What a Deeper Look Inside Project ‘Queues’ Really Tells Us

I was at a development meeting recently where several developers pointed out there are folks in that state who pay landowners, including farmers, for “options” on their land. In this case, the option in question is a contract where the developer pays the landowner a small fee in exchange for the exclusive right to match or exceed any offer to perform construction on their land. It’s a great deal for the landowner. They get paid for allowing someone to match or exceed the market price for their property. There is no downside for them.

But what the developer is actually doing with this mechanism is blocking others from building by tying up large tracts of the most attractive land for very little expense. It’s part of a broader plan by the developers to artificially inflate the perceived size of various markets to dissuade competition.

This strategy is not unusual. It’s been used in various market scenarios throughout history. In this case, we are seeing this occurring consistently in the wind, solar, and energy storage markets, where land “buyers” commit to projects they don’t intend to complete to create the illusion of scarcity. Once the land is “optioned,” the developers place these theoretical projects into the market “queue.”

Because the projects are in the “queue,” they tend to get counted when trade publishers and others do market analyses. But in reality, counting all projects in the queue plays into the developer strategy of counting on the inflated data to entice others to stay out of what now appears to be a “saturated” market(s).

Indeed, because of these “phantom” projects, these queues can contain four to six times more projects than will ever actually be built. One developer in particular told me directly that he has submitted large projects into the queue that he never intends to complete in order to influence his competitors into thinking the market had enough players. While completely legal and compliant, that developer’s true intention is to exaggerate his own profile, thereby lessening the competitors entering the market. The reality is these actions impact whole markets–especially developing, immature markets.

You might think this strategy of artificial inflation is aimed at blocking growth in renewable markets. The reality is they’re actually competitive strategies designed to provide the illusion of high barriers to entry, which serves to “block” market entry. One way to spot the problem is to identify projects in these queues that have been in the works for years. If a job hasn’t been completed in two years, it’s a strong indicator it likely is not going to happen.

To counter these legal, but market-influencing, moves, energy companies should require bidders into wind, solar, or energy storage projects to put money down based on the project size. Then, if their bid is chosen, they should have to prove they have enough credit to build the project as submitted to the queue.

Recently, we have started to see companies, such as Georgia Power, include requirements for bidders to put up significant money and require direct site control in order to bid projects under their Georgia REDI program. That’s a fresh trend that ultimately not only will help hasten true market growth for wind, solar, and energy storage, but it will also create a much stronger, more transparent and more active marketplace.

Do you agree? Leave your comments below.