Chapter 2 Location, Location, Location - Securing Your Space
| Jurisdiction | United States |
Chapter 2 Location, Location, Location - Securing Your Space
NICK GOODLING is senior real estate counsel at Clearway Energy Group. Clearway Energy Group, along with its public affiliate Clearway Energy, Inc., owns and operates over 5.5 gigawatts of renewable energy assets across the U.S. with an additional 1.4 gigawatts of capacity currently under construction. At Clearway, Nick manages a team of attorneys and real estate professionals that handles real estate legal support, title review, and curative processes for all wind and solar power generation and battery storage projects developed by the company. Nick attended undergrad at the University of Virginia and received his J.D. from Vanderbilt University. After graduation, Nick began his career in private practice, advising clients on a broad range of commercial real estate finance and development matters before transitioning to in-house roles, first at public entities, then at utility-scale renewable developers and operators. He resides in Houston, Texas, with his wife, two children, and two Labrador Retrievers.
I. Introduction
As the late Lord Harold Samuel, a real estate tycoon in Britain, coined: "There are three things that matter in property: location, location, location." As with any real estate, the renewable energy arena is no stranger to this passed down adage. Similar to other industries contemplating major project development, renewable energy involves significant project planning, due diligence and site evaluation, and development. However, with impending "green goals" (some states as early as 2025 and 2030),2 policies, tax and other incentives encouraging the transition to renewable energy, there is heightened focus on development of these energy resources driving a new energy boom shaping how renewable projects have historically been developed and the accompanying land rush.3
Similar to other projects, renewable projects generally involve early site identification, evaluation or "prospecting", a site control and feasibility evaluation phase, including leasing, and securing easements and other agreements, along with additional environmental evaluations, and a development phase, often including financing and construction.4 With the push for renewable generation, these "phases" can often bleed into each other and are often driven by competitive requests for proposal to obtain power purchase agreements (PPAs) that contract for the sale of electricity generated by the facility and the renewable energy benefits or credits that may be recognized by such generation.
With these background pressures in mind, this paper addresses "how to secure your space" and obtain site control to compete in today's market.
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II. The Basics - Project Siting
As with most projects, renewable project site control is the quintessential "choose your own adventure." Similar to mineral or other project development, renewable projects contemplate a similar slate of considerations in evaluating the surrounding area, ranging from commercial availability of natural resources based on geography and topography (i.e., solar, wind, or hydro), environmental factors such as wildlife and habitat considerations, archeological, historical, and cultural resources, and proximity to facilities (e.g., the energy grid, transmission lines, utilities, access, labor).5 As with any project, availability of resources and scope of impacts can alter the success, or worst case, failure, of a project.
For instance, solar siting accounts for levels of solar insolation, slope threshold, electricity demands given existing facilities, proximity to those facilities, and access to transmission lines.6 Wind energy siting, on the other hand, also accounts for what is called a "wake effect," i.e., the extent to which one turbine could reduce the capacity of another downwind and requires a more sprawling footprint to maximize generation, where solar is often more densely confined for generation purposes.7 Likewise, in some cases, sites cannot be developed for such purposes unless minimum thresholds are met - e.g., the Bureau of Land Management (BLM) generally requires an area have wind speeds of at least 5 meters per second to be considered "potentially developable."8
With this background, the following discussion provides a high-level summary on securing the project site based on the owner of land once initial site evaluations have been completed. Generally, site control for solar and wind projects are established through long term leases, easements, or storage agreements. As a precursor to a formal lease, early site review may include a short-term exploratory or site agreement or an option agreement.
A. Federal Lands
Siting on federal land or waters is generally governed by the BLM (except for lands under management of the U.S. Forest Service or the National Park Service)9 and the Bureau of Ocean Energy Management (BOEM), respectively. Notably, development on federal lands can trigger other requirements, specifically National Environmental Policy Act (NEPA) review, and as a result, it may be advisable for both the land and permitting teams to be aligned.
Some general roadmap considerations when siting on federal lands include:
• Utilize existing resources to evaluate sites on federal lands. By way of example, BLM (and BOEM) also developed resources to facilitate wind energy development, such as the Wind Mapper, an interactive website which maps "[land] areas with high wind energy potential
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and low resource conflict."10
• Follow federal regulatory requirements and procedures, including application requirements, plan of development, and financial assurance.
• Be aware of NEPA review and evaluate opportunities to take advantage of existing designated leasing areas that may bypass further NEPA review under comprehensive programmatic approvals - similar to BLM's process for large oil and gas lease sales.
• Plan early and comprehensively - federal grants are not typically as flexible or as easy to change as private leases and require time to process through additional applications or amendments, which can result in project delays.
1. Onshore Development
For onshore development, as indicated, BLM manages development on federal lands under its multiple use mandate, and manages solar and wind energy development on BLM-managed lands under Title V of the Federal Land Policy Management Act of 1976 rights-of-way (ROWs).11 A ROW grants a developer the right and privilege to use a specific piece of land for a specified use and specified period of time appropriate for the project.12 A developer can obtain a ROW through submission of a ROW application that must demonstrate, inter alia, financial and technical capacity, and include a detailed Plan of Development (POD).13
In general, BLM regulations contemplate a competitive lease program for leasing wind and solar rights on federal public lands14 - similar to oil and gas leasing. That said, the regulations generally promote the use of "designated lease areas" which are areas identified and preferred for renewable energy development under a Resource Management Plan and related approvals and authorizations. In particular, BLM has classified thousands of acres of lands as Solar Energy Zones (SEZs) under a programmatic NEPA review.15
For wind and solar leases, BLM regulations generally contemplate the following terms and conditions:
• Scope of Grant: BLM approved ROWs include the right to: (a) use the surface
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estate to construct, operate, maintain, and terminate solar or wind energy facilities within the ROW under the terms and conditions, (b) use and maintain existing access roads, (c) construct access roads that cross the ROW, (d) exclude others from using the ROW if such use is not included in the approved ROW or charge and allow others to use the ROW if such use is included in the approved ROW, (e) perform minor vegetation maintenance in the ROW, and (f) use soil and rocks that have been removed during construction in the ROW. Transmission lines and other supporting infrastructure are generally outside the scope of the grant and require separate application.16
• Term. The term of a BLM ROW is 30 years.17 BLM ROWs can be extended through submission of a renewal application to BLM at least 120 calendar days before the initial ROW expires. BLM will approve the application if it contains an explanation of why the renewal is required and proves compliance with stipulations, conditions, terms, laws, and regulations that apply to the original ROW.18 Compliance is reviewed and approved by BLM in the same way as the original ROW.19
• Rent. If the ROW was obtained through the competitive bidding process, ROW holders must pay the bidding price to BLM when the bid is submitted.20 All ROW holders must make payments to BLM based on an acreage rent and a megawatt (MW) capacity fee.21 After the initial rent is paid, all subsequent rental payments are due on January 1 of the first year in each rental period.22 Rental periods can be the entire term of the ROW, ten-year intervals, or annual.23
o MW Rent Calculation. The MW capacity fee is determined by the size and type of solar technology used on the ROW. The current MW rate for solar energy ROW grants and leases are $2,172 per MW for photovoltaic (PV) facilities, $2,716 per MW for concentrated PV (CPV) and concentrated solar power (CSP) facilities, and $3,259 per MW for CSP facilities with
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...storage of three hours or more.25
• Plan of Development. As part of the application,
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