How to sell a utility scale solar project

There is constant interest from developers looking to sell their solar projects. How can you get a piece of this lucrative opportunity and help wean us all off of dirty fossil fuels?

Solar development breaks down into three essential steps: site control, interconnection and the PPA. While working through these steps, you should propose to yourself and your team to ask better questions, versus always knowing what the answers are. Taking a journalistic approach will yield the best results.

This article will be driven by questions that you need to ask, before you can consider selling your utility scale (or any for that matter) solar project. If you’re new to developing projects 2 mW and above, read further. This is a good primer for saving time and money when you’re exploring this growing market segment.

Before an investor, developer or any entity would be interested in buying your solar asset, they’d need to determine if you really have something tangible to sell. Solar development comes in multiple stages of development, from early stage, to NTP (notice to proceed) by a utility.

At each stage, value is created. Earlier exit options for you will reduce the overall value of selling your solar asset, but you will also invest less. Later stage asset values are higher because you’ve removed barriers to have a project that can be developed and receive final interconnection with a utility.

Completing more of the stages will create more interest from investors looking to take “you out of your asset ownership”. However, this means you must take on the burden, both economic and time, to remove barriers which are limiting the likelihood of the project being completed successfully.

Here’s the general outline.

First, we need site control.

In order to begin we need to develop a strong relationship with the land owner. Will you approach this person/entity with a cash offer to purchase their land or lease it?

Knowing this from the start is critical. Next is the due diligence on the property. Is it suitable to build a solar farm of any size on it? Can you use 30% of the land? 80%? What are the potential challenges with the land? Permitting? Army Corp of Engineer study? Flood plain that will cripple the projects economics? Local group opposition that seems to have come out of nowhere?

How about the owners of the land? Is it owned by three family members that don’t get along? Do they want to sell? Are they ok with a lease? Can you fully educate them on their options and do they understand them? Do the owners have an attorney to review your option agreement?

Site control is important and often the first gate we need to go through. However, we should look at all three of these activities as working in parallel.

Second, we need interconnection.

By far this is the most often overlooked. Depending upon the utility, their infrastructure topography, the transmission lines, the substation location, the capacity, can all play a role in you being able to develop your project or not.

Do you have a detailed checklist to hurdle these items and more? Have you received approval from the utility to interconnect and have you asked them are other developers also seeking to tap into a specific location on the grid? Will it be on a first come, first serve basis as to who gets access? How does this impact the first step of site control? Can you ensure site control before verifying interconnection can happen? Are you doing this in parallel with site control?

What kind of engineering firms do you need to connect with to verify you’re heading in the right direction and what firms could you be blindsided by, by not knowing who they are?

It’s always the surprises that can trip us up and kill the most ambitious interconnection goals.

Third, we need the PPA.

This is always a chicken or egg situation. You might have site control. You also could have a clear pathway to interconnection. You’ve spend tens of thousands already to get to this point.

But do you have a PPA with the utility? And if you do, what is the PPA rate? Do you have a PPA with a larger corporate entity that wants to buy the power? Do you feel you can navigate and negotiate a rate that everyone can live with?

Does this work for you or your investors if you want the project to be acquired?

Do you know?

Would you like to know? Will your site control agreements and interconnection costs and timelines satisfy you and your investment groups short term and long-term goals? Will the economics support the project?

Solar development takes time. It also requires you to stomach an often obscene amount of capital and risk. You need to look at every potential project with this basic screening to identify the risk assessment before even considering investing your time and money.

If you want to learn how to do this the most effectively and avoid a lot of the pitfalls of this process, come join Chris Lord and I in the Solar MBA course. We go through the development process in detail and show you how to value a project and what comprises a great project.

This course will save you potentially hundreds of hours of your time and tens of thousands of dollars.

After the course, you’ll have a better understanding of the development process.

You’ll also be able to speak to investors, landowners and other stakeholders, knowing the right questions to ask them. This will increase your ability to find quality partnerships and leverage your knowledge to maximize your results.

The class is starting very soon.

Sign up today to get your questions answered during our calls and through the lessons. You’ll be glad you did.

Keith Cronin