Grid-Scale Solar "Basics"

What Is Grid-Scale Solar Development?

Grid-scale solar developments (GSSD) (also called utility-scale solar) are often called "solar arrays." They normally consist of about one hundred to several thousand acres of ground-mounted solar panels that produce electricity for transmission into the power grid for use offsite. A grid-scale solar development typically generates more than 5 megawatts (MW) of electricity, which can be sold to a single downstream user or placed onto the grid for wider use by numerous customers.

How Much Solar Energy Do We Have Now and How Quickly Is It Growing?

Solar energy is becoming one of the least expensive and fastest-growing forms of energy. Solar currently accounts for less than 4% of U.S. electricity production. The U.S. Energy Information Administration predicted in 2021 that 46 gigawatts (GW) of new grid-scale electric generating capacity— almost half of it solar—would be added to the U.S. power grid in 2022.

Site Selection

In general, solar developers are looking for sites that'll cost the least to develop so that their return on investment will be greatest. Approximately 80% of GSSD projects in the potential development queue (as of May 2022) in Pennsylvania are planned for open land, which is often agricultural land because it is most suitable for any type of new land use transition.

Desirable site characteristics:

• Relatively flat or gently sloping terrain (preferably less than 7% slope) facing east, south, or west
• Within 1–3 miles of a substation with unused capacity to transmit power
• Places where there is certainty in how the local government treats solar—what is expected for the site's setback, fencing, panel coverage, etc.

Advances in solar panel technology have made GSSD viable in all regions of Pennsylvania. The solar irradiance levels found at these latitudes have the potential to generate enough electricity to make projects economically feasible.

Why GSSD Here? Why Now?

Pennsylvania has more open space than many states in the Northeast and Mid-Atlantic, yet is near those population centers. The installed cost of solar panels has dropped about 70% since 2010, and the market for solar energy is hot. The US Department of Energy reported that at the end of 2020, the U.S. had proposals for at least 460 GW of grid-scale solar (GSS) power capacity. Pennsylvania has long been an electric power exporter, sending excess electricity to surrounding states. So, the state has much of the critical electrical infrastructure needed to support solar facilities. As solar companies propose and plan new sites, they will typically be looking for the most commercially viable pathway to connect to existing electrical transmission infrastructure because those connections are a significant cost of any GSS project.

The Leasing Process

When considering leasing land for solar energy development, it's highly recommended that landowners not sign ANYTHING without getting qualified legal advice. A solar lease is a legal obligation that may last for 25–50 years and deeply affects how the land can be used. Many properties will be optioned for solar development and investigated, but only 10–20% of those projects will likely be built.

Letter of Intent

A landowner may receive a letter of intent from the solar developer. Typically, the letter of intent:

• Is only one page
• May discuss general financial terms of a lease agreement
• Features a nondisclosure agreement specifying that future terms negotiated cannot be disclosed to others. The landowner should modify those terms so that they can discuss the agreement with family, attorneys, and financial advisors. 

Option Agreement

An option agreement is a private legal agreement between the landowner and the developer. No government entity has to sign off on its terms. The option agreement establishes the option for the development company to lease the land for solar development.

Typically, the option agreement:

• Lasts for 1–5 years, with the opportunity for the developer to extend that
• Is 2–15 pages in length
• Brings a financial payment to the landowner upon signing; The payment is typically a few thousand dollars per year total, not per acre.

It is critical for landowners to know that if they sign an option agreement, they are also typically agreeing to the terms of the underlying lease contained in the option contract in its entirety. The landowner must be satisfied with the terms of the lease before they sign the option agreement. Once the option agreement is signed, the developer has the land legally tied up, and the landowner cannot sign another option agreement with a different company for the same land. 

Preconstruction Activities

Studies

The relatively long period of time for the option agreement stems from the developer's need to do due diligence research on that particular site. This involves the developer exploring in more detail what it would take to develop a particular property and ultimately decide if they want to go forward with development.

During this time, the developer will:

• Conduct title searches to see if any other entity has an interest in the land (for example, mortgage, right-of-way, easement, lease, mineral rights)
• Submit the project into the PJM Interconnection new services queue. PJM is the regional electric grid operator. This step includes ensuring that a nearby substation has the capacity to carry the electricity generated by the new solar project.
• Explore the municipality's and county's requirements for solar projects.
• Consider local residents' reactions to the project.
• Work out an engineering plan for the site and seek investors for the project.
• Potentially find a buyer for the power to be produced by the new solar array and negotiate a solar power purchase agreement with a buyer

It's also important to know that:

• The developer can back out of a signed option agreement at any time. They will do this if they find something about the property that would prevent them from developing the project as envisioned.
• The developer might develop only part of the total land under the option. This would decrease the total yearly rent the landowner receives.
• The landowner likely cannot get out of an option agreement or amend it after they sign.

PJM Interconnection and Its Role in GSSD in Pennsylvania

PJM Interconnection is a regional electricity transmission organization that operates the electricity grid reaching more than 65 million people in the mid-Atlantic and parts of the Midwest. This includes all of Pennsylvania.

Most projects submitted to PJM for approval won’t actually be built. The developers decide to move forward only with the projects that promise the greatest return on investment, and technical and regulatory approval. As projects fall out of the PJM new services queue, new projects are added in.

Lease

The lease is the legal document binding the landowner and the company. The company may decide to exercise the option contract on the property and then the underlying lease if their due diligence exploration of the proposed project and property are favorable.

The lease:

• Is typically 20–60 pages of complex legal language that guides the terms of project development
• Typically extends for about 25 years
• Addresses payments to the landowner on a per-acre-used annual basis. These tend to range from $300 to $2,400/acre/year (in 2022). A common range is $1,000–1,500/ acre/year, with regional differences based on site characteristics such as topography, access to transmission infrastructure, and ability to construct the project given existing and proposed land use regulations.

The generic lease terms favor the solar developer, but with wise negotiation, landowners can improve the terms.

Municipal and Public Input on GSSD

After the option is signed and the developer has some assurance of the availability of capacity in the nearest substation, the municipality or township typically gets their first look at the proposed project. The local municipality or county, or the company might offer a public meeting to discuss the plans. Each state has different requirements for governmental review of solar projects. In Pennsylvania municipal or township officials are responsible for reviewing all applications to build GSS projects and regulating where and how solar projects can be built. In Pennsylvania, the Public Utility Commission is not involved in GSS siting or permitting. Pennsylvania DEP's role involves issuing stormwater management permits as it would for any large-scale land development. The county conservation district is typically involved with planning to control erosion and sedimentation, and the stormwater review process.

Construction Phase

If the developer decides to exercise the option and lease, the project buildout then begins. During the installation of a large project, the developer will have a hundred or more workers on site for a relatively short time. The site is mechanically cleared of trees and shrubs if needed, and an exterior fence is built. The land is surveyed to determine the exact locations where panels will be installed. Access roads are placed between sets of panels for maintenance. Trenches are dug for wiring, and panel support posts are installed.

Solar panels are bolted to galvanized steel and aluminum support structures ("racks") and wired together. Inverters and transformers (see Section 2 for more details) are installed and all system components are connected. Once the system is tested, the facility is turned on. Current estimates are that it costs more than $1 million per MW to develop a GSS project.

Decommissioning Phase

Most leases run for 20–25 years. Typically, the lease includes language allowing for an extension of the lease timeframe. A solar lease will include information about the termination of the lease and what happens then. The agreement typically calls for the solar panel owner to restore the land to essentially the same condition as it was in before panel installation began. The lease may specify that funds for the cleanup and restoration be held in escrow to ensure that they're available when needed.

Some municipalities have requirements for decommissioning in their solar ordinances. Decommissioning requirements are an active area of legislation in the Pennsylvania legislature, so check for updates.

Conclusion

The low-end estimate of total investment in solar development in the U.S. is $500–700 billion over the next decade. Developers want predictability and stability in local regulations as they plan to deploy GSS technology in communities across the state. It is important for local officials to clarify GSS expectations in their zoning ordinances to ensure the orderly development of solar if it is going to be permitted, just as they do with all other types of land uses, and for the benefit of all community residents.

For More Information

Agricultural and Natural Resources Law. North Carolina State University Extension. 2022.

Community Planning for Solar Toolkit. University of Massachusetts, Amherst.

Farmland Owner's Guide to Solar Leasing. National Agricultural Law Center. 2019.

Health and Safety Impacts of Solar Photovoltaics. North Carolina State University. 2017.

New York Solar Guidebook for Local Governments. NYSERDA. 2020. 

Solar energy education resources. 2022. Penn State Extension.

Solar Leases: Clearing Matters of Title During Solar Developer Due Diligence. North Carolina State University Extension. 2021. 

Legal Issues Surrounding Due Diligence for Solar Development. North Carolina State University Extension. 

Understanding Solar Energy Agreements. National Agricultural Law Center. 

Utility Scale Solar: Land Use, Policy and Emerging Ordinances An Interactive Q and A Webinar. Penn State Extension. Sept. 23, 2020. 

Glossary

Decommissioning–The phase of a solar project after the operational phase during which the panels and all associated equipment are removed from the site.

Due diligence–The research and analysis done by both parties in a legal agreement to thoroughly investigate the details of the transaction in question.

Easement–A legal right to some part of another's private land.

Escrow–Funds paid by the developer and held for use in decommissioning a solar site at the end of the lease term and restoring the land.

Gigawatt (GW)–A unit of power equal to 1 billion watts, 1 million kilowatts, or 1,000 megawatts.

Grid-scale solar (GSS)–Solar installation intended to supply power to the grid for use off-site from where the panels are; typically >5 MW. Also called "utility-scale solar."

Inverter–Electrical equipment that converts direct current (DC) produced from the sun's rays to alternating current (AC), which powers most electrical equipment.

Kilowatt–A standard unit of electrical power equal to 1,000 watts.

Letter of intent–Document sent by solar developer to landowner. Sometimes comes before the option agreement. Can be legally binding and lay out terms of a potential lease. The main purpose is often to establish a nondisclosure agreement specifying that future terms negotiated cannot be disclosed. Also called term sheet or preliminary agreement.

Megawatt (MW)–The standard measure of a solar array's generating capacity; equal to 1,000 kilowatts or 1,000,000 watts.

Nondisclosure agreement (NDA)–A provision common to many solar leases stating that the signer may not divulge sensitive information contained in the agreement.

Option agreement–A legally binding agreement between a solar developer and a landowner granting rights to the developer.

Photovoltaic (PV)–Pertaining to the direct conversion of light into electricity.

PJM Interconnection, LLC–A regional transmission organization that manages the high-voltage electricity grid reaching more than 65 million people in the Mid-Atlantic and parts of the Midwest. They also manage a long-term regional electric transmission planning process for the service area.

Right-of-way–Permanent or temporary easement allowing certain access to private land.

Solar array–Numerous solar modules are grouped to collect the sun's energy. Sometimes called a "solar facility."

Solar developer–A company that sees a solar array from idea to construction, including identifying suitable land; conducting relevant technical studies for the site; obtaining necessary local, state, and/or federal permits; finding a buyer for the power to be produced; obtaining financing to build the solar array; and identifying a company to build the solar array. Many times, the developer sells the array to another company once building is set to start or once it is built.

Solar energy–"Radiant energy (direct, diffuse, and/or reflective) received from the sun."

Solar lease–A legally binding agreement between a solar developer and a landowner granting the developer the right to develop the land for solar energy production.

Solar module–Solar cells grouped to collect the sun's energy.

Solar panel–The part of a solar energy system containing one or more photovoltaic cells or modules. Its purpose is to harness solar energy for electricity.

Solar power purchase agreement–A contract between the producer of solar power and the purchaser of the electricity generated through the solar array. It addresses how much energy the purchaser will buy and at what price.

Substation–Equipment that changes the voltage of energy. Electricity comes from the solar array to the substation and is converted into a higher voltage at the substation for transmission via high-voltage lines. Near the end user of the electricity, a substation would step the electricity down to a lower voltage usable by most appliances.

Utility-scale solar–See "grid-scale solar."

Notes

Page 3: "46 gigawatts (gw) of new grid-scale electric generating capacity". Source: EIA Predicts Solar Will Make Up Half of New U.S. Electric Generating Capacity in 2022. Solar Industry Magazine. January 2022. 

Page 3: Statistics on development of 1-megawatt grid-scale solar installation Source: PA DEP estimate from Dan Brockett. Prices, Economics, and Impacts of Utility-Scale Solar Leasing in Pennsylvania. Penn State Extension webinar, May 4, 2021.

Page 5: "The installed cost of solar panels has dropped about 70% since 2010". Source: D. Brockett, Overview of Pennsylvania UtilityScale Solar Development: Why Here, Why Now?, Penn State Solar Law Symposium: Utility-Scale Solar Development for Lawyers, Landowners and Others. June 15, 2021.

Page 6: Lease rates "tend to range from $300 to $2,400/acre/year. A common range is $1,000–1,500/ acre/year, with regional differences." Source: D. Brockett, Overview of Pennsylvania UtilityScale Solar Development: Why Here, Why Now?, Penn State Solar Law Symposium: Utility-Scale Solar Development for Lawyers, Landowners and Others. June 15, 2021. 

Page 8: "The low-end estimate of total investment in solar development in the U.S. is $500–700 billion over the next decade." Source: M. Badissy. Utility Scale Solar: Land Use, Policy and Emerging Ordinances - An Interactive Q and A. Penn State Extension webinar, Sept. 23, 2020.

Page 8: Some glossary definitions are adapted from or quoted from these sources: a Cumberland County Planning Department. 2011. Solar Energy Systems Model Ordinance. 

Hall, P.K., E. Bachelor, and E. Romich. 2019. Farmland Owner's Guide to Solar Leasing. National Agricultural Law Center. 

Office of Energy Efficiency & Renewable Energy, U.S. Department of Energy. 2011. Solar Powering Your Community: A Guide for Local Governments, 2nd ed. 

Office of Energy Efficiency & Renewable Energy, U.S. Department of Energy. Solar energy glossary. Accessed Dec. 10, 2021. 

New York State Energy Research and Development Authority (NYSERDA). 2020. New York Solar Guidebook for Local Governments. NYSERDA, Albany, NY.