As the demand for renewable energy surges, wind farms have emerged as a prominent solution for harnessing nature's power. For landowners, this growing trend presents a unique opportunity to generate additional income by leasing their land for wind energy production. But what exactly do wind lease payments look like? In this resource, we'll explore what it's like to get paid to lease your land for wind turbines and the essential factors that affect wind lease payment values.
Getting Paid for a Wind Lease on Your Land
There are quite a few ways to be paid when you lease land for wind turbines. Across the country, deal terms vary. Additionally, there are many different factors that can affect wind lease payment amounts.
What is the average lease payment for wind turbines?
Generally, for utility-scale wind farms, the developer will pay you $10 to $100 per acre per year until they start generating electricity. This term is referred to as the 'option period,' and it ranges from 2 to 5 years in length. During the wind lease option period, the wind developer conducts due diligence and gets the proper permits to ensure that they can begin construction.
Once the wind lease enters the construction and development phases, the payment amounts increase. Landowners can be paid per acre, per turbine, and/ or based on how much energy is produced from the turbines (called a 'royalty').
If the wind lease pays on a per-turbine basis, the size of the turbine generally determines the wind lease payment amounts, and how many megawatts of energy each turbine produces. $5,000-$8,000 per megawatt is generally typical. Wind leases that pay per turbine plus royalties are very common. The wind lease royalty is based on the revenue generated from the wind farm, and is paid to the landowner as a percentage of revenue. Generally, the royalty rate for wind leases generally starts at around 4% in year 1 and increases to around 10% on average in year 20.
Does a wind lease option mean I am guaranteed to have a wind farm on my property?
A wind lease option does not mean you are guaranteed to have wind turbines on your property. Wind developers use a wind lease option to ensure that they will have the exclusive right to enter into a formal wind farm land lease agreement before they invest time and money into their evaluation.
What is a fixed annual payment in a wind lease agreement?
A fixed annual payment for a wind lease is a pre-negotiated amount of money you will be paid annually for your wind farm lease. The number of years is also pre-negotiated and usually ranges from 20 to 25 years, with an option to extend the number of years by 5 to 10 year increments.
It's important to remember that wind royalty payments can be less predictable and dependable than a large fixed annual rental payment. However, the royalty payments also can be higher than a fixed annual rental payment. Wind leases that pay royalties typically have a guaranteed annual payment (regardless of the performance of the turbines), also referred to as a minimum payment.
What is a Power Purchase Agreement?
A Power Purchase Agreement is an agreement between the wind farm developer and a company wanting to purchase the electricity. The wind farm developer will need this agreement in place before making the large investment to build the wind farm on your land.
As electricity prices increase, am I compensated in my wind lease contract?
In a fixed annual rent payment lease, the landowner will not benefit from higher future electricity prices. However, if your lease provides for a royalty payment, your monthly royalty check would increase as the wind farm developer receives increased revenue as electricity prices increase.
Will I have to pay property taxes if my property is developed as a wind farm?
You will likely be responsible for property taxes on the portion of your property that is not developed for a wind farm. The wind farm lease agreement generally provides that the developer will be responsible for the taxes assessed on the wind farm-developed lands. However, please keep in mind that all wind lease agreements are negotiable with the wind developer.
Can I sell my wind lease payments?
Yes- landowners receiving payments from wind farm developers can market and sell those future payments. It is important for landowners that have leased their land for wind farms to consider selling their wind lease payments up front for a lump sum due to a few reasons:
Lease payments are not guaranteed: The wind developer can stop the wind farm's operations at any time.
Lease escalators generally do not outpace the current inflation rate: Most wind leases have escalator clauses that increase their lease payments by 1-3% each year. This percentage generally does not outpace the inflation rate, meaning that the wind lease payments are losing value over time.
When you sell your wind lease payments up front for a lump sum, the purchaser of those payments assumes these risks. You can list your wind lease payments for sale on LandGate's marketplace for free with no obligation to accept any offers:
Which factors affect wind lease payment amounts?
Wind lease payments vary depending on various factors and are completely negotiable with the wind energy developer. Wind leases are legal agreements that are confidential between the wind energy developer and the property owner, so there is a wide variation in lease rates and lease terms for wind farms across the country. Some of the main factors that affect your property's potential value and suitability for a wind lease include:
Acreage: One wind turbine can require 60 acres of land or more, even though the actual wind infrastructure will only be placed on a portion of your land.
Proximity to electrical infrastructure: The closer your property is to electrical infrastructure, the more attractive it is to wind energy developers. 4 miles from a substation or less, and near or adjacent to transmission lines is most valuable, but not a dealbreaker.
Local renewable energy incentives: Many states and cities pay renewable energy developers incentives to produce clean energy in their communities. Locations with high incentives are more attractive to wind energy developers than those without incentives.
If you've received an offer to lease your land for wind turbines, it's important that you conduct your own due diligence and consult with a licensed attorney regarding the specificities of your wind lease agreement.
Find Your Property's Estimated Wind Lease Value
You can find your land's estimated value for a wind lease by getting a Free property report on LandGate's map. This report will provide you with value indexes that compare your property's wind lease value to regional averages along with wind lease payment estimate that takes into account the above factors that can affect wind lease payment amounts and more:
