by Vincent J . Mangini, Esq.

In New Jersey, solar energy facilities have become very popular, especially among business concerns and residential property owners, making our state second only to California on the national stage for total solar installations. According to the 2011 Draft Energy Master Plan released by the Christie administration in June, there are approximately 9,000 solar photovoltaic projects within the State and most of these are located on commercial and residential sites. Specifically, as of February 28, 2011, in terms of installed capacity, commercial and residential solar projects produced approximately 240 megawatts of power and accounted for 82% of all projects statewide (with most of the remaining 51 megawatts being installed on government sites, school properties and farmland).

The drive by commercial establishments and property owners to offset conventional power sources with solar energy certainly comports with current state and federal energy policies. However, the construction and operation of a solar energy facility may involve myriad legal issues for which the advice and counsel of a knowledgeable attorney is essential. This article treats a few of the risks and considerations that are integral to solar energy installations, which prospective solar energy consumers should know.

Broadly speaking, businesses and individuals interested in hosting a solar energy facility on their premises may do so either by purchasing the solar panels and related equipment outright from a solar developer pursuant to an engineering, procurement and construction contract (EPC) or by leasing the facility long-term (usually 15 to 20 years) pursuant to a power purchase agreement (PPA). Under both types of agreements, the solar developer may offer to design, build, and maintain the solar facility.

One threshold matter that applies equally to EPC and PPA contracts is whether to obtain a solar feasibility study for the subject property and the proposed system equipment from an independent technical professional in consultation with an attorney. A solar developer will often perform a property and equipment analysis as a matter of course prior to installing the facility. However, the solar developer’s feasibility study may not include everything that a commercial enterprise or property owner may want to know before committing to the purchase or rental of a solar energy facility. For example, in order for a solar energy facility to operate efficiently and productively the owner or lessee of the system may need to prune or remove trees on site or to secure a solar easement from a neighboring property owner to restrict the location and/or height of a building addition, landscaping or other improvements (which might otherwise block access to sunlight).

A solar feasibility study should also gauge, among other things, whether the proposed system size will adequately serve current energy needs (and any anticipated change thereto that might occur in the future) and whether the roof of the existing building where the proposed facility is to be constructed, assuming that is the case, and all other structural components and the electrical system can handle the load of the proposed facility. In this regard, by way of further due diligence following receipt of a solar feasibility study, a prospective owner or lessee of a solar energy system should (1) verify with its insurance agent that the proposed facility will not require an insurance upgrade and (2) contact all companies that have supplied warranties for the roof or other building components that the proposed facility will not require any special inspections to avoid invalidation of any such warranties.

Another consideration integral to both EPC and PPA contracts is the procurement of land development approvals and permits for the solar installation. Indeed, it should not be assumed that the solar developer will obtain any required land development approvals, such as site plan or variance relief (although often they will secure the building permit) or that any failure to acquire such approvals will operate to terminate an agreement with a solar developer. Therefore, during contract negotiations, a prospective purchaser or lessee should discuss with the solar developer and resolve such matters as which party will be responsible to make application and pay for approvals or permits and whether a failure to obtain any such approvals or permits after making a good faith effort shall operate to terminate the contract.

The foregoing represents just a handful of the issues that may come into play when considering whether to install and operate a solar energy system. If you are interested in learning more about EPC or PPA contracts or have a legal issue relating to solar installations that you would like to discuss, do not hesitate to contact Vincent J. Mangini, Shareholder and LEED Accredited Professional BD+C, at the law firm of Stark & Stark (vmangini@stark-stark.com).

Vincent J. Mangini is a Shareholder and member of Stark & Stark’s Real Estate, Zoning & Land Use Group.

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