Publisher: Minute Blog Date September 14, 2018
(Please Note: Landmark does not build solar farms. We only buy existing solar leases that are currently generating rent for property owners, or provide land financing for solar developers) Solar energy in America is on the rise: according to the Solar Energy Industries Association (SEIA), in 2016, solar installations represented the largest source of new energy generating capacity in the United States, beating out other green energy-rivals like as natural gas and wind. 1 During this time, the U.S saw more than 10.5 gigawatts (10,500 megawatts) of utility-scale solar installations added to the grid, pushing total photovoltaic capacity to nearly 40 gigawatts.2 This capacity firmly positions the U.S as the world’s 4th largest solar power (behind China, Japan, and Germany), but things are just getting started, because it’s been reported that an additional 12 GW of solar capacity is set to go live this year .3This rapid expansion of solar energy has created significant financial opportunities for both landowners and farmers, since solar farming has become increasingly more valuable over time.
Why Has Solar Farming Grown More Valuable?
Simply put, solar developers need land for their new solar projects, but land is a commodity that is not always widely available, so solar land leases are often the only viable option.
These solar leases can be extremely valuable to landowners, and using Craven County, NC as an example, can help landowners generate up to $4,000 per acre in annual rental payments from solar developers.4
However, there’s a lot to take into consideration before entering into a solar lease with a developer, and to help our readers better understand the nature of solar farm lease rates, this article will discuss the importance of solar development in the U.S, how land for solar development is evaluated, and how Landmark Dividend can help property owners get the most out of their solar lease.
Solar Growth in the United States
The quick expansion in the solar industry has come as a result of two major factors: government programs like the Investment Tax Credit (ITC) and falling photovoltaic (PV) prices—both of which contribute to solar developers seeing a much faster return on their investments, making solar development a much more lucrative prospect.
For example, the ITC provides solar developers with a 30% tax credit on the price of a solar installation, and in some regions, solar energy production has fallen to as low as 4 cents per kilowatt-hour, making solar energy even cheaper than traditional fossil fuels.
Additionally, solar power is perhaps the world’s best bet for reducing carbon emissions. If current progress continues, it’s quite possible that solar energy installations could effectively reduce carbon emissions around the globe by nearly 6 billion tonnes per year.5
Opportunities for Landowners & Farmers
This rapid expansion of solar energy production and the creation of solar farms across the United States are generating a number of financial opportunities for landowners, and especially large landowners, like farmers.
Solar farms are especially interesting for American farmers, since depending on the crop, solar farm profits from photovoltaic panels could end up being far greater than traditional farming practices, especially in the right climates.
And even in situations where solar is not a more valuable option, it still might be preferable, especially since solar farm maintenance and upkeep is typically less exhaustive and far less of a hassle compared to traditional farming, for crops like sweet cherries, which often have to be picked by hand.
However, not all properties can be converted into utility-scale solar power plants, as the criterion for which a property is judged is very strict.
How do I Obtain a Solar Lease?
While it is possible to get in touch with a solar developer on your own, it is more likely the case that a solar developer will contact you first.
Developers typically have an acute understanding of where the most valuable land is located and they are also typically pretty quick to act on any new prospects.
How are Solar Farm Land Lease Rates Determined?
Determining the value of a solar farm lease rates usually comes down to a two-step process consisting of an evaluation of the land itself and the actual lease negotiation.
When a property catches the attention of a solar developer, they will usually send out a surveyor to determine whether or not the property meets certain criteria, which commonly includes site characteristics such as the following:
Amount of Land Available
For a typical solar installation, the general rule of thumb is that for every 1kW of solar panels needed, the area required is approximately 100 square feet.
This means, that, for a 1mW solar PV power plant, the area required is about 2.5 acres or 100,000 square feet. However, it’s important to keep in mind that this amount of land is just for the panels themselves, and doesn’t include the space required for other solar equipment, which can bring the total closer to about 4 acres for a 1mW farm.6
Amount of Sunlight
This one is fairly obvious: the land in question must receive an adequate amount of sunlight, or more specifically, solar irradiance, on an annual basis, and the property itself should be free of as many sunlight blocking obstructions as possible (i.e., tall trees, buildings, or anything else that might cast a shadow).
In some cases, these items can simply be removed, but doing so can sometimes make the development of the land too costly of an endeavor, leading the developers to look elsewhere.
Proximity to Grid Infrastructure
One of the most important factors taken into consideration during the evaluation process is the property’s proximity to important infrastructure like roads and grid connection points.
Infrastructure components such as these are incredible expensive to create, and require careful navigation of local regulations, so developers are highly likely to avoid selecting land that doesn’t already have these things in place.
It’s safe to say that if the property in question is too far from the necessary infrastructure, or the infrastructure simply doesn’t exist, it is very likely that the property will be declared unfit for the development of a solar farm.
Quality of Soil
The quality of both the terrain and soil also places a major factor in the evaluation process, as property that is sloped, excessively rocky, or unstable can become a major problem for solar development.
For example, if the property happens to be littered with large boulders, the developer will have to take into consideration the cost of removing these boulders into their budget, which may or may not affect their decision to develop the land.
The Lease Negotiation
If the property passes the evaluation phase, the solar developer will then present a draft of the solar lease agreement to the property owner.
The solar lease agreement will contain items such as the monthly rent that will be paid the property owner, the length of the lease, and how much acreage the development will require.
How Much Money Can a Solar Farm Make?
Rental fees paid to the property owner can vary widely based on the unique characteristics of the land and the size of the solar installation.
On average, the solar farm profit per acre is somewhere between $21,250 and $42,500 per acre on an annual basis.
As you can see, solar farming can be quite profitable for some landowners, as most solar installations require, at minimum, 4 acres of useable land; however, there are some solar farms that span hundreds of acres, netting property owners hundreds of thousands of dollars per year.
Things to Consider Before Signing Your Solar Lease
The quick expansion in the solar industry has come as a result of two major factors: government programs like the Investment Tax Credit (ITC)
Before leasing land for a solar farm, there are a few items that property owners should take into consideration.
First, even though solar farms typically require less maintenance than other forms of energy generation, they can still have a dramatic effect on the local surroundings.
For example, service roads are typically built to grant vehicles access to different components of the solar installation, which might necessitate the clearing out of high-value crops and other natural vegetation such as trees and shrubs.
Second, during the lease negotiation, it’s important to figure out who will be responsible for large financial liabilities, like real estate taxes, landowner insurance premiums, and other expenses associated with the property.
Additionally, it’s critically important to discuss what happens to the solar installation once the lease has ended, as many property owners may want to return the land back to its original condition, which can be an extremely costly endeavor if done without assistance.
Landmark Dividend’s Role
As one of the nation’s largest lease acquisition companies, Landmark Dividend can provide value, capital, and liquidity to qualified property owners with a solar lease agreement.
While the annual income from a solar lease can be substantial, Landmark Dividend can provide you with a large, lump sum payment for the entire value of your lease now, so that you have the financial flexibility to pursue goals such as starting a new business, purchasing additional real estate, or even retiring early.
Contact Landmark Dividend
Even if you’re not interested in selling your solar farm lease, we can still provide you a no-obligation analysis and valuation of your lease to determine its true market value if your site meets our criteria.