Hmm... yeah it seems like those relay(s) are down on that side. I just took some pics, I will post and try to circle what I think is the A/C relay.

Yeah, if I hadnt of smelled it, we may have had a fire too. It was not even smoking yet, but I was just getting whiffs of hot wood (like someone had a wood burning gun). It dawned on me then that these cars have that leaf trap down in that area and I think it gets hotter when you use the heater/AC. Must be a fan relay or something or a relay for the A/C compressor.

Its a known design flaw on the W126.