Resilience: Transforming Energy Sector – Navigating land issues in Solar and Storage Projects
In the latest episode of the Resilience podcast, colleague Shellka Arora-Cox and Laura Pagliarulo, CEO and founder of SolaREIT, get down to the nitty-gritty in a discussion of the interplay of solar power capacity, generation and land use.
(Editor’s note: The following transcript has been edited for clarity. Welcome to Resilience. This is the vodcast that discusses the most pressing issues and opportunities in the energy industry. Shellka Arora Cox is your host. She is a partner with Pillsbury Winthrop Shaw Pittman. Laura Pagliarulo is the CEO and founder at SolaREIT. We will be discussing the unique intersection between land and energy. Laura, welcome.
Laura Pagliarulo:
Thanks for having me, Shellka.
Shellka Arora-Cox: Before we dive into the nitty gritty today and talk about the land and the dirt, let’s begin with your career journey. What inspired you to take on this unique role of land and energy transformation? How did you get here?
Pagliarulo: I’ve been involved in renewables in various capacities for the past 20 years, with a strong focus on solar. Climate change has been my passion since I was a child. SolaREIT was founded by me and three co-founders about four years ago. Our collective experience includes roles as project financiers and developers, as well offtakers. We observed that developers who encountered landowners wanting something other than the standard leasing, which is used about 85% of time, often lacked capital to prepay the lease. Many landowners are not interested in a long-term lease with annuity payments, especially as the demand for solar and battery storage grows. We realized that this model could be applied to the entire developer community. We work almost exclusively with developers, helping them leverage land to their advantage.
Arora-Cox: Land is essential for solar and storage projects. Could you explain how important land is to the success of a project? Is it simply about finding the ideal piece of land, or is there more involved?
Pagliarulo: Absolutely. As a developer, I can say that we don’t buy early-stage assets but instead work with developers to provide guidance. Planning is key to finding the best sites for solar project right now, especially in terms of interconnection. It is important to know where the interconnection takes place and evaluate the capacity of the interconnection queue. Interconnection delays are a major problem. In 2023 and 2024 the average interconnection took five years. Across the U.S., approximately 1,500 gigawatts are currently stalled in interconnection queues, which is substantial.
Another critical consideration is the type of land–whether it’s farmland, cropland or other agricultural land. This is a key factor in determining the community’s reaction to a new solar project. Developers need to be prepared to work closely with communities, not only to address their concerns but also to consider ways to respect the agricultural heritage or purpose of the land, in addition to the solar or battery storage project.Arora-Cox:
How does SolaREIT assist clients in navigating land-related challenges? Could you elaborate on the specific services and support you provide to help clients manage these issues effectively?
Pagliarulo: We work exclusively with solar and battery storage developers across the country, currently operating in about 19 states. When a developer contacts us, it is usually because they have a purchase plan they need to implement. They are looking to us to add value to the project. Developers often prefer not to invest their own capital in real estate. We can structure better options for them because the cost of capital is different. We can go about this in a variety of ways. One option is to find the lowest possible rate of lease, and make their project more accretive, by assuming a lease for a long period with extensions. For example, a lease for 25 years. A second option is to pay more than the average market rate in the area. If, for example, the average lease rate is $3,500 an acre in Maryland, we may choose to offer $4 million or $3 million as a purchase option. In this scenario, $1,000,000 would be paid to the landowner and the remainder would go to a developer for use as project capital or other needs. Does that make sense?
Arora-Cox: Yes, that makes sense. You mentioned the community impact. While solar projects are focused on sustainability and maximising decarbonization efforts they can also raise issues related to land use or community impact. How does SolaREIT support clients in managing and balancing the goal of decarbonization with the potential effects on land use and community interests?
Pagliarulo
: Often, we’re stepping into an existing lease, typically after the developer has secured the necessary discretionary permits and executed the interconnection agreement. We can structure the deal early, but we won’t close it until these milestones have been met. This timing can be well ahead of construction, but that’s when we officially close the deal.Recently, I’ve observed some exciting developments in the industry. Two years ago, this wasn’t the case. Now, more developers are taking a forward-looking approach to agriculture. Many are making efforts to address conservation concerns, for example, committing to topsoil preservation or restoring topsoil to its original state after construction.
On the agricultural side, practices like sheep grazing are becoming more popular, not only to manage vegetation but also to introduce organic matter back into the soil over time. Crop protection clauses are another innovation. Since our investment is in the real estate, it’s up to asset owners to decide what they want to do with dual-use options. It’s encouraging to see asset owners becoming more open to practices like dual-use under solar panels, accepting the potential risks and exploring new ways to integrate agricultural use within solar projects.Arora-Cox:
That approach enhances the asset’s value and can also shift the equation away from a “not in my backyard” (or NIMBY) mindset. SolaREIT’s next question is: What strategies do they advocate to change attitudes from NIMBY (not in my backyard) to YIMBY? How do you encourage communities to actively support projects and even embrace seeing renewable installations in their local areas?
Pagliarulo
: A few responses come to mind. When a developer chooses a site, he or she is the one who establishes the first relationship with the community. They may engage with local planning committees or conservation committees, depending on the state. We are very deliberate about working with reputable developers, even though it is not our responsibility. We work with well-respected solar and battery storage developers that have strong, positive relationships in the communities where they operate. We own real estate in Massachusetts for a solar project where the developer is building educational paths that focus on pollinator habitats. Giving the community access to these trails provides an educational resource and transforms what might initially seem like an industrial project into something beneficial and engaging for local residents.
We’re also supportive of agrivoltaics or pollinator-friendly features that some communities want to promote. While our control extends only to the area up to the fence line, we fully support these community-oriented features within the fenced area, though the ultimate responsibility and management within that area rest with the project sponsor, not us.Arora-Cox:
You mentioned the combination of solar and storage–a perfect match. When it comes to integrating solar and storage on the same land, is it just a matter of finding additional land, or are there more synergies involved?Pagliarulo
: It’s an interesting dynamic. Solar typically requires five to seven acres of land per megawatt. Storage, on the other hand, only needs a fraction of that. Only a few states require solar projects to include storage. The land requirement for solar is minimal when storage is included. Even in larger projects like those in Texas the storage footprint is small compared to that required for solar. Solar and storage are complementary, despite the fact that they have different uses. Despite this distinction, solar and storage are incredibly complementary, each enhancing the value of the other.
Arora-Cox:
Laura, what strategies are developers using today for securing and optimizing land for solar and storage projects?Pagliarulo
: I think we’re in a unique and advantageous position since we work with so many developers nationwide and have insight into the outcomes of their negotiations with landowners through the leases. I would say that the majority of developers play a responsible role. We are sometimes approached directly by landowners who want to finance their lease. From a broader perspective, I believe the solar and battery storage industry faces enough challenges and developers shouldn’t have to deal with unnecessary complications in lease agreements.However, we do occasionally see some concerning practices in leases that I’d caution developers against. Some leases have vague language regarding rent abatement. This allows the developer to withhold payments for certain reasons, such as a casualty event or other specified circumstances. We also sometimes see extended construction periods paired with very low construction rents, which can be problematic.
On a positive note, it’s encouraging to see more landowners and farmers advocating for themselves, including provisions like crop protection in their leases, which promotes synergy between solar and agriculture. We see many great developers that work well with landowners, and maintain good lease practices. But unfortunately, we still come across some less favorable agreements more often than we’d like.
Arora-Cox: When it comes to sustainability and environmentally responsible projects, you briefly touched on SolaREIT’s role, but could you elaborate on how SolaREIT approaches sustainability in relation to land use?
Pagliarulo: We closely track a few key things. I would say that we actively encourage and promote projects developed on brownfields. In these cases, instead of buying the land, we work with developers to purchase easements for such sites. This approach is especially helpful, as these projects have often tight financial margins. Land lease costs can account for up to 15 percent, and sometimes even more, of a project’s budget. This can further squeeze margins. We’ve developed methods to transact on brownfields, rooftops and canopies. We should focus more on the brownfield approach, especially since it is more expensive and everyone wants to improve project economics. When we acquire land for a project, we often control more than what is needed. We might, for example, buy a parcel of 70 acres but only use 60 acres. This leaves 10 acres to be used for other purposes. We’re currently exploring the best way to use that extra acreage. It’s exciting. We should use it to create restorative wetlands. Should we sublease it out to a farmer or develop a habitat for pollinators? In certain areas, I am in favor of restorative wetland. These are some of the possibilities we’re currently evaluating.
Arora-Cox:
And with these projects, we both know that land is key, right? Location, location, location! As land becomes scarcer, looking ahead, how do you see the market evolving over the next two to three years?
Pagliarulo: I’d say that land itself isn’t scarce since there’s plenty of it, but high-quality sites are becoming increasingly hard to find. As we have discussed, the majority of prime locations in Texas for battery storage projects are already claimed. The location was less important for solar than battery storage. It depends on factors such as the node to which you’re connected, the volatility of the node, and if there’s an interconnection for high-voltage on the property. The proximity to the substation and the cost of interconnection are also important.
I believe many people overlook the fact that having land alone is not enough. I read a study that said we could power the entire country if we covered a lake-sized area with solar panels. But it’s far from simple. Installations must be near load zones so that the grid can distribute energy efficiently. In Maine, ambitious solar goals resulted in zero or negative pricing for solar due to a lack of population support. I hope that helps answer your question.Arora-Cox:
It does answer my question, but let me rephrase it. There’s plenty to go around. The location is what’s rare. It’s not easy to find the perfect piece of land for a project. What are the key challenges you see developers facing today?Pagliarulo
: I think the major issues right now revolve around interconnection queue reform. Utility interconnection studies caused significant delays in many of the projects that we track from the stage of notice to proceed to the date of commercial operation (COD). Interconnection costs have increased exponentially, which is a major challenge for developers.Apart from that, public opposition to projects in certain areas is another issue. Some companies are already adapting to the solar and battery storage industries by engaging with local communities. I’ve seen lease agreements which stipulate that the land must be decommissioned after 40 years and then returned to farmland. I have mixed feelings about that; if we own the land in that scenario, we just must factor it into our planning.
Arora-Cox:
Shifting gears a bit as we near the end of our conversation–on a lighter note–Laura, any words of wisdom based on our discussion today? Or, how do you unwind when you’re dealing with challenges around land or other issues?Pagliarulo
: Those are two questions! For some words of wisdom, i’d say the developers with whom we work are increasingly seeing land as an opportunity and not an obstacle. The smart developers, particularly those in the utility sector – though it is starting to spread to distributed generation – prioritize purchase options that they can leverage in the future for added value. You’re probably leaving money on your table if you don’t push for these options. This is a message that developers should take to heart: Land is not just a box you check when you want site control. As for my way to relax, I enjoy gardening, and especially weeding, on stressful days. Spending time with my dogs and being present with my children, ages nine and 15, also helps. Putting my phone down, going for a walk, and being in the moment with them is a great way to relax.Arora-Cox:
Excellent. It’s all about the simple things. Laura, thank you so much for being with us today.
Pagliarulo: It was great talking to you. Thank you.
Arora-Cox: That’s it for today. Tune in next time for more Resilience.
PREVIOUS EPISODES
Resilience: Transforming the Energy Sector – AI and the Energy Transition | Episode 1 (10.7.24)Resilience: Transforming the Energy Sector – The Solar M&A Landscape | Episode 2 (10.23.24)
