5 Reasons a Landowner Should Lease Land to a Solar Farm
By Pivot Energy September 16 2019
Author: Eli Oppenheimer
Manager, Project Development
Over the last ten years, electric utility providers around the country have taken active steps to increase the amount of renewable energy resources deployed through solar power within their service territory. Colorado’s utilities are among the nation’s leaders in these efforts and serve as a national model for how providers can diversify their portfolio without increasing rates for customers.
Projects in Colorado range from small rooftop solar installations to major wind farms that stretch across hundreds of miles of the Eastern Planes. Recently, Xcel Energy, the largest investor owned utility in the state, has made localized projects solar projects the focal point of its growing renewable portfolio.
These projects, which are known as community solar gardens, are constructed on ten to forty acres of land and help supplement the surrounding grid with clean, renewable energy. In order to keep rates low, Xcel Energy has turned to private solar developers to design, permit, construct, and finance these projects.
Chances are, if you own a piece of suitable land in Xcel Energy’s service territory, at least one solar company has reached out to discuss leasing your land for one of their projects. While dozens of landowners have explored this opportunity, many more have opted not to consider a ground lease for a solar project. Although it can seem intimidating to utilize your land for a new use and sign a long-term lease, a solar ground lease is often a safer and more profitable option for many landowners in Colorado.
Are you considering leasing your land for solar development? Landowners who lease their land to a solar developer can expect the following benefits:
1) Turn property into a land bank for the next generation
Solar leases provide guaranteed payments for the duration of the project’s life while the land continues to appreciate. This is an excellent way to generate additional income on a piece of land while keeping the property in the family for the next generation – also known as land banking. The question remains just “how much do solar farms pay to lease land?”
Over the course of thirty years the rent will accumulate into the hundreds of thousands of dollars.
Once the lease term expires, all solar equipment is removed, and the property is returned to the owner in either a “ready to plant” or a “ready to develop” condition. For property owners on the outskirts of Colorado’s growing cities and towns, this is a great way to generate additional revenue while maintaining ownership of their land for future generations to explore future development opportunities.
2) Create a predictable and reliable income stream for decades
Any honest solar company should tell you that if Walmart or a residential developer is interested in buying or leasing your land, a solar lease can not compete from a value perspective. However, for farmland owners that have historically used their land for agriculture, a solar ground lease offers a more profitable and reliable income stream. In fact, due to the solar farm land requirements solar developers often seek out land that has historically been used for agricultural production, as the sites are usually flat and cleared of any major obstacles that might create delays during construction.
Landowners can expect the rent paid by the solar farm to exceed revenue from agricultural endeavors or dormant land.
In addition, landowners do not have to worry about renegotiating a land lease or find a new tenant farmer every few years. Finally, the value of the land is not jeopardized by any changes to local or federal policies, global agricultural markets, or extreme weather. From the landowner’s perspective, this is hands-free mailbox money for several decades.
3) Generate income from otherwise unused land
One of the most obvious candidates for a solar site lease is a piece of dormant land.
Whether the landowner does not own water rights, or the land will not produce anything when it is farmed, a solar site lease can drastically increase the value of an otherwise dormant piece of land.
In addition to the lease payments, most solar farms will also pay the taxes for a parcel of land they lease. As a result, landowners can turn an annual financial burden into an income-generating asset without having to pay for any site upgrades themselves.
4) Continue being a good neighbor
Whenever landowners consider utilizing their land for a new purpose, they may not wish to disturb the way-of-life of neighboring properties. You have likely heard the concern that there are solar land lease issues associated with a solar lease agreement. While there are countless misconceptions about solar projects and solar panels, they are actually fantastic neighbors for anyone.
Solar projects have a short construction period, typically lasting no more than two or three months. Once constructed, solar projects are unmanned facilities that generate no noise, no emissions, no lighting, and no traffic.
As a neighbor, solar farms are generally preferred when compared to other development opportunities that exist. Solar gardens are a quiet field of neatly organized rows producing clean, renewable energy. Additionally, Xcel Energy requires solar farms to pay for any infrastructure upgrades needed to safely interconnect a project to their electricity grid. These upgrades improve the reliability of the grid and reduce any rate increases that would otherwise be passed on to customers to pay for infrastructural upgrades required to serve Colorado’s growing population.
5) Earn money while making a difference
For many landowners, what they choose to do with their land is part of their legacy. While most people take pride in making a positive impact in their communities, many more people are beginning to consider what kind of positive impact they can pass on to future generations.
Leasing your land to a solar farm is a great way to do your part in helping the United States convert to a cleaner, renewable economy. A solar garden constructed on ten acres can offset the equivalent amount of CO2 as 2,950 acres of U.S. forests each year.
This is a fantastic way for a landowner to pass on a reliable income stream while also being part of a cleaner future; it is a win-win.
Lease Land for Solar Farm
Whether landowners are interested in increasing the revenue your land generates, land banking your property until more lucrative future development opportunities are available or being part of the paradigm shift to renewable energy, a solar ground lease is a fantastic option for landowners. Pivot Energy’s team of experienced solar developers evaluate sites on a daily basis and would be happy to assess your land’s potential.
If you are a landowner and think this might be a good opportunity for you, please fill out our contact form for land.