Within the newest episode of the Resilience podcast, colleague Shellka Arora-Cox and Laura Pagliarulo, CEO and founding father of SolaREIT, get right down to the nitty-gritty in a dialogue of the interaction of solar energy capability, era and land use.
(Editor’s notice: The next transcript has been edited for readability.)
Welcome to Resilience, the vodcast the place we speak about probably the most urgent challenges and the most important alternatives within the vitality sector. I’m your host, Shellka Arora-Cox, a accomplice at Pillsbury Winthrop Shaw Pittman. I’m thrilled to have Laura Pagliarulo, the CEO and founding father of SolaREIT, with me at present.
Laura and I will likely be speaking in regards to the distinctive intersection of land and vitality transition. Laura, welcome.
Laura Pagliarulo: Thanks for having me, Shellka.
Shellka Arora-Cox: Earlier than we dive into the nitty gritty at present and discuss in regards to the land and the grime, let’s start along with your profession journey. What was the inspiration that led you this distinctive place of land and vitality transition? How did you get right here?
Pagliarulo: I’ve been concerned in renewables in numerous capacities for the previous 20 years, with a robust give attention to photo voltaic. Local weather change has at all times been a core ardour of mine. About 4 years in the past, together with three co-founders, I launched SolaREIT. Our collective expertise spans roles as venture financiers, builders and offtakers. By way of this work, we noticed that when builders encountered landowners who wished one thing aside from the usual lease—used about 85% of the time—they typically lacked the capital to both prepay the lease or buy the land outright. Because the demand for land for photo voltaic and battery storage continues to develop, many landowners, notably these approaching retirement, might not be focused on a 35-year lease with annuity funds. We acknowledged how this mannequin may apply throughout the developer neighborhood. We work nearly solely with builders, serving to them leverage land to their benefit.
Arora-Cox: Land is crucial for photo voltaic and storage tasks. Might you discuss a bit about how essential land is to a venture’s success? Is it merely about discovering the best piece of land, or is there extra concerned?
Pagliarulo: Completely. Talking with my developer hat on, we don’t purchase early-stage belongings instantly however moderately collaborate with builders, offering steerage the place we are able to. The perfect websites for photo voltaic tasks proper now require cautious planning, particularly round interconnection. It’s important to find out the place the interconnection will happen and assess the accessible capability inside the interconnection queue. Interconnection delays have change into a big problem; in 2023 and 2024, the typical interconnection time was round 5 years. Throughout the U.S., roughly 1,500 gigawatts are presently stalled in interconnection queues, which is substantial.
One other essential consideration is the kind of land—whether or not it’s farmland, cropland or different agricultural land. This facet is usually a significant factor in shaping neighborhood reactions to a brand new photo voltaic farm. Builders have to be ready to work intently with communities, not solely to handle their considerations but in addition to think about methods to respect the agricultural heritage or goal of the land, along with the photo voltaic or battery storage venture.
Arora-Cox: How does SolaREIT help shoppers in navigating land-related challenges? Might you elaborate on the particular providers and assist you present to assist shoppers handle these points successfully?
Pagliarulo: We work solely with photo voltaic and battery storage builders throughout the nation, presently working in about 19 states. When a developer involves us, they sometimes have a purchase order choice they should execute, and so they look to us for our capability so as to add worth to their tasks. Usually, builders choose to not allocate their very own capital to actual property. The price of capital for growth functions is sort of completely different from the capital we convey to the desk, which permits us to construction extra favorable choices for them.
Right here’s an instance: Let’s say the developer has a $1 million buy choice. We are able to method this in numerous methods. One choice is to unravel for the bottom attainable lease price, making their venture extra accretive by assuming a long-term lease with extensions, as an example, a 25-year lease. Another choice is to pay above the standard market price, relying on the particular space. Utilizing Maryland for instance, if the typical lease price in that area is round $3,500 per acre, we would select to supply $3 million or $4 million for the acquisition choice. In that state of affairs, $1 million would go to the landowner, and the remaining quantity would go to the developer to make use of as growth capital or for different venture wants. Does that make sense?
Arora-Cox: Sure, that is sensible. You talked about neighborhood impression, and whereas photo voltaic tasks are actually centered on sustainability and maximizing decarbonization efforts, they’ll additionally increase considerations associated to land use and neighborhood impression. How does SolaREIT assist shoppers in managing and balancing the purpose of decarbonization with the potential results on land use and neighborhood pursuits?
Pagliarulo: Usually, we’re getting into an present lease, sometimes after the developer has secured the required discretionary permits and executed the interconnection settlement. We are able to construction a deal early on, however we don’t shut till these milestones are in place. This timing might be effectively forward of building, however that’s after we formally shut the deal.
Lately, I’ve noticed some thrilling developments within the trade. Extra builders are adopting forward-looking approaches to agriculture, which wasn’t as widespread even two years in the past. Many are making efforts to handle conservation considerations, for instance, committing to topsoil preservation or restoring topsoil to its unique state after building.
On the agricultural facet, practices like sheep grazing are rising in popularity, not solely to handle vegetation but in addition to introduce natural matter again into the soil over time. Different improvements embody crop safety clauses in leases. Traditionally, photo voltaic and agriculture have been seen as incompatible, however there’s no purpose they have to be.
Since our funding is in actual property itself, it’s in the end as much as the asset house owners to determine how they need to handle dual-use choices. It’s encouraging to see asset house owners changing into extra open to practices like dual-use underneath photo voltaic panels, accepting the potential dangers and exploring new methods to combine agricultural use inside photo voltaic tasks.
Arora-Cox: That method enhances the asset’s worth and may also shift the equation away from a “not in my yard” (or NIMBY) mindset. This leads me to my subsequent query: What methods does SolaREIT advocate to rework attitudes from NIMBY to YIMBY (sure in my yard)? How do you encourage communities to actively assist tasks and even embrace seeing renewable installations of their native areas?
Pagliarulo: A couple of responses come to thoughts. First, when a developer selects a web site, they’re those establishing the preliminary relationship with the neighborhood, typically participating with native planning boards or conservation committees relying on the state. Whereas that duty doesn’t fall instantly on us, it does mirror on us, so we’re very intentional about partnering with respected builders. The trade remains to be close-knit, and we work with well-regarded photo voltaic and battery storage builders who preserve robust, optimistic relationships inside the communities they function.
On our finish, since we handle 1000’s of acres in our portfolio, we’re very open to initiatives that create neighborhood advantages. For instance, we personal the true property for a venture in Massachusetts the place the developer is constructing instructional trails centered on pollinator habitats inside the photo voltaic set up. Giving the neighborhood entry to those trails offers an academic useful resource and transforms what may initially appear to be an industrial venture into one thing useful and fascinating for native residents.
We’re additionally supportive of agrivoltaics or pollinator-friendly options that some communities need to promote. Whereas our management extends solely to the world as much as the fence line, we absolutely assist these community-oriented options inside the fenced space, although the last word duty and administration inside that space relaxation with the venture sponsor, not us.
Arora-Cox: You talked about the mixture of photo voltaic and storage—an ideal match. With regards to integrating photo voltaic and storage on the identical land, is it only a matter of discovering further land, or are there extra synergies concerned?
Pagliarulo: It’s an fascinating dynamic. Photo voltaic has a comparatively giant footprint, sometimes round 5 to seven acres per megawatt, whereas storage requires a a lot smaller space. Surprisingly, just a few states have mandated that photo voltaic tasks should embody storage. When storage is added to photo voltaic, the land requirement is minimal. Even with bigger tasks, like these in Texas, the storage footprint stays small in comparison with the area wanted for photo voltaic.
What I typically see within the media, although, is a few confusion between era and capability. For example, there are articles touting the set up of sure megawatt ranges of era, however they don’t at all times distinguish between era (which photo voltaic offers) and capability (which storage provides). Regardless of this distinction, photo voltaic and storage are extremely complementary, every enhancing the worth of the opposite.
Arora-Cox: Laura, what methods are builders utilizing at present for securing and optimizing land for photo voltaic and storage tasks?
Pagliarulo: I feel we’re in a singular and advantageous place since we work with so many builders nationwide and have perception into the outcomes of their negotiations with landowners via the leases. I’d say the vast majority of builders are accountable gamers. Often, we have now landowners method us instantly, looking for to finance their lease. From a broader perspective, I imagine the photo voltaic and battery storage trade faces sufficient challenges and builders shouldn’t should cope with pointless problems in lease agreements.
Nevertheless, we do often see some regarding practices in leases that I’d warning builders in opposition to. For instance, some leases embody obscure language round hire abatement, permitting the developer to withhold hire funds underneath sure circumstances, corresponding to casualty occasions or different specified causes. We additionally typically see prolonged building intervals paired with very low building rents, which might be problematic.
On a optimistic notice, it’s encouraging to see extra landowners and farmers advocating for themselves, together with provisions like crop safety of their leases, which promotes synergy between photo voltaic and agriculture. Total, we see many nice builders who work effectively with landowners and preserve stable lease practices. However sadly, we nonetheless come throughout some much less favorable agreements extra typically than we’d like.
Arora-Cox: With regards to sustainability and environmentally accountable tasks, you briefly touched on SolaREIT’s function, however may you elaborate on how SolaREIT approaches sustainability in relation to land use?
Pagliarulo: We intently observe a couple of key issues. First, I’d say we actively encourage and assist tasks developed on brownfields. In these instances, we don’t purchase the land however as a substitute work with builders, doubtlessly via easement purchases for such websites. This method is especially useful as a result of these tasks typically have tight monetary margins. Lease prices for land sometimes account for 10 to fifteen p.c of a median venture’s finances, typically much more, which may additional squeeze margins. To handle this, we’ve developed methods to transact on rooftops, canopies and brownfields. The brownfield method is a narrative we must always emphasize extra—particularly because it’s extra expensive and everybody’s trying to enhance venture economics. From an environmental standpoint, after we purchase land, we typically management greater than is instantly wanted for a venture. For instance, we would purchase a 70-acre parcel however use solely 60 acres, leaving 10 acres for added functions. Proper now, we’re actively exploring how one can make the most of that additional acreage, which is thrilling. Ought to we use it for restorative wetlands, sublease it to a farm, or develop a pollinator habitat? Personally, I’m in favor of restorative wetlands in sure areas. These are among the prospects we’re presently evaluating.
Arora-Cox: And with these tasks, we each know that land is vital, proper? It’s all about location, location. As land turns into scarcer, wanting forward, how do you see the market evolving over the subsequent two to a few years?
Pagliarulo: I’d say that land itself isn’t scarce since there’s loads of it, however high-quality websites have gotten more and more laborious to search out. As we mentioned earlier, particularly in Texas, many of the prime places for battery storage tasks have already been claimed. With photo voltaic, having a really perfect web site wasn’t as essential early on, however with battery storage, it’s all in regards to the location. It is dependent upon components like which node you’re connecting to, the volatility of that node, and whether or not there’s a high-voltage interconnection on the property. Proximity to substation and interconnection prices are additionally key.
I feel many individuals overlook that merely having land isn’t sufficient. I keep in mind studying a examine suggesting that if we coated an space the scale of Lake Michigan with photo voltaic panels, we may energy the nation. But it surely’s not that easy. The grid has to have the ability to distribute that vitality effectively, so installations have to be near load zones. We noticed this subject in Maine, the place formidable photo voltaic objectives led to zero and even adverse pricing for photo voltaic as a result of the inhabitants wasn’t giant sufficient to assist it. I hope that helps reply your query.
Arora-Cox: It does reply my query, however let me rephrase it. Land itself isn’t scarce, there’s loads of it. What’s scarce is an efficient location. So, it’s actually about discovering that splendid piece of land in your venture, and that’s no straightforward job. What are the important thing challenges you see builders dealing with at present?
Pagliarulo: I feel the most important points proper now revolve round interconnection queue reform. Most of the tasks we observe skilled important delays from the discover to proceed (NTP) stage to the industrial operation date (COD) as a consequence of utility interconnection research. Interconnection prices have elevated exponentially, which is a serious problem for builders.
Aside from that, public opposition to tasks in sure areas is one other subject. The photo voltaic and battery storage trade must adapt, and a few corporations are already doing so by participating with communities. Apparently, I’ve even seen lease agreements that require decommissioning after 40 years, with a stipulation to revive the land to farmland. I’ve combined emotions about that; if we personal the land in that state of affairs, we simply should issue it into our planning.
Arora-Cox: Shifting gears a bit as we close to the top of our dialog—on a lighter notice—Laura, any phrases of knowledge primarily based on our dialogue at present? Or, how do you unwind once you’re coping with challenges round land or different points?
Pagliarulo: These are two questions! For phrases of knowledge, I’d say that the builders we work with are more and more viewing land as a possibility moderately than an impediment. The savvy builders, particularly these within the utility sector—although it’s beginning to attain distributed era as effectively—are prioritizing buy choices, which they’ll leverage for added worth sooner or later. If you happen to’re not pushing for these choices, you’re possible leaving cash on the desk. This is a crucial message for builders: Land isn’t only a field to verify for web site management and transfer on. Probably the most strategic builders are actively securing buy choices to maximise long-term worth.
As for a way I unwind, I do a variety of gardening, particularly weeding on annoying days! Spending time with my canine additionally helps, in addition to being current with my children, who’re 9 and 15. Placing my cellphone down, going for a stroll, and being within the second with them is a good way to calm down.
Arora-Cox: Glorious. It truly is about easy issues. Laura, thanks a lot for being with us at present.
Pagliarulo: It was nice speaking to you. Thanks.
Arora-Cox: That’s it for at present. Tune in subsequent time for extra Resilience.
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