Choosing a Solar Farm Developer: What to Consider
 Topic: developing solar projects |  Read Time: 10 mins |
 Landowner type:Independent landowners | Institutional landowners |  Energy: Solar |
7th June 2024Are you in the process of choosing a solar farm developer for a new project? If you’re unsure who’ll serve your site best, follow along as I explain everything you need to know.
If your land is suitable for solar power, several developers are probably reaching out to host a project there.
But with these options comes a big decision – choosing a solar farm developer you want to work with (and feel confident about).
If you’re not sure where to start, this go-to guide has got you covered. I’ll walk you through key considerations, including:
- What a solar farm developer is
- Why you might want to work with one
- The pros and cons of working with a developer
- What a solar farm developer does
- Things you should think about before choosing a solar farm developer
Let’s get started.
What Is a Solar Farm Developer?
In simple terms, a solar farm developer is a company or individual responsible for building and installing solar projects. These are typically large-scale projects – often multiple megawatts in size – classified as ‘utility-scale solar’.
These solar farms are specifically designed to supply electricity to the Grid, helping to power homes and businesses across the country.
A developer will be responsible for several things (which I’ll cover in more detail later), but their primary responsibilities include acquiring land, securing financing, setting up construction and, in some cases, handing over management to a site operator.
Why Do I Need a Solar Farm Developer?
While you don’t strictly need a developer to host a renewable energy project, it’s undoubtedly the easiest option.
As a landowner, your options for having a project on your land are:
- Working with a developer
- Self-developing a site and running the project independently (including financing the project).
Unsurprisingly, self-developing a project can be difficult and requires an enormous initial investment.
Some landowners can cover these costs or secure funding through external investment or bank financing. However, not all landowners are willing to shoulder the burden of setting up the site as well as the financial hit while waiting for the project to recoup its investment.
That said, self-developing a site has significant benefits if you have the funds to do so. The main advantage is that you’ll reap all of the profits from the site once the initial investment is paid off.
So, you’ll need to weigh up whether the extra time and investment are worth the potential reward.
However, developing a solar project is incredibly hands-on. From securing finance to applying for Grid connection and planning permission, there’s a lot to navigate before your project is up and running. If you plan to self-develop, be prepared to put in considerable time and effort.
On the plus side, you won’t need to enter into option agreements or complicated leases to secure your land – because you already own it.
What Are the Pros and Cons of Working with a Developer?
As I’ve briefly mentioned, working with a developer has its pros and cons. These mainly relate to time, effort and money.
Let’s take a closer look at these factors to help you decide whether to self-develop or partner with a developer.
Pros of working with a developer
Setup costs aren’t the landowner’s responsibility
One of the biggest advantages of working with a solar farm developer is that they cover the entire cost of setting up the project. Working with a developer means you’ll get paid a rental fee per acre for leasing your land.
The average solar farm costs around £375,000 per megawatt-hour (MWh) of electricity produced, and even smaller community farms cost about £500,000 to set up. Not having to cover these costs is a huge benefit.
Since setup costs aren’t yours to bear, you’ll sign an option agreement, receive a fee for leasing your land and let the developer sort permits and permissions.
Once the project is up and running, you’ll receive rent based on the payment arrangement you choose.
So, the finance side is incredibly hands-off (unless you choose a payment arrangement based on output).
It’s virtually risk-free
While there’s always some risk of land damage if you have a large project, working with a developer keeps your financial risk minimal.
For example, if adverse weather damages panels, you won’t be responsible for replacing or fixing them. As monocrystalline panels can be costly, this is a huge cost you’re avoiding by working with a developer.
Although turnover-based or hybrid rental agreements may fluctuate, landowners with fixed arrangements won’t see any changes to their payments.
Over the course of a lease, you’ll probably pull in a significant figure from rents (as they run for upwards of 30 years).
Developers are experienced
Landowners new to renewable energy probably don’t have much experience developing solar projects. But the developers wanting to lease your land will have likely done this many times before.
While some newer developers may have a smaller portfolio, most large-scale solar developers will have a track record of successful projects you can review.
They should also provide you with proof of finances and demonstrate how their current projects are performing.
If you’re anxious and unsure about leasing your land, working with an experienced developer should put you at ease.
Their experience will also mean that they can get the project up and running faster.
With established construction teams, links with local authorities and pre-applied Grid connections, they can start generating income for you sooner than if you self-develop.
You can carry on with your usual activities
One major advantage of using a developer is that you can continue with your usual activities. Construction will happen around you, and solar panels typically take up less space than you might expect.
This means you should still be able to farm or tend to your land during construction.The only consideration here is that some of your land will be blocked off for the project. During the option and lease period, you won’t be able to make changes to this land.
Cons of working with a developer
You’re unlikely to make as much income from your project
You’ll rarely encounter a seriously inexperienced developer, but it does happen. If they don’t have a solid portfolio, they might make mistakes during the project’s lifetime that can be detrimental.
While most developers maintain a professional and cordial approach, some may be too busy to give you the attention you deserve. As a result, you may rarely deal with them personally, which can leave you feeling out of the loop.
When choosing a developer, you need to ensure they have time for you. A reliable developer should be willing to answer questions about leasing your land, creating option agreements and securing contracts without making you feel like an annoyance.
You’re unlikely to make as much income from your project
While the initial investment for a project can be huge, self-developing means you get to keep all the profits.
If you can shoulder the costs (and stresses) of self-development, the payouts down the line can stretch into the millions.
However, if you choose this route, you’ll need to ensure that you can secure funding, repay investors and manage the site.
The decisions about the project won’t be in your hands
Many landowners are happy to have a hands-off experience, but working with a developer means key decisions won’t be yours to make.
If you work with a developer, every decision from construction to finance will be theirs. Plus, the developers will be looking out for their own financial interests ahead of yours.
For example, they may choose to set up Power Purchase Agreements (PPAs) to secure reliable customers for the energy the site produces. While this is good, developers can sell these PPAs for less than market value.
What Does a Solar Farm Developer Do?
A solar developer does many things, but they’re mainly responsible for:
- Doing site scans and carrying out feasibility studies
- Drawing up option agreements and contracts
- Securing adequate financing for the project
- Seeking planning permission
- Installing solar panels and monitoring equipment (with a construction team). This involves finding the most competitive prices for the panels and mounting equipment.
- Negotiating contracts with off-takers
- Keeping the site running smoothly (usually with the help of a site operator)
If you’re unsure what your developer will be responsible for, it’s always best to ask them for a rundown of their duties.
Any good developer should be happy to discuss this with you in detail.
Once the construction phase is complete, the developer is usually no longer the primary point of contact for the landowner. Instead, the operational contract is passed to a site operator (if different from the project developer). From here, landowners will directly raise any concerns or queries to them.
What Should Landowners Look For in a Solar Farm Developer?
Who you’re dealing with
One of the most important factors when choosing a solar farm developer is knowing who you’re actually working with.
It’s important to avoid middlemen where you can, as some developers employ intermediaries. These intermediaries may present an appealing contract, but ultimately result in lower potential income on the table, as they will take their cut.
To try and reduce this risk, ask the developer to run through their finances and provide a clear idea of what you can expect from the agreement.
It’s also always worth prioritising established developers who can show you a varied portfolio of successful projects. This gives you confidence in their experience and reduces the risk of working with someone unproven.
Smaller developers might offer slightly better payment rates – so bear this in mind. This is because larger solar developers tend to focus on their established brand name and track record, rather than offers of high payments.
Additionally, some developers specialise in smaller or medium-scale solar projects but don’t have much experience with large-scale operations. Conversely, some only work with large projects, not smaller ones. Make sure you choose a developer whose expertise suits the project size you’re considering for your land.
How much they pay
Income should be a key consideration for any landowner choosing a solar farm developer.
Solar developers don’t technically need to follow any professional standards, meaning they’ll approach landowners with the aim of securing the best deal possible for renting the land.
Realistically, the better deal a developer can get, the more they’ll make from the project.
Most developers will offer an option agreement to secure your land right at the beginning of the project.
At this stage, they’ll have done a simple desktop study on the site and will know it’s suitable for hosting solar panels. However, if your site is close to ideal, you could push for a larger upfront payment during the option agreement period.
While some developers may offer below-market rates for long-term leases, others might present non-negotiable terms. However, every plot of land is different and should be treated as such. It’s always worth negotiating for a tailored contract. Discussing lease terms for both the option agreement and the final lease can help ensure you secure the best deal.
At the end of the day, the main thing is to make sure you’re receiving a fair market rate.
How they’ll operate the site
While a site operator usually handles the day-to-day running of a solar farm, a developer should always aim to keep the site running as efficiently as possible during its lifetime.
Although it can be difficult to track the operational details, here are a few things to consider:
- Are they willing to replace broken panels quickly?
- Do they perform regular maintenance checks to keep the project running smoothly?
- Is the site operator aware of the ins and outs of the site?
A developer committed to maintaining the site and maximising its profit is invaluable.
After all, landowners not on a fixed rental contract may lose income when the site is down for maintenance. Prompt repairs and upkeep are essential to minimise any loss of income.
Their willingness to work with you and maintain a good relationship
A good relationship dynamic is essential for any project.
It’s important to assess whether the developer comes across as aggressive or more flexible and open.
If they’re aggressive and pushing for a deal from the outset, they’re unlikely to change and be more accommodating later on.
Equally, it’s also worth considering if the developer treats you more like an equal or whether they seem distant and avoid communication. This will reveal a lot about how the project will operate during its lifetime.
What Should Landowners Look Out For Before Choosing a Developer?
References
Experience matters when mounting a solar project, so it’s a good idea to ask for references from previous projects that have gone well.
If the developer has a full portfolio, that’s a great sign that they know how to finance and set up large-scale projects.
On the other hand, if they have nothing to show in terms of experience, you’ll naturally want to tread more carefully.
Proof of finance
Before signing over your land, you must verify the developer’s financial plans.
Solar projects are costly to set up, and developers often rely on external funding sources like angel investors, bank financing or other means.
Ensure that they can provide clear proof of how they plan to finance the project before entering into any lease agreements.
A quick Grid connection application
Grid connection applications stall a lot of solar projects.
By applying for connection right after the option stage, your developer is far more likely to get a successful project running quickly.
With Grid backlogs stretching up to 10 years, this is a serious consideration.
It’s worth discussing the application timeline with your developer to ensure the project moves ahead smoothly.
Power Purchase Agreements
In the solar industry, PPAs are a standard part of the running of a large-scale solar project.
They are essentially a plan to sell energy to an off-taker, who then distributes it to customers.
Although landowners aren’t privy to these PPA agreements with a fixed payment arrangement, they’re worth enquiring about.
Having a PPA in place can greatly benefit a landowner, as it lets you accurately forecast your income. Plus, having a guaranteed customer for the energy a site produces is always a good thing.
Steps to Take Before Signing On with a Solar Developer
Before choosing a solar farm developer, take these steps to ensure the best outcome for your project:
- Talk to the experts like solicitors and land agents to understand your land’s worth. You can also work with independent accountants to better understand how much you should be getting in rent.
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- Check your developer’s credentials and financial sourcing to ensure you’re comfortable in their ability to execute the project.
- Get an idea of their approachability. Are they willing to discuss your concerns or are they dismissive?
- Discuss rental payments and how your land will be impacted during the lease’s life.
- Enquire about tenant changes. Ask whether there are expected to be any changes of tenants (such as site operators) during the lease’s life.
- Does the developer offer support post-installation? Any good developer will provide maintenance, monitoring and troubleshooting services.
Final Thoughts
Choosing a solar farm developer can be a complicated task. But with the correct information, you can make an informed decision that suits your needs.
If your developer is financially sound, willing to answer your queries and has a decent portfolio, you’ll be in a solid position to move forward.
If you’re still concerned about choosing a solar developer for a new project, get in touch. Our expert team will happily guide you through the process and give you a few top tips for securing the right developer. We can even compare your potential project to similar sites nationwide to ensure you get fair rental figures for leasing your land. So, what are you waiting for?
