Solar Farms

For the last several years, I have seen solar developers fairly regularly, enough of them that I've lost count; there must be at least 20 if not 25 of them who have approached me. And they all seem to want somewhat different things: three phase power, proximity to substations, southern exposure, hidden from view, on main roads, open land, back roads... it's a long list and which of these things are desired varies with each company.

But there are similarities. Here's what most tell me: they identify the property of interest  to them, then try to get it locked in on some sort of lease or long term purchase agreement while they do their due diligence. The first year of this process does not require them to be on the land as they are dealing with the power company, local officials and the State, making sure it will fly - from their perspective. Then studies are done about endangered species, historical or archeological sites, all that sort of thing. Then, they survey it. Their upfront behind-the-scenes costs are far greater than the purchase price. Given bureaucratic lethargy, it takes 2-3 years to do all this.

So they offer owners an ascending series of incentives, ones which can be quite attractive. Typically, they use a carrot and stick approach, with huge rewards promised at the end, but only small ones, incrementally larger with the passage of time, before then. The further we go in the process, the greater their commitment to the owner. But they nearly always retain the right to back out in one way or another.  I have not seen statistics and as this type of thing is in its infancy in our area, there probably aren't statistics out there yet, but my guess is that most of these contemplated projects will never get completed. But some do and I think that over the next several years we are going to see quite a few more in service. There is too much money out there for that not to happen.

As a landowner, my concerns would first be about the time it takes and whether the reward was great enough to warrent the risk of it not coming to fruition. These may be things we can dicker about. They all offer the terms that appeal most to them, naturally enough, but often seem willing to bend to the demands and requirements of the landowner, especially if they really want the property. Most of them will offer full price, assuming it's a sale the owner hopes for, which would be most often the case in the deals with which I become involved. I am aware that some have offered well above asking price to get the owner's consent. Often they prefer to rent. They will pay highly for this. And make it richly rewarding (on paper at least) for the actual land-owner.

One of my personal caveats in investing is to stick to something you know. If you have only cursory knowledge of a potential investment, you may bet the people on the other side know a whole lot more and you can also bet that they are looking out for #1, and that may or may not include you. Solar developers may not always be huge Wall Street listed firms, but their pockets are far deeper than your own. So is their experience. So if you want advice, who do you go to? One of my clients began looking for attorneys who have expertise in solar and wind development. Guess what they found? There were quite a few, and in nearly every case, they were already employed by solar developers. Your local attorney cannot be expected to be an expert in such cases, though they are gaining experience.

So, say you get past the fat contracts offered by solar developers and are satisfied that the deal makes sense for you and decide to go ahead with it. I am going to interrupt myself for a second: by "fat", I mean it in more than one sense. Their contracts are very involved and take up many pages. They may come in stages too. Lots to read and hopefuly understand. .And they are "fat" in the sense that a lot of money is involved, for you, and for them. OK, got that out of my system. Now back to the regular programming.

I have other concerns. First, as their project would be visible to the public, a public outcry would not come as a surprise. It has happened elsewhere. We all like the idea of free electricity from the sun but do not discount the NIMBY (Not In My Backyard) factor. It's real, and it's common. I once had dinner with an environmental writer, who was in favor of all sort of environmentally friendly things and waxed eloquently about them. Then a minute later, he was raving about the possibility of wind towers being raised within the sight line of his home. These guys are your neighbors.

Secondly, there are a lot of these firms out there. Some are going to get swallowed by larger firms. Some will go belly up. It happens in other businesses, so expect it to happen here. In my short time involvement, I have seen this happen. They employ point men, who forge relationships with you. Then maybe he takes another job. There was a firm who employed me to find the right place for their huge project. We all had to sign a document for this. Then, when I found it, they  would not even acknowledge my letters. Technology changes rapidly and we don't know where it will lead.  What happens if they suddenly become unprofitable? How will you feel if they are raking in gadzillions and you only got a few hundred thousand?

Also political changes are another concern. We can't predict what Congress, State legislatures and local officials will do. In today's political environment, all we can be sure of is neither side wants to cooperate with the other. Where might that leave you?

These solar collectors have expected lifetimes; what happens then? Who is responsible for remediation if that is ever needed?  Are they bonded? Is money set aside in escrow for the eventual dismantling of the project? (Probably not.)  If they rent from you, you may be getting the big sums they promised, but what happens when the lease is over? Is it all on you if they are no longer in business? Of course if they actually buy your land, all that becomes their problem, not yours. You got a nice lump sum. Yes, you missed out on the big regular payments, but missed most of the worry and potential liability.

Lastly, remember "there is no free lunch". Our country, the world, is pushing us toward renewable energy. And that's good - but don't ignore the cost. Solar farms are not pretty and they change our landscape, interfere with our views. They take land out of production, land that might produce food.  Wind farms are less objectionable from an aesthetic standpoint, but they can be seen for many miles. Nationwide, much more power is generated by hydroelectric, which means dams and flooding valleys - places where people could live or food could be produced. The second highest source of electric generation is by coal, the very product we are trying to avoid. The US has the world's greatest deposits of coal, especially so if you include lignin. Are we to abandon this resource? Maybe. Power lines must be built to handle the extra energy flow. They take up space too, crossing formerly private land (which might have once been your own - how do you like that idea?) and they are not exactly things of beauty. There are some nasty chemicals used in the manufacture of solar panels. What about them? When you start thinking, the list grows.

On the long range positive side is the fact that if enough power was harvested from the sun, global warming would necessarily lessen. None of this would matter if the world's human population was far smaller. In my life, it has doubled roughly twice and scientists who study this sort of thing have real worry how we are going to find food enough to feed the even greater number predicted to be around in 2-3 more decades. It makes me wonder what we are doing to our grandchildren.