Solar energy usage is on the rise, and solar companies need land where they can install their solar arrays. This means that landowners and farmers can lease their land for utility-scale solar installations. However, that also means that if you are a landowner or farmer, you need to do your research and learn as much as you can about leasing your land to solar developers. Solar farmland development is a complex subject, but here are a few important topics within it:
When land is developed for solar projects, the process generally follows these steps:
Initial Site Visit
The developer visits the land they want to lease and develop. The size of the land they’re looking for will depend on how many megawatts (MW) of solar panels they want to install. If they want to install one MW of panels, they’ll need about six to seven acres. If they want three MW, they’ll need 18-21 acres, and if they want 10 MW, they’ll need 60-70 acres. If your land has the amount of acreage they are looking for, they will evaluate your land for these four characteristics:
- Amount of land available
- Amount of sunlight the land receives
- Proximity to grid infrastructure
- Quality of soil
If the initial visit is successful, the developer will make an offer to lease the land for their solar farm. That begins the leasing process and lease agreement negotiations.
Letter of Intent
The developer may make their offer through a letter of intent (LOI). The LOI will outline the developer’s terms for leasing the land, as well as any problems that need to be addressed before the solar farm lease and development can begin. This can include clearing the land of obstructive powerlines, for example. All of these issues should be addressed to meet the developer’s solar farmland requirements.
Many developers will use a lease option instead of a LOI to negotiate a solar farmland lease. At this point, the landowner should employ legal counsel to help them understand and work through the negotiations. In a lease option, the landowner gives the developer up to two or three years to exercise the lease on the land. The lease option agreement will outline which party pays taxes on the land, whether payments will be made during the lease option period, and what will happen to the land if the developer decides not to develop the project there.
If the developer decides to lease the land, each party should work with their respective legal counsel to finalize the lease. The landowner and the developer should collaborate to determine how the land should be used for the project. They should also figure out how rent is calculated: Will they base rent on the amount of acreage leased or the amount of power (in MW) in the systems? The landowner should read the finalized lease carefully and go over it with their legal counsel.
The leasing process isn’t the only thing to consider as you weigh the decision to lease your land for solar farming. Additional factors you’ll want to consider include:
- How will the solar project affect the surrounding landscape? Will trees, shrubs, or crops need to be taken out? Are there any nearby power lines that could interfere with the solar project?
- What are the solar farmland lease rates in your area? This will affect how you lease land for solar farming, and how lucrative the project will be for you, so it’s definitely worth researching.
- Are you working with a reputable developer? Research them and the previous projects they’ve worked on. Make sure they are not a small middleman company that will transfer your land over to a larger company as soon as they lease it.
- Can you sell this clean energy to local utility companies? If you can, you may make quite a profit.
If you want to turn your real estate into a viable solar farm, Verogy would like to develop it. When you work with us, we can help change solar energy from an unknown quantity into a lucrative clean energy source. If you have questions about what we do, please contact us today.