The colocation of energy storage facilities with solar and wind projects has emerged as a popular trend within the renewable energy field. Many Independent System Operators have reported an increase in hybrid resources projects in their interconnection queues in recent years. For example, CAISO (California Independent System Operator) reported that hybrid projects constitute two-thirds of all solar projects in its interconnection queue.
From the prospective of a developer, the benefits of combining energy storage facilities with wind generation or photovoltaic systems include: (1) the availability of investment tax credits not otherwise available for standalone energy storage projects (although there has been some recent movement in the U.S. Legislature to recognize tax incentives for such projects); (2) up-front cost savings due to shared permitting, sitting, equipment, interconnection, transmission, and transaction costs; (3) an increase in the reliability and efficiency of renewable-generated energy due to energy storage facilities assisting with peak load reduction and the recapture of otherwise lost power generation.
When considering altering existing or potential solar or wind projects to incorporate in an energy storage component or vise-versa, developers should review their siting agreements to determine the effect that a hybrid project will have on real estate terms. A few things to consider include:
- Project Property: Due to their smaller footprint, energy storage facilities have the flexibility to be located anywhere, including dense urban areas where energy resources are in high demand and where there may be the most grid connection benefits, whereas wind and solar projects have to be located where the applicable resource is strong and the land is plentiful. However, we note that given its vast and variable geography, Texas is a prime location for hybrid projects.
- Type of Real Estate Rights Obtained: The smaller footprint of energy storage facilities not only affects the project acreage required for project operation, but the type of real estate interest that must be obtained. If subdivision requirements are not triggered or are otherwise not an issue, the land required for stand-alone energy storage projects can be purchased in fee, whereas given the hundreds, if not thousands of acres required for solar or wind projects, project rights are most often obtained through leases or easements. We note that specific county subdivision requirements should be reviewed prior entering into a purchase agreement; however, pursuant to Texas Local Government Code Section 232.0015 (Exceptions to Plat Requirement), a purchaser (in this case the developer) is not required to obtain a plat of subdivision if the fee purchase tract(s) and the remainder tract(s) are more than ten (10) acres. However, it is worth noting that fee purchases require an up-front investment and a developer can often times be stuck unloading property after the life of the project or if developer was unable to develop the project due to permitting or interconnection issues.
- Decommissioning: Texas mandates certain statutory decommissioning requirements for solar and wind projects. Pursuant to the Texas Utilities Code, Title 6, Chapter 301, which affects all wind lease agreements entered into on or after September 1, 2019, a wind developer is responsible for the removal of wind power facilities from a landowner’s property at the expiration or earlier termination of the agreement. The Texas Legislature also recently passed Senate Bill 760 which imposes similar requirements on solar developers, and which takes effect September 1, 2021. Both Chapter 301 and the newly created Chapter 302 under Senate Bill 760 include within their definitions of “wind power facility” and “solar power facility” facility or equipment (including a battery storage facility) “used to support the operation” of a wind turbine generator or solar energy device. Thus, battery storage facilities “used to support” a wind or solar project will be subject to the statutory wind and solar decommissioning requirements. However, there are currently no similar requirements on standalone battery storage projects operating independent of wind or solar facilities.
- Ancillary Easements: Most, if not all, renewable energy projects require access and/or transmission easements which are either incorporated into the prime agreement or are stand-alone easements. However, solar and wind projects also require additional easements, some of which burden a landowner’s adjacent property, if applicable, such as an easement to the free and unobstructed insolation of solar energy over the entirety of the horizontal space and the entirety of the vertical air space over and across the subject property and any adjacent property owned by the landowner, for solar projects, or an easement to capture, use, and convert the unobstructed wind resources over and across the subject property and any adjacent property owned by the landowner, for wind projects. Wind projects also require overhang easements if a turbine blade encroaches into a landowner’s adjacent property.
While hybrid projects are on the rise, before undertaking such projects, developers should consider the real estate implications to their current agreements, and the necessary revisions and considerations needed to make them applicable to the chosen hybrid resources.
For more information, including questions on drafting energy storage or solar power facility agreements, please contact Mashaal Bhaidani, Jennifer Pier, or another member of Husch Blackwell’s renewables group.