther its a completely different value. There’s not a lot of community awareness. And a lot of times people have to sign NDAs (non-disclosure agreements), so they cannot even talk about the prices they get. It really upsets me, and that’s why I’ve been advising a few people.”