Landowners have a variety of options when it comes to leasing out the resources on their property. Leasing land for renewable energy production, such as solar, wind, carbon, water, minerals, mining, battery storage, or EV charging can provide property owners with an opportunity to make money from their land without having to sell any acreage. In this guide, we will describe some of the options available.
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Different Resource Leasing Options for Landowners
Leasing your land can be an excellent way to generate passive income while utilizing your property to its fullest potential.
Leasing land for renewable energy production is a popular way to generate long-term, consistent revenue from your land. The different resource leasing options for landowners include:
1) Solar Leasing
Landowners can lease their land to solar energy companies for the installation of solar panels. Typical solar leases are paid on a per acre per year basis, but payment amounts and payment terms fluctuate across the country. This can provide landowners with a steady income stream and help them contribute to the growth of renewable energy.
Acreage Required for Solar Farms
Commercial or utility-scale solar projects usually require 40+ acres of buildable land. Meaning, at a minimum, they will be able to construct at least 40 acres of solar panels. Many commercial solar projects can be very large and require several thousand acres of land to be built.
Community solar projects can be as small as 5 acres. These projects do not produce nearly as much energy as a commercial facility. Community solar facilities usually provide power to nearby communities or businesses. These do not require being close to large transmission lines or substations to function.
Typical Span of Solar Lease Contract
Solar energy leases have two main phases: option and development/production phase.
Typical Solar Lease Timeline and Payments
The option phase typically lasts 2-5 years depending on the size and scope of a project. The faster a developer would like to get their project online - the shorter the term. The landowner will get paid a small portion of the agreed-upon “lease” during this period. The developer will not be obstructing the property during this time. During this phase, the landowner can continue whatever agricultural or recreational practices they have traditionally been doing on the property. The developer uses this time to submit applications for the viability and approval of the project. This includes permits, interconnection queues, purchase power agreements, environmental studies, regulatory and administrative tasks, etc.
The development/operation phase typically lasts anywhere from 25-50 years and can include several “options” to be extended. Meaning that if the developer chooses to extend the life of the project, they can choose to do so, but are not required to.
The operation phase is where the landowner gets paid the agreed-upon “lease” rate. This can be based on a dollar-per-acre per year rate, a percentage of the energy production, or a combination of the two. Production or royalty payments are more common in wind leases and rarely if ever seen in solar leases.
There are quite a few ways that landowners can get paid to lease their land for a solar farm, and solar lease contracts vary across the country. Solar lease payment terms are negotiable, but landowners are usually paid between $700-2,000 per acre, per year.
2) Wind Leasing
Similarly, farmers and landowners can lease their land to wind energy companies for the installation of wind turbines. This lease agreement may involve a flat rate or a percentage of the energy produced by the turbines. Wind leasing can be a good option for landowners who have large, open spaces, and are interested in sustainable energy.
Acreage Required for Wind Farms
Commercial wind turbines can be erected on parcels as small as 10 acres. However, wind developers tend to target large tracts of land since entire wind farms can, and often do exceed hundreds of thousands of acres.
Typical Wind Lease Contract Length
Most wind lease agreements start with a 2-10 year option period, with a 30-50 year development/operation phase. Some wind lease extension options may include “re-powering” options. This is where the developer can maintain the right to upgrade an existing turbine to allow for more efficient or larger blades/hubs to be installed. Additionally, most wind lease contracts contain 'option to extend' provisions that give the developer the option to extend the lease by 5 or 10-year increments.
Wind Lease Payment Amounts
There are quite a few ways that landowners can be paid when they lease their land for a wind farm, and wind lease contracts vary across the country. Wind turbine lease payment terms are negotiable. Landowners can be paid per acre, per turbine, and/ or with royalties.
What You Can & Can't Do on Your Land With a Solar or Wind Lease
You Can Grow Crops
Wind turbines or solar panels on agricultural land do not have to interfere with growing crops, this type of option is called agrivoltaics. A solar or wind lease should not impact existing farming operations and you can grow crops on any land not covered by solar panels or wind turbines. The ground cover ratio of the solar panels is 30% on average. This means that 70% of your land leased for a solar farm isn’t occupied by solar panels due to topography and maintenance spacing.
Any land not covered by solar panels can be farmed as usual. A wind turbine occupies more land because of the width of the blades but it has a very small ground-to-cover ratio. Farming around wind turbines is surprisingly easy considering they have to be placed far apart to operate. That leaves a lot of land in between the turbines to farm and carry out other surface activities. One wind turbine can require up to 80 acres of land but only a fraction of those acres are used for the actual turbines and supporting infrastructure.
You Can Graze Livestock
Grazing livestock and a renewable energy lease can happen simultaneously. Certain animals can graze under and around land with solar panels, with sheep being the most common as they are not too large and enjoy the shade. They can even help with solar farm upkeep.
For example, research at Cornell University has shown that sheep can be successfully incorporated into fenced solar installations as a way to reduce the amount of mowing required. When it comes to land with wind turbines, there's pretty much no holds bar as to what types of animals can graze on leased land. As mentioned before, because wind turbines have to be spaced so far apart but require very little land to operate, there is plenty of room for cattle to graze around and even under the equipment.
You Can Enjoy Privacy
Some landowners worry that an energy lease will mean energy company employees are constantly on their land. You may be concerned about a lack of privacy due to workers making their way onto your property. But not to worry! While your land will see heavier-than-normal traffic during the construction phase of the project, once the solar panels or wind turbines are up and running, an equipment checkup 2-3 times per year is likely all that will be necessary.
Important to note - if there is not already an access road adjacent to your land, the energy company will have to build one to get equipment (and people) in and out.
You Can Make Money
An energy lease is a great way to supplement your income and provide a cushion for difficult times. When you list your land for a solar farm or wind farm with LandGate, you are exposing your property to thousands of qualified energy buyers. To make even more, you can cumulate revenues from a renewable energy farm and carbon offsets on the same land. For example, you can grow perennial tall grass on the land being used for a solar farm to earn carbon credits every year while you get paid for a solar lease.
You Cannot Build Impeding Structures
Solar lease agreements generally prohibit the construction of any structures that will block sunlight to the solar panels, as this decreases energy production. Likewise, a wind lease won’t allow for any obstructions to wind flow. In addition, when it comes to a wind lease, wind turbines create turbulence so they must be a certain distance from any structures as well as other turbines. This is why they require so much land but take up very little. To this same point, wind turbines and solar panels can exist on one parcel simultaneously. However, it is very unlikely for this to occur.
You Cannot Plug Directly Into the Power
Some landowners with a solar farm lease or wind farm lease think, “Well if energy is being produced on my land, can I use that as a power source?” While it’s a good question, because the electricity generated by solar panels and wind turbines is very high voltage, it has to be transformed multiple times before it is suitable for residential use.
3) Carbon Credit Leasing
Carbon leasing involves selling the carbon credits generated from your land based on the amount of carbon it is removing from the atmosphere. Companies or organizations can purchase these credits to offset their carbon emissions. This can be a good option for landowners who want to contribute to the fight against climate change, and for those who are not interested in making major changes to their land.
Acreage Required to Sell Carbon Credits
Carbon credits can be established on all ranges of parcel sizes. Most carbon credit developers are looking for larger tracts (over 100 acres) of forestland, and over several hundred acres of grassland/farmland. Forestland is generally more valuable for carbon credits because trees sequester more carbon than any other type of plant or vegetation.
Typical Carbon Credit Contract Length
Carbon contracts vary depending on the carbon developer and the type of carbon credit. Timber carbon credit contracts can be as short as 12 months, while agriculture-based carbon credit programs tend to be much longer and range from 5-100 years.
4) Leasing Water Rights
Landowners with access to water resources can lease those resources to companies or organizations that need them for their operations. This can include leasing water rights for irrigation or use in manufacturing processes. Water leasing can be a way for landowners to generate income from resources that they may not have a use for themselves.
Amount of Water Required to Lease Water Rights
The amount of water that you can trade is heavily dependent on the location and regulations on the resource. As with most resources, the larger the amount that you have, the more interest in your listing you'll receive.
Typical Water Rights Lease Length
Water can be leased on a seasonal or long-term basis depending on the regulatory environment in your specific area.
5) Oil & Gas Mineral Leasing
Landowners can lease their minerals to mining and exploration companies for the extraction of minerals such as coal, oil, and gas. Mineral leasing can provide significant income in areas where these valuable resources exist in abundance. The United States is the only country in the world that allows private citizens to own minerals. Mineral ownership can, and often does, differ from surface ownership. Meaning that just because someone owns the surface, doesn’t mean they own the minerals, and vice versa.
Acreage Required to Lease Oil & Gas Rights
Minerals down to fractions of an acre can be leased.
Typical Oil & Gas Lease Length
Most oil and gas leases are paid upfront with a primary term of 3-5 years. This commonly includes a 2-year extension as well. That means that an exploration company has 3-5 years to drill for and produce an oil and gas well, or the lease expires. The lease can be held in perpetuity as long as the production continues based on the terms of the lease.
6) Leasing Mineral Rights for Mining
Landowners can lease their minerals to mining companies to explore important minerals such as gold, silver, copper, coal, uranium, sand/gravel, and others. Landowners must own mineral rights to take advantage of leasing their property for mineral exploration. The United States is the only country in the world that allows private citizens to own minerals. Mineral ownership can, and often does, differ from surface ownership. Meaning that, just because someone owns the surface, doesn’t mean they own the minerals, and vice versa. Mineral exploration can involve subsurface and surface extraction where the mineral and surface owner will need to be common.
Acreage Required to Lease for Mining
Minerals down to fractions of an acre can be leased for mining operations. Precious mineral leases are common down to a few acres while less valuable minerals such as sand/gravel require larger amounts for economic purposes
Typical Mining Lease Length
Mineral lease length is typically determined by a presumed amount of resources to be extracted. Lease terms can be in 5 or 10-year phases with the option for the developer to renew at the end of each phase.
7) Leasing Land for EV Charging and Battery Storage
Landowners can lease their property for the installation of electric vehicle charging stations and battery storage facilities. This can be a good option for landowners who are interested in sustainable energy and want to contribute to the growth of the electric vehicle industry. Any site that has nearby access to transmission/distribution and a substation may be good for battery storage, while the same criteria in addition to major highway or road access can be ideal for EV charging.
Acreage Required for Energy Storage & EV Charging
EV charging stations can be placed on as small as ½ an acre, while battery storage tends to be on parcels with at least 2+ buildable acres. Large battery storage sites can lease parcels up to 40 acres in some instances.
Typical Battery Storage & EV Charging Station Lease Lengths
EV charging and battery storage leases are typically 20-30 years with options to extend and/or allow periodic facility upgrades.
How to Lease Land to Generate Income
Overall, the leasing options available to landowners depend on the resources that they have available, the type of land that they own, and the location of their land. From tapping into the renewable energy sector with solar and wind leasing to exploring traditional industries like mining and oil and gas production, there is potential for substantial financial gain. It's important for landowners to carefully consider all of their options to make the best decision for their property.
To start receiving offers to make money on your land through renewable energy lease opportunities, you can list your property for lease at no cost on LandGate's marketplace, which is actively used by hundreds of renewable energy developers nationwide to connect with property owners:
