Shining a Lighton Solar Projects Considerations from a Ranch Perspective By Jason Sawyer
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n the last decade, there has been a substantial increase in the development of solar energy projects in the US, and much of the surge in development has occurred in areas that have a history of ranching as a primary land use. Land managers often seek additional income streams and enterprises supported by their land assets, it is important to have a thorough decision-making process to ensure long-term value of the asset is sustained. While the decision to seek or secure a solar energy project ultimately depends on the specific needs, goals, and objectives of an individual entity, there are some important considerations common to a due diligence process. These include temporal, physical, financial, and liability components. As with many decisions facing ranch owners and managers, elements of each consideration may affect the others, and the overall decision should be considered from a systems perspective.
Temporal considerations Surface use agreements and energy (oil and gas) leases are familiar to many landowners. Renewable energy leases have similarities to more traditional surface agreements, but differ in some material ways. One difference is duration. A solar lease project typically has a minimum term of 20 years, and often these terms extend to 50 years. The duration of these agreements makes careful advance consideration very important – landowners will live with the decision for a long time after it is made. Solar lease agreement terms are often
divided into phases. The ‘development’ phase is the period from the initial lease through site development, construction, and installation of the solar equipment. The ‘operations’ phase commences when the installation comes online and begins power production. Because the operator is not generating power (nor income) during the development phase, a lower annual lease payment is offered, which increases during the operation phase. Unlike oil and gas development, which typically occurs relatively quickly, the development phase for a solar project can extend for long periods. Land managers should carefully consider the terms of the lease and the maximum duration of the development phase, as this can substantially alter the true value of the agreement. Additionally, the operations phase may exist as a set term (e.g., 20 years) from the end of the development phase, and so the total length of the lease can be extended beyond expectation if the development phase is lengthy.
Physical Considerations The acreage required for solar installations varies with the specific type of installation and location. Use of 8 to 10 acres per 1 megawatt (MW) of generation capacity had been a ‘rule of thumb’ estimator, but improvements in solar technology have reduced the footprint, and current estimates are 2 to 5 acres per MW constructed. The cost of solar generation capacity has also decreased, with current estimates of $1 to $1.50 per Watt; or $1 million per MW. Solar installations Spring 2022 | King Ranch® Institute for Ranch Management 7
