July 04, 2019

What You Need To Know About Renewable Energy Land Lease Management

by Etienne Lecompte

Whether wind or solar, renewable energy generation has one thing in common—it needs land. In solar alone, every megawatt installed is predicted to need 6-7 acres of landWhile solar panels occupy a lot more surface area than their vertical wind cousins, renewables asset managers need to manage land leases and agreements across many cities, countries and continents. Regional rules, environmental regulations and market trends have a huge impact on renewable energy land leases, and conversely, renewables projects.

So here’s a few of the things you need to know about renewables land leases.
 

Private Solar Land Leases versus Public Land Leases       

Renewable energy projects can be built on both private and public land, and can be multi-use as wellLeasing from private landowners means you can avoid some of the lengthy review processes that surround the use of federal or provincial lands. 

 

However, certain jurisdictions have made it easier to lease public lands—for example, the U.S. Bureau of Land Management (BLM) has designated leasing areas for renewable energy projects in the past few years. These areas have been pre-approved for an expedited approval process of renewable energy development. 

 

 

The BLM’s Solar Energy Zones, Development Focus Areas, and Renewable Energy Development Areas make up large swaths of Arizona, California, Colorado, Nevada, New Mexico and Utah. Developers wanting to take advantage of this streamlined process go through a competitive bidding exercise, and are then awarded a lease.  

 

“Solar energy development projects on BLM-managed public lands are authorized as rights-of-way (ROWs) under Title V of the Federal Land Policy and Management Act (FLPMA) if the proposed project is consistent with BLM land-use planning,” the website outlines“The BLM approved its first project to generate solar energy on public lands in October 2010, and as of March 2018 had approved 25 solar projects, totalling 6,319 megawatts (MW) of installed capacity.” 

 

If financially viable, leasing public lands can have many advantages for developers—reliability, transparency, and predictability chief among them. The type of land leased will also impact the process and price of acquiring the leasecompared to private leases, bidding exercises for public land can either be streamlined and simple, or a massive headache.  

 

Low-conflict land 

Certain areas, despite being ideal for wind or solar projects, are entangled in environmental considerations (such as the presence of endangered species). While all renewable companies deal with environmental regulations to a certain extent—wind farm production curtailment agreements due to bird mortality thresholds are a common example of thisit’s important to consider the impact of these regulations on production and profit, before any agreements are signed.

 

Just because a piece of land ticks all the boxes I’ve listed so far, doesn’t mean it’s the best fit for your renewable energy project. Think of “low-conflict land” as land thatbest suited for renewable energy projects considering its other simultaneous uses, both before and during development. We’ll talk more about this below. 

 

Leases on multi-purpose land 

The other uses of the land have a huge relationship with the lease itself, as well as operation down the line. As we wrote a few months ago, solar and wind operators can reap the benefits of leasing their land for agricultural purposes. Leasing from these stakeholders has its own considerations, too. You should definitely read his article to find out more. 

 

Misunderstandings 

Bad communication and inadequate lease agreements have long hurt the reputation of renewable energy developers, especially in the eyes of rural landowners and farmers. It’s important to build honesty and sympathy early on in a lease agreement—after all, these partnerships can last several decades.  

 

It’s so important for landowners and the renewables development team to agree on the effect of construction and operation on non-leased land (will there be trees that might block the sun, a road built to accommodate service cars, future plans that might affect the lease?).  

 

Who will pay for the taxes and insurance associated with the land? Who will cover which unpredictable expenses? How does the presence of a renewable energy project change these fees? Conversely, who will reap the tax benefits of the project on leased land, should there be regional incentives? All of these questions need to be addressed ahead of time, and the lease should clearly outline these answers. 

 

Managing all of the above, and more 

Not all of what I’ve just said directly applies to solar rooftop leases, but a lot of similarities emerge and the requirement to manage them proactively and site well are all the same. Additional things to consider for rooftops are roof specific covenants and payment structures that may be slightly different. In any case most of these should be managed and maintained diligently.  Here’s a useful introduction if you’d like to learn more.

The motherlode of proper land lease management isn’t just checking off the above boxes.  It’s also handling all of these moving pieces across your multiple portfolios. So how do you keep track? 

 

On an asset management platform like PowerHub, you can build renewable energy land lease management into your team’s processes. Instead of having to remember next steps, you can set a bi-annual task for your project manager with the lease document attached. You can build lease project plans that send out automatic notifications to the team members involved. You can manage everything we’ve talked about on one convenient platform built by people who understand the renewable energy world. 

 

Want to learn more? Contact us today. 

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