Over the years, we’ve noticed a pattern within renewable energy real estate investment. And, it can be a risky pattern for investors new to the space.
- An exciting “First and New” wind or solar farm is developed, or is proposed to be developed in a given area
- Landowners and speculative investors alike, get excited about the project, and begin to buy up all available land nearby
- Land prices rise rapidly as this speculation runs rampant
- Then one of two things happens:
- (most often) the first project was a fluke, and many speculators are stuck with land, that will never be a part of a renewable energy project, and that they paid way too much for
- Or, (less often) Many more renewable energy projects come into the pipeline, and the land investment pays off handsomely
The balance between these two scenarios is the motivation for Clean USA Power’s land investment strategy: there’s a big upside if you get it right, and a loss if you don’t. This is why we do not speculate, we collaborate.
For years we have been working closely with renewable energy developers to aid in the land acquisitions for their proposed projects. We have developed trust in our developer partners, and know through experience, that they are able to take a new project from the ideation stage, all the way through to producing power. Track record is everything. Many land investment firms use a shotgun approach, just buying anything they can get their hands on, and hoping that they stumble on a few big wins. If the volume is big enough, this can work, but it’s slow and risky.
We dug into some data from Kern County, CA last year, to see the relationship between the number of proposed projects, and the number of projects that actually make it into operation. The numbers are surprising to many who’ve not been through the industry cycle. According to our research, 65-70% of proposed projects fail before being built. If you throw land against the wall to see what sticks, you’ll miss upwards of 70% of the time.
The takeaway for investors, is to ensure renewable energy real estate investment choices are being fully vetted, before commiting to the purchase.
Our funds have been successfully buying land in wind and solar projects since 2012, delivering quarterly income for years. And while we’ve experienced our share of mistakes, we have learned a few hard lessons so new investors don’t’ have to.