LEARN ABOUT LEASING OR SELLING SOLAR ENERGY

LEARN ABOUT LEASING OR SELLING SOLAR ENERGY

FAQS ABOUT LEASING OR SELLING SOLAR RESOURCES

Are you collecting as much money as you can for your property? Good chance you’re NOT. In this issue of the LandGate Blog, I want to answer some of the questions we get about solar farms, solar panels and how much you can make by leasing your property to companies trying to meet renewable energy targets. Solar Farms can provide a steady and predictable income to landowners while their property continues to appreciate in value.

Landowners who lease their land to a solar company can expect the following benefits:

  • Turn your property into a Solar Land Bank for the next generation
  • Generate stable and predictable income 
  • Income that is insulated from market fluctuations associated with other types of land use
  • Doing your part in helping the U.S. to convert to a cleaner, renewable economy

Is some land more valuable than other land for solar farms? Yes. This map from LandGate.com shows the average Solar Irradiance for the past 12 months. 

Can you actually own sun rights?  Great question. Not certain if the courts have ever ruled on whether the sun is part of the surface or the minerals, but legal scholars assume that the courts would hold that solar rights belong to the surface owner. Meaning the surface owner has the right to enter into a solar lease agreement. Solar rights, however, could be severed from the surface rights. For instance, let’s assume Mr Smith owns the surface and sells it to Mrs Jones, but Mr Smith reserved the solar rights. In this case, Mrs Jones owns the surface and Mr Smith owns the solar rights.

Who builds solar farms? There are a lot of companies building solar farms. But your initial contact could be with a landman. That landman might hope you are uninformed and try to lease your property for as little as possible, then flip your lease to a solar farm developer and make a profit. That profit should be yours! LandGate can make certain you are informed and can market your property directly to the developers and get you the best price.

How can you learn more about solar panels? Call LandGate first. And the U.S. Energy Information Administration is a great resource to learn more about petroleum products, natural gas, electricity, coal, nuclear and all the renewable and alternative fuels like solar and wind.  

How much should you expect to be paid to lease your property? There are a lot of factors that go into what you will be paid, such as:

  • The size of your property. The more you own, the more you will be paid.
  • Is your property flat? Is it on a steep hillside?
  • Is your property located inside a 100 year floodplain or on wetlands?
  • The size of the project. Larger utility scale projects could require 100 acres. Whereas small to medium scale projects could require 5 – 40 acres.
  • Land values in your area
  • Ease of access to your property
  • Supply and demand for solar sites in your area

Historically, landowners receive an annual rental ranging anywhere from $300 – $2,000 per acre per year. Yes, that can be a big number. Probably more than you are currently making off your land. These solar leases will last an average of 25 years. The lease should provide for the rentals to increase annually to keep up with inflation and may provide for an option to extend the lease for another 5 – 15 years.  And depending on how competitive the leasing is, you could also receive a signing bonus of $50 – $100 per acre.

Will you receive a royalty if you lease your land to a solar company?  Royalties are common in the oil and gas business, where the landowner receives a percentage of the revenue from the sale of oil and gas. Wind farms have also been known to offer a royalty, but to date, it seems royalty provisions are being left out of solar leases. If a royalty is important to you, we can help you achieve that. But receiving an annual rental has its benefits. Landowners will receive more in rental payments if they do not ask for a royalty.  And rental payments make it easier to plan for projected property income. LandGate might even get the solar company to pay your annual property taxes.

How long will they be on your property?   After you sign the solar lease, there are 4 Phases to a Solar Farm project.

  1. Development Phase – This could take anywhere from 1 – 5 years. It will include planning, permitting and regulatory. You will receive an annual rental during this phase. The rental will be less than the rental you receive in the Operations Phase. There is a possibility that during this phase, the operator could decide not to complete the project due to financial reasons or perhaps they were unable to secure enough leases. During this phase, you will also be allowed to continue using your land for grazing, agriculture, etc. 
  2. Construction Phase – This could last 2 – 4 months while they install the solar panels.
  3. Operations Phase (generating electricity) – This phase could last 20 – 30 years.
  4. Decommissioning Phase – Unless they negotiate the right to extend the lease for another lengthy Operations Phase, the solar panels and supporting structures will be removed.  They will also work with you to restore your property to its original condition.

Can you still use your land if solar panels are installed?  Yes, during the Development Phase (1-5 years) you can continue to use your land. Once the Construction Phase begins, you will be restricted from using the land they lease. The property will be fenced for security and liability reasons. Generally, the fence is 6’ chain link.

Can I lease surface for solar if I already leased the minerals for oil and gas?  Yes. The solar company will work with you and the operator to ensure that there are dedicated locations set aside for future drilling and development operations.

Can I lease my surface for solar if someone else owns the mineral rights. Yes, but the solar company will want to make certain that their investment on your land is not interfered with. In most states, the mineral estate is the dominant estate (over the surface estate). In short, that means that the mineral owner has the right to grant an oil and gas lease to an operator, who then has the right to use as much of the surface as is reasonably necessary to produce minerals, even without permission from or payment to the surface owner. 

I can assure you that the solar company will be diligent in knowing who owns the minerals and how their possible solar lease might be impacted.

Bottom line…call LandGate.  We will help to make sure you avoid unintended consequences when it comes to adding value to your property and leasing your solar rights. Let’s put that money in your wallet.

 

Dan_McCue

 

Article by Dan McCue, VP of Land

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