Superfund and brownfield sites represent available, cheap land with few competing alternative uses, and are well suited to solar’s light installation footprint and long-term use horizon.
By Geoffrey S. Underwood, Special To Solar Power World
For more than two decades, solar development on a Superfund site has been an industry holy grail. Until Hanwha Q CELLS’ (HQC) completion of the first utility scale project on an active Superfund site earlier this year, the development has been a trail of tears. How did HQC break that dismal streak? A combination of luck, internal and external resources, and a little ingenuity.
There are more than 1,500 Superfund sites and 425,000 estimated brownfield sites in the United States that appear to be ideal solar development candidates. In most cases there are limitations on human activity, site development within a 10- to 50-year time horizon, cost burdens to current owners, and are generally located in industrial areas near utility and grid infrastructure. In short, Superfund and brownfield sites represent available, cheap land with few competing alternative uses, and are well suited to solar’s light installation footprint and long-term use horizon.
In late 2013, HQC acquired the rights to an 11 MW project in Indianapolis, with a 15-year award from Indianapolis Power & Light, located on the Reilly Tar Superfund site. Almost immediately HQC ran into the same headwinds experienced by decades of project developers. Among the unknowns in Superfund/brownfield development are permitting timeframes, legal liability issues, subsurface contamination, insurance requirements and premiums, construction requirements and premiums, and project health-and-safety costs.
In early stage development, we deal with project unknowns with money —contingency funds as an estimate—rather than attempting to cure the underlying issue. With the breadth and severity of risk issues for Superfund/brownfield sites, the revenue to cost ratio becomes fatally inverted.
HQC overcame this common, critical fail point with two internal resources and two external resources. Foremost, the landowner was a large chemical manufacturer with multiple Superfund sites under ownership. As a result, it had environmental counsel with deep experience specifically devoted to the transactional elements of Superfund law.
In short, HQC received precisely the type of $1000-an-hour legal advice needed, but that would be imprudent to spend in early stage development. Guidance given by company counsel — later verified by HQC engaged counsel — removed multiple, large contingencies related to process and liability.
Secondly, the U.S. EPA was an early supporter of the project. The project manager had, 20 years earlier, closed the same site. As a result, he had extensive experience and knowledge of the site. The EPA engaged with HQC before HQC had project ownership and expressed a willingness to shape EPA review requirements in-line with HQC and project timing and commercial considerations — most notably bonus depreciation timing.
The EPA’s early engagement in the process and clear guidance on expectations similarly removed large dollar-value contingencies related to process and transaction, which brought revenue and cost alignments. At the same time, early EPA guidance allowed HQC to shape/reshape construction approaches to best match the site characteristics and significantly reduce the potential for liability.
Thirdly, HQC had internal expertise in Superfund/brownfield construction. The HQC Development head was a chemical engineer by training and spent decades at a leading environmental consulting firm, where he led a number of Superfund site closures and developed understanding for EPA processes and construction requirements.
A second HQC colleague, serving as project manager but an engineer by training, spent years managing construction on contaminated/brownfield sites in the pharmaceutical sector, developing familiarity with contaminated site management, permitting and agency management, and rigorous health-and-safety site requirements. Similarly, this internal expertise allowed HQC to price risk factors more accurately, which ultimately brought revenue and cost ratios in line sufficiently to acquire and pursue the project.
Geoff Underwood (pictured in the foreground) explains how Hanwha Q CELLS broke the unlucky streak of those companies that tried to blaze this trail before.
In short, it is the early/estimating phase of the project viewed as most dangerous and likely to result in a disqualification. The HQC experience determined, however, hat moving past what appeared a negative returning project on the basis of risk mitigation estimates ultimately resulted in a highly profitable endeavor.
HQC completed project due diligence and proceeded to construction with a risk-modified build, dubbed the Soil Disturbance Minimization Plan. Despite expectations to deliver a comparatively-costly ballast solution, HQC proposed a driven pile system throughout the 50 acre site while lifting all other project elements above grade. This approach — developed internally — reduced soil movement on the site by an estimated 95% over conventional methods and significantly reducing the potential for disturbing the existing EPA site remedy or creating HQC liability. At the same time, this approach met cost-efficiency goals and was completed at, or below, comparable greenfield builds during the same period.
HQC’s experience brings into greater relief the critical fault line in Superfund/brownfield development: early stage and risk mitigation estimation. With this knowledge, it is possible that more projects on environmentally challenged sites can similarly overcome early stage challenges and create a virtuous cycle of brownfield to greenfield.
Geoffrey S. Underwood is responsible for development of national and international distributed generation (DG) and utility-scale solar projects for Hanwha Q CELLS, with a focus on brownfield development. Previously, Underwood managed solar asset acquisition for Constellation Energy in support of its national portfolio of more than 100 MW of solar facilities.