Unfortunately, there are several different development paths for different types of projects and the information can be sparse, leaving landowners scrambling to get the details before making a decision. Here are a few tips and nuggets of info that may help you along the way.
If I lease my land, what are the chances a project will be successful?
This of course is the million dollar question when landowners are considering leasing their land for solar. Many Pennsylvania landowners carry scar tissue from the oil and gas mineral rights which were acquired by speculators – and nothing ever came of it except a cloud on title leading to challenges with property transfers. The Solar industry has been slowly gaining ground and while there may not be many projects installed at this time, there is a lot of momentum with key legislation in the works which could overnight greenlight a wave of new projects.
What legislation? What is driving this new solar development?
There are general trends that are driving utility scale solar development – including the cost of panels steadily decreasing over the past decade and a focus on environmental benefits from utilities. The most recent boost is due to key legislation, including bill SB472, which according to a recent article in PV Magazine, will deliver more than $1.8 billion into the state and authorize the development of small-scale community solar projects, enabling more than 200 shovel-ready projects to break ground.
Should I wait and see how it plays out before signing a lease?
Unfortunately, the solar development market is so competitive that most of these projects have been underway well before the legislation will pass. A major factor in site selection is the capacity along the power lines which the projects will eventually interconnect with. Interconnection applications are honored on a first come first serve basis so even if you have a great site, if there are too many projects ahead of it in the queue there will not be enough capacity left to build a project. So while it may seem prudent to wait it out, the opportunity may not be there if you choose to do so.
What Makes a Good Solar Site in PA?
Factors such as land size, physical characteristics, and proximity to powerlines are the primary drivers when developers are selecting potential sites. To learn more about the specifics on what makes for a good solar site click here.
In Pennsylvania there are a few special factors developers must also consider. For one, excessive slope or bedrock is a major challenge for development and Pennsylvania offers no shortage of either. Another is that the community solar program in the works will only apply for the investor owned utilities, not for coops or municipal utilities. These service territory maps and ownership of lines are not well documented so it’s difficult for developers to be sure of the property utility when initially reaching out. It’s important to know the power company associated with the site – as this may save you a good deal of time, energy, and legal bills if you know the project won’t work right off the bat. It’s important to be aware if you have oil and gas rights sold off or active wells on your property. These won’t necessarily be deal breakers, but a developer must resolve this with the oil and gas company before getting started. As you can imagine, they cannot run the risk of an oil and gas company tearing up a solar farm to drill or repair a well.
Are there predatory speculative developers? What should I look out for?
The solar market has become a very lucrative business for developers. Each project could fetch millions of dollars once interconnected and constructed. It takes a lot of investment, risk and experience to get these projects to the finish line, but there are a number of speculative middlemen looking to secure these leases and flip them to other companies. Some simple interview questions to ask before you get too far down the road should be:
- What is your development experience? Do you have a portfolio you can share with me?
- Can you share more about your financial stability with me?
- What does your process look like? Will you remain involved in the project the entire time or does your company pass us along to a third party?
Also, there should be a fair consideration paid to the landowner during the option period. This money is at risk and a developer would prefer to invest it in the project costs, but it’s still a good test of their financial stability and should compensate the landowner for the time spent negotiating the lease option.
As for specific lease provisions, make sure there is decommissioning language to account for removing the project at the end of the lease. Other folks in the midwest have seen issues with cell phone towers and wind-turbines that have been abandoned by the tenants and left a costly clean up for the landowner. The good news is solar panels are simpler to remove and they have valuable metals that a tenant wouldn’t want to leave behind. Also, beware of property taxes. Oftentimes developers will offer to pay for any property tax increases that may occur as a result of the project. It’s a standard provision but make sure it’s included. The last thing you want is to be stuck with a big tax bill as a result of the project.
The truth is, a number of the projects put under lease option will never be constructed. Keep this in mind when negotiating the lease and don’t count your eggs before they hatch. The high lease rates are attractive so it’s very much worth the endeavor but it’s important to manage your expectations.
At NLR Solar our team is well versed in solar development projects and happy to help you navigate what can be a cumbersome and confusing process. Our team of experts are here to help evaluate your property and ensure you partner with the best developer for the job.
If you think your land in Pennsylvania could be a good fit for solar development, contact us today for a free evaluation.