Ohio Passes Expansive Law to Promote Energy Generation in Response to Concerns about Grid Reliability

Changes include large customer microgrids, tax reductions, and faster permitting.

Rising electricity demand from data centers, industrial reshoring, and electrification have sparked national concern about grid reliability. With forecasts pointing to even greater energy needs, some stakeholders warn that aging infrastructure and permitting delays for new generation resources could jeopardize both grid stability and economic growth. Ohio, experiencing rapid growth in data centers and advanced manufacturing projects, faces similar challenges.

In response, newly passed legislation seeks to position Ohio as a leader in new generation development. A key component of this effort is expanding self-generation opportunities for large customers. The option for large energy users to self-supply their electric requirements is widely seen as a critical solution to enable economic growth until longer term grid-connected resources become available. For example, the issue of how to co-locate large energy users with behind-the-meter power plants is being discussed and debated nationwide.

The Ohio legislation includes what is perhaps the most expansive industrial microgrid framework in the nation. This comprehensive approach allows multiple large users to aggregate behind-the-meter resources—even across separate sites—without strict proximity requirements. The legislation aims to deploy more generation to support development otherwise constrained by current grid limitations. If effective, it could serve as a national model for balancing economic growth with energy reliability amid rising demand.

As goes Ohio, so goes the nation.

Legislative Background

In early 2025, both chambers of the Ohio General Assembly introduced comprehensive energy legislation (House Bill 15 and Senate Bill 2, respectively). In part, the purpose of the legislation is to promote the development of new generation resources and supporting infrastructure.[1] The legislation seeks to accomplish this by: 1) promoting self-generation by clarifying existing provisions and creating new opportunities for large scale microgrids for industrial customers; 2) reducing tangible personal property taxes; and 3) expediting permitting timelines.

On April 30, 2025, the Ohio Senate unanimously approved Sub. H.B. No. 15, with the House concurring shortly thereafter. The legislation now heads to Ohio Governor Mike DeWine for his signature. The legislation takes effect 90 days after enrolling with the Ohio Secretary of State, which usually occurs shortly after the Governor signs a bill.

The final language can be found here.

Summary of Legislative Changes to Promote Generation Development

 a. Large Customer Microgrids and Clarifications to Existing Self-Generation Provisions

The legislation establishes a “mercantile customer self-power system” to enable extensive behind-the-meter generation and/or storage facilities to serve large customers.[1] A mercantile customer self-power system includes one or more electric generation facilities, electric storage facilities, or both, as long as:

• The system produces electricity primarily for the use of a large customer or a group of large customers;
• Electricity delivered to the large customer(s) from the system is connected directly to the customer’s side of the meter; and
• Electricity is delivered without using a utility’s distribution or transmission lines.

Sec. 4928.73(2)(a)-(c).

Notably, the mercantile customer self-power system can now consist of multiple customers. By allowing multiple customers to be part of a system, the legislation may encourage self-generation microgrids for industrial parks and clusters of large customers. In addition, the system may be comprised of multiple behind-the-meter generation and/or storage resources. This may enable one or more customers to develop a portfolio of multiple resources to meet their specific requirements, including any reliability or sustainability requirements. The system may be owned or operated by a customer, a group of customers, or a third-party entity. Sec. 4928.73(B).

Under the legislation, the mercantile customer self-power system can be located 1) adjacent to the customer, or 2) on property owned or controlled by the customer or by the entity that owns the system. Sec. 4928.73(2)(d)(i)-(ii). No other specific proximity relationship between the customer and the system is required. This provides customers flexibility in siting their mercantile customer self-power system may be located while continuing to be considered a self-generating customer.

While the legislation requires that the system must produce power primarily for the use of the specific customer(s), there is no restriction on the generating facilities eventually transitioning to grid-serving facilities. In this respect, the framework may encourage the development of generation facilities initially as mercantile customer self-power systems to later serve the broader grid once the lengthy interconnection process is complete.

Although the mercantile customer self-power system framework is newly created by the legislation, the concept of self-generation is not new under Ohio law. The existing parameters of self-generation provide that the generation facility be located on the customer’s “premises.” In addition, the facility must also be “installed or operated by the owner or by an agent under a contract.” 

The new legislation clarifies components of the “self-generator” definition. First, the reference to “premises” is changed to “property the entity controls.” Second, the use of the term “agent” is changed to a “third party.” In addition, the new legislation clarifies that the contract between the customer and third party may be “a lease, power purchase agreement, or other contract.” Sec. 4928.01(A)(32).

Finally, the legislation provides important clarification that self-generator and mercantile customer self-power systems are exempted from being classified as a public utility, electric utility, or electric service company. These exclusions clarify that self-generator and mercantile customer self-power system arrangements do not violate the exclusive certified territories of the incumbent electric utilities. Sec. 4933.81(F).

b. Reductions to Tangible Personal Property Tax

The legislation significantly reduces the tangible personal property (TPP) rates applicable to energy generation, as well as new transmission, distribution, and pipeline infrastructure. Historically, assessment rates for the TPP associated with utility companies have ranged from 25% to 88%, with the majority of the TPP related to energy transmission, distribution, and conversion falling in the 50% to 88% range. 

Under the new legislation, the assessment rates for TPP placed into service by utility companies beginning in 2027 will drop substantially. The legislation also inserts definitions within R.C. 5727.111 to define the terms “repower” and “convert.”[1] In addition, the legislation provides a new definition for an “energy storage system” under R.C. 5727.01(R) and clarifies that energy storage systems are to be treated as production equipment for the purpose of TPP taxation for energy companies.[2]

Company Type	Current TPP Tax Assessment Rates	New TPP Tax Assessment Rates
Electric Company	Transmission/Distribution TPP: 85% Energy Conversion Equipment TPP: 85% Other TPP: 24%	Transmission/Distribution Property that is first subject to TPP taxation prior to 2027: 85% Energy Conversion Equipment TPP that is first subject to TPP taxation prior to 2027: 85% Transmission/Distribution that is first subject to TPP taxation in 2027+: 25% Production Equipment TPP that is first subject to TPP taxation in 2027+: 7% Existing Production Equipment TPP that is either Repowered or Converted: 7% Energy Conversion Equipment TPP that is first subject to TPP taxation in 2027+: 7% Other TPP: 24%
Rural Electric Company	Transmission/Distribution TPP: 50% Energy Conversion Equipment TPP: 50% Other TPP (includes Production Equipment): 25%	Transmission/Distribution Property that is first subject to TPP taxation prior to 2027: 50% Energy Conversion Equipment TPP that is first subject to TPP taxation prior to 2027: 50% Production Equipment TPP that is first subject to TPP taxation in 2027+: 7% Existing Production Equipment TPP that is either Repowered or Converted: 7% Energy Conversion Equipment TPP that is first subject to TPP taxation in 2027+: 7% Other TPP (includes Transmission and Distribution Property that is first subject to TPP taxation in 2027+): 25%
Energy Company	Production Equipment TPP: 24% Other TPP: 85%	Transmission/Distribution Property that is first subject to TPP taxation prior to 2027: 85% Transmission/Distribution that is first subject to TPP taxation in 2027+: 25% Production Equipment TPP that is first subject to TPP taxation prior to 2027: 24% Production Equipment TPP that is first subject to TPP taxation in 2027+: 7% Existing Production Equipment TPP that is either Repowered or Converted: 7% Energy Conversion Equipment TPP that is first subject to TPP taxation in 2027+: 7% Other TPP: 85%
Pipeline Company	All TPP: 88%	TPP that is first subject to TPP taxation prior to 2027: 88% Other TPP: 25%

The Ohio Legislature recently amended R.C. 5727.75, the statute granting property tax exemptions for qualified energy projects (QEP). A new subsection (L) clarifies that the section—and any associated payments in lieu of taxes (PILOTs)—remain enforceable despite the passage of H.B. 15 (136th General Assembly). This affirms that existing PILOT agreements under R.C. 5727.75 will not be affected by the new legislation.

However, recent reductions in assessment rates on TPP may shift the landscape for private energy developers, especially those planning projects for 2027 and beyond. Lower TPP tax rates could make traditional tax incentive programs—like QEP status or enterprise zone agreements—less appealing. These programs often involve complex applications, legal costs, and compliance with capital investment or job creation requirements.

In many cases, developers may now find it more cost-effective to forgo these programs and simply pay TPP taxes at the reduced rates. As energy developers plan future projects in Ohio, they must carefully weigh the benefits of tax incentives against their costs, obligations, and opportunities to build local community support.

c. Expedited Permitting Timelines at Ohio Power Siting Board

Energy generation projects with a nameplate capacity of 50 megawatts or more are subject to the jurisdiction of the Ohio Power Siting Board (OPSB). The OPSB is a comprehensive permitting process governing the construction and operation of jurisdictional facilities. Currently, the OPSB’s standard certificate process has no statutory deadline for issuing decisions, and in practice, approvals typically take between seven months and a year.

The new legislation establishes a timeline for the OPSB’s standard certificate process. It requires the OPSB to “render a decision . . . not later than one hundred fifty days after the date the application is determined to be complete.” Sec. 4906.10(D). The legislation also requires the completeness determination to be made within 45 days after the application is filed. Sec. 4906.06(G). As a result, assuming an application is deemed complete in that period, an applicant will receive a decision within 195 days from applying. 

The legislation also creates Priority Investment Areas (PIA) to provide favorable permitting treatment for energy generation and battery storage projects.[1] A local government may establish a PIA by petitioning the Ohio Department of Development to designate a brownfield or former coal mine as a PIA. Sec. 122.161. PIA projects receive expedited review by the OPSB through a 45-day approval process. Sec. 4906.03(G). PIA projects are also eligible to receive a Brownfield Remediation Program grant of up to $10 million.[2]

Finally, the legislation also requires the OPSB to adopt rules for the accelerated review of jurisdictional facilities located on the following: (1) property under a lease with a term of 25 years or more, (2) property owned by the applicant, (3) an easement or right-of-way, or (4) a combination thereof, if no further consent for the construction on the property, easement, or right-of-way is required by any person or entity besides the OPSB. Sec. 4906.03(H).

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_{[1] Although this discussion focuses on the legislation’s implications for generation development, the legislation also addresses other areas of Ohio energy law, including significant changes to the utility rate case process at the Public Utilities Commission of Ohio. Previous overviews of the legislation can be accessed here.}  

_{[2] A “mercantile customer” means “a commercial or industrial customer if the electricity consumed is for nonresidential use and the customer consumes more than seven hundred thousand kilowatt hours per year or is part of a national account involving multiple facilities in one or more states.” R.C. 4928.01(A)(19).}

_{[3] Pursuant to R.C. 5727.111, “convert” means “to switch fuel input from one energy source to another”, and “repower” means “to replace enough of the original taxable production equipment to make an original production facility equivalent to a new facility, such that at least 80% of the true value of the taxable production equipment is derived from new taxable production equipment installed as part of the replacement project.”}

_{[4] An “energy storage system” now also falls within the definition of an “energy resource” pursuant to R.C. 5727.01(N)(5) and, therefore, has been removed from the definition of “energy conversion equipment” for rural electric companies and electric companies.}

_{[5] The legislation also provides favorable tax treatment for tangible personal property used to transport or transmit electricity or natural gas in a PIA. These eligible projects are exempted from TPP tax for five years after being placed into service. Sec. 5727.76.}

_{[6] The Brownfield Remediation Program provides grants to assist in the remediation of hazardous substances or petroleum at an industrial, commercial, or institutional property.}