Oregon Dept. of Revenue tells Morrow County commissioners battery storage changes valuation, could outsize current PILOT formula

At a Morrow County Board of Commissioners meeting, representatives from the Oregon Department of Revenue gave a technical briefing on how utility‑scale solar and battery storage systems are valued and warned that the state’s pilot payment‑in‑lieu formula does not explicitly account for battery storage.

Rob Motley, central assessment team manager for the Oregon Department of Revenue, told the board that "battery energy storage systems, they are brand new to the state of Oregon," and that the central assessment team currently sees only one combined solar/battery project in the state: "we have 1 installed solar with battery energy storage in Oregon, I believe. It's actually in Morrow County." Motley said the department uses cost, income and — where available — market approaches to value utility property and that rapidly declining equipment costs affect depreciation and replacement‑cost estimates.

Motley noted the state pilot payment‑in‑lieu statute, ORS 307.175, ties a flat fee to nameplate AC capacity and "was written at a different time for a different cost structure," and therefore may not cover the additional value contributed by battery systems. "That fee in lieu of is you know, it was written at a different time for a different cost structure," he said.

Michael Gomez, a team lead on the department’s central assessment team, said the department requires taxpayers to file income and expense information and that examiners incorporate those cash flows into discounted cash‑flow models when applicable. "Typically, property tax expenses is an operating expense for these projects. So we kinda have to, you know, forecast that into the DCF," Gomez said, adding the department will include any negotiated exemption amounts in that income analysis.

Nick Harris, an appraiser who specializes in renewables, explained technical reasons solar and batteries are often paired: "they share an AC inverter," he said, and that pairing affects system cost and valuation. Motley summarized national cost trends for photovoltaic systems (sharp long‑term declines) and emerging but less mature cost data for battery storage, saying battery cost curves are improving but not as steep as for solar panels.

Commissioners and staff asked how expected battery life, evolving contract structures and one‑time investment tax credits affect valuation. Department staff said battery useful life estimates vary widely and strongly affect replacement‑cost and income‑approach outcomes; the group cited ranges discussed in the presentation from roughly 5 to 40 years depending on cycling and technology choices. The department also said many projects rely on an investment tax credit in year one, which can make income‑based valuations much higher in that first year and materially lower afterward.

County commissioners and staff discussed whether to ask the Oregon Department of Land Conservation and Development (DLCD) to change recommended siting rules and whether to send a letter raising concerns about cumulative impacts of large projects. A motion to forward the county’s letter to DLCD failed for lack of a second.

Why it matters: county assessors and commissioners set local tax treatments and negotiate payment‑in‑lieu agreements; appraisals feed property tax revenues and exemptions. The Department of Revenue advised commissioners to account explicitly for battery components when negotiating PILOT or other tax agreements.

The county did not adopt policy changes during the presentation; the Department of Revenue presenters offered to provide further modeling if the county asked.