Utility-scale solar developments have proliferated across the United States over the past decade, growing at a rate that few could have predicted just a short while ago. Even as the actual capacity of solar projects installed continues to beat the most optimistic forecasts, States across the country have set ambitious renewable energy targets that will depend heavily on solar energy’s continued growth over the next decade and beyond.
Siting a utility-scale solar project requires balancing a number of competing concerns. In general, costs associated with moving electricity, infrastructure limitations and the complex regulatory patchwork and ownership structures that characterizes the United States electrical grid require that solar projects be installed in the same general geographic area where the electricity is being consumed. Solar projects require a large land area to generate a significant amount of energy when compared to non-renewable resources like coal or gas, and in most markets it is possible to locate areas where there is limited competition for farmland and forestland from other types of development (such as residential or commercial developments) making pristine land particularly economical and generally available for solar projects. As a result, these tensions often result in conflict between solar developers and the communities they are looking to develop in.
Brownfield sites are frequently identified by policymakers as priorities for remediation and redevelopment. Solar and other renewable energy projects are particularly tantalizing prospects on contaminated properties from a policy perspective. Redevelopment of a brownfield site into a renewable energy project should satisfy any land use concerns about the impact of solar development on local ecosystems. In addition, given the passive nature of this use, solar should be highly compatible with properties that are relying on natural attenuation as a remediation strategy, or that face limited redevelopment prospects given the nature or concentration of contaminants on the property.
Unfortunately, a lack of adequate incentives and concerns about risk continue to limit brownfields development for utility-scale solar. Federal and State environmental laws were intentionally drafted to ensure potential liability for environmental contamination reached as broadly as possible. Further, if additional remediation measures might be necessary in the future, it can be extremely difficult to incorporate these unpredictable and possibly significant costs into a base case financial model, threatening project financing. That potential for uncertainty is inconsistent with the established financing strategy for these assets, which often look to predict costs and income with unusually high precision (when compared to other types of real estate developments) over a 20-plus year term.
Some of these concerns can be addressed with additional engineering and diligence. While redeveloping a brownfield property may not be the norm in the solar industry, real estate development projects on brownfield properties have been successfully executed for decades. Many States shield third party tenants or purchasers (as well as their lenders) implementing an approved remediation plan from liability for existing contamination, and various strategies may exist for precisely identifying the scope of any potential risk, as well as for shifting risk for potential contamination onto a third party, such as the existing property owner. Experience really matters here, and the attorneys at DarrowEverett can help navigate you through this area of law that may otherwise seem unfamiliar.
Even with proper diligence and liability protections, incentives on the local and State level may be required to offset the additional cost of developing and holding a brownfield site. Municipalities concerned about the proliferation of solar projects should consider zoning changes that simplify and accelerate the permitting process for developing on a brownfield, possibly allowing for higher density development and reduced setback requirements. Most utility-scale solar projects already rely on tax equity financing, meaning that tax credit incentives would likely be embraced by the industry, as the infrastructure largely already exists to take advantage of those types of incentives. Other strategies exist as well: grants, higher payments for electricity generated by projects located on brownfields, clearer eligibility criteria and greater certainty in liability protections could all play a significant role in incentivizing brownfield development.
About DarrowEverett LLP: DarrowEverett LLP full-service business law firm committed to providing clients what the highest level of service and attention to detail as well as efficient and effective legal advice, with offices in New York, NY; Providence, RI; Boston, MA; Fall River, MA; Charlotte, NC; Charleston, SC, and Ft. Lauderdale, FL. The DarrowEverett team has a wealth of experience in a variety of areas, including acquisitions and sales of businesses and real estate, corporate and real estate finance, renewable energy, commercial transactions, commercial land development and land use, all forms and uses of leasing, condominiums, personal and corporate tax matters, estate planning, and commercial litigation. DarrowEverett is a team of legal and business advisors having substantial knowledge and experience on both the business and legal side of transactional and non-transactional matters.
About Capitol Communications Group, LLC: Capitol Communications Group, LLC is a full-service government and public affairs firm dedicated to providing our clients with professional, ethical and diligent representation. At Capitol Communications Group, we pride ourselves in our ability to bridge the gap between the private and public sector. Too often, business leaders find themselves speaking a different language than the government officials sitting across the table from them. These communications breakdowns are frustrating and discouraging, but that is where we come in. Our professionals bridge the gap between your business and the halls of government by combining our unmatched business experience with our political expertise and understanding of the nuances of the political process.
This alert should not be construed as legal advice or a legal opinion on any specific facts or circumstances. This alert is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. The contents are intended for general informational purposes only, and you are urged to consult your attorney concerning any particular situation and any specific legal question you may have. We are working diligently to remain well informed and up to date on information and advisements as they become available. As such, please reach out to us if you need help addressing any of the issues discussed in this alert, or any other issues or concerns you may have relating to your business. We are ready to help guide you through these challenging times.
Unless expressly provided, this alert does not constitute written tax advice as described in 31 C.F.R. §10, et seq. and is not intended or written by us to be used and/or relied on as written tax advice for any purpose including, without limitation, the marketing of any transaction addressed herein. Any U.S. federal tax advice rendered by DarrowEverett LLP shall be conspicuously labeled as such, shall include a discussion of all relevant facts and circumstances, as well as of any representations, statements, findings, or agreements (including projections, financial forecasts, or appraisals) upon which we rely, applicable to transactions discussed therein in compliance with 31 C.F.R. §10.37, shall relate the applicable law and authorities to the facts, and shall set forth any applicable limits on the use of such advice.