Webinar Recording and Transcript: Got Land? Learn How to Evaluate Your Agricultural or Distressed Industrial Property for Building Solar Power Plants
The following is a lightly edited and time-stamped transcription of Inovateus Solar’s webinar “Got Land? Learn How to Evaluate Your Agricultural or Distressed Industrial Property for Building Solar Power Plants”
Joining the discussion was Tim Powers of Inovateus Solar, Ben Hatch of TRC, and Howard Halderman of The Halderman Companies. Please refer to the time stamp to review any section on the video.
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Tim Powers 00:05
All right. Good afternoon. My name is Tim Powers. This is the quarterly Inovateus “Investing in Your Energy Future” webinar series. I am with Inovateus Solar, and today we have Ben Hach and Howard Halderman. Join us today for a very exciting, exciting webinar about land sighting for utility solar projects. Inovateus is well accustomed to, but two folks that know this as well as anyone in the industry. We’re going to talk to them today about what’s going on in utility development, specifically how these projects can go from early stages to final completed and operating clean energy, clean energy system. So Ben, go ahead and give us an introduction. And tell us a little about your background.
Ben Hach 00:56
Perfect, thank you. My name is Ben Hoch. I’ve worked in the renewables industry pretty much most of my life, which is a 27 to 29-year work career. And I worked very heavily in the wind industry. And then also in the solar. And in tandem. I’ve also been in the Army National Guard and Army Reserve for 27 years as well. Great to be here.
Tim Powers 01:42
Thanks, Ben. Great introduction. So, thank you, Ben. And then Howard. Go ahead and do some introductions, as well.
Howard Halderman 02:00
Sure. Howard Halderman, and I’m president of The Holderman Companies. That would be Halderman Farm Management, Halderman Real Estate Services. We really do three things in the farm real estate space. We manage properties for absentee landowners, and we also appraise properties for loans and estate purposes. And then we are a brokerage. And so we buy and sell farm properties, as well. In the last two or three years, we’ve had the opportunity to get into the solar leasing space, and have worked with two or three or four solar developers in helping them find land and negotiate lease options and ultimately leases on land that they would build a solar array on. So we do have experience in both looking at it from the landowner’s perspective, as well as from the solar developer’s perspective.
Tim Powers 02:49
Great, thank you, Howard. And last but not least, I’m Tim Powers and with Inovateus Solar. I am part of the development origination team. We are what’s known as an EPC developer. That’s an engineering procurement and construction firm. We’re one of the leading providers of clean energy in the Midwest for utilities, schools, cities, and the educational sector. Our team of panelists today is here to talk about solar siting, and just how if you’re a landowner, how you can be a little more educated and engaged on this front and understand how the process works. But also on the procurement side, just understanding how long this process takes. It takes some due diligence and understanding what goes into the planning of projects here. So, Howard, let’s start with you. We’re going to jump to get an understanding of how should a landowner out there who might have been approached by solar developer at some point, who is really interested in this niche process. How do they even begin to start this long process of a solar leasing and considering putting clean energy on their land? What should they be looking at and thinking about?
Type of Farmland That’s Right For Solar Development
Howard Halderman 04:13
Well, I think, Tim, that the right place to start is what kind of land or properties qualify, or are interesting for solar development. And largely in the agricultural space, it’s their green fields, open environmentally safe land for solar development.
Howard Halderman 04:41
Generally, it’s flat, but somewhat rolling will work if it’s clear of waterways, flood plain, and trees. This is not a business where you’re going to come in and clear the woods to build a solar array. So it’s open cropland spaces at the end of the day. You want to have a minimal impact to the land. So the goal would be that you’re going to put solar panels on the ground, and you’re going to have a grass mix cover crop underneath those solar panels. There is no advantage to having tall weeds or trees growing because that provides shade, which is not the goal here. And so as a result, it’ll be a well-maintained grass and or pollinator mix. Well, what’s a pollinator mix? Those are the flowers that you see. And those tend to enhance or grow the bee population. And if you’ve read anything in the environmental press, bee population has been eroding over time in the United States and around the world. And without bees, no fruits or vegetables are grown. So, I think that a really important environmental benefit to these solar projects is not only are we putting a cover crop on the land that provides better soil health, higher organic matter, less erosion, we can also involve some pollinators that enhance the overall bee population.
Howard Halderman 06:05
As I said earlier, there’s not going to be much in the way of clearing any land or trees. You’re not going to go into any wetlands, you’re not going to go into the floodplain. And in fact, in some solar development cases, if it makes sense for the actual layout of the solar panels, if they remove a few trees, they’re going to provide new pre-planting. You can call it mitigation if you’re in the wetland space, but basically planting trees for any that are removed.
Howard Halderman 06:33
Now, beyond greenfields, you have other opportunities where you could site a solar development. And you might understand brownfield properties, which might have some environmental contamination. There’s certainly no harm in putting panels on top of that kind of site. And you can think of a lot of those in cities all over the United States and around the world. In addition, you’ve got parking lots, carports, canopies. How you structure the solar arrays can still allow for those sorts of things to go on in terms of parking their cars underneath and having solar panels above, or parking garages. There’s a whole host of opportunities there. So next slide, Tim.
Solar Land Leasing Terms
Howard Halderman 07:20
So if I’m a landowner, and I’m looking at opportunities, and say I always want to farm. I’ve got a family farm operation, and we’ve been in business for over 100 years. Why would I consider a solar lease? And so I put down some items that I think could be something that you ought to think about if you’re a landowner. The first reason is the simple economics of it: Farm and family income. Solar leases, in our experience, tend to be two and a half to three times of farmland rents in a given area. And here in Indiana, for example, it might be $700 to $900 an acre. In some locations, for smaller arrays, it might be even higher than that. And I can tell you that if you’re in some other locations around the United States, where cropland rents are much less, solar rent is less, but that multiple that two and a half times seems to have some consistency across the industry. So you have no cost, and you enhance your revenue by two and a half to three times. So that’s one reason you might want to consider a solar lease, which is enhancing your farm and family income.
Long Term Considerations
Howard Halderman 08:30
That next point is securing the farms generational future. And what I mean by that is, farming is a difficult business, sometimes. You can’t control weather, you can’t control commodity prices to a large degree. And so sometimes you get into economic stress. One of the things that if you own 1000 acres, and you enroll 500 acres, let’s say into a solar array, maybe your farm and 5000 acres of that you own 20% but you enroll 500 acres in a solar leasing program, that revenue with no associated costs to you, the landowner could basically provide a foundational income level for the farm operation and secure, generational future, meaning that the farm will stay in existence generation after generation. It allows you to immersify your income stream instead of just being reliant on corn and soybean prices and weather associated with those. You now have diverse income that you’re harvesting Sun and solar power in a different way and generating revenue from that. It could allow your farm to grow and expand. So you are now making some additional income off of this certain segment of your farm operation you’ve enrolled in solar leasing. So, that additional income could be used to go out and acquire additional land if that opportunity arises. It could also be used to maybe enable you to rent additional land because you now have the ability to expand your equipment, or bring on more employees. And so it could be a lever to grow your farm operation in addition to securing its future.
Howard Halderman 10:11
One thing I always like to point out to landowners is that it’s a low cost of entry for the landowner. It is a multi-million dollar cost of entry for the solar developer. But for a landowner, the way the leases are written, all those costs are borne by the solar company in the solar development. And so that landowner is going to have a low cost of entry. In fact, they’re paid lease option payments during the time that it’s, it’s an option. And before the actual leasing begins.
Howard Halderman 10:39
You also have environmental benefits. So maybe you’ve got that field or fields that are highly erodible. That’s what H E L stands for highly erodible land. Maybe there are some acres that you find challenging to farm. Those might be enrolled in a solar development, if logistics makes sense. And as I said earlier, you suddenly reduce the erosion on those because of planting the pollinator grass. You enhance the bee population, which might help the rest of your crops, and you reduce the runoff of any water, extra fertilizer or pesticides into nearby watersheds. So there are some nice environmental benefits that come from this. You have, then the next step is community enhancement.
Solar Project Benefits to the Community
Howard Halderman 11:22
And if a large-scale solar development comes into a community, there will be additional tax revenue because the solar project is going to add a tremendous amount of value, millions of millions of dollars of value and solar panels to the property. That’s going to be taxed, that’s going to generate additional tax revenue, or reduce the real estate taxes. So you got a couple of opportunities that, obviously, it’s going to be subjected to the County Council and the county commissioners to decide how that’s used. But it’s an opportunity that could be reinvested in bridges and roads. It could be reinvested in schools, it could be used to just simply reduce real estate taxes because it got a higher assessed valuation. So a lot of different levers can be pulled there and in different ways that enhance the overall quality of life in that community. And it may attract more people that will come to the community. On this last point, all boats will rise. So not only does it benefit your farm operation or your landholdings, but it also could benefit the community around you through these additional opportunities that are presented.
Tim Powers 12:35
Howard, real quick. I know you mentioned a kind of chaos that landowners and farmers may have to deal with. Can you spend at least a quick minute on common issues like tariffs and changing government policy, or even extreme weather that farmers have been dealing with that you’ve seen in the last few years?
Leasing Land for Solar Development vs Agricultural Development
Howard Halderman 12:59
Certainly. The agricultural economy is variable. As I said, we can’t control the weather. And one of the things that have been said about climate change, global warming, whatever you want to call it, as our climate changes, we are going to see more volatile weather events. And I think it would be hard to argue that we haven’t been seeing that, whether it be the wind event out in Iowa that laid a lot of crops flat, whether it be hurricanes, large rain volumes, that’s one of the things they mentioned here for the eastern Corn Belt. We’ll get more rain, which is a good thing for crops, right? Except that when it comes in three and four inches at a time; that tends to drown crops out. So there’s more volatility potentially in climate change. Likewise, we are in a commodity market where prices are controlled by production around the globe. So right now, Argentina and Brazil, for example, are planting millions of hectares of corn and soybeans. That impacts our prices here in the United States.
Howard Halderman 14:00
Again, these are things that we as a farmer can’t control. And we can’t control if the federal government gets into conflict with China. And all of a sudden there’s a tariff war. And China says, yep, fine, we’re just not going to buy any more soybeans from the United States. And our soybean price declined significantly because of it. Now, that happened three years ago. Now, the federal government came out with market facilitation payments and helped offset that. But still, it was a damaging situation, current prices as well as maybe long-term potential demand for China. So, those are things we can’t control as a farmer. But if you take and put some of your farm or maybe all of your farm–your pick–into a solar project and generate that lease income, which largely is going to be fairly guaranteed, then you have an opportunity to secure your farm long term and insulate you from some of the volatility that exists in agriculture today. So Tim, is that where you’re going with the question?
Tim Powers 15:00
It was. Thanks for the insight there. That’s a lot to consider, certainly, if you are in the ag business these days.
Solar Land Leasing Terms
Howard Halderman 15:23
So now you’re thinking, maybe I want to do this solar leasing option. How does this work? Well, first of all, you’re going to get a lease option agreement. It basically says the solar developer is taking an option on the property that you’re enrolling, to eventually lease it under certain terms. And for that option, they will pay you an option rate. This can vary anywhere from $10 to $30, $40 $50 an acre. Sometimes it’s for the first year, and sometimes it’s for a period of up to 5 years. It all varies by the solar developer as to what they want to do.
Howard Halderman 15:23
But that’s one question you want to consider. What is that option, right? There’s no cost for this, this is just additional revenue that comes into the farm. Your potential cost is that you’ve signed this option. And so you can’t go and use that property outside of row crop production, you can’t go and option it for construction of a mall, or a distribution building or something like that. It’s committed for that period of time and the option to go into solar, if in fact, that’s what ultimately happens. So you are giving up a right of ownership use, but you still get to farm it, you still get to generate income from your farming operations. And you get the additional option income on top of that. Then the developer goes through their due diligence. They get to the end of that and they say they’re ready to build the project. So you move into the construction term. And that’s while they’re building the project, putting posts in the ground, putting up the solar array, putting in all the transmission lines. And that’s a different lease rate.
Howard Halderman 17:08
So you need to consider what is that lease rate. Usually, that ends up being somewhere, 50% or so, a third of the long-term lease rate. So, one of the things you want to think about during construction, also, is a damage clause. So, if they start construction in July, for example, and they go in and destroy some corn, there ought to be a damage clause that reimburses you as the farmer for at least your cost, and maybe even the opportunity of grain you could have sold through that process.
Protecting Your Land Over Time
Howard Halderman 17:39
Also during due diligence, and one of the things they’ll do before construction, is they may want to go out and do some soil test to see about construction and how that will be allowed. If they go out and do soil tests and happen to damage the crop, you want to be reimbursed for that. Solar developers are fully willing to do that. So that construction term language becomes important as a landowner. And then at the end of the day, what’s the long term operational lease rate? That’s that $700 to $900 that I talked about earlier. That can be a 25 to 40-year lease term. Maybe it’s 25 with two 5-year options. There are a lot of different ways that it can be structured, but that’s a key part.
Howard Halderman 18:19
So you might say, well, that’s a great number Howard. $900 an acre or $800 an acre, that’s way more than what I can get off my corn today. But what happens over time? We don’t really know where the markets will go. No, we don’t. So you might want to look at an annual inflation clause. And are those lease rates going to go up over time? And that annual inflation rate is something to also think about negotiating and considering.
Howard Halderman 18:45
Now, I’ve had a lot of landowners say, “Howard, what happens if that solar company goes broke and they no longer can pay the lease rate?” And the first time I worked on a project in solar was down in Texas. And that’s exactly what my client and I had a concern about. And the solar developer, in that case, said, well, first of all, you need to understand we’re investing millions of dollars in these panels and posts and infrastructure. Any lender that’s going to take over our project because we’ve defaulted on the loan is going to continue to make the lease payments to you, Mr. landowner, because the value of the panels, the value of that project is so significant, they would not leave it to just have the landowner take apart and resell. And so there is a period of time, 10 or 15 years, when that value is so high, that it’s not really a concern. Somebody is going to pay you that lease rate, whether that would be at the lender or the actual company themselves.
Howard Halderman 19:44
And then after that, you basically want to look for a bond, where the solar developer posts a bond, or the solar company that’s buying the energy. But it’s by posting this bond that basically ensures that if they fail to make payments at year 20 and you can’t get them to do anything, you can tap the bond, use that money then to remove the solar panels, clean up whatever is needed and go back to farming the land. So that’s why they may not start for 10 to 15 years, but again, that’s a negotiable item. But that’s something, as a landowner, make sure that I know what happens if there’s a failure at some point in time. Because this is a long-term lease. The length of the option period and the ultimate lease are two things to consider. Some option periods are shorter, some are longer, but 5 years would be pretty common. You’d say, gosh, that’s a long time to tie my farm up. Well, the reality is, the project will probably happen sooner than a 5 year time period. But that gives the solar developer plenty of time to navigate all the different permitting and approvals that they need to seek from the county and the state to ultimately build the project.
Solar Land Lease Options and Renewals
Howard Halderman 20:54
So, how long is the ultimate lease? And what are the renewal periods? Those are just things to think about. That inflation clause kind of protects you in those longer-term situations. Land improvements that are under the panels–that would be that pollinator habitat that I talked about, soil erosion control–at the end of the lease, you, the landowner, are going to get this land back, in theory, after they’ve pulled the panels off of. The posts that are not in concrete. They’re just driven into the ground. So, they pull those posts out. That land has sat there for 30 years in grass and pollinators, and it probably doesn’t have any enhancement to any large degree of fertility because you’ve not applied any phosphorus or potash. But it will certainly improve in organic matter, because those are being mowed every year. And that organic matter is going back into the soil. It won’t have any erosion because that grass is across the whole section of land underneath the panels. And so the there’s no continuing erosion over that 30 year time period. So you’re enhancing the soil health. There have been no fertilizers put on there. So earthworms and other things that improve soil health have come back. And so you really should have a pretty healthy soil that has not had any erosion during the term of the lease. So I think you end up with better land. It’s not going to necessarily be more fertile, in terms of actual fertility that you use for crops, but everything else is going to be improved.
Howard Halderman 22:23
Some things to think about: fencing. Will they fence the project? Most developers do. What are the setbacks? That means the distance between any buildings. Let’s say they’re going to put the solar array around your house? Well, how far back? Do they have to set the project far from the home? Is it 50 feet? Is it 100 feet? What do you want? Maybe it’s closer to you. But they put in mounds, and so you’re not looking directly at the panels., but there’s some kind of natural wall of trees, mounds or other landscaping that actually enhances the view. So, those are other things to consider.
Howard Halderman 23:01
And as to how they develop the project, drainage maintenance is a big deal. You’ve got tile drainage that runs through these fields, so you don’t want that tile drainage to be broken down. Having them repair any drainage issues that crop up when they drill these posts into the ground, I think that’s a key thing to incorporate into a lease. Now, here’s a concern: If you have a property that’s irrigated, and let’s say it’s a full center pivot circle, but you’re only putting half into solar panels. Alright, what do you do about that irrigation system? And how does that operate long term? Just something to think about? It really depends on the farm. If you don’t have irrigation, it’s not a worry.
Howard Halderman 23:42
Safety concerns addressed: How do they protect people in the community? That’s the fencing, right? So people can’t just walk into the solar array at any time that they wish, so how do they address safety? I think that’s important in a lease. And then there are landowner expectations: What do they want you as the landowner to do during due diligence and post-construction? Odds are, it’s going to be very little. Maybe during due diligence, they just want you to make it accessible, that they can get on the land and do some soil testing or whatever they need to do.
Howard Halderman 24:14
And obviously, that crop damage clause is important or land damage clause. Post-construction, probably very little that you’ll need to do as long as you’re not messing with the project itself.
Leasing the Land vs Selling the Land
Howard Halderman 24:26
And then that last question: We’ve had some landowners ask us, “Well, what if I don’t want to do a lease? What if I just rather sell the real estate that the panels are going to go on?” We do have buyers for that. We have a couple of groups that have said to us, “Howard, if you ever have a landowner who doesn’t want to do the lease, we would be interested in buying that land on the front end, and then entering into the lease with the solar developer.” So I think there are buyers out there for that farm real estate if that’s of interest to a landowner. Tim, do you have any questions?
Tim Powers 25:04
We’ll get to questions at the end here. So we’re going to jump in the next slide.
Howard Halderman 25:17
So, what about the lease option and timeline? I just want landowners to be aware of how this works, and not isn’t necessarily going to happen in a 12-month window. Let’s say everything looks good.
Howard Halderman 25:36
You’ve agreed to the lease option terms, and you enter into that lease option with a solar developer. You may be asked to help assist with recruiting other landowners in the area to participate. As you might imagine, 100 acres isn’t big enough for a project today at a commercial scale. So they may want 1000 acres, they may want 2000 acres in a project. And so that might be more than what you have as a landowner. And you may get involved with helping recruit other landowners adjacent to you in the area to participate. Once that developer achieves that critical mass–enough acres or scale needed to make the project viable–then they begin the approval process. That’s county and state approval. Plan for 12 to 24 months for that to happen. It may involve rezoning, it may involve plan commission approval, state regulatory agencies, and permits. So, all of that takes some time. They’re going to have to do some engineering on the front end, to get some of those approvals. So don’t plan on this happening just right away.
Howard Halderman 26:43
There is also a lag time from the time you enter the lease option until the time that construction might begin. And then construction takes a little bit of time. When you think about putting these panels up, I’ve watched a couple of projects go up in Texas. Each one’s about 10,000 acres. And it does take a number of months to build those projects out at a large scale. As I said, the damage clause is important to review so that you know that your crop and any soil damage are covered during due diligence work as well as construction. So, it does take time. The landowner can greatly help that process by being an advocate in the local area, with your county commissioners, with your county plan commission, and people you know, such as your adjacent landowners. Talk them through the process and engage with them. Help them participate in it. That can greatly enhance the regulatory approval process. I’ve seen that firsthand here in Indiana. And I guess that would be my last comment. But I just want to make landowners aware that it isn’t a really super fast process.
Tim Powers 27:53
Great. Thank you. We’ll come back to your questions here in a little bit. Now we’ll go to Ben with TRC. Ben, can Are you ready to get off mute here?
Ben Hach 28:09
I’m off. I’m ready to go.
Tim Powers 28:12
Thanks, Ben. So, switching over to more of the development and design aspects of how these projects utilize landowners and how real estate groups like Howard would be pulling together for a project. Ben, these are complicated, long-term electrical systems, what are some of the stages of development that you guys go through to make sure that one, that the location of the site is going to actually truly be feasible? And two, to take out any potential red flags during development? What is your group doing to ensure that developers have the wherewithal to get a successful project up and running?
Ben Hach 29:01
Absolutely. Before I cover that, we’re going to cover this slide just briefly, if you don’t mind, Tim. So, TRC is a global professional services firm providing integrated strategy consulting, engineering and applied technology services to our clients. We have about 6,000 employees within the company and we now have over 140 offices spread throughout the United States. So we can support any type of person or entity that is looking to do development in de-risking the development process and help them help to get through from the very beginning to the very end as far as construction and into maintenance. So, it’s a very good company that has so many different services that we can provide. Next slide, please.
Ben Hach 30:03
So, these are the services that we offer. Starting over on the left side, if you’re already a developer or a utility that is looking for a project site, we can start out by doing those services. And then as we go through the development cycle in the process of taking a project from the very first ideation and trying to find the location through construction and inspection. Next slide, please.
Evaluating If Your Land Right for Solar
Ben Hach 30:43
So this is going to be the slide that’s going to help me answer your question. And the track is just a little bit modified, depending on whether your utility an independent power producer, or a farmer that consumes a lot of power, or a business that consumes a lot of power, and they want to offset their load, and be renewable and energy-efficient.
Ben Hach 31:06
So, locating the market opportunity could start from, “I’m a utility, and I want you to provide some load in a certain area, regarding a location. It could be them wanting access to a transmission line, etc. Or it could just be a business, and you already consume power. We can help the client either way, or the farmer. Once you have found an area, Howard’s already talked about the leasing options and available benefits, etc.
Ben Hach 31:36
So the next important piece is your interconnect, which goes is into your transmission line, so that you can either sell the power or be able to provide back the power that you’re not consuming. If you are building a project that is going to be for yourself, we call that “behind the meter,” because you do not have to go out and get a transmitter electrical offtake agreement with the utility. You’re basically using the utility as your battery if you don’t want to use battery storage, etc. So that’s where the interconnect application takes place. We can also do transmission studies. All of those things help get you from the very beginning to the very end of decreasing risk.
Due Diligence
Ben Hach 32:20
The next step is your environmental due diligence. This is ensuring that you don’t have something out there that’s going to cause a problem long-term with the project that could be billable. We make sure that it’s minimal and that it’s constructible. So, it could be waterways, it could be some critical and endangered species. And TRC can look at all of those items to help make sure you can be successful. Our team gets land permits. What that means is going out and looking at the township level, the county level, the state level, and ensuring that all their requirements are met with the resources and the studies that help get those approvals.
Ben Hach 33:00
Preconstruction, new designs. design, engineering, procurement, construction inspection. As far as that stage, market, and contract for uptake. That goes right along into the following the interconnect process, ensuring that you have the agreement in place to sell your power or to be able to consume your own power and sell back the extra energy to the utility. And that leads to the execution of the interconnection agreement. That allows you to sell your power into the grid to the utility, and to secure ministerial and regulatory permits. And those are all your regulatory bodies. EPC is your engineer, procure, construct. We have services that can support every aspect of that process.
Environmental Considerations
Tim Powers 33:50
Ben, back to one of these points briefly. You mentioned endangered species. Just off the top of your head, what are some of the species that folks might be able to look out for and might be aware of already that are going to be in the Midwest or even here in Indiana?
Ben Hach 34:04
Well, I ran into the Topeka Shiner Minnow in some locations in the Dakotas and western Minnesota. I’ve never seen one of them. But we had to make sure that the areas that projects were being built weren’t going to impact or degrade the populations of those minnows. There are also different turtles. There are different animals out there like that, that all need to be looked at so that these projects do not interfere with the animals that are out there. And as Howard did a great job explaining about these projects, once they’re built out, now you have to keep that land preserved and locked in. So now you can have bee pollinators and you might be able to also graze sheep out there to keep the grasses down and for the project.
Tim Powers 34:59
The environmental aspects are absolutely something we want to be well aware of in that. Finding it in the early staging process. And so glad to know that TRC is on top of that. Moving on, Ben, walk us through some of the processes here. They’re outlined in terms of site selection and feasibility for sites that we’re looking at.
Due Diligence from the Utility Perspective
Ben Hach 35:23
You bet. So I took this in a two different approach, style system here. One is an independent power producer (IPP) or a utility. They’re something that’s going to go out and develop a large project. We’re talking 10 megawatts, maybe 500 megawatts, depending on the size. When we go out, and we’re looking at site selection. We’re going to start out by using GIS mapping and analyses. And we’re going to look at elevation, Howard did a good job of explaining that, as well. The average elevation change cannot typically be over 14% in grade change over the area that a project is being proposed in order to have trackers, which helps maximize the production of the power. And so we utilize that. It’s s a very upfront very important criteria.
Ben Hach 36:14
We also look at the transmission lines. If you’re looking at a parcel that is out in the middle of nowhere and there are no transmission lines, it’s probably going to be bypassed unless there’s something that’s going to be built, that’s actually crucial to get the power out. And there’s a substation local, that can also be a benefit to a project. It helps keep the cost down. Same with transmission lines, environmental issues.
Ben Hach 36:40
We’re going to definitely take a look at any wetland issues that could be out there on properties that are being looked at, endangered species, like we talked about earlier. Lastly, there are areas where the mineral rights are separated from the property. And that can be a very big concern if you are a developer or independent power producer or utility. And you go out and you build your facility, and now somebody who owns the mineral rights to that property below ground level comes in and says,”I want to build an oil drilling rig right in the middle of your facility.” And you’re not going to want to give that up. So we take a look at those issues to mitigate risk and get rid of issues right upfront.
Brownfields
Ben Hach 37:25
And then on the last one, the letter E, it’s looking at brownfield sites. Those are areas that probably have some issues or concerns that they’re not that great as far as they’re contaminated or something like that. Those can be great sites for solar, because you can come in, install it, have a minimum invasive impact to that area, and just give that property time to hopefully maybe come back to fruition. And it’s an environmental setback that’s being productive now. It’s producing power. And the last one, there are the setbacks. Howard did a really good job talking about that. But we definitely have to take a look at setbacks from waterways, from homes, from property lines, from other from transmission lines, pipelines. All of those elements need to be taken and accounted for as you’re going out and looking for a site. That’s at a high level.
Siting from the Landowner Perspective
Ben Hach 38:23
Now, looking at it from the other perspective of a landowner, and I want to have solar potential in my place or a business that uses power and wants to offset my utility bill. That’s going to be important as far as which processes and procedures we go to try to mitigate your risk and help you get the project permitted and ready to construct. Whether you’re going to be selling the power or offsetting your own use.
Ben Hach 38:50
So if it’s an IPP, you’re doing a transmission with interconnect and a power purchase agreement. If you are a landowner or a business, you’re going to look at an electrical interconnect location study, and maybe use net metering, which allows you to potentially spin your meter back if you’re producing more than you can consume. They also are very concerned about elevation and location. Obviously, the closer, if you are a landowner or a business, that you can have the project to where you have your load, it is going to decrease costs and help you be much more efficient with your payback. And your bill. We also looked at the environmental issues. It just helps you ensure you’re going to have success and get your projects permitted and constructed. And again, we look at setbacks. Different jurisdictions have different setbacks. It is different everywhere you go. So we look at all of those items as far as site selection, evaluation, and feasibility.
Tim Powers 39:51
Great, thanks, Ben. We’ll jump to the next slide here. Would you mind digging in a little more environmental studies and the importance of that scope of work that ties in to the development one of these projects? Why should that be something in the forefront of folk’s minds? Why is this so important?
Ben Hach 40:12
Great question. So starting at the very top of the list there, wetlands. So if you were a farmer, and you have a aournd 160 acres of property, and you’re looking at either leasing it out or doing your own projects, we have to take a look at the wetlands that might be out there. And it could be something as simple as just a drainage ditch where the water to just naturally go off into the soil. Or you might have an area with a little bit of a knoll and a lower spot somewhere else, and you have that ditch. Well, that ditch could go into a different jurisdictional setback requirement that needs different mitigation, different permits, to make sure that you aren’t hurting the environment, polluting the waterways, etc.
Assessing for Challenges: Environmental, Permitting, Visual, NIMBY
Ben Hach 41:02
Along with that, the next one is a critical issue: analyses. That is, looking at that whole site from so many different important areas. As far as endangered species, transmission lines, other impacts that would need to be mitigated in order to get your permits and build a successful very environmentally friendly projects.
Ben Hach 41:25
Environmental: The interconnects and load flow, especially at the independent power producer utility level, that’s going to be very long lead items. So you’re going to want to get into that interconnect as quickly as possible, because there’s a lot of money and a lot of time involved in order to get through those steps. So we like to help our clients get through that and into it as quickly as possible. Because that as the long lead item.
Ben Hach 41:52
Visual impacts, that is absolutely crucial. There are a lot of people that just don’t want to see something that’s invasive to them. We can help come up with designs and methods to help mitigate that impact. But the awesome part is that with time, things just slowly kind of blend into the environment. Like communication towers and transmission lines that we see every day. And then the last one is the stormwater portion, which is helping mitigate water or the flow of water as it is coming down from the environment. We’re making sure that it does not erode the property. And so we can come up with mitigation plans and permits to ensure that your property is secure. And we’ve maintained the environmental surety of the property.
Ben Hach 42:50
Permitting challenges. This is my favorite. With permitting, you have three different levels. You’ve got your local, which is your township and county. You’ve got your state, and you’ve got your federal. And it really doesn’t matter what level you’re coming at, whether it’s a utility or an independent power producer. All of those just need to be looked at to ensure you’re meeting all the requirements to build a legal project that meets all the environmental setbacks and requirements.
Ben Hach 43:17
Challenges. Now this one might be funny, and hopefully, you might learn something on this, but one of the biggest challenges to any project is “nimby-ism:” “Not In My Backyard.” Or here’s my favorite, “BANANA.” “Build Absolutely Nothing Anywhere Near Anyone.” The solution to try to overcome those barriers is good communication. That means from the very get-go, making sure that all the different groups that you’re going to be working with, that they know who you are, what your intent is, and you’re getting good information out to those jurisdictions to help support your project.
Ben Hach 43:53
A really good definition of how that normally is impacted: Normally on any big commercial solar project, you have 10% that are going to be very pro-solar and renewable energy, and you have 10% that are con or against it. And then you’re gonna have about 80% that are just not informed, have no opinion, or just don’t know that much about renewable energy or solar or the benefits. And so it’s going to be very important that you utilize your communication plan to inform that 80% before the NIMBYs or the BANANAS start getting out their false information. So you can overcome that stuff from the very get-go. It’s very important to be up in front on that.
Ben Hach 44:41
The next thing that you can utilize to help overcome your challenges is using your experts. TRC is available all across the United States. There are other great companies that are out there, but you’re going to have to make sure that you’re checking all the boxes to build those successful and very environmentally friendly projects. And lastly, there’s a lot of amazing advocates out there. And I just listed a couple of them there at the bottom. But you’ve got SEIA, which is the Solar Energy Industries Association. You’ve got ACP, American Clean Power Association. And you’ve got DSIREusa.org. And they all have great information to help you, as the person that wants to have a project done, have the right information to learn about renewable energy and the benefits. They also help to provide that information to that 80% that you want to try to inform about your project, to ensure that you get that project built, permitted, and constructed, and to keep the environment and the local community happy.
Tim Powers 45:50
Yes, local engagement, we’ve always found is extremely important. Early on transparency can go a long way. And also from your partners. They are going to be on site and showing that due diligence, showing why permitting is so important, why the project is going to be safely designed and designed to standard at the highest quality. So definitely good to know that TRC is very experienced and tied into those those items. Moving on here, this is a little more of a roundtable discussion for the three panelists here.
Tim Powers 46:24
So, Ben, you had mentioned NIMBY, not in my backyard aspect that comes into project development. This is not unique to solar, certainly. It comes up for wind, it comes up for other kinds of developments in general. But I think all three have certainly seen that number one, being very clear about what the project is and isn’t, the benefits that will be made real from not only day one, in terms of payments to landowners, but also in the long term: Property tax benefits, pollinators, erosion, erosion control. That kind of thing goes into these projects. So Ben, let’s let’s throw it back to you for a very brief second here. Can you speak to how permitting, from everything from erosion to stormwater control, to even the electrical for building, can really satisfy the safety requirements for these sites? How do you ensure that anyone who might live nearby is going to be at no more risk than they were before the project was operating?
Ben Hach 47:35
You bet. So referring back, I talked about the local, state and federal level permitting requirements, ensuring that you are doing those studies to show that you’re not negatively impacting the environment, or the local area. This is going to be absolutely crucial to ensure that they’re satisfied that you are not damaging the area. Because those jurisdictions or entities, their requirement is to ensure that if they approve a project to be built, that it does no harm to anybody else out there. So that’s what all of those studies do. They show and prove that as I’m working towards getting a permitted solar project on my property, that it’s done. We’re going to make sure it doesn’t impact you negatively in value, vision, water. And it’s not going to endanger animals, etc. And so that’s why those studies are so important, and that’s what TRC can do is to help do those studies and make sure we can prove that and get those permits done.
Tim Powers 48:51
Great. Well, I think this is a good segue into our Q&A session here in the last 10 minutes of our webinar today. We’ll get some of the questions that came in here. Ben, you’re talking about local impacts. But this question is going to go to Howard here. And Ben, feel free to chime in after him. One question is about drain tiles, right? So folks in the Ag community are well aware of drain tiles and how they’re they’re important to the function of a farm. When you get decommissioned after 30 plus years or whenever they end up ceasing operations, we want to return that land to exactly as we found it, right. That’s typically something that we provide in the lease agreement. So, how can you touch on drain tiles? It’s a slightly mundane thing, but it’s actually pretty important to these farmers. So, drain tiles, what are they? And what happens if a developer might, –first of all how do developers find them? And that second of all, what happens if we accidentally break one or two during the construction process?
Protecting Drain Tiles
Howard Halderman 50:03
Great question. Drain tiles are perforated. Historically, they could be clay, or they could be black plastic. And you probably have seen them in a lot of construction projects. Many times they’re two to three feet wide and used as a drainage tile a road or something. But out in the farmland space, what you’ll find is they’ll vary in size from four inches to six inches in diameter, as laterals, and those will be placed every 40 to 80 feet apart. And the excess water drains into those. And then it goes into the main tile, which might be 10 or 12 inches in diameter. And that main tile will ultimately drain to an open ditch or a creek, or something like that. Generally speaking, those mains are going to be in a lower part of the field. They might even be in a grass waterway. Probably, they would be an area for a solar developer to avoid putting any of the solar panels. They would be across those large drainage ways where you might have some of those main tiles.
Howard Halderman 51:10
Now, to Tim’s question, what happens if a developer hits one of the four to six-inch tiles that are every 40 or 80 feet across the field? You may or may not know that at the time of construction, because those are going to tend to be three, three and a half four feet deep. So if the posts don’t go down that far, that would be one way to avoid it. The other way to avoid it would be if the landowner has a map, and they have a tilemap of where they’ve installed the tile. Many of the tiles that are being installed today, they’re GPSd. So you know exactly where those tile lines run. And then you can, as the developer, avoid perforating them. But that does not mean that those tiles that were put in 60 or 70 years ago aren’t vulnerable. I’ve seen my dad’s map, and it’s handwritten out verbally where these tile lines are. That may not be exact. And so if you were to hit them, probably you will discover that drainage issue over the last 20 or 30 years of the lease. And that’s something that then could be fixed once it’s returned back to its original state. But the ideal thing is if the landowner has a decent map of any kind, whether it’s GPS or not, that would really enhance the opportunity to miss those tile lines and keep the drainage as it has been.
Tim Powers 52:32
Thank you, Howard. Very good points. All right. And today, we actually have access to a ground-penetrating radar as well, to help if we don’t have accurate maps. Or if no maps at all, we can certainly get out to the site in the early stages and understand what’s out there and where it is, and how we can leave it as it lies.
Ben Hach 53:12
Two extra things to add along the drain tile issue is that your typical tracker or your typical, even fixed-pitch solar array, their panels, or their footers, and the pieces that go into the ground are spread out quite a ways. So, you can span tile. And in the case where you have those tilemaps, it’s very easy to locate those and just ensure that your pylons that go down into ground support the system, don’t hit them. But going back to some of Howard’s very initial comments about leasing, etc., your contract is also going to cover if there’s any damage. Let’s say, worst-case scenario, they couldn’t locate it. They couldn’t witch it. There are no tilemaps, and they hit one. And you don’t notice it for two to three years. But you can see the after fact down the road? That developer or that owner is going to be required to repair that at their cost, not the landowner’s cost.
Tim Powers 54:12
Perfect. Thanks, Ben. Five minutes to go here. Another question to Howard: Another cost question related to the landowner’s property taxes. We discussed the benefits that these systems will pay millions over several years to the local tax body, typically the county. Does that impact the taxes of the property owner at all? Howard, can you speak a little more to that?
Property Taxes
Howard Halderman 54:41
I failed to mention that in my presentation, and I should have. Normally, the way that lease is written, the underlying historical real estate tax that would be tied to the value of that land as cropland stays with the landowner, and the landowner pays that long term. Any incremental tax that that is above that due to the solar development would be the responsibility of the solar company. So, as a result, the landowner is not going to see an increase in their real estate taxes, unless, of course, their underlying cropland value would go up in value. So it should have minimal impact on the real estate taxes to the landowner.
Tim Powers 55:27
Excellent, thank you. That’s an important note on the tax question, something that might not be obvious, but definitely something to think about when considering these agreements. We’ve got time for probably one more question here. So Ben, we can shoot it to you. Briefly on this one. Where do you see permitting processes possibly changing over the next maybe 3 to 5 years? Are they getting more strict? What kind of due diligence might be needed upfront to make permitting to continue to run smoothly and have a project get to an operating stage?
Permitting Trends
Ben Hach 56:11
Great question. I think that as more and more projects are built, more and more jurisdictions are going out in advance and putting into their guidelines, the rules and processes that need to be followed to do bring a project to fruition. And it’s at all different levels. So as the utilities want, and the people want more renewable energy, these processes for permitting continue to get better. The big thing is, is just continuously, always making sure that you’re communicating your intent, your endeavors, and getting that good information out in advance. Don’t let the lies or the bad information, get out to that 80%.
Tim Powers 56:59
Great, thank you. Well, that just about wraps it up here for us here today. Ben and Howard, it’s a really exciting time to be in the solar industry. Now, in the last 2 to 3 years, the largest amount of new energy added to the grid has been has been solar in the US. And we’re going to see that trend continue over the next 5 to 10 plus years. Indiana’s suddenly jumped to a Top 5 state in projected solar development and construction in the next several years. So, we’re very excited about that. Inovateus certainly appreciates the input today on this topic. So any closing thoughts or words here for the audience as we wrap things up?
Howard Halderman 57:44
I think it’s a great opportunity for landowners to think about. Clearly, when you read about various fossil fuel energy plants being closed, solar is one of the renewable sources that can certainly help maintain the power that this country needs to not only live but also be productive. And so I think landowners can take advantage of this, it can be a great way to secure the farm’s financial future, and provide an opportunity for growth. So I’m obviously an advocate. But I think it can be done in a way that protects all parties and provides great opportunities.
Ben Hach 58:23
I agree with that wholeheartedly. And I love solar because you can do it and build out in so many different ways. Creativity is just the very beginning of that. And I love the fact that there’s no water consumption in the generation of that power and no waste. And there are more awesome technologies coming out there. So everybody, hang on. A lot of great stuff coming down.
Tim Powers 58:51
Great points by everyone here. So it is three o’clock. We will conclude things here with our Q4 Investing in Your Energy Future series. Thank you so much for joining today, Howard and Ben.
