Landowners have the opportunity to earn millions of dollars from lease options, rental payments and cash bonuses paid by solar energy developers. In some cases, landowners with 40 acres can generate a total of $1.2 million over the life of a utility-scale solar project. However, many have settled for only 10-20% of their property's solar income potential by falling prey to competitive leasing tactics. Today's big energy players are investing heavily in solar projects across the United States, and they are always trying to negotiate the best deals for themselves and their investors. This has created intense competition among solar developers for the best sites, so landowners that have property with great solar potential are in danger of being taken advantage of by these groups.
From using the benefits of renewable energy as an effective marketing tool, developers can commonly negotiate terms that are more favorable for themselves than for the landowner, and generate impressive returns in the long run. For all the positive stories we have heard about someone striking it rich from leasing their land, we have likely heard 10x more horror stories about landowners getting low-balled due to preventable matters, such as lack of technical knowledge or access to the proper data and tools needed to analyze the quality of an opportunity. It is extremely important that landowners understand the potential their land holds for solar leasing to avoid falling victim to these tactics.
Landowners interested in leasing land for a solar farm can receive a free third-party estimate for their land's solar leasing value in LandGate's free Property Report:
Key Takeaways
Landowners have the opportunity to earn significant revenue by leasing their land to solar developers.
Many landowners receive only 10-20% of potential income due to competitive leasing tactics and lack of negotiation knowledge.
Understanding the true solar lease value of a property and conducting due diligence on solar developers is crucial to avoid being low-balled.
Proximity to electrical infrastructure and existing solar farms significantly increases land value for solar leasing.
LandGate provides landowners with tools to evaluate and maximize their land’s solar potential, offering detailed property reports.
Why Would a Landowner Want to Lease Their Land for a Solar Farm?
The primarily benefit of leasing land for solar farms is revenue generation. Solar developers will pay $700 to 2,000 per acre per year to install solar panels on their property for long-term leases that range anywhere from 20 to 40 years.
It is important that landowners partner with developers who have demonstrated technical expertise and have a successful reputation for completing solar projects. Although most solar developers will negotiate directly with the landowners that they want to work with, many landowners fall prey to leasing their properties to middlemen and intermediaries that often delay the timeline of a project being completed. Countless management teams tout their technical expertise in marketing materials, but have no track record of success building and operating solar farms but simply flipping opportunities to the next buyer. This is important to note when considering leasing land to solar companies.
The Value of Energy Across the U.S.
Historically, the largest and most valuable companies in the world have been energy companies. NextEra Energy, a solar and wind energy company, has now leapfrogged ExxonMobil and Chevron as the most valuable energy company in the U.S. As the demand for solar energy increases, the demand for land suitable for solar projects will also increase.
How Much Does a Solar Lease Pay?
Solar leases pay anywhere from $700 to $2,000 per acre per year or more depending on the specific property and what is negotiated in the solar lease agreement. When leasing land to a solar developer, landowners are relieved of the financial responsibility to shoulder any costs related to building the project. In return, the developers may pay an upfront cash payment, and reserve a portion of future revenue payments for the property owner. For example, a property owner could receive an upfront cash bonus of $500/acre for signing a solar lease option on their 40-acre property ($20,000 cash payment). Then receive an additional $1,000/acre cash bonus at the time the lease is executed ($40,000 cash payment). Once executed, the developer will be required to make annual rental or solar lease royalty payments depending on the lease structure.
Some leases may outline a base rental payment and annual escalator increasing the payment every year. For example: $1,000/acre-per year, 2% escalator and 30 year term. This structure would net over $1.2 million in lease bonus and rental payments. Other leases could be structured to pay the property owners a portion of future revenues generated by the project.
Land Qualifications for Solar Farms
Property qualifications for solar farms include location, proximity to electrical infrastructure, and local renewable energy incentives. In particular, land that is near electrical infrastructure is highly valuable for solar leasing, and its importance should be properly understood before negotiating with a solar developer. It is also helpful to understand where active solar farms are located on the grid about your property: if solar developers are already constructing projects in your area, that is an indication that your property has immense potential for a solar farm.
A property's proximity to electrical infrastructure & nearby solar farms is a key input analyzed as part of the solar lease estimate value provided by LandGate, and you can find both in your free property report:
The Importance of Solar Lease Negotiations
Successful lease negotiations are defined by the landowner and developer reaching an agreement that is advantageous for both parties in the long term. The more that a landowner knows about the true value of their land, the more likely it is that they can reach these mutually beneficial agreements. It is recommended that landowners who have received a solar lease offer consult with a licensed attorney that is familiar with solar lease contracts. This helps to ensure that the lease agreement is fair and addresses any potential concerns.
Solar Energy is Big Business, and Landowners are Commonly Misled
Many solar developers will try to negotiate solar leases with landowners based on metrics not directly related to the productivity of the proposed solar farm. Instead, they may try to negotiate based on values from agricultural leasing rates for nearby properties due to a lack of historical and comparable solar lease terms.
Solar developers may offer lease terms similar to agricultural leases and justify it because both options can be equally invasive to the surface of a property. This is a common mistake that can result in the same 40-acre landowner mentioned above earning a fraction of what should have been a total of $1.2 million in solar lease payments.
Many landowners are under the impression that renewable energy is in its infancy and has not been proven profitable yet. This thinking leads many landowners to accept unfavorable lease terms in the name of “Saving the Planet,” but in many cases, they quickly realize they have entered into a one-sided contract that was not in their best interest. Thanks to generous financial incentives, increasing retail electricity prices, and high demand for renewable electricity, solar farms now earn incredible margins and they are expanding rapidly.
How to Make Money Leasing Land for Solar Energy
To get the most value from your property and make money leasing land for solar energy is to generate competitive offers. By listing your property for lease for a solar farm on LandGate's marketplace, you are presenting your property to a wide network of reputable solar companies actively planning new projects across the country. Listing is free, with no obligations to accept any offers. Get started today:
