cited reasons for opposition were the potential consequences for land value and environmental impacts. In some cases, these concerns could be lessened if developers identify sites in communities that have recently experienced economic disruption and that might benefit from a new source of jobs and development. 23 As an example, Savion Energy is building a solar project on a reclaimed coal mine. 24 Several other companies are also repurposing land belonging to closing fossil-fuel plants that has ready access to transmission—for instance, Vistra Energy’s Moss Landing storage facility in California.
quality land is limited, which means it is very valuable. Land in the top 100th percentile of capacity factor for solar could be priced more than ten times higher than land in the 70th to 80th percentiles and still result in a lower levelized cost of electricity (approximately $14 per megawatt-hour compared with $16 per megawatt-hour) (Exhibit 3). 25 If a developer is willing to pay a premium for land with a high capacity factor, that value could be shared among developers, landowners, and nearby communities. Developers often acquire large land portfolios to mitigate the risk of uncertainties such as interconnection cost and timeline. They could mitigate community
7. Share the economic value of high-quality land with owners and local communities. High-
Exhibit 3 Levelized cost of electricity for solar and wind development is driven by capacity factor and cost of land.
Levelized cost of energy (LCOE) produced by effect of capacity factor and land price for wind energy,¹ $/MWh
0
100
200+
200
Price of land increase, multiple
2
3
4
5
6
7
8
9
10
100 90 80 70 60 50 40 30 20 10
Percentile of capacity factor (all US land)
¹Assumptions: LCOE = (capital expenditures + fixed operations and maintenance [FOM] costs) / (8760 x capacity factor [CF]). Lifetime: solar, 25 years; wind, 30 years. CF for wind is for the Vestas V112 3 MW turbine at a 120-meter hub height. Source: McKinsey analysis using the proprietary REMAP tool; McKinsey Global Energy Perspective Achieved Commitments Scenario
McKinsey & Company
23 Lawrence Susskind et al., “Sources of opposition to renewable energy projects in the United States,” Energy Policy , June 2022, Volume 165. 24 “Martin County Solar Project to locate on former eastern Kentucky coal mine,” Lane Report , December 9, 2021. 25 This analysis assumes a lifetime of 25 years for solar and 30 years for wind. Capacity factor assumes solar is for fixed-tilt panels with CSi technology and wind is for Vestas V112 3MW turbine at a 120-meter hub height. This analysis assumes constant renewables capital expenditure costs. Over time, land costs are likely to increase, while other factors driving renewables capital expenditures are likely to decrease (for example, the cost of panels after current supply chain challenges are mitigated). As these cost dynamics shift, the high value of optimal land will decline.
Accelerating the journey to net zero
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