POWER January 2023 - 30

PROJECT DEVELOPMENT
Risk Mitigation: An Essential
Prerequisite for Inflation
Reduction Act Funding
The groundbreaking Inflation Reduction Act (IRA) will put hundreds of billions of
dollars toward renewables. As the most comprehensive energy policy in recent
years, the IRA is already having a profound impact on the U.S. renewable energy
market, triggering increases to long-term forecasts and power prices.
Kimberlee Centera
n a recent interview with Odd Lots,
a Bloomberg News Finance podcast,
Jigar Shah, director of the U.S.
Department of Energy (DOE) Loan Programs
Office (LPO), discussed the IRA
application. He stated that the ability to
repay the loan is the single most important
consideration when granting a direct
loan or a loan guarantee.
The LPO has established a robust proI
cess
for due diligence of the applications
in review. Applications are rigorously vetted
by a team of DOE scientists, engineers,
and transaction specialists, who
carefully evaluate project eligibility and
viability. A submission that withstands
this scrutiny requires significant fatal
flaw and risk analysis to establish a reasonable
assurance that the project will
ultimately generate revenue.
Lessons from the Field-Don't Make
Assumptions
Whether applying for a DOE loan or loan
guarantee, or seeking investment or financing
from other sources, we recommend
starting the due diligence, risk
analysis, and title insurance application
process as soon as possible, so that
potential risks can be identified and resolved.
Understanding possible threats
to a project at the outset gives developers
the ability to mitigate risks, so that
they can meet rigorous lender or investor
standards, including those of the LPO.
One of the fundamental challenges
faced by project developers is land acquisition.
The competition for suitable
land is amplified by the rapid growth of
renewable energies. In our work, we
have found that there is a pinch point
between this growth and the American
Land Title Association (ALTA) surveys
(Figure 1) we need to propel a project
forward. ALTA survey work is a field that
30
has historically been slower to change,
and it has not yet fully adapted to the
dynamics of the market.
The impact this has on project development
was recently underscored
when we spent several hours with one
of our trusted survey partners, a highly
respected surveyor with years of experience
in ALTA work generally, and in
renewable survey work specifically. He
explained in detail the various ALTA requirements
and best practices surveyors
are expected to follow to conform
to their professional standards. What
became resoundingly clear is that the
goals of the survey work are often completely
at odds with the goals of the developers
we work with.
We already knew how difficult it can
be to get what our clients need, and
how frustrating that is for surveyors
and developers alike. This conversation
shed new light on why that is. It's not
because surveyors aren't helpful or because
they don't understand a request;
but, rather, because their standards require
them to do things entirely differently.
Because the expectations from
each side are incongruent, we have a
classic case of words that mean one
thing to the surveyor and something
else entirely to the developer.
What a developer needs when commissioning
an ALTA survey is as follows:
■ Information that will make lenders
happy.
■ Information that will allow the developer
to obtain title insurance.
■ Reporting that includes the comprehensive
specifications
project
planning.
■ Exhaustive information about what
is physically on the ground, over the
ground, and under the ground that is
to be developed.
www.powermag.com
1. American Land Title Association (ALTA)
surveyors are generally the " kingpin " on projects.
Courtesy: TerraPro Solutions
POWER | January 2023
needed
for
What surveyors provide when they deliver
an ALTA survey could be data points
that may or may not actually achieve all,
some, or any of these goals.
There is a huge communication gap
based on the assumptions each side
makes about what is necessary, and
when it is necessary. Timing also plays
a role in surveyor frustration. The nature
of development is to rush, request
a thousand changes, sit still for months
(or even years), and then pick it up again
where they left off (Figure 2). From the
surveyor's perspective, this is problematic,
because things can change.
Even if a deal initially sounds lucrative
and realistic, new information can impact
viability. The large acreage we usually
deal with can present timing challenges
related to multiple owners and a host
of other issues. The fact that conditions
change can become a source of frustration
and miscommunication between
the parties involved.
Major complications can also arise
when there are transmission lines on
the site. Facts such as ownership, size,
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POWER January 2023

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