By Joseph Tassone Jr. | May 24, 2024
Last week, I was privileged to address the NY BEST Capture the Energy Conference in Albany, NY. My presentation, “No Land, No Project,” highlighted the critical need for securing site control on property through a signed lease, option, or purchase agreement.
Renewable energy development fundamentally revolves around real estate. Independent Power Producers (IPP) and developers can only move forward by securing a legal agreement from the property owner. Despite having the best policies, interconnection, and EPC plans, a project can only succeed with usable, permittable land. Not all land is equal, and the most desirable land is often taken first.
With over 25 years of development experience, I have observed that the first company to secure site control generally wins. Incentives and interconnection costs are typically similar across the board. Therefore, a developer’s competitive edge lies in being a first mover and establishing a good rapport with landowners. However, many developers face challenges in quickly finalizing site control documents. These delays can be costly and may ultimately jeopardize a project.
Several factors, including legal department backlogs, title company hold-ups, mishandling contract revisions, or simply a lack of prioritization, contribute to these delays. The cost of obtaining quality site control is minimal, usually less than one-tenth of one percent of the total project cost, yet it is crucial for project success- “no land, no project !”
Well-drafted land contracts often include various contingencies for developers if significant issues arise. Consequently, there is little reason to delay signing a site control contract when all parties agree on the terms.
Tips for Streamlining the Site Control Process:
- Engage with the property owner and key stakeholders early to establish a solid relationship.
- Identify potential red flags upfront, such as wetlands, setbacks, or easements. Addressing these early issues can prevent costly problems later.
- Set clear expectations with the property owner by discussing the contract and expected timelines transparently and sincerely.
- If applicable, sign a non-binding term sheet to secure an exclusivity period for negotiating the lease or purchase terms.
- Order a title report soon after agreeing on business terms. A reputable title company can deliver a preliminary report within five business days.
- If the property owner has legal representation, arrange an introductory call between counsels.
- Quickly address contract redlines, as delays often occur here. Aim to return a revised version within 72 hours.
- Prepare any additional documents and information needed for the land agreement early in the process.
- Maintain consistent follow-up and document all communications via email, as effective communication is crucial.
Conclusion
Securing quality site control is the foundation of a successful renewable energy project. Establishing a diligently vetted property and obtaining legal agreements with landowners are essential pillars for any project. In the competitive landscape of renewable energy, those who prioritize and swiftly secure site control position themselves for success.
Joe Tassone Jr. is founder and a principal of Oncore Origination and has over twenty-five years of project development experience. Visit www.oncoreorig.com for more information.